MAXWELL M. BLECHER (#026202)
HAROLD R. COLLINS, JR. (#037114)
BLECHER & COLLINS, P.C.
611 West Sixth Street, 20th Floor
Los Angeles, CA 90017
(213) 622-4222
JOSEPH W. COTCHETT (#36324)
MARIE SETH WEINER (#112032)
COTCHETT & PITRE
San Francisco Airport Office Center
840 Malcolm Road, Suite 200
Burlingame, CA 94010
(415) 697-6000
Attorneys for Plaintiff
and the Class
SUPERIOR COURT OF THE STATE OF CALIFORNIA
COUNTY OF LOS ANGELES
TIMOTHY W. BRADLEY, Civil No. BC139665
individually and on behalf of
all others similarly situated, CLASS ACTION
Plaintiffs, CLASS ACTION COMPLAINT FOR:
vs. 1. BREACH OF FIDUCIARY DUTY;
WILLIAM E.B. SIART; JOHN E. 2. ABUSE OF CONTROL;
BRYSON; JEWEL PLUMMER COBB;
RALPH P. DAVIDSON; MYRON 3. UNFAIR BUSINESS PRACTICES;
DuBAIN; DON C. FRISBEE; GEORGE
M. KELLER; THOMAS L. LEE; 4. UNJUST ENRICHMENT; and
WILLIAM F. MILLER; WILLIAM S.
RANDALL; STEVEN B. SAMPLE; 5. CONSTRUCTIVE FRAUD.
FORREST N. SHUMWAY; RICHARD J.
STEGEMEIER; DANIEL M. TELLEPL;
FIRST BANK SYSTEM, INC.; and
DOES 1 through 50, inclusive,
Defendants.
_____________________________/
Plaintiff Timothy W. Bradley alleges upon information and
belief, based upon, inter alia, the investigation made by
plaintiff and by and through his attorneys, except as to those
allegations which pertain to the named plaintiff and his counsel,
as follows:
INTRODUCTION
1. This is a class action on behalf of all persons, except
defendants, who own shares of the common stock of First
Interstate Bancorp ("First Interstate"), a holding company whose
principal assets is its wholly-owned subsidiary, First Interstate
Bank. The members of the class have been damaged and deprived of
opportunities to realize the highest price reasonably available
and a fair price for their stock ownership in First Interstate
because the defendants have wrongfully prevented and are
wrongfully preventing the acquisition of all of the common stock
of First Interstate by third parties who are willing and able to
acquire such stock at a price in excess of the current market
price of First Interstate common stock, including but not limited
to Wells Fargo & Company ("Wells Fargo"), headquartered in
California; and because defendants are now attempting to and have
arranged a merger transaction of First Interstate into First Bank
System, headquartered in Minneapolis, pursuant to which the First
Interstate shareholders will received less per share than the
other available transactions and offers. The officers and
directors of First Interstate, to protect and preserve their
positions of power, prestige and profits and officers and
directors of First Interstate, have acted contrary to their
fiduciary obligations to the shareholders of First Interstate,
namely plaintiff and the Class. Indeed, the defendants have now
obligated First Interstate to pay a "poison pill" break-up fee of
$200 million if the merger with First Bank System does not go
forward, despite the fact that the First Bank System offer is
less than the initial offer by Wells Fargo as well as less than
the subsequent pending offer by Wells Fargo. The proposed merger
with First Interstate is also structured to allow at least half
of the defendants to keep their positions as directors and/or
officers, and their positions of power, i.e., although First
Interstate will technically be owned by First Bank System, the
leadership of First Interstate will continue practically
unscathed. The defendants have publicly announced that they are
giving preference over the lower First Bank System's offer
because they want to save the jobs of people at First Interstate,
which includes themselves. In order to persuade the shareholders
of First Interstate to support the offer by First Bank System
rather than the higher offer by Wells Fargo, so as to obtain and
sustain the personal financial and prestigious positions of the
defendants, the defendants have engaged in the dissemination of
misleading statements to plaintiff and the Class.
JURISDICTION AND VENUE
2. The amount in controversy exceeds the jurisdictional
minimum of this Court.
3. At all times herein, the headquarters and principal
place of business of the individual defendants were and are in
Los Angeles, California. The individual defendants are all
officers and/or directors of First Interstate Bancorp, which is a
Delaware corporation with the principal place of business in Los
Angeles, California.
THE PARTIES
Plaintiff
4. Plaintiff Timothy W. Bradley is a resident of Los
Angeles County, California and owns common stock of First
Interstate.
5. Plaintiff Timothy W. Bradley brings this action
individually and on behalf of a Class consisting of all persons
and entities who own the common stock of First Interstate,
excluding the individual defendants, the members of their
immediate families and any entity controlled by any of the
defendants, and excluding defendant First Bank System to the
extent that it holds any First Interstate common stock.
Defendants
6. Defendant William E.B. Siart, at all relevant times
herein, was and is President (since 1990), Chief Executive
Officer (since January 1995), a director (since 1990), and
Chairman of the Board (since May 1995) of First Interstate. As
of March 1995, defendant Siart owned, directly or indirectly,
215,004 shares of First Interstate common stock. During 1994,
defendant Siart received cash compensation of $1,846,133 from
First Interstate, plus other compensation of $19,638 in addition
to lucrative securities options and pension plan benefit.
Defendant Siart was also provided with a preferential loan on his
residence of approximately $875,000 at an interest rate of 6.34%
by First Interstate. There is also an employment agreement
between defendant Siart and First Interstate providing, and in
case of a change of control of First Interstate, the term of the
agreement is automatically extended for two years from the date
of the change of control, plus if terminated, defendant Siart is
entitled to "liquidated damages" of three times annual base
salary and target bonus, plus an amount equivalent to three
additional years of participation in the Company's retirement
plan, plus $30,000 as alleged cost of health and welfare benefit
plan coverage, all payable as a cash lump sum within ten days
after termination.
7. Defendant John E. Bryson, at all relevant times herein,
was and is a director of First Interstate since 1991. As of
March 1995, defendant Bryson owned, directly or indirectly, 7,640
shares of First Interstate common stock.
8. Defendant Jewel Plummer Cobb, et al. relevant times
herein, was and is a director of First Interstate since 1985. As
of March 1995, defendant Cobb owned, directly or indirectly,
8,290 shares of First Interstate common stock.
9. Defendant Ralph P. Davidson, at all relevant times
herein, was and is a director of First Interstate since 1987. As
of March 1995, defendant Davidson owned, directly or indirectly,
9,500 shares of First Interstate common stock.
10. Defendant Myron DuBain, at all relevant times herein,
was and is a director of First Interstate since 1983. As of
March 1995, defendant DuBain owned, directly or indirectly,
36,939 shares of First Interstate common stock.
11. Defendant Don C. Frisbee, at all relevant times herein,
was and is a director of First Interstate since 1985. As of
March 1995, defendant Frisbee owned, directly or indirectly,
3,872 shares of First Interstate common stock.
12. Defendant George M. Keller, at all relevant times
herein, was and is a director of First Interstate since 1974.
Defendant Keller is also a director of First Interstate Bank of
California. As of March 1995, defendant Keller owned, directly
or indirectly, 10,896 shares of First Interstate common stock.
13. Defendant Thomas L. Lee, at all relevant times herein,
was and is a director of First Interstate since 1993. Defendant
Lee is also a director of First Interstate Bank of California.
As of March 1995, defendant Lee owned, directly or indirectly,
6,300 shares of First Interstate common stock.
14. Defendant William F. Miller, at all relevant times
herein, was and is a director of First Interstate since 1980.
Defendant Miller is also a director of First Interstate Bank of
California. As of March 1995, defendant Miller owned, directly
or indirectly, 10,310 shares of First Interstate common stock.
15. Defendant William S. Randall, at all relevant times
herein, was and is Executive Vice President, Chief Operating
Officer, and a director of First Interstate. As of March 1995,
defendant Randall owned, directly or indirectly, 115,940 shares
of First Interstate common stock. During 1994, defendant Randall
received cash compensation of $939,252 from First Interstate,
plus other compensation of $14,530 in addition to lucrative
securities options and pension plan benefit. There is also an
employment agreement between defendant Randall and First
Interstate providing, and in case of a change of control of First
Interstate, the term of the agreement is automatically extended
for two years from the date of the change of control, plus if
terminated, defendant Randall is entitled to "liquidated damages"
of three times annual base salary and target bonus, plus an
amount equivalent to thee additional years of participation in
the Company's retirement plan, plus $30,000 as alleged cost of
health and welfare benefit plan coverage, all payable as a cash
lump sum within ten days after termination.
16. Defendant Steven B. Sample, at all relevant times
herein, was and is a director of First Interstate since 1991. As
of March 1995, defendant Sample owned, directly or indirectly,
7,000 shares of First Interstate common stock.
17. Defendant Forrest N. Shumway, at all relevant times
herein, was and is a director of First Interstate since 1982. As
of March 1995, defendant Shumway owned, directly or indirectly,
10,000 shares of First Interstate common stock.
18. Defendant Richard J. Stegemeier, at all relevant times
herein, was and is a director of First Interstate since 1989. As
of March 1995, defendant Stegemeier owned, directly or
indirectly, 7,800 shares of First Interstate common stock.
19. Defendant Daniel M. Tellep, at all relevant times
herein, was and is a director of First Interstate since 1991. As
of March 1995, defendant Tellep owned, directly or indirectly,
7,500 shares of First Interstate common stock.
20. The defendants named in Paragraphs 6 through 19 above,
are hereinafter referred to collectively as the "Officer and
Director Defendants".
21. Defendant First Bank System, Inc. ("First Bank System")
was and is a Minnesota corporation with its principal place of
business in Minneapolis, Minnesota.
22. Plaintiff is ignorant of the true names and capacities
of other defendants sued herein as DOES 1 through 50, inclusive,
and therefore sues these defendants by such fictitious names.
Plaintiff will amend this complaint to allege their true names
and capacities when ascertained. Plaintiff is informed and
believes and thereon alleges that each such fictitiously named
defendant is legally responsible in some manner for the events
and conduct referred to, and legally caused injury and damages to
plaintiff and the members of the Class as herein alleged.
CLASS ACTION ALLEGATIONS
23. This lawsuit is brought on behalf of a Class consisting
of all persons and entities who own First Interstate common
stock. Excluded from the Class are the individual defendants
herein, and their immediate family and any subsidiary, affiliate
or controlled person or entity of any such defendants, and
excluding defendant First Bank System to the extent that it holds
any First Interstate common stock.
24. The members of the Class are so numerous that joinder
of all members is impracticable. First Interstate common stock
is traded on the New York Stock Exchange, a nationwide,
recognized stock exchange, under the symbol "I". While the exact
number of the Class members is unknown to plaintiff at this time,
as of November 1995, First Interstate had approximately 75.7
million shares of its common stock outstanding; and as of March
9, 1995 had 76,268,424 common shares outstanding. The Class
members can be identified from the books and records maintained
by the defendants and their agents.
25. Plaintiff's claims are typical of the claims of the
members of the Class, including issues of law and facts such as
whether: (i) defendants violated California state law, (ii)
whether defendants failed to obtain the best and highest price
for First Interstate shareholders for their shares, (iii) whether
defendants acted contrary to their fiduciary obligations to First
Interstate shareholders in order to protect defendants' own
personal, financial, and professional interests, and (iv)
sustained damages arising out of defendants' wrongful conduct in
violation of California state law.
26. Plaintiff will fairly and adequately represent and
protect the interests of the members of the Class, and has
retained counsel competent and experienced in class actions and
complex litigation.
27. A class action is superior to other available methods
for the fair and efficient adjudication of this controversy,
since joinder of all members is impracticable. Furthermore, as
the damages suffered by the individual members of the Class may
be relatively small, the expense and burden of individual actions
makes it impossible for the Class members to individually redress
the wrongs from which they have suffered. There will be no real
difficulty in the management of this action as a class action.
28. Common questions of law and fact exist as to all
members of the Class, and predominate over any questions
affecting solely individual members of the Class. Among the
questions of law and fact common to the Class are:
A. Whether defendants acted in violation of
California law;
B. Whether defendants, who were in positions of
control of First Interstate, breached their fiduciary obligations
to the Class members;
C. Whether defendants abused their positions of
control of First Interstate;
D. Whether defendants concealed, failed to disclose,
or misrepresented to the Class members regarding the offers to
purchase all or a controlling interest of First Interstate stock
in excess of the then market value of First Interstate common
stock;
E. Whether defendants participated in and pursued a
conspiracy, scheme, or common course of conduct as alleged
herein;
F. Whether the defendants acted wilfully, recklessly
or intentionally in committing the wrongful conduct complained of
herein; and
G. Whether the members of the Class have sustained
damages, and the proper measure of damages.
DEFENDANTS' WRONGFUL CONDUCT
29. On or about October 18, 1995, Wells Fargo & Company,
the holding company of California-based Wells Fargo Bank, offered
to purchase all outstanding stock of First Interstate Bancorp,
the holding company of California-based First Interstate Bank, in
a stock swap of 0.625 share of Wells Fargo common stock for each
share of First Interstate common stock, which bid was valued at
approximately $10.2 billion. The offering price was in excess of
the market price of First Interstate common stock. The offer was
considered by First Interstate to be a "hostile takeover" bid,
and the Officer and Director Defendant responded to it by an
announcement that First Interstate would be exploring
"alternatives".
30. On or about October 23, 1995, Wells Fargo announced
that it would move forward with seeking approval under the
federal antitrust laws to start buying First Interstate stock.
31. Without given due consideration to the offer by Wells
Fargo, the Officer and Director Defendants proceeded to solicit
"white knight" purchasers of First Interstate, and specifically
financial institutions which did business outside of California.
The Officer and Director Defendants invited Norwest Bancorp of
Minneapolis, Minnesota, and Banc One Corp of Columbus, Ohio to
inspect the books of First Interstate and otherwise conduct due
diligence with an eye towards a "friendly" counteroffer. The
Officer and Director Defendants also engaged in communications
with defendant First Bank System of Minneapolis in this regard.
32. On or about November 5, 1995, Wells Fargo publicly
announced that it had increased its bid to a stock swap of 0.65
to 1.00, or $136.91 per share of First Interstate.
33. On or about November 6, 1995, First Interstate
announced that it had rejected the Wells Fargo offer of
approximately $10.9 billion and, instead, proposed a merger with
defendant First Bank System of Minneapolis in a stock swap valued
at $9.88 billion, or $129.55 per share of First Interstate.
First Bank System's offer is slightly above the market price of
First Interstate common stock. At the end of November 6, 1995,
the market price of Wells Fargo placed its bid at a value of
$10.04 billion, or $131.41 per share of First Interstate.
34. As the bid by Wells Fargo envisioned a complete
acquisition and integration of First Interstate into Wells Fargo,
with Wells Fargo to be the surviving business, the Officer and
Director Defendants endeavored to obtain a bid by another
financial institution holding company which would leave
defendants with their existing positions. Although characterized
by the Officer and Director Defendants as an offer to acquire and
takeover First Interstate by defendant First Bank System, in
reality it is nothing but a merger that would leave both
financial institutions relatively intact.
35. The reality of the proposed transaction between First
Interstate and defendant First Bank System is that (i) First Bank
System is only about one-half the size of First Interstate, (ii)
their bank subsidiaries have branches located, predominantly, in
different locations, different cities, and different states,
(iii) the Board of Directors of the merged company consist one-
half of "former" First Interstate directors, including certain of
the Officer and Director Defendants herein.
36. Indeed, First Interstate and defendant First Bank
System only have potentially overlapping operations in Colorado,
Montana and Wyoming, despite the fact that combined operations
would exist in 21 states. On the other hand, Wells Fargo only
has bank branches in California, while First Interstate has half
of its bank branches in California, despite operations over 13
states.
37. The Officer and Director Defendants supported defendant
First Bank System's bid as they would be provided with retaining
or obtaining personal and financial benefits, whereas they would
be subject to possibly losing their positions if the Wells Fargo
bid was accepted. For example, under the terms of the proposed
transactions with defendant First Bank System, (i) defendant
Siart would be the President and Chief Operating Officer of the
combined company, (ii) the bank of the combined company would
operate under the First Interstate name, (iii) membership on the
Board of Directors of the combined company would be even split
between present directors of First Interstate and present
directors of First Bank System, and (iv) the corporate
headquarters would remain in Minneapolis, but all business lines
would be run by personnel in Los Angeles, including certain of
the Officer and Director Defendants.
38. In order to further protect their positions and
financial benefits, the Officer and Director Defendants agreed
with defendant First Bank System to a "poison pill" provision.
The poison pill, designed to discourage other offers by other
interested buyers and designed to make a hostile takeover more
difficult, potentially obligates First Interstate to pay a $200
million break-up fee to defendant First Bank System if their
merger transaction is not completed.
39. In an attempt to further shore-up to the First Bank
System "sweetheart" deal, the Officer and Director Defendants
also agreed to a "lock-up" agreement, whereby First Bank System
holds and controls certain First Interstate shares in a fiduciary
capacity, and agreed to grant stock options to purchase 19.9% of
all outstanding shares of First Interstate common stock.
40. According to the New York Times in an article published
on November 7, 1995, defendant Siart publicly announced that
First Bank System's bid "was superior, despite its lower price,
because it offered the best opportunity for growth, whereas the
proposal from Wells Fargo focused mainly on cost-cutting."
41. It has been rumored that, prior to the announcement of
the transaction with First Bank System (and the poison pill
provision), Banc One was interested and willing to pay more than
the offering price proposed by defendant First Bank System.
42. In response, on or about November 13, 1995, Wells Fargo
announced a new bid valued at $10.6 billion to $10.9 billion, in
a proposed stock swap of 0.666 share of Wells Fargo common stock
for one share of First Interstate common stock, which bid Wells
Fargo intends to pursue through a tender offer directly to First
Interstate shareholders. The valid of the First Bank System's
bid was valued at this time at approximately $10.4 billion. By
the close of the market on November 13, 1995, the Wells Fargo bid
was worth $140.19 to $140.32 per First Interstate share, while
First Bank System's offer was only worth $137.80 per share.
43. To bolster its superior offer, Wells Fargo also
informed the Officer and Director Defendants that it would move
forward with all regulatory steps for approval of such a proposed
acquisition, that any rejection of the latest bid would lead to
Wells Fargo and First Bank System having 10 days to submit their
best offer to the First Interstate shareholders, that it would be
filing a legal action and seeking shareholder action to depose
Wells Fargo's current Board to be replaced by directors who
support the Wells Fargo higher offer, and that it was seeking
judicial intervention to negate the $200 million poison pill
provision. Wells Fargo Chairman, Paul Hazen, in a letter to
defendant Siart requested, if its last bid was not accepted, that
Wells Fargo and First Bank System submit their "best and final"
offers and present them side-by-side on a proxy ballot to the
First Interstate shareholders for a vote. Hazen went on to
state, "As you know, the economic benefit to our respective
stockholders that can be generated from the combination of our
two companies is enormous, and far outstrips the benefits of a
First Interstate First Bank System combination."
44. Upon the announcement by Wells Fargo, First Bank
System's Chairman, John Grundhofer, made a public statement that
the proposed merger between defendant First Bank System and First
Interstate would proceed to completion (stating, "this deal will
close as planned"), and accused Wells Fargo of exaggerating the
economic benefits of its new proposal, stating that he was
"incredulous". He further questioned Wells Fargo's ability to
manage the combined company better than First Bank System, and
that Wells Fargo has "no multistate operating experience and a
very limited recent acquisition history."
45. Wells Fargo has affirmatively filed with the Federal
Reserve for approval of its application to be permitted to
purchase and to increase its ownership of First Interstate common
stock to beyond 4.9%. That clearance has now been given as of
November 20, 1995.
46. On or about November 17, 1995, John Grundhofer, the
Chairman of First Bank System, and Richard Zona, its Chief
Financial Officer, held a conference with financial analysts, in
an attempt to debunk statements by Wells Fargo as to earnings and
cost savings projections should Wells Fargo's bid be accepted and
First Interstate be merged into Wells Fargo. First Bank System
accused Wells Fargo of projecting numbers which "are not
credible", that Wells Fargo has "overstated cost savings", and
that Wells Fargo has "understated revenue losses".
47. In addition, First Bank System, on or about November
17, 1995, published non-SEC approved, full-page advertisement in
California newspapers attacking the Wells Fargo offer, and
calling such a transaction between Wells Fargo and First
Interstate a "disaster for California", citing the possible loss
of jobs.
48. What First Bank System has failed to fully and fairly
disclose is the fact of and extent to which its own stock market
price, which is the basis of the value of the proposed stock swap
bid, has been orchestrated and manipulated by First Bank System
to be more buoyant than if the market price reflected the
market's response to the competition for Wells Fargo. Indeed, it
has been reported by the Wall Street Journal on November 20,
1995, that First Bank System has been actively buying up its own
stock since its announcement of its potential transaction with
First Interstate. This repurchase activity by First Bank System
has propped up the market price of First Bank System's stock, and
thus kept a higher value on its stock-swap bid than would
otherwise be the case. Indeed, since November 7, 1995, through
its brokerage, First Bank System has been an enormous buyer of
First Bank System stock, accounting for 47% of the total volume
of First Bank System stock for the trading days from November 6,
1995 through November 15, 1995, in purchases totalling
approximately 2.4 million to 2.7 million shares. Specifically,
First Bank System, through its stockbroker, Donaldson Lufkin &
Jenrette, bought more than half of all First Bank System shares
traded on four of those trading dates; nearly two-thirds of all
shares traded on November 7, 1995 (the day after the
announcement); yet, bought zero shares the four trading days
prior to the November 6, 1995 announcement. Furthermore, those
trades have, circumspectly, been timed so that purchases are made
by First Bank System when its stock is declining in price --
thus, keeping the First Bank System stock artificially high.
Upon inquiry, First Bank System, through its spokesperson Wendy
Raway, publicly declined to say whether First Bank System had
been engaging in repurchase of its shares since the announcement
of its agreement with First Interstate.
49. On the other hand, Wells Fargo has publicly announced
that it had affirmatively refrained from any repurchasing of its
own shares during the time of this bidding competition for First
Interstate.
50. On November 20, 1995, First Interstate issued a press
release, which was publicly disseminated, announcing that the
Board of Directors of First Interstate, i.e., the Officer and
Director Defendants, had rejected the latest Wells Fargo bid and
would be moving forward with consummation of the proposed
transaction with defendant First Bank System. In that press
release, the Officer and Director Defendants made the false
representation to all First Interstate shareholders, including
plaintiff and the members of the Class, that the Wells Fargo
increased offer was "not in the best interests of First
Interstate and its shareholders", while stating that the First
Bank System offer was in the best interests of First Interstate
and its shareholders. The Officer and Director Defendants
further instructed the First Interstate shareholders to reject
the Wells Fargo offer and not to tender their shares to Wells
Fargo.
51. Defendant Siart, on behalf of all of the Officer and
Director Defendants, issued an open letter to the First
Interstate shareholders, as follows:
Dear First Interstate Shareholder:
On November 6, 1995, First Interstate announced
that it had entered into a merger agreement with First
Bank System, Inc. (FBS) pursuant to which First
Interstate would merge with a subsidiary of FBS and
each of your shares of First Interstate common stock
would be converted into 2.6 shares of FBS common stock.
On November 13, 1995, Wells Fargo & Company
announced that it intended to commence an unsolicited
exchange offer in which holders of First Interstate
common stock would have the right to exchange each of
their shares for two-thirds of a share of Wells common
stock. (The Wells exchange offer has not yet commenced
and it may be several weeks or longer before you
receive any materials with respect to it.) This
announcement followed the First Interstate Board's
rejection of Wells' earlier unsolicited proposal to
merge with First Interstate in a transaction in which
First Interstate's shareholders would receive .625 (or
possibly .65) shares of Wells common stock for each
First Interstate share.
Your Board of Directors believes that the merger
with FBS is in the best interests of First Interstate
and its shareholders. Accordingly, the Board
recommends that you reject the Wells Fargo & Company
exchange offer and, when and if such offer is
commenced, not tender any of your shares to Wells
Fargo.
Your Board's consideration of Wells Fargo's
revised proposal and the FBS merger follows an
extensive process of evaluating the company's strategic
alternatives for enhancing shareholder value. This
process began several months prior to Wells' initial
unsolicited bid and included discussions and
evaluations of several potential merger possibilities,
including one with Wells Fargo. The record is clear.
After Wells made its initial takeover proposal public
on October 18, on behalf of your Board I engaged in
extensive discussions with Wells Fargo, as well as with
other potential merger candidates. A full account of
that process is contained in the Schedule 14D-9 filed
today by First Interstate with the Securities and
Exchange Commission and enclosed with this letter.
The First Interstate Board believes that the
strategic combination of First Interstate and FBS
creates a dynamic, lower risk, multi-state banking
alliance that will provide substantial near-term and
long-range value to you. Your Board and management
believe that this combination offers better value to
First Interstate's shareholders than the Wells offer.
In reaching its determination to reaffirm the FBS
merger and recommend rejection of the Wells offer, the
First Interstate Board relied upon a number of factors,
including: -- the greater earnings per share and cash
flow per share of an FBS combination compared to a
Wells Fargo combination; -- the higher dividends per
share to be received by First Interstate shareholders
as a result of the FBS merger than with a Wells Fargo
combination; -- the reduced credit risk resulting from
operations in 21 states under the FBS merger as
contrasted with the substantially greater exposure to
the California market that would result from a merger
with Wells; -- the superior market position created by
an FBS merger--a top three ranking, in terms of deposit
market share, in ten states--as opposed to increasing
First Interstate's top three ranking in only one state
in a Wells merger; -- the substantial loss of revenue,
as compared to Wells' public statements, that would
result from Wells' proposed branch closings, other cost
saving measures and antitrust divestitures (revenue
losses not present in the FBS merger); -- the
dependence of the value of the Wells offer on Wells'
sustaining its high price-to-earnings ratio relative to
other high quality bank stocks, including FBS; --
Wells' use of purchase accounting for the transaction,
which creates additional goodwill in excess of $7
billion, which would substantially reduce future
earnings and returns on equity; and -- the opinions of
First Interstate's independent financial advisors,
Goldman Sachs & Co. and Morgan Stanley & Co.
Incorporated, that the exchange ratio of the FBS merger
is fair to First Interstate shareholders.
We understand very well why our highly successful
multi-state franchise, with its operating scope and
strengths, is attractive to Wells Fargo. Our concern
is not with Wells' interests, but the strategic
alternative that is best for you.
We expect the First Interstate/FBS combined
company to achieve 1997 EPS accretion of 23% and a
return on equity of 27.5%, with virtually no tangible
book value dilution. Because cost reductions would be
achieved through bank office and staff cuts and systems
integration, they can be accomplished quickly and with
minimal impact to our customers and revenue. Under
pooling accounting, the combined company will avoid the
creation of goodwill and still be able to continue
returning excess capital to shareholders through share
repurchases. The company will have a reduced risk
profile and an expanded foundation for future business
growth across our 21-state service territory. It will
have an exceptional, low-cost deposit base and be a
leader in pioneering alternative delivery systems. And
the combined company will be the number one ranked bank
in the country in corporate cards, purchasing cards,
corporate trust and ATM/POS, in addition to being among
the top five banks in merchant card processing and
asset management.
Your Board and management are convinced that the
FBS merger is a winning combination for the long-term
benefit of our shareholders. It is unfortunate that a
respected institution like Wells Fargo would jeopardize
its reputation by ignoring your Board of Directors'
carefully considered decision and choosing instead to
recklessly pursue its hostile takeover proposal. We
will not be deterred or distracted from completing our
pending merger with First Bank on your behalf.
A more detailed description of the factors
considered by your Board of Directors is contained in
the Schedule 14D-9. We urge you to read it carefully
and in its entirety so that you will be fully informed
as to the Board's recommendation.
The date of the special meeting of First
Interstate's shareholders which will be called to
consider the proposed merger with FBS has not yet been
set. First Interstate is not soliciting proxies from
shareholders with respect to the FBS merger at this
time. A Joint Proxy Statement/Prospectus of First
Interstate and FBS will be mailed to the Company's
shareholders in connection with the special meeting of
each company's shareholders which will be called to
vote upon the merger.
On behalf of the Board of Directors,
William E.B. Siart
Chairman and Chief Executive Officer
52. Grundhofer of defendant First Bank System quickly
followed with a public statement, supporting the decision and
statements of the Officer and Director Defendants: "The
continued support of the people who serve on the board of First
Interstate is gratifying and welcome news. We thank them for
sharing our conviction that the union of First Bank System and
First Interstate is clearly in the best interests of
shareholders, employees and the communities we serve."
53. As to November 20, 1995, the competing offers were
valued at approximately $10.4 billion for the First Bank System
bid and approximately $10.7 billion for the Wells Fargo bid.
FIRST CAUSE OF ACTION
Breach of Fiduciary Duty
(Direct and Secondary Liability of the Officer and Director
Defendants) Secondary Liability of Defendant First Bank System)
54. Plaintiff hereby incorporates by reference paragraphs 1
through 53 above as though fully set forth hereinafter.
55. The Officer and Director Defendants, and each of them,
owed to plaintiff and the Class, as First Interstate
shareholders, a fiduciary duty of the highest good faith,
integrity and fair dealing, and said fiduciary relationship
existed at all relevant times herein.
56. The Officer and Director Defendants, and each of them,
breached their fiduciary duties to plaintiff and the Class by the
acts and omissions set forth above.
57. The Officer and Director Defendants, and each of them,
committed the acts and omissions alleged herein with the intent
to gain an advantage over plaintiff and the Class and to benefit
themselves to the detriment of plaintiff and the Class.
58. The breaches of fiduciary duty by the Officer and
Director Defendants, and each of them, caused detriment to
plaintiff and the Class, including but not limited to (i) the
wrongful dissipation of assets by the Officer and Director
Defendants obligating First Interstate to a "poison pill"
provision with defendant First Bank System providing a break-up
fee of $200 million; (ii) refusing to accept or support the offer
which provides the greatest return to the First Interstate
shareholders and is in their best interests; (iii) by refusing to
accept or support any offer which does not protect the Officer
and Director Defendants' own positions of power, prestige and
money; and (iv) by not making available, fully and fairly, to the
First Interstate shareholders, all of the offers that have been
made and the terms thereof so that they can make an informed
decision regarding the offers.
59. Defendant First Bank System aided and abetted,
encouraged and rendered substantial assistance in accomplishing
the breaches of fiduciary duties committed by the Officer and
Director Defendants, and each of them. Without the involvement
of and agreement by defendant First Bank System to act as a
"white knight" merger partner to First Interstate, the Officer
and Directors Defendants could not accomplish their wrongful
goals, including the retention or obtaining of lucrative
positions with the ultimately existing corporation and bank. In
return of its granting of preferential, job-saving provisions to
the Officer and Director Defendants, and the making of a merger
offer (although less than any other offer made to date),
defendant First Bank System is to receive ownership of First
Interstate at a reduced "price", and defendant First Bank System
is pledged to receive $200 million if the deal with First
Interstate does not go through. In taking action, as
particularized herein, to aid and abet and substantially assist
the commission of these wrongful acts and other wrongdoings
complained of, defendant First Bank System acted with an
awareness of its primary wrongdoing and realized that its conduct
would substantially assist the accomplishment of the wrongful
conduct, wrongful goals, and wrongdoing.
60. The Officer and Director Defendants, and each of them,
aided and abetted, encouraged and rendered substantial assistance
in accomplishing the wrongful conduct and their wrongful goals
and other wrongdoing complained of herein. In taking action, as
particularized herein, to aid and abet and substantially assist
the commission of these wrongful acts and other wrongdoings
complained of, each of the defendants acted with an awareness of
his primary wrongdoing and realized that his conduct would
substantially assist the accomplishment of the wrongful conduct,
wrongful goals, and wrongdoing.
61. Defendants, and each of them, pursued a conspiracy,
common enterprise and common course of conduct to accomplish the
wrongs complained of herein. The purpose and effect of the
conspiracy, common enterprise and common course of conduct
complained of was, inter alia, to allow continuing monetary and
non-monetary benefits to defendants, and to allow continuing
control of First Interstate operations by the Officer and
Director Defendants, to the detriment of plaintiff and the Class.
Defendants accomplished their conspiracy, common enterprise and
common course of conduct by making misrepresentations and
concealing information, as specified herein, and by breaching
their fiduciary obligations, and by taking steps and making
statements in furtherance of their wrongdoing as specified
herein. Each defendant was a direct, necessary and substantial
participant in the conspiracy, common enterprise and common
course of conduct complained of herein, and was aware of his/its
overall contribution to, and furtherance of the conspiracy,
common enterprise and common course of conduct. Defendants' acts
of conspiracy include, inter alia, all of the acts that each of
them are alleged to have committed in furtherance of the wrongful
conduct complained of herein, except those relating to the
reaching of agreements or understandings sufficient to
characterize their conduct as conspiratorial.
62. Other persons and entities not named as defendants
herein were also participants in the conspiracy alleged and acted
in furtherance of the objectives of the conspiracy as co-
conspirators.
63. As a result of the defendants', and each of their,
wrongful conduct, plaintiff and the other members of the Class
have sustained and will sustain economic losses and other general
and specific damages, including but not limited to the amounts
which the First Interstate shareholders could have received if
the highest offer had been accepted and supported by the
defendants, and the amount of the $200 million "poison pill"
which potentially will reduce the assets of First Interstate,
loss of future income, and lost profits, all in an amount to be
determined according to proof.
64. The wrongful acts of defendants, and each of them, were
done maliciously, oppressively, and fraudulently, and plaintiff
and the other members of the Class are entitled to punitive and
exemplary damages in an amount to be ascertained according to
proof, which is appropriate to punish or set an example of the
defendants, and each of them.
WHEREFORE, plaintiff and the Class pray for relief as set
forth below.
SECOND CAUSE OF ACTION
Abuse of Control
(Direct and Secondary Liability of the Officer and Director
Defendants; Secondary Liability of Defendant First Bank System)
65. Plaintiff hereby incorporates by reference paragraphs l
through 53 above as though fully set forth hereinafter.
66. The Officer and Director Defendants, and each of them,
dominated and controlled the business and corporate affairs of
First Interstate through the corporate positions, relationship
with the other defendants, personal stock ownership, and their
control over other related entities and shareholders. There
exists an imbalance and disparity of knowledge and economic power
between the Officer and Director Defendants, and the Plaintiff
Class. In doing the acts alleged hereinbefore, the defendants,
and each of them, have acted to further their own private
financial interests to the detriment of the interests of
plaintiff and the Class, in flagrant abuse of their positions of
corporate control.
67. The Officer and Director Defendants, and each of them,
caused detriment to plaintiff and the Class by their abuses of
control, including but not limited to (i) the wrongful
dissipation of assets by the defendants obligating First
Interstate to a "poison pill" provision with defendant First Bank
System providing a break-up fee of $200 million; (ii) not
attempting to realize the highest recovery possible for the First
Interstate shareholders in a sale or merger of First Interstate;
(iii) by refusing to accept or support any offer which does not
protect defendants' own positions of power, prestige and money;
and (iv) by not making available, fully and fairly, to the First
Interstate shareholders, all of the offers that have been made
and the terms thereof so that they can make an informed decision
regarding the offers.
68. The Director and Officer Defendants, and each of them,
knew that the acts of the other defendants constituted a breach
of duty and an abuse of control. Nevertheless, each Director and
Officer Defendants conspired and acted in concert with the other
defendants to accomplish the improper acts and transactions
alleged. Defendants' actions were illegal and improper, and are
in furtherance of the common design to achieve the unlawful
purpose of the conspiracy. Each of the Director and Officer
Defendants had knowledge of the conspiracy and its unlawful
purpose.
69. Defendant First Bank System aided and abetted,
encouraged and rendered substantial assistance in accomplishing
the abuses of control committed by the Officer and Director
Defendants, and each of them. Without the involvement of and
agreement by defendant First Bank System to act as a "white
knight" merger partner to First Interstate, the Officer and
Directors Defendants could not accomplish their wrongful goals,
including the retention or obtaining of lucrative positions with
the ultimately existing corporation and bank. In return of its
granting of preferential, job-saving provisions to the Officer
and Director Defendants, and the making of a merger offer
(although less than any other offer made to date), defendant
First Bank System is to receive ownership of First Interstate at
a reduced "price", and defendant First Bank System is pledged to
receive $200 million if the deal with First Interstate does not
go through. In taking action, as particularized herein, to aid
and abet and substantially assist the commission of these
wrongful acts and other wrongdoings complained of, defendant
First Bank System acted with an awareness of its primary
wrongdoing and realized that its conduct would substantially
assist the accomplishment of the wrongful conduct, wrongful
goals, and wrongdoing.
70. The Officer and Director Defendants and each of them,
aided and abetted, encouraged and rendered substantial assistance
in accomplishing the wrongful conduct and their wrongful goals
and other wrongdoing complained of herein. In taking action, as
particularized herein, to aid and abet and substantially assist
the commission of these wrongful acts and other wrongdoings
complained of, each of the defendants acted with an awareness of
his primary wrongdoing and realized that his conduct would
substantially assist the accomplishment of the wrongful conduct,
wrongful goals, and wrongdoing.
71. Defendants, and each of them, pursued a conspiracy,
common enterprise and common course of conduct to accomplish the
wrongs complained of herein. The purpose and effect of the
conspiracy, common enterprise and common course of conduct
complained of was, inter alia, to allow continuing monetary and
non-monetary benefits to defendants, and to allow continuing
control of First Interstate operations by defendants, to the
detriment of plaintiff and the Class. Defendants accomplished
their conspiracy, common enterprise and common course of conduct
by making misrepresentations and concealing information, as
specified herein, and by breaching their fiduciary obligations,
and by taking steps and making statements in furtherance of their
wrongdoing as specified herein. Each defendant was a direct,
necessary and substantial participant in the conspiracy, common
enterprise and common course of conduct complained of herein, and
was aware of his/its overall contribution to, and furtherance of
the conspiracy, common enterprise and common course of conduct.
Defendants' acts of conspiracy include, inter alia, all of the
acts that each of them are alleged to have committed in
furtherance of the wrongful conduct complained of herein, except
those relating to the reaching of agreements or understandings
sufficient to characterize their conduct as conspiratorial.
72. Other persons and entities not named as defendants
herein were also participants in the conspiracy alleged and acted
in furtherance of the objectives of the conspiracy as co-
conspirators.
73. As a result of the defendants', and each of their,
wrongful conduct, plaintiff and the other members of the Class
have sustained and will sustain economic losses and other general
and specific damages, including but not limited to the amounts
which the First Interstate shareholders could have received if
the highest offer had been accepted and supported by the
defendants, and the amount of the $200 million "poison pill"
which potentially will reduce the assets of First Interstate,
loss of future income, and lost profits, all in an amount to be
determined according to proof.
74. The wrongful acts of the defendants, and each of them,
were done maliciously, oppressively, and fraudulently, and
plaintiff and the other members of the Class are entitled to
punitive and exemplary damages in an amount to be ascertained
according to proof, which is appropriate to punish or set an
example of the defendants, and each of them.
WHEREFORE, plaintiff and the Class pray for relief as set
forth below.
THIRD CAUSE OF ACTION
Unfair Business Practices
(Direct and Secondary Liability Against All Defendants)
75. Plaintiff hereby incorporates by reference paragraphs 1
through 53 above as though fully set forth hereinafter.
33. By their wrongful conduct, as set forth above,
defendants, and each of them, have engaged in unfair competition
including unlawful, unfair or fraudulent business practice, in
violation of business and Professions Code section 17200 et seq.,
and have destroyed or prevented fair and honest competition for
the purchase of First Interstate common stock as part of a merger
or acquisition of First Interstate.
76. Defendants, and each of them, aided and abetted,
encouraged and rendered substantial assistance in accomplishing
the wrongful conduct and their wrongful goals and other
wrongdoing complained of herein. In taking action, as
particularized herein, to aid and abet and substantially assist
the commission of these wrongful acts and other wrongdoings
complained of, each of the defendants acted with an awareness of
his or its primary wrongdoing and realized that his/its conduct
would substantially assist the accomplishment of the wrongful
conduct, wrongful goals, and wrongdoing.
77. Plaintiff and the Class have standing to bring this
cause of action for injunctive relief, pursuant to California
Business & Professions Code section 17203.
78. If defendants, and each of them, proceed with a merger
between First Interstate and defendant First Bank System at the
price offered by First Bank System, it will irreparably harm the
First Interstate shareholders, namely plaintiff and the Class,
unless appropriate injunctive relief is granted. If defendants,
and each of them, proceed with payment of a $200 million break up
fee pursuant to the "poison pill" provision of the agreement
between First Interstate and defendant First Bank System, it is
will irreparably harm the First Interstate shareholders, namely
plaintiff and the Class, unless appropriate injunctive relief is
granted.
WHEREFORE, plaintiff and the Class pray for relief as set
forth below.
FOURTH CAUSE OF ACTION
Uniust Enrichment
(Direct Liability Against All Defendants)
79. Plaintiff hereby incorporates by reference paragraphs 1
through 53 above as though fully set forth hereinafter.
80. If defendants, and each of them, proceed with a merger
between First Interstate and defendant First Bank System at the
price offered by First Bank System, rather than accepting the
higher offer(s) by Wells Fargo, or soliciting and attempting to
obtain the highest offer possible for the benefit of the First
Interstate shareholders, because the Officer and Director
Defendants want to keep and obtain personal and financial
benefits for themselves instead, this would be an unjust
enrichment to the Officer and Director Defendants, and each of
them, to the detriment of plaintiff and the Class.
81. If defendant First Bank System obtains payment of a
$200 million break up fee pursuant to the "poison pill" provision
of the agreement between First Interstate and defendant First
Bank System, for which compensation defendant First Bank System
is not entitled, has not earned, and is not the result of any
benefit to the First Interstate shareholders, this would be an
unjust enrichment to defendant First Bank System, to the
detriment of plaintiff and the Class.
82. Any unjust enrichment obtained by the defendants, and
each of them, should be disgorged, and placed in trust for the
financial benefit of plaintiff and the Class.
WHEREFORE, plaintiff and the Class pray for relief as set
forth below.
FIFTH CAUSE OF ACTION
Constructive Fraud
(Direct and Secondary Liability Against the
Officer and Director Defendants)
83. Plaintiff hereby incorporates by reference paragraphs 1
through 53 above as though fully set forth hereinafter.
84. As a result of the tortious conduct of the Officer and
Director Defendants, and each of them, as set forth above, and
because of the fiduciary relationship between First Interstate
shareholders and these defendants, the Officer and Director
Defendants are liable to plaintiff and the Class for constructive
fraud.
85. The Officer and Director Defendants, and each of them,
aided and abetted, encouraged and rendered substantial assistance
in accomplishing the wrongful conduct and their wrongful goals
and other wrongdoing complained of herein. In taking action, as
particularized herein, to aid and abet and substantially assist
the commission of these wrongful acts and other wrongdoings
complained of, each of the defendants acted with an awareness of
his primary wrongdoing and realized that his conduct would
substantially assist the accomplishment of the wrongful conduct,
wrongful goals, and wrongdoing.
86. As a result of the Officer and Director Defendants',
and each of their, wrongful conduct, plaintiff and the Class have
suffered and continue to suffer economic losses, and other
general and specific damages, all in an amount to be determined
according to proof at time of trial.
WHEREFORE, plaintiff and the Class pray for relief as
follows:
1. Compensatory and general damages according to proof;
2. Special damages according to proof;
3. Prejudgment interest at the maximum legal rate;
4. Punitive and exemplary damages according to proof;
5. For injunctive relief;
6. Costs of the proceedings herein;
7. Reasonable attorneys' fees; and
8. All such other and further relief as the Court deems
just.
DATED: November 22, 1995 BLECHER & COLLINS, P.C.
By:____________________
MAXWELL M. BLECHER
COTCHETT & PITRE
By:____________________
MARIE SETH WEINER
Attorneys for Plaintiff
and the Class