IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
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WELLS FARGO & COMPANY, a Delaware :
corporation,
: C.A. No. 14696
Plaintiff,
:
-against-
:
FIRST INTERSTATE BANCORP, a Delaware
corporation, FIRST BANK SYSTEM, INC., a :
Delaware corporation, ELEVEN
ACQUISITION CORPORATION, a Delaware :
corporation, JOHN E. BRYSON, EDWARD M.
CARSON, JEWEL PLUMMER COBB, RALPH P. :
DAVIDSON, MYRON DU BAIN, DON C.
FRISBEE, GEORGE M. KELLER, THOMAS L. :
LEE, WILLIAM F. MILLER, WILLIAM S.
RANDALL, STEPHEN B. SAMPLE, FORREST N. :
SHUMWAY, WILLIAM E. B. SIART,
RICHARD J. STEGEMEIER, AND DANIEL M. :
TELLEP,
Defendants. :
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VERIFIED COMPLAINT FOR PRELIMINARY AND PERMANENT
INJUNCTIVE RELIEF AND DECLARATORY JUDGMENT
Wells Fargo & Company ("Wells Fargo"), as and for its complaint,
alleges upon knowledge with respect to itself and its own acts, and upon
information and belief as to all other matters, as follows:
Nature of the Action
1. Plaintiff brings this action for injunctive
and/or declaratory relief:
(a) to prevent First Interstate Bancorp ("First Interstate") and its
directors from breaching their fiduciary duty to their stockholders by
entering into or consummating an unfair, inadequate and unlawful proposed
merger (the "First Bank Proposed Merger") with First Bank System, Inc. ("First
Bank") and to prevent First Bank from aiding and abetting that breach;
(b) to prevent the anti-takeover devices of defendant First interstate
from being utilized to impede or delay Wells Fargo's proxy solicitation to
solicit proxies in opposition to the First Bank Proposed Merger, its proposed
exchange offer which is considerably more favorable to First Interstate's
stockholders than the First Bank Proposed Merger, and Wells Fargo's consent
solicitation, which is designed to elect new directors to the First Interstate
Board of Directors, in violation of the fiduciary duties of First Interstate's
Board of Directors; and
(c) to prevent First Interstate from otherwise taking actions that
impede or delay Wells Fargo's higher exchange offer, its proposed proxy
solicitation and consent solicita-
2
tion, all of which will be made in compliance with all applicable laws,
obligations and agreements.
The Parties
2. Plaintiff Wells Fargo is a Delaware corpora-
tion with its principal place of business in California. Wells Fargo is a bank
holding company registered under the Bank Holding Company Act of 1956, as
amended. Based on assets as of December 31, 1994, it was the 15th largest bank
holding company in the United States. Wells Fargo's subsidiary banks provide a
full range of banking services to commercial, agribusiness, real estate and
small business customers and consumers. It is one of the nation's leading
managers of personal trust accounts, corporate 401(k) plans and mutual funds.
Wells Fargo is the beneficial owner for its own account of 100 shares of
common stock of First Interstate.
3. Defendant First Interstate is a Delaware corporation with its
principal place of business in Califor- nia. First Interstate is a bank
holding company registered under the Bank Holding Company Act of 1956, as
amended. Its subsidiary banks accept checking, savings and other time deposit
accounts and employ those funds principally by making consumer, real estate
and commercial loans and investing in securities and other interest-bearing
assets.
3
First Interstate also provides banking-related financial services and products
both through non-bank subsidiaries and through its bank subsidiary and the
bank subsidiary's subsidiaries.
4. Defendant First Bank is a Delaware corporation with its
principal place of business in Minnesota. First Bank is a bank holding company
registered under the Bank Holding Company Act of 1956, as amended.
5. Defendant Eleven Acquisition Corporation is a Delaware
corporation. Eleven Acquisition Corporation is a corporation created by First
Bank solely for the purposes of effecting the Proposed Merger. For the
purposes of this Complaint, all references to defendant First Bank include
Eleven Acquisition Corporation.
6. Defendant William E. B. Siart is Chairman of
the Board of Directors, President and Chief Executive Offi-
cer of First Interstate. Defendant William S. Randall is
Executive Vice President, Chief Operating Officer and a
director of First Interstate. Edward M. Carson, John E.
Bryson, Dan C. Frisbee, Steven B. Sample, George M. Keller,
Forrest N. Shumway, Jewel Plummer Cobb, Ralph P. Davidson,
Thomas L. Lee, Richard J. Stegemeier, Myron Du Bain, William
F. Miller, and Daniel M. Tellep are all directors of First
Interstate. The foregoing individual directors of First
4
Interstate (collectively the "defendant directors"), owe fiduciary duties to
First Interstate and its stockholders.
Factual Background
7. On October 17, 1995, Wells Fargo delivered a
letter to First Interstate submitting for its consideration a proposal for a
tax-free merger (the "letter") in which each First Interstate stockholder
would receive 0.625 shares of Wells Fargo common stock for each share of First
Interstate common stock. Based on the price of Wells Fargo's common stock at
the time the letter was delivered, that exchange ratio represented a price of
$133.50 for each First Interstate share, a 26% premium over the market value
of First Interstate common stock at the time of the letter.
8. Despite the immediate premium to the stockholders of First
Interstate and the extraordinary long-term economic benefits to the
stockholders of both companies that would accrue under the merger described in
the letter, Siart asked for six months to consider the Wells Fargo proposal.
Siart also publicly responded negatively, saying that he was "deeply
disappointed" by Wells Fargo's unsolicited proposal.
9. Following Wells Fargo's letter, the press reported that Siart
was actively soliciting other offers from, and sharing First Interstate's
confidential information with, other suitors. Press reports indicated that
First
5
Interstate invited Bank One Corporation and Norwest Corporation to review its
loan and financial books. During the same time, First Interstate also
conducted merger negotiations with, at least, First Bank.
10. On November 6, 1985, First Interstate announced that it had
entered into an agreement with First Bank to merge the two corporations. First
Bank agreed to exchange 2.6 shares of its common stock for each share of First
Interstate's common stock. Based on the closing price of First Bank stock on
November 3, 1995, the last trading day prior to announcement of the Proposed
Merger, that exchange ratio represented a price of $132.28 per share of First
Interstate stock. First Interstate also agreed to pay a break-up fee of $100
million and granted First Bank a lock-up stock option to purchase First
Interstate stock that would yield it a profit of up to $100 million in the
event the First Bank merger agreement was not consummated.
11. The market reacted negatively to the news of the Proposed
Merger. Public reactions by analysts and stockholders were negative. The deal
has been called "a senior management job preservation act" for First
Interstate executives and Siart has been accused of failing to "show"[] a lot
of interest in the shareholder." In addition, immediately following the public
announcement of the First Bank
6
Proposed Merger, more than 50% of the purchases of First Bank stock (an amount
aggregating more than $90 million) were in large blocks of stock purchased by
or through a single broker. Although the identity of the person or company for
whom those purchases were made was not disclosed, the size of those purchases,
coupled with the fact that they were all made through the same broker, has had
the effect of supporting the price of the First Bank stock, thus making the
First Bank Proposed Merger appear to be more attractive than it would have
appeared in the absence of those large block purchases.
12. Before First Interstate entered into its agreement with First
Bank, Wells Fargo had offered to increase the exchange ratio of its offer to
0.65 shares of Wells Fargo common stock for each share of First Interstate
common stock, a ratio that would have continued to offer more value than the
First Bank Proposed Merger. Based on the closing price of Wells Fargo common
stock on November 3, 1995, the last trading day prior to announcement of the
First Bank Proposed Merger, that bid increased the value of the Wells Fargo
proposal to $137.96 per share of First Interstate common stock, considerably
in excess of the consideration to be received in the First Bank Proposed
Merger. Despite the clear superiority of that Wells Fargo
7
proposal, First Interstate rejected it in favor of the inferior First Bank
Proposed Merger and granted the break-up fee and lock-up stock option to First
Bank.
13. By meeting and sharing confidential information with at least
three banks (First Bank, Norwest Corporation and Banc One Corporation) in
response to the letter from Wells Fargo and Wells Fargo's subsequent offer to
improve its bid, First Interstate's directors initiated an active bidding
process seeking to sell the company.
14. As a result, the defendant directors had the duty (a) to be
diligent and vigilant in examining critically all alternative offers; (b) to
act in good faith; (c) to obtain, and act with due care on all material
information reasonably available, including information necessary to compare
all offers to determine which of them would provide the best value reasonably
available to the stockholders; and (d) to negotiate actively and in good faith
with all bidders to that end.
15. The fiduciary duties of the defendant directors require them
to assess whether each anti-takeover device or contractual provision
(separately and in the aggregate) under the facts and circumstances prevailing
at the time (a) adversely affects the value provided to First Interstate
stockholders; (b) inhibits or encourages alterna-
8
tive bids; (c) is an enforceable contractual obligation in light of the
directors' fiduciary duties; and (d) in the end would advance or retard the
First Interstate directors' obligation to secure for the First Interstate
stockholders the best value reasonably available under the circumstances. To
the extent such devices or provisions are inconsistent with the defendant
directors' fiduciary duties, as they are here, they are invalid and
unenforceable.
16. On November 13, 1995, Wells Fargo announced that it intends to
commence an exchange offer for all outstanding shares of common stock of First
Interstate Bancorp (the "Exchange Offer"). Wells Fargo will offer to exchange
two-thirds of a share of Wells Fargo common stock for each outstanding share
of First Interstate common stock. Based on the closing price of Wells Fargo
common stock on November 10, 1995, the last trading day before the
announcement of the Exchange Offer, the value of the Exchange Offer is $143.58
per share of First Interstate common stock. First Interstate has approximately
76 million shares outstanding, giving the transaction a total equity value of
approximately $11 billion. Wells Fargo's offer is therefore considerably
higher than the current value of the consideration offered to First
Interstate's stockholders in the First Bank Proposed Merger.
9
17. Also on November 13, 1995, Wells Fargo announced that it
intends to file preliminary proxy materials with the Securities and Exchange
Commission ("SEC") for use in connection with the solicitation of First
Interstate stockholders to vote against the approval of a merger with First
Bank at any meeting of stockholders of First Interstate to be called to
consider the First Bank Proposed Merger (the "Proxy Solicitation").
18. Concurrently, Wells Fargo announced that it will file with the
SEC preliminary materials for the solicitation of written consents from
stockholders of First Interstate to remove First Interstate's current board of
directors and to replace them with nominees of Wells Fargo who are committed
to removing any impediments to the consummation of the acquisition of First
Interstate by Wells Fargo (the "Consent Solicitation").
19. Wells Fargo's Exchange Offer clearly will be in the best
interests of First Interstate's stockholders. It will be available to all
First Interstate stockholders for all outstanding shares. It will not be
"front-end loaded" or otherwise coercive in nature. Moreover, the Exchange
Offer will provide First Interstate's stockholders with the opportunity to
realize a substantial premium over the market price of their shares
immediately prior to the public an-
10
nouncement of Wells Fargo's October 17 letter. The closing price of First
Interstate's common stock on October 17, 1995, the last full trading day prior
to the public announcement of that letter, was $106 per share and the average
closing price of First Interstate's common stock for the 20 consecutive
trading days immediately preceding October 17, 1995, was $102.59 per share.
20. In addition to the greater immediate financial value of the
Wells Fargo Exchange Offer, a combination of Wells Fargo and First Interstate
also will result in greater savings than can be realized through the First
Bank Proposed Merger. Despite having overlapping operations only in Colorado,
Montana and Wyoming, First Bank claims that $500 million in savings will
result from the First Bank Proposed Merger. Due to the greater geographical
overlap between Wells Fargo and First Interstate, a merger of the two
companies would result in an estimated $700 million in net cost savings,
approximately $30 per share based on the present value of the projected future
savings.
21. The Exchange Offer will give First Interstate stockholders an
opportunity to participate in the future performance of the combined company,
and to benefit from the synergies expected to result from the combination of
the two
11
companies, through the equity interest in the combined company that would
continue to be held by such stockholders.
22. The Exchange Offer will not pose any threat to the interests
of First Interstate's stockholders or to First Interstate's corporate policy
and effectiveness.
23. The Exchange Offer, Proxy Solicitation and Consent
Solicitation will comply with all applicable laws, obligations and agreements
including, without limitation, the securities laws and all other legal
obligations to which plaintiff is subject, including any contractual and
common law obligations that may be owed by plaintiff to First Interstate. The
Exchange Offer, Proxy Solicitation and Consent Solicitation will not
constitute tortious interference with, or any other business-related tort in
connection with, the First Bank Proposed Merger. The Exchange Offer, Proxy
Solicitation and Consent Solicitation materials will fully disclose all
required information in compliance with plaintiff's obligations under the
securities laws.
24. Unless modified, First Interstate's anti-takeover devices will
interfere with the Exchange Offer and may have the effect of preventing or
impeding the consummation of the Proxy Solicitation and the Consent
Solicitation. Given the nature of the Exchange Offer and its benefits to First
Interstate stockholders, First Interstate should not
12
be permitted to erect impediments to it. Nor should First Interstate be
permitted to impede or delay plaintiff's, efforts to conduct its Proxy
Solicitation and Consent Solicitation, activities to which plaintiff has a
right under Delaware law.
25. First Interstate's anti-takeover devices and other defensive
measures will adversely affect the value available to First Interstate
stockholders, will inhibit alternative bids to the First Bank Proposed Merger,
are (in the case of the break-up fee and lock-up stock option granted to First
Bank and described infra) not enforceable contractual obligations in light of
the breach of the defendant directors' fiduciary duties, and will retard the
defendant directors in carrying out their obligation to secure for the First
Interstate stockholders the best value reasonably available under the
circumstances. First Interstate's anti-takeover devices and other defensive
measures are therefore invalid and unenforceable.
First Interstate's Anti-Takeover Devices
and Other Defensive Measures
Break-Up Fee and Lock-Up Stock Option
26. As a stated inducement to First Bank to enter
into the First Bank Proposed Merger agreement, First Bank is
13
to be paid a $100 Million fee (the "Break-up Fee) and First Bank was granted
an option to purchase up to 15,073,106 shares of First Interstate stock at a
price of $127.75 per share, a price that will yield it a profit of up to $100
million in the event the Proposed merger is not consummated (the "Lock-Up
Stock Option").
27. The Break-Up Fee and the Lock-Up Stock Option were designed
not to induce a higher bid, but to compel First Interstate stockholders to
accept a lower bid for their stock. First Interstate's Board had, at the time
the Break-Up Fee and the Lock-Up Stock Option were agreed to, already received
and rejected a bid from wells Fargo that would have been worth at least $200
million more to the stockholders of First Interstate than the offer made by
First Bank.
28. The Break-Up Fee and Lock-Up Stock Option thus signal the
Board's support for, and increase the expense of offering alternatives to, the
First Bank Proposed Merger, which will serve the interests of the entrenched
management of First Interstate over those of the company's stockholders.
29. The Break-Up Fee and Lock-Up stock option
violate the fiduciary duties owed to First Interstate stock-
holders because they promote the self-interest of First
14
Interstate's directors at the expense of its stockholders, and are intended to
coerce First Interstate's stockholders into approving the Proposed Merger.
30. To the extent that First Interstate modifies
the First Bank Proposed Merger in response to the Wells
Fargo Exchange Offer or enters into any modified or future
agreement with First Bank, the defendant directors will have
a duty to eliminate the Break-Up Fee, the Look-Up Stock
Option and any similar provision in order to fulfill their
obligation to seek the best value reasonably available on
the stockholders' behalf and in order to avoid further
breaching their fiduciary duties.
Poison Pill
31. On November 21, 1988, First Interstate's Board adopted a
stockholder rights plan (the "Poison Pill") that allows the Board to prevent
the consummation of any tender or exchange offer, even one providing
substantial benefits to First Interstate's stockholders. The Board declared a
dividend of one common stock purchase right (a "Right"), payable to each of
First Interstate's stockholders of record as of December 30, 1988. Each Right
entitles the holder to purchase one share of First Interstate common stock at
a price of $170.00 per share (the "exercise price"), subject to adjustment.
15
32. Until the earlier to occur of (a) 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 common stock other than pursuant to a Qualified Offer (as defined
below), or (b) 10 business days (or such later date as may be determined by
action of the Board of Directors 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 common stock (the earlier of such dates, being called the
"Distribution Date"), the Rights are evidenced by the common stock
certificates. However, unless the First Interstate Board takes specific action
to delay the "Distribution Date" under the Poison Pill, on the tenth business
day after the announcement of the Wells Fargo Exchange offer the "Distribution
Date" will occur, resulting in the distribution of separately tradeable and
exercisable Rights certificates.
33. In the event that any person becomes an Acquiring Person
(other than pursuant to a Qualified Offer), each holder of a Right (other than
Rights beneficially owned
16
by the Acquiring Person (which will thereafter be void)) will thereafter have
the right to receive upon exercise a number of shares of First Interstate
common stock having a market value of two times the exercise price of the
Right.
34. A "Qualified offer" is defined as a tender offer or exchange
offer for all outstanding common stock that is determined by the
non-management directors to be adequate and otherwise in the best interests of
the Company and its stockholders.
35. First Interstate's Board can redeem the Rights at a redemption
price of $.001 per Right or can amend the Poison Pill to make the Rights
inapplicable to the Wells Fargo Exchange Offer.
36. Due to the prohibitive costs the Poison Pill imposes on an
Acquiring Person, any tender offer or exchange offer (such as the Wells Fargo
Exchange Offer) that would trigger the Rights cannot practically be
consummated unless First Interstate's Board redeems or amends the Pill or
declares the offer to be a Qualified Offer. Accordingly, First Interstate's
Board can block any proposed tender or exchange offer regardless of the
interests of First Interstate's stockholders. The triggering of the Poison
Pill would be particularly unjustified in this case given
17
the non-coercive nature of Wells Fargo's Exchange Offer and the substantial
benefits it would generate.
37. In light of the nature and value of Wells Fargo's Exchange
Offer, the First Interstate Board should declare that the Offer is
"Qualified". Alternatively, the Board should redeem the Rights under the
Poison Pill or amend it to make it inapplicable to Wells Fargo's Exchange
Offer and the second-step merger with Wells Fargo or a subsidiary that would
be expected to be consummated following the successful completion of the Wells
Fargo Exchange offer. Only when the Exchange Offer is deemed to be a Qualified
Offer or the Poison Pill has been redeemed, amended or invalidated so that it
is inapplicable to the Exchange Offer will First Interstate's stockholders be
able to benefit from the Exchange Offer.
38. The failure of First Interstate's Board to declare Wells
Fargo's Exchange Offer a "Qualified Offer" or to redeem or amend the Poison
Pill violates the fiduciary duties owed to plaintiff because it will deny
plaintiff meaningful access to or control over the assets of First Interstate
and will hinder or prevent plaintiff from exercising its fundamental
stockholder rights under Delaware law. Plaintiff will suffer irreparable
injury as a result
18
of the loss of the unique opportunity to acquire control of
First Interstate.
Amendments to the Poison Pill
39. First Interstate's current Board could frustrate the power of
any future Board, such as one that might be elected pursuant to the Consent
solicitation, to redeem the Poison Pill by, for example, adding a "Dead Hand"
provision. Under a "Dead Hand" provision, if a company's board is replaced
pursuant to a stockholder consent solicitation, the power to redeem a pill is
exercisable only by the former directors. Accordingly, the newly-elected board
would be powerless to redeem a poison pill, even if it believed that it was in
the best interests of the stockholders to do so. Similarly, First Interstate's
Board might attempt to amend the Poison Pill to make it non-redeemable by
anyone.
40. Because any such amendment would purport to prevent future
directors from exercising certain corporate powers and to limit the ability of
future directors to direct the management of the business and affairs of the
corporation, any such amendment would violate Delaware law.
41. The adoption of any such amendment would vio-
late First Interstate's Board's fiduciary duties because it
would be designed to prevent future directors from acting in
the best interests of the company and its stockholders. Any
19
such provision or amendment would represent an intentional
effort by the current Board to nullify the effectiveness of
a stockholder vote pursuant to the Consent Solicitation,
thereby preventing plaintiff from exercising its fundamental
stockholder rights under Delaware law.
Bylaw 4(b)--the "Nominating Restriction"
42. First Interstate's Bylaws require that notice of a nomination
of a candidate for director be "delivered to or mailed and received at the
principal executive offices of the Corporation not less than thirty days nor
more than sixty days prior to the meeting . . ." (the "Nominating
Restriction"). The Nominating Restriction further states that "[o]nly persons
who are nominated in accordance with [these] procedures shall be eligible for
election as Directors of [First Interstate]". As there is no meeting in the
consent solicitation context, the Nominating Restriction, if applied to a
consent solicitation, would effectively prohibit the election of directors by
written consent.
43. The Nominating Restriction, if applied to a
consent solicitation, would impose an arbitrary restraint on
stockholders that would frustrate their ability to exercise
effectively the consent solicitation power given to than
under Delaware law. 8 Del. C. S 228. The requirement of
prior notification is clearly inconsistent with section 228
20
in that, among other things, Section 228 expressly permits stockholder action
without prior notice. Accordingly, the Nominating Restriction cannot lawfully
be applied to election of directors by consent solicitation.
Delaware business Combination statute, Section 203
44. Section 203, entitled "Business Combinations
with Interested Stockholders" (8 Del. C. ss. 203), applies to
any Delaware corporation that has not opted out of the
statute's coverage. First Interstate has not opted out of
the statute's coverage.
45. Section 203 was designed to impede coercive and inadequate
tender offers. Section 203 provides that if a person acquires 15% or more of a
corporation's voting stock (thereby becoming an "interested stockholder"),
such interested stockholder may not engage in a "business combination"
(defined to include a merger or consolidation) with the corporation for three
years after the interested stockholder becomes such, unless: (i) prior to the
15% acquisition, the Board of Directors has approved either the acquisition or
the business combination, (ii) the interested stockholder acquires 85% of the
corporation's voting stock in the same transaction in which it crosses the 15%
threshold or (iii) on or subsequent to the date of the 15% acquisition, the
business combination is approved by the Board of
21
Directors and authorized at an annual or special meeting of stockholders (and
not by written consent) by the affirmative vote of at least 66-2/3% of the
outstanding voting stock that is not owned by the interested stockholder.
Section 203 does not apply if the business combination is proposed prior to
the consummation or abandonment of and subsequent to the announcement of a
proposed merger with another party.
46. Plaintiff anticipates that First Interstate will assert that
Section 203 would apply to block any merger between Wells Fargo and First
Interstate. Section 203 should not be applicable because Wells Fargo's
Exchange offer and the second-step merger with wells Fargo or a subsidiary
that would be expected to be consummated following successful completion of
the Exchange offer has been proposed subsequent to announcement of the First
Bank Proposed Merger, but before consummation or abandonment of the First Bank
Proposed Merger, and is thus exempt from the section's restrictions under
Section 203(b)(6).
47. Even if a merger between First Interstate and Wells Fargo is
found not to fall within the Section 203(b)(6) exemption, the Court should
conclude that under the circumstances, section 203 should not be applied to
this transaction. Should the Court decline to do so, First Interstate's
Board's fiduciary duties require the Board to
22
approve the Wells Fargo Exchange offer under Section 203(a)(1).
Declaratory Relief
48. The Court may grant the declaratory relief
sought herein pursuant to 10 Del, C. ss. 6501. First Interstate's Board's
rejection of Wells Fargo's offers and its hasty decision to accept the First
Bank Proposed Merger clearly demonstrate that there is a substantial
controversy between the parties. The adverse legal interests of the parties
are real and immediate in light of First Interstate's announced deal with
First Bank. Moreover, First Interstate's unreasonable anti-takeover devices
and other defensive measures will interfere with plaintiff's Proxy
Solicitation, Exchange Offer and Consent Solicitation.
49. The granting of the requested declaratory relief will serve
the public interest by affording relief from uncertainty and by avoiding delay
and will conserve judicial resources by avoiding piecemeal litigation.
Irreparable Injury
50. First Interstate's agreement to pay a Break-
Up Fee to First Bank and to grant the Lock-Up Stock Option to First Bank will
inhibit future bids to acquire or merge with First Interstate and will deny
First Interstate's stockholders their right to receive maximum value for their
23
stock. First Interstate's use of or reliance upon its anti-takeover devices
and other defensive measures to obstruct plaintiff's Exchange Offer, Proxy
Solicitation and Consent Solicitation will hinder and prevent plaintiff from
exercising its fundamental stockholder rights under Delaware law including,
but not limited to, the right to conduct a proxy solicitation and consent
solicitation. Plaintiff's resulting injury will not be compensable in money
damages and plaintiff has no adequate remedy at law.
COUNT ONE
(INJUNCTIVE AND DECLARATORY RELIEF AGAINST
FIRST INTERSTATE AND DEFENDANT DIRECTORS: THE, FIRST BANK
PROPOSED MERGER, THE BREAK-UP FEE AND THE LOCK-UP STOCK
OPTION ARE VOID AND UNENFORCEABLE)
51. Plaintiff repeats and realleges each and
every allegation set forth in paragraphs 1 through 50 here-
of.
52. Wells Fargo's Exchange Offer is substantially superior to the
First Bank Proposed Merger. Wells Fargo's Exchange Offer will give First
Interstate's stockholders considerably more for their shares than they would
receive under the First Bank Proposed Merger. In addition, a combination of
wells Fargo and First interstate will result in greater combined savings than
the First Bank Proposed Merg-
24
er, and thus will provide greater long-term value to First
Interstate stockholders.
53. First Interstate's decision to enter into the First Bank
Proposed Merger was unreasonable and was in breach of the fiduciary duties
owed to the First Interstate stockholders. In addition, First Interstate's
decision to agree to pay First Bank a Break-Up Fee and to grant to First Bank
a Lock-Up stock Option was also unreasonable under the circumstances. Neither
the Break-Up Fee nor the Look-Up Stock Option was granted in order to induce
higher bidding. Rather, the Break-Up Fee and Lock-Up Stock Option were
intended to compel First Interstate's stockholders to accept an inferior price
for their shares so that current management could be entrenched. Accordingly,
the Break-Up Fee and Lock-Up Stock Option granted to First Bank are a breach
of the fiduciary duties owed to First Interstate's stockholders.
54. Plaintiff seeks declaratory relief declaring the First Bank
Proposed Merger, the Break-Up Fee and the Lock-Up Stock Option to be void and
unenforceable and in- junctive relief enjoining the consummation of the First
Bank Proposed Merger, the payment of any such Break-Up Fee and the issuance of
First Interstate stock (or any payment of money) to First Bank pursuant to the
Lock-up Stock Option.
25
In the alternative, plaintiff seeks an injunction compelling the defendant
directors to terminate the First Bank Proposed Merger and invalidating the
Break-Up Fee and Lock-Up Stock Option.
55. Plaintiff has no adequate remedy at law.
COUNT TWO
[INJUNCTIVE RELIEF AGAINST FIRST INTERSTATE AND THE DEFEN-
DANT DIRECTORS: CONTINUING VIOLATION OF FIDUCIARY DUTIES)
56. Plaintiff repeats and realleges each and
every allegation set forth in paragraphs I through 54 here-
of.
57. If First Interstate modifies the First Bank Proposed Merger,
considers any future merger or enters into any future agreement with First
Bank, the First Interstate defendant directors will have the duty to eliminate
the Break-up Fee, the Lock-Up Stock Option and any similar provision from such
agreement in order to fulfill their obligation to seek the best value
reasonably available on the stockholders' behalf.
58. The retention of the Break-Up Fee and-the Lock-Up Stock Option
in any modified agreement or future agreement with First Bank would constitute
an additional violation of the First Interstate Board's fiduciary duties.
26
59. Plaintiff therefore seeks injunctive relief enjoining First
Interstate and the defendant directors from, including the Break-Up Fee, the
Lock-Up Stock Option or any similar provision in any modified or future
agreement with First Bank.
60. Plaintiff has no adequate remedy at law.
COUNT THREE
(INJUNCTIVE RELIEF AGAINST FIRST INTERSTATE
AND THE DEFENDANT DIRECTORS; REDEEM THE POISON PILL
61. Plaintiff repeats and realleges each and
every allegation set forth in paragraphs 1 through 59 here-
of.
62. Wells Fargo's Exchange offer is non-coercive and
non-discriminatory; it is fair to First Interstate stockholders; and it
represents a substantial premium over the market price of First Interstate
shares prior to the public announcement of the Wells Fargo October 17 letter
and the First Bank Proposed Merger.
63. The Poison Pill is not proportionate to any threat posed by,
or within the range of reasonable responses to, the Exchange offer. In
addition, the Board's failure to determine that plaintiff's Exchange Offer is
fair and in the best interests of First Interstate and its stockholders will
27
constitute a violation of its fiduciary duties to First
Interstate stockholders.
64. Plaintiff seeks injunctive relief compelling First Interstate
and the defendant directors to declare Wells Fargo's Exchange Offer to be a
"Qualified Offer," to redeem the Rights under the Poison Pill, or otherwise to
amend the Poison Pill to make it inapplicable to the Exchange Offer or to any
follow-on merger.
65. Plaintiff has no adequate remedy at law.
COUNT FOUR
(INJUNCTIVE RELIEF AGAINST FIRST INTERSTATE AND DEFENDANT
DIRECTORS: NO DEFENSIVE MEASURES)
66. Plaintiff repeats and realleges each and
every allegation set forth in paragraphs 1 through 64 here-
of.
67. Wells Fargo's Exchange offer is fair to First Interstate
stockholders and it represents a substantial premium over the market price of
First Interstate shares prior to the public announcement of Wells Fargo's
October 17 letter and the First Bank Proposed Merger.
68. The Exchange Offer complies with all applicable laws,
obligations and agreements including, without limitation, the securities laws,
and all other legal obligations to which plaintiff is subject, including any
con-
28
tractual and common law obligations that may be owed by plaintiff to
First Interstate.
69. The Exchange Offer poses no threat to the interests of First
Interstate's stockholders or to First Interstate's corporate policy and
effectiveness.
70. Adoption of any provision or amendment of the Poison Pill (by
a "Dead Hand" amendment or otherwise) or any other defensive measure against
the Exchange Offer, Proxy Solicitation or Consent Solicitation that would have
the effect of impeding that offer or solicitation or that would prevent a
future Board of Directors from exercising its fiduciary duties would itself be
a violation of the current Board's fiduciary duties to First Interstate
stockholders.
71. Plaintiff seeks injunctive relief against any such defensive
measure by First Interstate and the defendant directors to thwart the Exchange
Offer, Proxy Solicitation or Consent Solicitation or the consummation of any
subsequent merger in violation of their fiduciary duties.
72. Plaintiff has no adequate remedy at law.
29
COUNT FIVE
(INJUNCTIVE AND DECLARATORY RELIEF AGAINST FIRST INTERSTATE
AND DEFENDANT DIRECTORS: DELAWARE BUSINESS COMBINATION
STATUTE, SECTION 203)
73. Plaintiff repeats and realleges each and
every allegation set forth in paragraphs 1 through 71 here-
of.
74. The Delaware Business Combination Statute, Section 203, if
sought to be enforced against a merger between Wells Fargo and First
Interstate, should be found inapplicable because any such merger would fall
within the Section 203(b)(6) exemption.
75. Plaintiff seeks a declaratory judgment that any merger between
Wells Fargo and First Interstate would fall within the Section 203(b)(6)
exemption, or if it does not, that under the circumstances, section 203 should
not be applied to prohibit such a merger.
76. Alternatively, plaintiff seeks injunctive relief to require
First Interstate and the defendant directors to approve Wells Fargo's becoming
an interested stockholder pursuant to the Exchange Offer or to approve any
merger between Wells Fargo and First Interstate that is found not to fall
within the 203(b)(6) exemption.
77. Plaintiff has no adequate remedy at law.
30
COUNT SIX
(INJUNCTIVE AND DECLARATORY RELIEF AGAINST FIRST INTERSTATE
AND DEFENDANT DIRECTORS: THE NOMINATING RESTRICTION
78. Plaintiff repeats and realleges each and
every allegation set forth in paragraphs 1 through 76,
hereof.
79. The Nominating Restriction in First Interstate's Bylaws, if
applied to consent solicitations, effectively prohibits First Interstate
stockholders from exercising their right to elect directors by written consent
or though a consent solicitation.
80. The Nominating Restriction can be applied lawfully only to the
nomination of directors prior to a stockholders' meeting and, as a matter of
law, cannot be applied to the election of directors pursuant to plaintiff's
Consent Solicitation.
81. Plaintiff is entitled to a declaration that the Nominating
Restriction violates Delaware law if applied to consent solicitations and is,
to that extent, void. Alternatively, plaintiff is entitled to a declaration
that the Nominating Restriction does not apply to plaintiff's Consent
Solicitation.
82. Plaintiff seeks injunctive relief against any
attempt by First Interstate or the defendant directors to
31
apply the Nominating Restriction to the Consent Solicita-
tion.
83. Plaintiff has no adequate remedy at law.
COUNT SEVEN
(INJUNCTIVE RELIEF AGAINST FIRST INTERSTATE AND DEFENDANT
DIRECTORS: DUTY TO CONDUCT SALE ON A LEVEL PLAYING FIELD)
84. Plaintiff repeats and realleges each and
every allegation set forth in paragraphs 1 through 82 here-
of.
85. By meeting and sharing confidential information with at least
three banks (First Bank, Norwest Corporation and Banc One corporation) in
response to the letter from Wells Fargo offering a bid for First Interstate,
First Interstate's directors initiated an active bidding process seeking to
sell the company. Moreover, given the size of the proposed combination of
First Interstate and First Bank, that combination, unless enjoined, would be
the last practical opportunity for the First Interstate stockholders to obtain
a control premium for their stock. Under those circumstances, the defendant
directors had the duty (a) to be diligent and vigilant in examining critically
the First Bank Proposed Merger and all alternative offers; (b) to act in good
faith; (c) to obtain, and act with due care on, all material information
reasonably available, including infor-
32
mation necessary to compare all offers to determine which of the transactions
would provide the best value reasonably available to the stockholders; and (d)
to negotiate actively and in good faith with Wells Fargo to that end.
86. By refusing to share the same confidential information with
plaintiff that it shared with First Bank and other suitors, by entering into
the First Bank Proposed Merger, by granting the Break-Up Fee and the Lock-Up
Stock Option to First Bank, by adopting and/or refusing to redeem or amend the
Poison Pill or to declare the Exchange Offer to be a Qualified Offer and by
applying the Nominating Restriction to the Consent Solicitation, the defendant
directors will breach or have already wilfully breached their fiduciary duties
as fair and neutral stewards of First Interstate.
87. Those breaches of fiduciary duties have injured plaintiff and
all other First Interstate stockholders and will continue to injure then by
depriving them of the benefits of a fair and evenhanded bidding process and
have put the sale of the company on an uneven playing field.
88. Plaintiff seeks injunctive relief enjoining the consummation
of the First Bank Proposed Merger and the payment of any such Break-Up Fee or
the issuance of First Interstate stock (or any payment of money) to First Bank
pursuant to the Lock-Up Stock Option. In the alternative,
33
plaintiff seeks an injunction compelling the defendant directors to terminate
the First Bank Proposed Merger and invalidating the Break-Up Fee and Lock-Up
Stock Option.
89. Plaintiff has no adequate remedy at law.
COUNT EIGHT
(INJUNCTIVE AND DECLARATORY RELIEF AGAINST FIRST BANK:
AIDING AND ABETTING BREACHES OF FIDUCIARY DUTY)
90. Plaintiff repeats and realleges each and
every allegation set forth in paragraphs 1 through 88 here-
of.
91. First Bank, with knowledge of the breaches of fiduciary duties
alleged herein on the part of First Interstate and the defendant directors,
substantially assisted in such breaches by agreeing to the Break-Up Fee and
Lock-Up Stock Option and the First Bank Proposed Merger, thereby aiding and
abetting First Interstate and the defendant directors in such breaches.
92. Plaintiff seeks a declaration that First Bank aided and
abetted First Interstate and the defendant directors in their breach of
fiduciary duty and injunctive relief against First Bank's participation in
First Interstate's and the defendant directors' breaches of their fiduciary
duties, including, but not limited to, an injunction prohibiting the
acceptance of a Break-Up Fee or the receipt of any First
34
Interstate stock (or receipt of any money) from First Interstate pursuant to
the Lock-Up Stock Option.
93. Plaintiff has no adequate remedy at law.
COUNT NINE
(DECLARATORY JUDGMENT AGAINST FIRST BANK:
THE WELLS FARGO EXCHANGE OFFER, PROXY SOLICITATION AND
CONSENT SOLICITATION DO NOT CONSTITUTE TORTIOUS INTERFERENCE
WITH OR ANY OTHER BUSINESS-RELATED TORT IN CONNECTION WITH
THE FIRST INTERSTATE-FIRST BANK PROPOSED MERGER)
94. Plaintiff repeats and realleges each and
every allegation set forth in paragraphs 1 through 93 here-
of.
95. First Interstate stockholders benefit from free, open and
unfettered competitive bidding in the face of a proposed merger and will be
the beneficiaries if permitted to consider the Wells Fargo Exchange Offer.
Indeed, the First Bank Proposed Merger contemplates the possibility of a
higher offer since it may be terminated by First Interstate following tile
receipt of another takeover proposal. Moreover, the stockholders of First
Interstate are entitled to know what offers are available to them at the time
they vote. Accordingly, Wells Fargo's Exchange Offer, Proxy Solicitation and
Consent Solicitation do not constitute and should not be deemed to be tortious
interference with, or
35
any other business-related tort in connection with, the
First Bank Proposed Merger.
96. Plaintiff seeks a declaratory judgment that neither the
Exchange Offer, the Proxy Solicitation nor the Consent Solicitation
constitutes tortious interference with, or any other business-related tort in
connection with, the First Bank Proposed Merger.
97. Plaintiff has no adequate remedy at law.
WHEREFORE, plaintiff respectfully requests that this Court enter
judgment against all defendants, and all persons in active concert or
participation with them, as follows:
A. Declaring that the First Bank Proposed Merger, the Break-Up Fee
and the Lock-Up Stock Option breach the fiduciary duties that the defendant
directors owe to First Interstate's stockholders and are, therefore, void and
unenforceable.
B. Permanently enjoining First Interstate and the
defendant directors from:
(i) consummating the First Bank Proposed Merger;
(ii) making any payments to First Bank pursuant
to the Break-Up Fee or issuing any stock (or making any
36
payment of money) to First Bank pursuant to the Lock-Up
Stock Option;
(iii) taking any action that would interfere with the Exchange
Offer, or entering into any agreement or arrangement or using any device
that would interfere with, restrict or that would have the effect of
restricting consummation of the Exchange offer,
(iv) employing any defensive device to interfere
with the Proxy Solicitation,
(v) employing any defensive device or taking any steps to
interfere with the Consent Solicitation or to interfere with, or limit
the power of, directors elected pursuant to the Consent Solicitation to
execute fully their fiduciary duties;
(vi) permitting the "Distribution Date" to occur
under the Poison Pill; and
(vii) applying the Nominating Restriction to the
Consent Solicitation.
C. Permanently enjoining First Bank and all persons in active
concert or participation with it from anticipating in the consummation of the
Proposed Merger and the payment of the Break-Up Fee or issuance of First
Interstate Stock (or any payment of money) to First Bank pursuant to the
Lock-Up Stock Option.
37
D. Declaring that First Bank aided and abetted
First Interstate and the defendant directors' breaches of
their fiduciary duties.
E. Compelling First Interstate and its defendant directors to
declare Wells Fargo's Exchange Offer to be a "Qualified Offer," to redeem the
Rights under the Poison Pill or otherwise to amend the Poison Pill to make it
inapplicable to the Exchange Offer or to any follow-on merger.
F. Declaring that the Nominating Restriction has no application to
the Consent Solicitation or, in the alternative, that it violates Delaware law
if applied to the Consent Solicitation and is, to that extent, void.
G. Declaring that the Exchange Offer and any subsequent merger are
exempt from Section 203 of the Delaware Corporation Law pursuant to Section
203(b)(6), or that Section 203 is otherwise inapplicable to the Exchange Offer
and any subsequent merger or, in the alternative, compelling First Interstate
and the defendant directors to approve the Wells Fargo Exchange Offer under
Section 203.
H. Declaring that the Wells Fargo Exchange offer, Proxy
Solicitation and Consent Solicitation do not constitute tortious interference
with, or any other business-related tort in connection with, the Proposed
Merger.
38
I. Granting damages for all incidental injuries
suffered as a result of defendants' unlawful conduct.
J. Awarding plaintiff the costs and disbursements
of this action, including attorneys' fees.
K. Granting plaintiff such other and further
relief as the Court deems just and proper.
----------------------------------
Jesse A. Finkelstein
Todd C. Schiltz
RICHARDS, LAYTON & FINGER
One Rodney Square
P.O. Box 551
Wilmington, DE 19899
(302) 658-6541
Attorneys for Plaintiff
Of counsel:
CRAVATH, SWAINE & MOORE
Worldwide Plaza
825 Eighth Avenue New York, NY 10019
(212) 474-1000
39
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
- - -------------------------------------------X
WELLS FARGO & COMPANY, a Delaware cor- :
poration, C.A. No.
Plaintiff, :
-against- :
FIRST INTERSTATE BANCORP, a Delaware :
corporation, FIRST BANK SYSTEM, INC., a
Delaware corporation,, ELEVEN :
ACQUISITION CORPORATION, a Delaware
corporation, JOHN E. BRYSON, EDWARD M. :
CARSON, JEWEL PLUMMER COBB, RALPH P.
DAVIDSON, MYRON DU BAIN, DON C. FRIS- :
BEE, GEORGE M. KELLER, THOMAS L. LEE,
WILLIAM F. MILLER, WILLIAM S. RANDALL, :
STEPHEN B. SAMPLE, FORREST N. SHUMWAY,
WILLIAM E. B. SIART, :
RICHARD J. STEGEMEIER, AND DANIEL M. :
TELLEP,
:
Defendants.
- - -------------------------------------------X
STATE OF CALIFORNIA )
) ss.:
COUNTY OF SAN FRANCISCO )
GUY ROUNSAVILLE, JR., being duly sworn, deposes and says:
I am Executive Vice President and Chief Counsel of plaintiff,
Wells Fargo & Company, and I know the allegations of the foregoing Verified
Complaint to be true of my own
40
knowledge, except as to matters alleged upon information and belief. As to
those matters, I believe them to be true.
Sworn to before me this
______ day of November 1995
Notary Public
41