EXHIBIT 2.1
AGREEMENT
AND
PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") entered into as
of the 29th day of September, 1999, by and between NORTH COUNTY BANCORP
("Company"), a California corporation, and WELLS FARGO & COMPANY ("Wells
Fargo"), a Delaware corporation.
WHEREAS, the parties hereto desire to effect a reorganization whereby a
wholly-owned subsidiary of Wells Fargo will merge with and into Company (the
"Merger") pursuant to an agreement and plan of merger (the "Merger Agreement")
in substantially the form attached hereto as Exhibit A, which provides, among
other things, for the exchange of the shares of Common Stock of Company, no par
value ("Company Common Stock"), outstanding immediately prior to the time the
Merger becomes effective in accordance with the provisions of the Merger
Agreement into shares of voting Common Stock of Wells Fargo of the par value of
$1-2/3 per share ("Wells Fargo Common Stock"),
NOW, THEREFORE, to effect such reorganization and in consideration of
the premises and the mutual covenants and agreements contained herein, the
parties hereto do hereby represent, warrant, covenant and agree as follows:
1. BASIC PLAN OF REORGANIZATION
(a) MERGER. Subject to the terms and conditions contained herein, a
wholly-owned subsidiary of Wells Fargo (the "Merger Co.") will be merged by
statutory merger with and into Company pursuant to the Merger Agreement, with
Company as the surviving corporation, in which merger each share of Company
Common Stock outstanding immediately prior to the Effective Time of the Merger
(as defined below) (other than shares as to which statutory dissenters'
appraisal rights have been exercised) will be exchanged for the number of shares
of Wells Fargo Common Stock determined by dividing the Adjusted Wells Fargo
Shares by the number of shares of Company Common Stock then outstanding.
The "Adjusted Wells Fargo Shares" shall be a number equal to the
Aggregate Share Amount divided by the Wells Fargo Measurement Price. The "Wells
Fargo Measurement Price" is defined as the average of the closing prices of a
share of Wells Fargo Common Stock as reported on the consolidated tape of the
New York Stock Exchange during the period of 20 trading days ending on the day
immediately preceding the meeting of shareholders required by paragraph 4(c) of
this Agreement. The "Aggregate Share Amount" shall be $112,000,000 plus the
aggregate exercise price of all Options exercised by cash payments between the
date hereof and the day immediately prior to the Closing Date minus the Cash
Surrender Amount. The "Cash Surrender Amount" shall equal the difference
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between (i) the product of (A) the "Fair Market Value Per Share" multiplied
by (B) the number of Redeemed Options, minus (ii) the aggregate exercise
price of all Redeemed Options. "Fair Market Value Per Share" shall mean
$21.00. "Option" has the meaning given it in paragraph 2(c).
(b) WELLS FARGO COMMON STOCK ADJUSTMENTS. If, between the date hereof
and the Effective Time of the Merger, shares of Wells Fargo Common Stock shall
be changed into a different number of shares or a different class of shares by
reason of any reclassification, recapitalization, split-up, combination,
exchange of shares or readjustment, or if a stock dividend thereon shall be
declared with a record date within such period (a "Common Stock Adjustment"),
then the number of shares of Wells Fargo Common Stock into which a share of
Company Common Stock shall be converted pursuant to subparagraph (a), above,
will be appropriately and proportionately adjusted so that the number of such
shares of Wells Fargo Common Stock into which a share of Company Common Stock
shall be converted will equal the number of shares of Wells Fargo Common Stock
which holders of shares of Company Common Stock would have received pursuant to
such Common Stock Adjustment had the record date therefor been immediately
following the Effective Time of the Merger.
(c) FRACTIONAL SHARES. No fractional shares of Wells Fargo Common Stock
and no certificates or scrip certificates therefor shall be issued to represent
any such fractional interest, and any holder thereof shall be paid an amount of
cash equal to the product obtained by multiplying the fractional share interest
to which such holder is entitled by the average of the closing prices of a share
of Wells Fargo Common Stock as reported by the consolidated tape of the New York
Stock Exchange for each of the five (5) trading days ending on the day
immediately preceding the meeting of shareholders required by paragraph 4(c) of
this Agreement.
(d) MECHANICS OF CLOSING MERGER. Subject to the terms and conditions
set forth herein, the Merger Agreement shall be executed and a Certificate of
Merger shall be filed with the Secretary of State of the State of California
within ten (10) business days following the satisfaction or waiver of all
conditions precedent set forth in Sections 6 and 7 of this Agreement or on such
other date as may be agreed to by the parties (the "Closing Date"), provided
that the Closing Date shall not occur prior to January 15, 2000. Each of the
parties agrees to use its best efforts to cause the Merger to be completed as
soon as practicable after the receipt of final regulatory approval of the Merger
and the expiration of all required waiting periods. The time that the filing
referred to in the first sentence of this paragraph is made is herein referred
to as the "Time of Filing." The day on which such filing is made and accepted is
herein referred to as the "Effective Date of the Merger." The "Effective Time of
the Merger" shall be 11:59 p.m. Sacramento, California time on the Effective
Date of the Merger. At the Effective Time of the Merger on the Effective Date of
the Merger, the separate existence of Merger Co. shall cease and Merger Co. will
be merged with and into Company pursuant to the Merger Agreement.
The closing of the transactions contemplated by this Agreement and the
Merger Agreement (the "Closing") shall take place on the Closing Date at the
offices of Wells Fargo, 420 Montgomery Street, San Francisco, California, or
such other place mutually agreed upon by Wells Fargo and Company.
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(e) The terms "Schedule" and "Schedules" as used in this Agreement
refer to, collectively, the Schedules to be delivered by, respectively, the
Company and Wells Fargo, to one another. The parties acknowledge that the
Schedules have been delivered prior to the execution of this Agreement.
2. REPRESENTATIONS AND WARRANTIES OF COMPANY. Company represents and
warrants to Wells Fargo as follows:
(a) ORGANIZATION AND AUTHORITY. Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California, is duly qualified to do business and is in good standing in all
jurisdictions where its ownership or leasing of property or the conduct of its
business requires it to be so qualified and failure to be so qualified would
have a material adverse effect on Company and the Company Subsidiaries taken as
a whole and has corporate power and authority to own its properties and assets
and to carry on its business as it is now being conducted. Company is registered
as a bank holding company with the Federal Reserve Board under the Bank Holding
Company Act of 1956, as amended (the "BHC Act"). Company has furnished Wells
Fargo true and correct copies of its articles of incorporation and by-laws, as
amended.
(b) COMPANY'S SUBSIDIARIES. Schedule 2(b) sets forth a complete and
correct list of all of Company's subsidiaries as of the date hereof
(individually a "Company Subsidiary" and collectively the "Company
Subsidiaries"), all shares of the outstanding capital stock of each of which,
except as set forth on Schedule 2(b), are owned directly or indirectly by
Company. No equity security of any Company Subsidiary is or may be required to
be issued by reason of any option, warrant, scrip, preemptive right, right to
subscribe to, call or commitment of any character whatsoever relating to, or
security or right convertible into, shares of any capital stock of such
subsidiary, and there are no contracts, commitments, understandings or
arrangements by which any Company Subsidiary is bound to issue additional shares
of its capital stock, or any option, warrant or right to purchase or acquire any
additional shares of its capital stock. All of such shares so owned by Company
are fully paid and nonassessable and are owned by it free and clear of any lien,
claim, charge, option, encumbrance or agreement with respect thereto. Each
Company Subsidiary is a corporation or state banking association duly organized,
validly existing, duly qualified to do business and in good standing under the
laws of its jurisdiction of incorporation, and has corporate power and authority
to own or lease its properties and assets and to carry on its business as it is
now being conducted. Except as set forth on Schedule 2(b), Company does not own
beneficially, directly or indirectly, more than 5% of any class of equity
securities or similar interests of any corporation, bank, business trust,
association or similar organization, and is not, directly or indirectly, a
partner in any partnership or party to any joint venture.
(c) CAPITALIZATION. The authorized capital stock of Company consists of
10,000,000 shares of common stock, no par value per share, of which as of the
close of business on June 30, 1999, 4,917,798 shares of common stock were
outstanding and no shares of common stock were held in the treasury. The maximum
number of shares of Company Common Stock (assuming for this purpose
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that phantom shares and other share-equivalents constitute Company Common
Stock) that would be outstanding as of the Effective Date of the Merger if
all options, warrants, conversion rights and other rights with respect
thereto were exercised is 5,498,141. All of the outstanding shares of capital
stock of Company have been duly and validly authorized and issued and are
fully paid and nonassessable. Except as set forth in Schedule 2(c), there are
no outstanding subscriptions, contracts, conversion privileges, options,
warrants, calls, preemptive rights or other rights obligating Company or any
Company Subsidiary to issue, sell or otherwise dispose of, or to purchase,
redeem or otherwise acquire, any shares of capital stock of Company or any
Company Subsidiary. As of the date hereof, the total number of options
("Options") and the exercise prices thereof issued pursuant to the Company's
1983 Incentive Stock Option Plan, the 1991 Stock Option Plan and the 1997
Stock Option Plan (collectively, the "Stock Option Plans") are as set forth
on Schedule 2(c). Since June 30, 1999, no shares of Company capital stock
have been purchased, redeemed or otherwise acquired, directly or indirectly,
by Company or any Company Subsidiary and no cash or stock dividends or other
distributions have been declared, set aside, made or paid to the shareholders
of Company.
(d) AUTHORIZATION. Company has the corporate power and authority to
enter into this Agreement and the Merger Agreement and, subject to any required
approvals of its shareholders, to carry out its obligations hereunder and
thereunder. The execution, delivery and performance of this Agreement and the
Merger Agreement by Company and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by the Board of
Directors of Company. Subject to such approvals of shareholders and of
government agencies and other governing boards having regulatory authority over
Company as may be required by statute or regulation, this Agreement and the
Merger Agreement are valid and binding obligations of Company enforceable
against Company in accordance with their respective terms.
Except as set forth on Schedule 2(d), neither the execution, delivery
and performance by Company of this Agreement or the Merger Agreement, nor the
consummation of the transactions contemplated hereby and thereby, nor compliance
by Company with any of the provisions hereof or thereof, will (i) violate,
conflict with, or result in a breach of any provision of, or constitute a
default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination of, or accelerate the
performance required by, or result in a right of termination or acceleration of,
or result in the creation of, any lien, security interest, charge or encumbrance
upon any of the properties or assets of Company or any Company Subsidiary under
any of the terms, conditions or provisions of (x) its articles of incorporation
or by-laws or (y) any material note, bond, mortgage, indenture, deed of trust,
license, lease, agreement or other instrument or obligation to which Company or
any Company Subsidiary is a party or by which it may be bound, or to which
Company or any Company Subsidiary or any of the properties or assets of Company
or any Company Subsidiary may be subject, or (ii) subject to compliance with the
statutes and regulations referred to in the next paragraph, to the best
knowledge of Company, violate any judgment, ruling, order, writ, injunction,
decree, statute, rule or regulation applicable to Company or any Company
Subsidiary or any of their respective properties or assets.
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Other than in connection or in compliance with the provisions of the
Securities Act of 1933, as amended, and the rules and regulations thereunder
(the "Securities Act"), the Securities Exchange Act of 1934, as amended, and the
rules and regulations thereunder (the "Exchange Act"), the securities or blue
sky laws of the various states or filings, consents, reviews, authorizations,
approvals or exemptions required under the BHC Act, the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 ("HSR Act") or the California Financial Code,
and filings required to effect the Merger under California law, no notice to,
filing with, exemption or review by, or authorization, consent or approval of,
any public body or authority is necessary for the consummation by Company of the
transactions contemplated by this Agreement and the Merger Agreement.
(e) COMPANY FINANCIAL STATEMENTS. The consolidated balance sheets of
Company and Company's Subsidiaries as of December 31, 1998 and 1997 and related
consolidated statements of income, stockholders' equity and cash flows for the
three years ended December 31, 1998, together with the notes thereto, certified
by PRICEWATERHOUSECOOPERS, LLP and included in Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1998 (the "Company 10-K") as filed
with the Securities and Exchange Commission (the "SEC"), and the unaudited
consolidated statements of financial condition of Company and Company's
Subsidiaries as of June 30, 1999 and the related unaudited consolidated
statements of income, stockholders' equity and cash flows for the six (6) months
then ended included in Company's Quarterly Report on Form 10-Q for the fiscal
quarter ended June 30, 1999 as filed with the SEC (collectively, the "Company
Financial Statements"), have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis and present fairly (subject,
in the case of financial statements for interim periods, to normal recurring
adjustments) the consolidated financial position of Company and Company's
Subsidiaries at the dates and the consolidated results of operations and cash
flows of Company and Company's Subsidiaries for the periods stated therein.
(f) REPORTS. Since December 31, 1993, Company and each Company
Subsidiary has filed all reports, registrations and statements, together with
any required amendments thereto, that it was required to file with (i) the SEC,
including, but not limited to, Forms 10-K, Forms 10-Q and proxy statements, (ii)
the Federal Reserve Board, (iii) the Federal Deposit Insurance Corporation (the
"FDIC"), and (iv) any applicable state securities or banking authorities. All
such reports and statements filed with any such regulatory body or authority are
collectively referred to herein as the "Company Reports." As of their respective
dates, the Company Reports complied in all material respects with all the rules
and regulations promulgated by the SEC, the Federal Reserve Board, the FDIC, and
applicable state securities or banking authorities, as the case may be, and did
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Copies of all the Company Reports have been made available to Wells
Fargo by Company.
(g) PROPERTIES AND LEASES. Except as may be reflected in the Company
Financial Statements and except for any lien for current taxes not yet
delinquent, Company and each Company Subsidiary have
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good title free and clear of any material liens, claims, charges, options,
encumbrances or similar restrictions to all the real and personal property
reflected in Company's consolidated balance sheet as of June 30, 1999
included in Company's Quarterly Report on Form 10-Q for the period then
ended, and all real and personal property acquired since such date, except
such real and personal property as has been disposed of in the ordinary
course of business. All leases of real property and all other leases material
to Company or any Company Subsidiary pursuant to which Company or such
Company Subsidiary, as lessee, leases real or personal property, which leases
are described on Schedule 2(g), are valid and effective in accordance with
their respective terms, and there is not, under any such lease, any material
existing default by Company or such Company Subsidiary or any event which,
with notice or lapse of time or both, would constitute such a material
default. Substantially all Company's and each Company Subsidiary's buildings
and equipment in regular use have been well maintained and are in good and
serviceable condition, reasonable wear and tear excepted.
(h) TAXES. Each of Company and the Company Subsidiaries has filed
all federal, state, county, local and foreign tax returns, including
information returns, required to be filed by it, and paid all taxes owed by
it, including those with respect to income, withholding, social security,
unemployment, workers compensation, franchise, ad valorem, premium, excise
and sales taxes, and no taxes shown on such returns to be owed by it or
assessments received by it are delinquent. The federal income tax returns of
Company and the Company Subsidiaries for the fiscal year ended December 31,
1995, and for all fiscal years prior thereto, are for the purposes of routine
audit by the Internal Revenue Service closed because of the statute of
limitations, and no claims for additional taxes for such fiscal years are
pending. Except only as set forth on schedule 2(h), (i) neither Company nor
any Company Subsidiary is a party to any pending action or proceeding, nor is
any such action or proceeding threatened by any governmental authority, for
the assessment or collection of taxes, interest, penalties, assessments or
deficiencies and (ii) no issue has been raised by any federal, state, local
or foreign taxing authority in connection with an audit or examination of the
tax returns, business or properties of Company or any Company Subsidiary
which has not been settled, resolved and fully satisfied. Each of Company and
the Company Subsidiaries has paid all taxes owed or which it is required to
withhold from amounts owing to employees, creditors or other third parties.
The consolidated balance sheet as of June 30, 1999, referred to in paragraph
2(e) hereof, includes adequate provision for all accrued but unpaid federal,
state, county, local and foreign taxes, interest, penalties, assessments or
deficiencies of Company and the Company Subsidiaries with respect to all
periods through the date thereof.
(i) ABSENCE OF CERTAIN CHANGES. Since June 30, 1999 there has been no
change in the business, financial condition or results of operations of Company
or any Company Subsidiary, which has had, or may reasonably be expected to have,
a material adverse effect on the business, financial condition or results of
operations of Company and the Company Subsidiaries taken as a whole.
(j) COMMITMENTS AND CONTRACTS. Except as set forth on Schedule 2(j),
neither Company nor any Company Subsidiary is a party or subject to any of the
following (whether written or oral, express or implied):
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(i) any employment contract or understanding (including any
understandings or obligations with respect to severance or
termination pay liabilities or fringe benefits) with any present or
former officer, director, employee or consultant (other than those
which are terminable at will by Company or such Company
Subsidiary);
(ii) any plan, contract or understanding providing for any bonus,
pension, option, deferred compensation, retirement payment, profit
sharing or similar arrangement with respect to any present or
former officer, director, employee or consultant;
(iii) any labor contract or agreement with any labor union;
(iv) any contract not made in the ordinary course of business
containing covenants which limit the ability of Company or any
Company Subsidiary to compete in any line of business or with any
person or which involve any restriction of the geographical area in
which, or method by which, Company or any Company Subsidiary may
carry on its business (other than as may be required by law or
applicable regulatory authorities);
(v) any other contract or agreement which is a "material contract"
within the meaning of Item 601(b)(10) of Regulation S-K;
(vi) any lease with annual rental payments aggregating $10,000 or
more;
(vii) any agreement or commitment with respect to the Community
Reinvestment Act with any state or federal bank regulatory
authority or any other party; or
(viii) any current or past agreement, contract or understanding
with any current or former director, officer, employee, consultant,
financial adviser, broker, dealer, or agent providing for any
rights of indemnification in favor of such person or entity.
(k) LITIGATION AND OTHER PROCEEDINGS. Company has furnished Wells Fargo
copies of (i) all attorney responses to the request of the independent auditors
for Company with respect to loss contingencies as of December 31, 1998 in
connection with the Company financial statements included in the Company 10-K,
and (ii) a written list of legal and regulatory proceedings filed against
Company or any Company Subsidiary since said date. Neither Company nor any
Company Subsidiary is a party to any pending or, to the best knowledge of
Company, threatened, claim, action, suit, investigation or proceeding, or is
subject to any order, judgment or decree, except for matters which, in the
aggregate, will not have, or cannot reasonably be expected to have, a material
adverse effect on the business, financial condition or results of operations of
Company and the Company Subsidiaries taken as a whole.
(l) INSURANCE. Company and each Company Subsidiary is presently
insured, and during each of the past five calendar years (or during such lesser
period of time as Company has owned such
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Company Subsidiary) has been insured, for reasonable amounts against such
risks as companies engaged in a similar business would, in accordance with
good business practice, customarily be insured and has maintained all
insurance required by applicable law and regulation.
(m) COMPLIANCE WITH LAWS. Company and each Company Subsidiary has all
permits, licenses, authorizations, orders and approvals of, and has made all
filings, applications and registrations with, federal, state, local or foreign
governmental or regulatory bodies that are required in order to permit it to own
or lease its properties and assets and to carry on its business as presently
conducted and that are material to the business of Company or such Company
Subsidiary; all such permits, licenses, certificates of authority, orders and
approvals are in full force and effect and, to the best knowledge of Company, no
suspension or cancellation of any of them is threatened; and all such filings,
applications and registrations are current. The conduct by Company and each
Company Subsidiary of its business and the condition and use of its properties
does not violate or infringe, in any respect material to any such business, any
applicable domestic (federal, state or local) or foreign law, statute,
ordinance, license or regulation. Neither Company nor any Company Subsidiary is
in default under any order, license, regulation or demand of any federal, state,
municipal or other governmental agency or with respect to any order, writ,
injunction or decree of any court. Except for statutory or regulatory
restrictions of general application and except as set forth on Schedule 2(m), no
federal, state, municipal or other governmental authority has placed any
restriction on the business or properties of Company or any Company Subsidiary
which reasonably could be expected to have a material adverse effect on the
business or properties of Company and the Company Subsidiaries taken as a whole.
(n) LABOR. No work stoppage involving Company or any Company Subsidiary
is pending or, to the best knowledge of Company, threatened. Neither Company nor
any Company Subsidiary is involved in, or threatened with or affected by, any
labor dispute, arbitration, lawsuit or administrative proceeding which could
materially and adversely affect the business of Company or such Company
Subsidiary. Employees of Company and the Company Subsidiaries are not
represented by any labor union nor are any collective bargaining agreements
otherwise in effect with respect to such employees.
(o) MATERIAL INTERESTS OF CERTAIN PERSONS. Except as set forth on
Schedule 2(o), to the best knowledge of Company no officer or director of
Company or any Company Subsidiary, or any "associate" (as such term is defined
in Rule l4a-1 under the Exchange Act) of any such officer or director, has any
interest in any material contract or property (real or personal), tangible or
intangible, used in or pertaining to the business of Company or any Company
Subsidiary.
Schedule 2(o) sets forth a correct and complete list of any outstanding
loan from Company or any Company Subsidiary to any present officer, director,
employee or any associate or related interest of any such person, which was
required under Regulation O of the Federal Reserve Board to be approved by or
reported to Company's or such Company Subsidiary's Board of Directors.
(p) COMPANY BENEFIT PLANS.
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(i) Schedule 2(p)(i) sets forth each employee benefit plan
with respect to which Company or any Company Subsidiary
contributes, sponsors or otherwise has any obligation (the
"Plans"). For purposes of this Section 2(p) and Schedule
2(p)(i), "ERISA" means the Employee Retirement Income Security
Act of 1974, as amended, and the term "Plan" or "Plans" means
all employee benefit plans as defined in Section 3(3) of ERISA,
and all other benefit arrangements including, without
limitation, any plan, program, agreement, policy or commitment
providing for insurance coverage of employees, workers'
compensation, disability benefits, supplemental unemployment
benefits, vacation benefits, retirement benefits, severance or
termination of employment benefits, life, health, death,
disability or accidental benefits.
(ii) Except as disclosed on Schedule 2(p)(ii), no Plan is a
"multiemployer plan" within the meaning of Section 3(37) of ERISA.
(iii) Except as disclosed on Schedule 2(p)(iii), no Plan
promises or provides health or life benefits to retirees or
former employees except as required by federal continuation of
coverage laws or similar state laws.
(iv) Except as disclosed on Schedule 2(p)(iv), (a) each Plan
is and has been in all material respects operated and
administered in accordance with its provisions and applicable
law including, if applicable, ERISA and the Code; (b) all
reports and filings with governmental agencies (including but
not limited to the Department of Labor, Internal Revenue
Service, Pension Benefit Guaranty Corporation and the Securities
and Exchange Commission) required in connection with each Plan
have been timely made; (c) all disclosures and notices required
by law or Plan provisions to be given to participants and
beneficiaries in connection with each Plan have been properly
and timely made; (d) there are no actions, suits or claims
pending, other than routine uncontested claims for benefits with
respect to each Plan; and (e) each Plan intended to be qualified
under Section 401(a) of the Code has received a favorable
determination letter from the Internal Revenue Service stating
that the Plan (including all amendments) is tax qualified under
Section 401(a) of the Code and Company knows of no reason that
any such Plan is not qualified within the meaning of Section
401(a) of the Code and knows of no reason that each related Plan
trust is not exempt from taxation under Section 501(a) of the
Code.
(v) Except as disclosed on Schedule 2(p)(v), (a) all
contributions, premium payments and other payments required to
be made in connection with the Plans as of the date of this
Agreement have been made; (b) a proper accrual has been made on
the books of Company for all contributions, premium payments and
other payments due in the current fiscal year but not made as of
the date of this Agreement; (c) no contribution, premium payment
or other payment has been made in support of any Plan that is in
excess of the allowable deduction for federal income tax
purposes for the year with respect to which the contribution was
made (whether under Sections 162, 280G, 404, 419, 419A of the
Code or otherwise); and (d) with respect to
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each Plan that is subject to Section 301 of ERISA or Section 412
of the Code, Company is not liable for any accumulated funding
deficiency as that term is defined in Section 412 of the Code
and the projected benefit obligations determined as of the date
of this Agreement do not exceed the assets of the Plan.
(vi) Except as disclosed in Schedule 2(p)(vi) and to the best
knowledge of Company, no Plan or any trust created thereunder,
nor any trustee, fiduciary or administrator thereof, has engaged
in a "prohibited transaction," as such term is defined in
Section 4975 of the Code or Section 406 of ERISA or violated any
of the fiduciary standards under Part 4 of Title 1 of ERISA
which could subject such Plan or trust, or any trustee,
fiduciary or administrator thereof, or any party dealing with
any such Plan or trust, to a tax penalty or prohibited
transactions imposed by Section 4975 of the Code or would result
in material liability to Company and the Company Subsidiaries as
a whole.
(vii) No Plan subject to Title IV of ERISA or any trust
created thereunder has been terminated, nor have there been any
"reportable events" as that term is defined in Section 4043 of
ERISA, with respect to any Plan, other than those events which
may result from the transactions contemplated by this Agreement
and the Merger Agreement.
(viii) Except as disclosed in Schedule 2(p)(viii), neither the
execution and delivery of this Agreement and the Merger
Agreement nor the consummation of the transactions contemplated
hereby and thereby will (a) result in any material payment
(including, without limitation, severance, unemployment
compensation, golden parachute or otherwise) becoming due to any
director or employee or former employee of Company under any
Plan or otherwise, (b) materially increase any benefits
otherwise payable under any Plan, or (c) result in the
acceleration of the time of payment or vesting of any such
benefits to any material extent.
(q) PROXY STATEMENT, ETC. None of the information regarding Company and
the Company Subsidiaries supplied or to be supplied by Company in writing for
inclusion in (i) a Registration Statement on Form S-4 to be filed with the SEC
by Wells Fargo for the purpose of registering the shares of Wells Fargo Common
Stock to be exchanged for shares of Company Common Stock pursuant to the
provisions of the Merger Agreement (the "Registration Statement"), (ii) the
proxy statement to be mailed to Company's shareholders in connection with the
meeting to be called to consider the Merger (the "Proxy Statement") and (iii)
any other documents to be filed with the SEC or any regulatory authority in
connection with the transactions contemplated hereby or by the Merger Agreement
will, at the respective times such documents are filed with the SEC or any
regulatory authority and, in the case of the Registration Statement, when it
becomes effective and, with respect to the Proxy Statement, when mailed, be
false or misleading with respect to any material fact, or omit to state any
material fact necessary in order to make the statements therein not misleading
or, in the case of the Proxy Statement or any amendment thereof or supplement
thereto, at the time of the meeting of shareholders referred to in paragraph
4(c), be false or misleading with respect to any material fact, or omit to state
any material fact necessary to correct any statement in any earlier
communication with
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respect to the solicitation of any proxy for such meeting. All documents
which Company and the Company Subsidiaries are responsible for filing with
the SEC and any other regulatory authority in connection with the Merger will
comply as to form in all material respects with the provisions of applicable
law.
(r) REGISTRATION OBLIGATIONS. Except as set forth on Schedule 2(r),
neither Company nor any Company Subsidiary is under any obligation, contingent
or otherwise, which will survive the Merger by reason of any agreement to
register any of its securities under the Securities Act.
(s) BROKERS AND FINDERS. Except for Hovde Financial, Inc., neither
Company nor any Company Subsidiary nor any of their respective officers,
directors or employees has employed any broker or finder or incurred any
liability for any financial advisory fees, brokerage fees, commissions or
finder's fees, and no broker or finder has acted directly or indirectly for
Company or any Company Subsidiary in connection with this Agreement and the
Merger Agreement or the transactions contemplated hereby and thereby.
(t) FIDUCIARY ACTIVITIES. Neither Company nor any Company Subsidiary
has ever had any accounts for which it has acted as a fiduciary including but
not limited to accounts for which it has served as trustee, agent, custodian,
personal representative, guardian, conservator or investment advisor; provided,
however, that the Company Subsidiaries may have acted in a fiduciary capacity
with respect to individual retirement accounts and Keogh accounts.
(u) NO DEFAULTS. Except as set forth in Schedule 2(u), neither Company
nor any Company Subsidiary is in default, nor has any event occurred which, with
the passage of time or the giving of notice, or both, would constitute a
default, under any material agreement, indenture, loan agreement or other
instrument to which it is a party or by which it or any of its assets is bound
or to which any of its assets is subject, the result of which has had or could
reasonably be expected to have a material adverse effect upon Company and the
Company Subsidiaries, taken as a whole. Except as set forth in Schedule 2(u), to
the best of Company's knowledge, all parties with whom Company or any Company
Subsidiary has material leases, agreements or contracts or who owe to Company or
any Company Subsidiary material obligations other than with respect to those
arising in the ordinary course of the banking business of the Company
Subsidiaries are in compliance therewith in all material respects.
(v) ENVIRONMENTAL LIABILITY. There is no legal, administrative, or
other proceeding, claim, or action of any nature seeking to impose, or that
could result in the imposition of, on Company or any Company Subsidiary, any
liability relating to the release of hazardous substances as defined under any
local, state or federal environmental statute, regulation or ordinance
including, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended ("CERCLA"), pending or to the
best of Company's knowledge, threatened against Company or any Company
Subsidiary the result of which has had or could reasonably be expected to have a
material adverse effect upon Company and Company's Subsidiaries taken as a
whole; to the best of Company's knowledge there is no reasonable basis for any
such proceeding, claim or action; and to the best of
11
Company's knowledge neither Company nor any Company Subsidiary is subject to
any agreement, order, judgment, or decree by or with any court, governmental
authority or third party imposing any such environmental liability. Company
has provided Wells Fargo with copies of all environmental assessments,
reports, studies and other related information in its possession with respect
to each bank facility and each non-residential OREO property.
(w) COMPLIANCE WITH YEAR 2000 REQUIREMENTS. Except as set forth in
Schedule 2(w), Company is in full compliance with its Year 2000 project
management process as set forth in the May 5, 1997 Federal Financial
Institutions Examination Council ("FFIEC") Interagency Statement on the Year
2000 and subsequent guidance documents (the "FFIEC Requirements"). Company has
made its Year 2000 project assessment and remediation plan available to Wells
Fargo for review.
(x) REQUIRED SHAREHOLDER APPROVAL. The affirmative vote of a majority
in outstanding shares and qualified to vote of Company is sufficient to approve
the Merger, this Agreement, and the Merger Agreement, and the transactions
contemplated thereby pursuant to the California General Corporation Law and
pursuant to the articles and bylaws of Company.
3. REPRESENTATIONS AND WARRANTIES OF WELLS FARGO. Wells Fargo
represents and warrants to Company as follows:
(a) ORGANIZATION AND AUTHORITY. Wells Fargo is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, is duly qualified to do business and is in good standing in all
jurisdictions where its ownership or leasing of property or the conduct of its
business requires it to be so qualified and failure to be so qualified would
have a material adverse effect on Wells Fargo and its subsidiaries taken as a
whole and has corporate power and authority to own its properties and assets and
to carry on its business as it is now being conducted. Wells Fargo is registered
as a bank holding company with the Federal Reserve Board under the BHC Act.
(b) WELLS FARGO SUBSIDIARIES. Schedule 3(b) sets forth a complete and
correct list as of December 31, 1998, of Wells Fargo's Significant Subsidiaries
(as defined in Regulation S-X promulgated by the SEC) (individually a "Wells
Fargo Subsidiary" and collectively the "Wells Fargo Subsidiaries"), all shares
of the outstanding capital stock of each of which, except as set forth in
Schedule 3(b), are owned directly or indirectly by Wells Fargo. No equity
security of any Wells Fargo Subsidiary is or may be required to be issued to any
person or entity other than Wells Fargo by reason of any option, warrant, scrip,
right to subscribe to, call or commitment of any character whatsoever relating
to, or security or right convertible into, shares of any capital stock of such
subsidiary, and there are no contracts, commitments, understandings or
arrangements by which any Wells Fargo Subsidiary is bound to issue additional
shares of its capital stock, or options, warrants or rights to purchase or
acquire any additional shares of its capital stock. Subject to 12 U.S.C.
Section 55 (1982), all of such shares so owned by Wells Fargo are fully paid and
nonassessable and are owned by it free and clear of any lien, claim, charge,
option, encumbrance or agreement with respect thereto. Each Wells Fargo
Subsidiary is a corporation or national banking association duly organized,
validly existing, duly
12
qualified to do business and in good standing under the laws of its
jurisdiction of incorporation, and has corporate power and authority to own
or lease its properties and assets and to carry on its business as it is now
being conducted.
(c) WELLS FARGO CAPITALIZATION. As of June 30, 1999, the authorized
capital stock of Wells Fargo consists of (i) 20,000,000 shares of Preferred
Stock, without par value, of which as of the close of business on June 30, 1999,
955,000 shares of Cumulative Tracking Preferred Stock, at $200 stated value,
9,596 shares of ESOP Cumulative Convertible Preferred Stock, at $1,000 stated
value, 19,903 shares of 1995 ESOP Cumulative Convertible Preferred Stock, at
$1,000 stated value, 21,288 shares of 1996 ESOP Cumulative Convertible Preferred
Stock, at $1,000 stated value, 18,639 shares of 1997 ESOP Cumulative Convertible
Preferred Stock, at $1,000 stated value, 8,560 shares of 1998 ESOP Cumulative
Convertible Preferred Stock, $1,000 stated value, 45,508 shares of 1999 ESOP
Cumulative Convertible Preferred Stock, $1,000 stated value, 1,500,000 shares of
Adjustable-Rate Cumulative Preferred Stock, Series B, $50 stated value, and
4,000,000 shares of 6.59% Adjustable Rate Noncumulative Preferred Stock, Series
B, $50 stated value, were outstanding; (ii) 4,000,000 shares of Preference
Stock, without par value, of which as of the close of business on June 30, 1999,
no shares were outstanding; and (iii) 4,000,000,000 shares of Common Stock,
$1-2/3 par value, of which as of the close of business on June 30, 1999,
1,650,629,353 shares were outstanding and 15,465,932 shares were held in the
treasury. All of the outstanding shares of capital stock of Wells Fargo have
been duly and validly authorized and issued and are fully paid and
nonassessable.
(d) AUTHORIZATION. Wells Fargo has the corporate power and authority to
enter into this Agreement and to carry out its obligations hereunder. The
execution, delivery and performance of this Agreement by Wells Fargo and the
consummation of the transactions contemplated hereby have been duly authorized
by the Board of Directors of Wells Fargo. No approval or consent by the
stockholders of Wells Fargo is necessary for the execution and delivery of this
Agreement and the Merger Agreement and the consummation of the transactions
contemplated hereby and thereby. Subject to such approvals of government
agencies and other governing boards having regulatory authority over Wells Fargo
as may be required by statute or regulation, this Agreement is a valid and
binding obligation of Wells Fargo enforceable against Wells Fargo in accordance
with its terms.
Neither the execution, delivery and performance by Wells Fargo of
this Agreement or the Merger Agreement, nor the consummation of the
transactions contemplated hereby and thereby, nor compliance by Wells Fargo
with any of the provisions hereof or thereof, will (i) violate, conflict
with, or result in a breach of any provision of, or constitute a default (or
an event which, with notice or lapse of time or both, would constitute a
default) under, or result in the termination of, or accelerate the
performance required by, or result in a right of termination or acceleration
of, or result in the creation of, any lien, security interest, charge or
encumbrance upon any of the properties or assets of Wells Fargo or any Wells
Fargo Subsidiary under any of the terms, conditions or provisions of (x) its
certificate of incorporation or by-laws or (y) any material note, bond,
mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which Wells Fargo or any Wells Fargo Subsidiary
is a party or by which it may be bound, or to which Wells Fargo or any Wells
Fargo
13
Subsidiary or any of the properties or assets of Wells Fargo or any Wells
Fargo Subsidiary may be subject, or (ii) subject to compliance with the
statutes and regulations referred to in the next paragraph, to the best
knowledge of Wells Fargo, violate any judgment, ruling, order, writ,
injunction, decree, statute, rule or regulation applicable to Wells Fargo or
any Wells Fargo Subsidiary or any of their respective properties or assets.
Other than in connection with or in compliance with the provisions of
the Securities Act, the Exchange Act, the securities or blue sky laws of the
various states or filings, consents, reviews, authorizations, approvals or
exemptions required under the BHC Act or the HSR Act, and filings required to
effect the Merger under California law, no notice to, filing with, exemption or
review by, or authorization, consent or approval of, any public body or
authority is necessary for the consummation by Wells Fargo of the transactions
contemplated by this Agreement and the Merger Agreement.
(e) WELLS FARGO FINANCIAL STATEMENTS. The consolidated balance sheets
of Wells Fargo and Wells Fargo's subsidiaries as of December 31, 1998 and 1997
and related consolidated statements of income, changes in stockholders' equity
and comprehensive income, and cash flows for the three years ended December 31,
1998, together with the notes thereto, certified by KPMG LLP ("KPMG") and
included in Wells Fargo's Annual Report on Form 10-K for the fiscal year ended
December 31, 1998 (the "Wells Fargo 10-K") as filed with the SEC, and the
unaudited consolidated balance sheets of Wells Fargo and its subsidiaries as of
June 30, 1999 and the related unaudited consolidated statements of income,
changes in stockholders' equity and comprehensive income and cash flows for the
six (6) months then ended included in Wells Fargo's Quarterly Report on Form
10-Q for the fiscal quarter ended June 30, 1999, as filed with the SEC
(collectively, the "Wells Fargo Financial Statements"), have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis and present fairly (subject, in the case of financial statements for
interim periods, to normal recurring adjustments) the consolidated financial
position of Wells Fargo and its subsidiaries at the dates and the consolidated
results of operations, changes in financial position and cash flows of Wells
Fargo and its subsidiaries for the periods stated therein. The Year 2000
disclosure contained in Wells Fargo's Quarterly Report on Form 10-Q for the
fiscal quarter ended June 30, 1999, as filed with the SEC and designated as the
Year 2000 Readiness Disclosures related to the Year 2000 Information and
Readiness Disclosure Act, is true and correct in all material respects as of the
date hereof.
(f) REPORTS. Since December 31, 1993, Wells Fargo and each Wells Fargo
Subsidiary has filed all reports, registrations and statements, together with
any required amendments thereto, that it was required to file with (i) the SEC,
including, but not limited to, Forms 10-K, Forms 10-Q and proxy statements, (ii)
the Federal Reserve Board, (iii) the FDIC, (iv) the United States Comptroller of
the Currency ("Comptroller"), and (v) any applicable state securities or banking
authorities. All such reports and statements filed with any such regulatory body
or authority are collectively referred to herein as the "Wells Fargo Reports."
As of their respective dates, the Wells Fargo Reports complied in all material
respects with all the rules and regulations promulgated by the SEC, the Federal
Reserve Board, the FDIC, the Comptroller and any applicable state securities or
banking authorities, as the
14
case may be, and did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under
which they were made, not misleading.
(g) PROPERTIES AND LEASES. Except as may be reflected in the Wells
Fargo Financial Statements and except for any lien for current taxes not yet
delinquent, Wells Fargo and each Wells Fargo Subsidiary has good title free and
clear of any material liens, claims, charges, options, encumbrances or similar
restrictions to all the real and personal property reflected in Wells Fargo's
consolidated balance sheet as of June 30, 1999 included in Wells Fargo's
Quarterly Report on Form 10-Q for the period then ended, and all real and
personal property acquired since such date, except such real and personal
property has been disposed of in the ordinary course of business. All leases of
real property and all other leases material to Wells Fargo or any Wells Fargo
Subsidiary pursuant to which Wells Fargo or such Wells Fargo Subsidiary, as
lessee, leases real or personal property, are valid and effective in accordance
with their respective terms, and there is not, under any such lease, any
material existing default by Wells Fargo or such Wells Fargo Subsidiary or any
event which, with notice or lapse of time or both, would constitute such a
material default. Substantially all Wells Fargo's and each Wells Fargo
Subsidiary's buildings and equipment in regular use have been well maintained
and are in good and serviceable condition, reasonable wear and tear excepted.
(h) TAXES. Each of Wells Fargo and the Wells Fargo Subsidiaries has
filed all material federal, state, county, local and foreign tax returns,
including information returns, required to be filed by it, and paid or made
adequate provision for the payment of all taxes owed by it, including those with
respect to income, withholding, social security, unemployment, workers
compensation, franchise, ad valorem, premium, excise and sales taxes, and no
taxes shown on such returns to be owed by it or assessments received by it are
delinquent. The federal income tax returns of Wells Fargo and the Wells Fargo
Subsidiaries for the fiscal year ended December 31, 1982, and for all fiscal
years prior thereto, are for the purposes of routine audit by the Internal
Revenue Service closed because of the statute of limitations, and no claims for
additional taxes for such fiscal years are pending. Except only as set forth on
Schedule 3(h), (i) neither Wells Fargo nor any Wells Fargo Subsidiary is a party
to any pending action or proceeding, nor to Wells Fargo's knowledge is any such
action or proceeding threatened by any governmental authority, for the
assessment or collection of taxes, interest, penalties, assessments or
deficiencies which could reasonably be expected to have any material adverse
effect on Wells Fargo and its subsidiaries taken as a whole, and (ii) no issue
has been raised by any federal, state, local or foreign taxing authority in
connection with an audit or examination of the tax returns, business or
properties of Wells Fargo or any Wells Fargo Subsidiary which has not been
settled, resolved and fully satisfied, or adequately reserved for. Each of Wells
Fargo and the Wells Fargo Subsidiaries has paid all taxes owed or which it is
required to withhold from amounts owing to employees, creditors or other third
parties.
(i) ABSENCE OF CERTAIN CHANGES. Since December 31, 1998, there has been
no change in the business, financial condition or results of operations of Wells
Fargo or any Wells Fargo Subsidiary which has had, or may reasonably be expected
to have, a material adverse effect on the business,
15
financial condition or results of operations of Wells Fargo and its
subsidiaries taken as a whole.
(j) COMMITMENTS AND CONTRACTS. Except as set forth on Schedule 3(j), as
of December 31, 1998, neither Wells Fargo nor any Wells Fargo Subsidiary is a
party or subject to any of the following (whether written or oral, express or
implied):
(i) any labor contract or agreement with any labor union;
(ii) any contract not made in the ordinary course of business
containing covenants which materially limit the ability of Wells
Fargo or any Wells Fargo Subsidiary to compete in any line of
business or with any person or which involve any material
restriction of the geographical area in which, or method by
which, Wells Fargo or any Wells Fargo Subsidiary may carry on
its business (other than as may be required by law or applicable
regulatory authorities); or
(iii) any other contract or agreement which is a "material
contract" within the meaning of Item 601(b)(10) of Regulation S-K.
(k) LITIGATION AND OTHER PROCEEDINGS. Neither Wells Fargo nor any Wells
Fargo Subsidiary is a party to any pending or, to the best knowledge of Wells
Fargo, threatened, claim, action, suit, investigation or proceeding, or is
subject to any order, judgment or decree, except for matters which, in the
aggregate, will not have, or cannot reasonably be expected to have, a material
adverse effect on the business, financial condition or results of operations of
Wells Fargo and its subsidiaries taken as a whole.
(l) INSURANCE. Wells Fargo and each Wells Fargo Subsidiary is presently
insured or self insured, and during each of the past five calendar years (or
during such lesser period of time as Wells Fargo has owned such Wells Fargo
Subsidiary) has been insured or self-insured, for reasonable amounts against
such risks as companies engaged in a similar business would, in accordance with
good business practice, customarily be insured and has maintained all insurance
required by applicable law and regulation.
(m) COMPLIANCE WITH LAWS. Wells Fargo and each Wells Fargo Subsidiary
has all permits, licenses, authorizations, orders and approvals of, and has made
all filings, applications and registrations with, federal, state, local or
foreign governmental or regulatory bodies that are required in order to permit
it to own or lease its properties or assets and to carry on its business as
presently conducted and that are material to the business of Wells Fargo or such
Subsidiary; all such permits, licenses, certificates of authority, orders and
approvals are in full force and effect, and to the best knowledge of Wells
Fargo, no suspension or cancellation of any of them is threatened; and all such
filings, applications and registrations are current. The conduct by Wells Fargo
and each Wells Fargo Subsidiary of its business and the condition and use of its
properties does not violate or infringe, in any respect material to any such
business, any applicable domestic (federal, state or local) or foreign
16
law, statute, ordinance, license or regulation. Neither Wells Fargo nor any
Wells Fargo Subsidiary is in default under any order, license, regulation or
demand of any federal, state, municipal or other governmental agency or with
respect to any order, writ, injunction or decree of any court. Except for
statutory or regulatory restrictions of general application, no federal,
state, municipal or other governmental authority has placed any restrictions
on the business or properties of Wells Fargo or any Wells Fargo Subsidiary
which reasonably could be expected to have a material adverse effect on the
business or properties of Wells Fargo and its subsidiaries taken as a whole.
(n) LABOR. No work stoppage involving Wells Fargo or any Wells Fargo
Subsidiary is pending or, to the best knowledge of Wells Fargo, threatened.
Neither Wells Fargo nor any Wells Fargo Subsidiary is involved in, or threatened
with or affected by, any labor dispute, arbitration, lawsuit or administrative
proceeding which could materially and adversely affect the business of Wells
Fargo or such Wells Fargo Subsidiary. Employees of Wells Fargo and the Wells
Fargo Subsidiaries are not represented by any labor union nor are any collective
bargaining agreements otherwise in effect with respect to such employees.
(o) WELLS FARGO BENEFIT PLANS.
(i) For purposes of this Section 3(o), the term "Wells Fargo Plan"
or "Wells Fargo Plans" means all employee benefit plans as defined
in Section 3(3) of ERISA, to which Wells Fargo contributes,
sponsors, or otherwise has any obligations.
(ii) No Wells Fargo Plan is a "multiemployer plan" within the
meaning of Section 3(37) of ERISA.
(iii) Each Wells Fargo Plan is and has been in all material
respects operated and administered in accordance with its
provisions and applicable law, including, if applicable, ERISA and
the Code.
(iv) Each Wells Fargo Plan intended to be qualified under Section
401(a) of the Code has received a favorable determination letter
from the Internal Revenue Service stating that the Wells Fargo Plan
(including all amendments) is tax qualified under Section 401(a) of
the Code and Wells Fargo knows of no reason that any such Wells
Fargo Plan is not qualified within the meaning of Section 401(a) of
the Code and knows of no reason that each related Wells Fargo Plan
trust is not exempt from taxation under Section 501(a) of the Code.
(v) All contributions, premium payments, and other payments
required to be made in connection with the Wells Fargo Plans as of
the date of this Agreement have been made.
(vi) With respect to each Wells Fargo Plan that is subject to
Section 301 of ERISA or Section 412 of the Code, neither Wells
Fargo nor any Wells Fargo Subsidiary is liable for any accumulated
funding deficiency as that term is defined in Section 412 of the
Code.
17
(vii) The present value of all benefits vested and all benefits
accrued under each Wells Fargo Plan that is subject to Title IV of
ERISA does not, in each case, exceed the value of the assets of the
Wells Fargo Plans allocable to such vested or accrued benefits as
of the end of the most recent Plan Year.
(p) REGISTRATION STATEMENT, ETC. None of the information regarding
Wells Fargo and its subsidiaries supplied or to be supplied by Wells Fargo for
inclusion in (i) the Registration Statement, (ii) the Proxy Statement, or (iii)
any other documents to be filed with the SEC or any regulatory authority in
connection with the transactions contemplated hereby or by the Merger Agreement
will, at the respective times such documents are filed with the SEC or any
regulatory authority and, in the case of the Registration Statement, when it
becomes effective and, with respect to the Proxy Statement, when mailed, be
false or misleading with respect to any material fact, or omit to state any
material fact necessary in order to make the statements therein not misleading
or, in the case of the Proxy Statement or any amendment thereof or supplement
thereto, at the time of the meeting of shareholders referred to in paragraph
4(c), be false or misleading with respect to any material fact, or omit to state
any material fact necessary to correct any statement in any earlier
communication with respect to the solicitation of any proxy for such meeting.
All documents which Wells Fargo and the Wells Fargo Subsidiaries are responsible
for filing with the SEC and any other regulatory authority in connection with
the Merger will comply as to form in all material respects with the provisions
of applicable law.
(q) BROKERS AND FINDERS. Neither Wells Fargo nor any Wells Fargo
Subsidiary nor any of their respective officers, directors or employees has
employed any broker or finder or incurred any liability for any financial
advisory fees, brokerage fees, commissions or finder's fees, and no broker or
finder has acted directly or indirectly for Wells Fargo or any Wells Fargo
Subsidiary in connection with this Agreement and the Merger Agreement or the
transactions contemplated hereby and thereby.
(r) NO DEFAULTS. Neither Wells Fargo nor any Wells Fargo Subsidiary is
in default, nor has any event occurred which, with the passage of time or the
giving of notice, or both, would constitute a default under any material
agreement, indenture, loan agreement or other instrument to which it is a party
or by which it or any of its assets is bound or to which any of its assets is
subject, the result of which has had or could reasonably be expected to have a
material adverse effect upon Wells Fargo and its subsidiaries taken as a whole.
To the best of Wells Fargo's knowledge, all parties with whom Wells Fargo or any
Wells Fargo Subsidiary has material leases, agreements or contracts or who owe
to Wells Fargo or any Wells Fargo Subsidiary material obligations other than
with respect to those arising in the ordinary course of the banking business of
the Wells Fargo Subsidiaries are in compliance therewith in all material
respects.
(s) ENVIRONMENTAL LIABILITY. There is no legal, administrative, or
other proceeding, claim, or action of any nature seeking to impose, or that
could result in the imposition, on Wells Fargo or any Wells Fargo Subsidiary of
any liability relating to the release of hazardous substances as defined under
any local, state or federal environmental statute, regulation or ordinance
including, without
18
limitation, CERCLA, pending or to the best of Wells Fargo's knowledge,
threatened against Wells Fargo or any Wells Fargo Subsidiary, the result of
which has had or could reasonably be expected to have a material adverse
effect upon Wells Fargo and its subsidiaries taken as a whole; to the best of
Wells Fargo's knowledge there is no reasonable basis for any such proceeding,
claim or action; and to the best of Wells Fargo's knowledge neither Wells
Fargo nor any Wells Fargo Subsidiary is subject to any agreement, order,
judgment, or decree by or with any court, governmental authority or third
party imposing any such environmental liability.
(t) MERGER CO. As of the Closing Date, Merger Co. will be a corporation
duly organized, validly existing, duly qualified to do business and in good
standing under the laws of its jurisdiction of incorporation, and will have
corporate power and authority to own or lease its properties and assets and to
carry on its business.
4. COVENANTS OF COMPANY. Company covenants and agrees with Wells Fargo
as follows:
(a) Except as otherwise permitted or required by this Agreement, from
the date hereof until the Effective Time of the Merger, Company, and each
Company Subsidiary will: maintain its corporate existence in good standing;
maintain the general character of its business and conduct its business in its
ordinary and usual manner; extend credit in accordance with existing lending
policies and provide Wells Fargo access to its loan files (including credits
extended after the date hereof), except that it shall not, without the prior
written consent of Wells Fargo (which shall be deemed to be waived if Wells
Fargo has made no response by the end of the second complete business day
following the receipt (by confirmed facsimile) of the request by a Wells Fargo
representative designated in writing), (A) make any new loan or modify,
restructure or renew any existing loan (except pursuant to commitments made
prior to the date of this Agreement) to any borrower if the amount of the
resulting loan, when aggregated with all other loans or extensions of credit to
such person, would be in excess of $750,000, or (B) make any extensions of
credit aggregating in excess of $500,000 to a person or entity that is not a
borrower as of the date hereof; maintain proper business and accounting records
in accordance with generally accepted principles; maintain its properties in
good repair and condition, ordinary wear and tear excepted; maintain in all
material respects presently existing insurance coverage; use its best efforts to
preserve its business organization intact, to keep the services of its present
principal employees and to preserve its good will and the good will of its
suppliers, customers and others having business relationships with it; use its
best efforts to obtain any approvals or consents required to maintain existing
leases and other contracts in effect following the Merger; comply in all
material respects with all laws, regulations, ordinances, codes, orders,
licenses and permits applicable to the properties and operations of Company and
each Company Subsidiary the non-compliance with which reasonably could be
expected to have a material adverse effect on Company and the Company
Subsidiaries taken as a whole; and permit Wells Fargo and its representatives
(including KPMG) to examine its and its subsidiaries books, records and
properties and to interview officers, employees and agents at all reasonable
times upon reasonable prior notice when it is open for business. No such
examination by Wells Fargo or its representatives either before or after the
date of this Agreement shall in any way affect, diminish or terminate any of the
representations, warranties or covenants of
19
Company herein expressed.
(b) Except as otherwise contemplated or required by this Agreement,
from the date hereof until the Effective Time of the Merger, Company and each
Company Subsidiary will not (without the prior written consent of Wells Fargo):
amend or otherwise change its articles of incorporation or association or
by-laws; issue or sell or authorize for issuance or sale, or grant any options
or make other agreements with respect to the issuance or sale or conversion of,
any shares of its capital stock, phantom shares or other share-equivalents, or
any other of its securities, except that Company may issue shares of Company
Common Stock upon the exercise of outstanding stock options described in
Schedule 4(b); authorize or incur any long-term debt (other than deposit
liabilities); mortgage, pledge or subject to lien or other encumbrance any of
its properties, except in the ordinary course of business; enter into any
material agreement, contract or commitment in excess of $25,000 except banking
transactions in the ordinary course of business and in accordance with policies
and procedures in effect on the date hereof; make any investments except
investments made by bank subsidiaries in the ordinary course of business for
terms of up to one year and in amounts of $100,000 or less and except for "fed
funds" investments made in the ordinary course of business (which consent
requirement shall be deemed to be waived as to any investment to which Wells
Fargo has made no response by the end of the second complete business day
following the receipt of the request by a Wells Fargo representative designated
in writing); amend or terminate any Plan except as required by law or the terms
of this Agreement; make any contributions to any Plan except as required by the
terms of such Plan in effect as of the date hereof; declare, set aside, make or
pay any cash or stock dividend or other distribution with respect to its capital
stock except any dividend declared by the Board of Directors of a Company
Subsidiary in accordance with applicable law and regulation; redeem, purchase or
otherwise acquire, directly or indirectly, any of the capital stock of Company;
increase the compensation of any officers, directors or executive employees,
except pursuant to existing compensation plans, agreements and practices; sell
or otherwise dispose of any shares of the capital stock of any Company
Subsidiary; or sell or otherwise dispose of any of its assets or properties
other than in the ordinary course of business.
(c) The Board of Directors of Company will duly call, and will cause to
be held on a date agreeable to Wells Fargo, but not later than twenty-five (25)
business days following the effective date of the Registration Statement
referred to in paragraph 5(c) hereof, a meeting of its shareholders and will
direct that this Agreement and the Merger Agreement be submitted to a vote at
such meeting. The Board of Directors of Company will (i) cause proper notice of
such meeting to be given to its shareholders in compliance with the California
General Corporation Law and other applicable law and regulation, and (ii) except
to the extent that the Board of Directors of Company shall conclude in good
faith, after taking into account the advice of its outside counsel, that to do
so would violate its fiduciary obligations under applicable law, (A) recommend
by the affirmative vote of the Board of Directors a vote in favor of approval of
this Agreement and the Merger Agreement, and (B) use its best efforts to solicit
from its shareholders proxies in favor thereof.
(d) Company will furnish or cause to be furnished to Wells Fargo all
the information concerning
20
Company and its subsidiaries required for inclusion in the Registration
Statement referred to in paragraph 5(c) hereof, or any statement or
application made by Wells Fargo to any governmental body in connection with
the transactions contemplated by this Agreement. Any financial statement for
any fiscal year provided under this paragraph must include the audit opinion
and the consent of PRICEWATERHOUSECOOPERS, LLP to use such opinion in such
Registration Statement.
(e) Company will take all necessary corporate and other action and use
its best efforts to obtain all approvals of regulatory authorities, consents and
other approvals required of Company to carry out the transactions contemplated
by this Agreement and will cooperate with Wells Fargo to obtain all such
approvals and consents required of Wells Fargo.
(f) Company will use its best efforts to deliver to the Closing all
opinions, certificates and other documents required to be delivered by it at the
Closing.
(g) Company will hold in confidence all documents and information
concerning Wells Fargo and its subsidiaries furnished to Company and its
representatives in connection with the transactions contemplated by this
Agreement and will not release or disclose such information to any other person,
except as required by law and except to Company's outside professional advisers
in connection with this Agreement, with the same undertaking from such
professional advisers. If the transactions contemplated by this Agreement shall
not be consummated, such confidence shall be maintained and such information
shall not be used in competition with Wells Fargo (except to the extent that
such information can be shown to be previously known to Company, in the public
domain, or later acquired by Company from other legitimate sources) and, upon
request, all such documents, any copies thereof and extracts therefrom shall
immediately thereafter be returned to Wells Fargo.
(h) Neither Company, nor any Company Subsidiary, nor any director,
officer, representative or agent thereof, will, directly or indirectly, solicit,
authorize the solicitation of or except to the extent that the Board of
Directors of Company shall conclude in good faith, after taking into account the
written advice of its outside counsel, that to fail to do so could reasonably be
determined to violate its fiduciary obligations under applicable law, enter into
any discussions with any corporation, partnership, person or other entity or
group (other than Wells Fargo) concerning any offer or possible offer (i) to
purchase any shares of common stock, any option or warrant to purchase any
shares of common stock, any securities convertible into any shares of such
common stock, or any other equity security of Company or any Company Subsidiary,
(ii) to make a tender or exchange offer for any shares of such common stock or
other equity security, (iii) to purchase, lease or otherwise acquire the assets
of Company or any Company Subsidiary except in the ordinary course of business,
or (iv) to merge, consolidate or otherwise combine with Company or any Company
Subsidiary. If any corporation, partnership, person or other entity or group
makes an offer or inquiry to Company or any Company Subsidiary concerning any of
the foregoing, Company or such Company Subsidiary will promptly disclose such
offer or inquiry, including the terms thereof, to Wells Fargo.
(i) Company shall consult with Wells Fargo as to the form and substance
of any proposed press
21
release or other proposed public disclosure of matters related to this
Agreement or any of the transactions contemplated hereby.
(j) Company and each Company Subsidiary will take all action necessary
or required (i) to terminate or amend, if requested by Wells Fargo, all
qualified pension and welfare benefit plans and all non-qualified benefit plans
and compensation arrangements as of the Effective Date of the Merger to
facilitate the merger of such plans with Wells Fargo plans without gaps in
coverage for participants in the plans and without duplication of costs caused
by the continuation of such plans after coverage is available under Wells Fargo
plans, and (ii) to submit application to the Internal Revenue Service for a
favorable determination letter for each of the Plans which is subject to the
qualification requirements of Section 401(a) of the Code prior to the Effective
Date of the Merger.
(k) [Intentionally omitted.]
(l) Company shall use its best efforts to obtain and deliver at least
thirty-two (32) days prior to the Effective Date of the Merger signed
representations substantially in the form attached hereto as Exhibit B to Wells
Fargo by each executive officer, director or shareholder of Company who may
reasonably be deemed an "affiliate" of Company within the meaning of such term
as used in Rule 145 under the Securities Act.
(m) Company shall establish such additional accruals and reserves as
may be necessary to conform Company's accounting and credit loss reserve
practices and methods to those of Wells Fargo and Wells Fargo's plans with
respect to the conduct of Company's business following the Merger and to provide
for the costs and expenses relating to the consummation by Company of the Merger
and the other transactions contemplated by this Agreement as set forth in
writing by Wells Fargo; PROVIDED, HOWEVER, that (a) Company shall not be
required to take such actions more than three (3) business days prior to the
Closing Date or prior to the time Wells Fargo agrees that all of the conditions
to their obligation to close as set forth in paragraph 7 have been satisfied or
waived (other than the deliveries to be made on the Closing Date) and no such
adjustment shall (i) require any prior filing with any governmental agency or
regulatory authority, or (ii) violate any law, rule or regulation applicable to
Company; provided that in any event no accrual or reserve made by Company
pursuant to this paragraph 4(m), shall constitute or be deemed to be a breach,
violation of or failure to satisfy any representation, warranty, covenant,
condition or other provision of this Agreement or otherwise be considered in
determining whether any such breach, violation or failure to satisfy shall have
occurred including without limitation any determination that the Company
Financial Statements have been prepared other than in accordance with generally
accepted accounting principles.
(n) Company shall obtain, at its sole expense, Phase I environmental
assessments for each bank facility and each non-residential OREO property. Oral
reports of such environmental assessments shall be delivered to Wells Fargo no
later than four (4) weeks and written reports shall be delivered to Wells Fargo
no later than eight (8) weeks from the date of this Agreement. Company shall
obtain, at its sole expense, Phase II environmental assessments for properties
identified by Wells Fargo on the
22
basis of the results of such Phase I environmental assessments. Company shall
obtain a survey and assessment of all potential asbestos containing material
in owned or leased properties (other than OREO property) and a written report
of the results shall be delivered to Wells Fargo within four (4) weeks of the
date of this Agreement.
(o) Company shall obtain, at its sole expense, commitments for title
insurance and boundary surveys for each bank facility which shall be delivered
to Wells Fargo no later than four (4) weeks from the date of this Agreement.
(p) Company will comply with the FFIEC Requirements and will not rely
on the consummation of the transactions contemplated by this Agreement to
satisfy its FFIEC requirements. Company will provide Wells Fargo with complete
access to its Year 2000 project and remediation plan documentation and permit
Wells Fargo to review and investigate Company's continuing Year 2000 compliance
efforts and the results thereof.
(q) Company shall take such action as is necessary to terminate the
Stock Option Plans as of the Effective Date of the Merger. Company shall collect
in cash (and timely pay) all applicable withholding and payroll taxes with
respect to such options, awards and stock appreciation rights, and shall comply
with all payroll reporting requirements with respect thereto. All Options which
remain unexercised and which are not Redeemed Options pursuant to the provisions
of paragraph 4(q) hereof shall expire as of the Effective Time of the Merger.
(r) Immediately prior to the Effective Time, Company shall redeem and
shall cause its stock option committees under the Stock Option Plans to take all
action necessary to redeem any Options which the option holders have elected in
writing, prior to the meeting of shareholders required by paragraph 4(c) hereof,
to have redeemed by the Company ("Redeemed Options") in an amount for each
Redeemed Option equal to the Fair Market Value Per Share of such Redeemed Option
minus the exercise price thereof as set forth in an Option holder's option
agreement or option agreements. Company shall withhold (and timely pay) all
applicable withholding, and payroll taxes from the Cash Surrender Amount, and
shall comply with all payroll reporting requirements with respect to such
payments. In addition, Company shall, and shall cause its stock option
committees to, determine the "Fair Market Value" (as defined in the Stock Option
Plans) of a Redeemed Option to be an amount equal to the Fair Market Value Per
Share as defined in this Agreement.
5. COVENANTS OF WELLS FARGO. Wells Fargo covenants and agrees with
Company as follows:
(a) From the date hereof until the Effective Time of the Merger, Wells
Fargo will maintain its corporate existence in good standing; conduct, and cause
the Wells Fargo Subsidiaries to conduct, their respective businesses in
compliance with all material obligations and duties imposed on them by all laws,
governmental regulations, rules and ordinances, and judicial orders, judgments
and decrees applicable to Wells Fargo or the Wells Fargo Subsidiaries, their
businesses or their properties; maintain all books and records of it and the
Wells Fargo Subsidiaries, including all financial
23
statements, in accordance with the accounting principles and practices
consistent with those used for the Wells Fargo Financial Statements, except
for changes in such principles and practices required under generally
accepted accounting principles.
(b) Wells Fargo will furnish to Company all the information concerning
Wells Fargo required for inclusion in a proxy statement or statements to be sent
to the shareholders of Company, or in any statement or application made by
Company to any governmental body in connection with the transactions
contemplated by this Agreement.
(c) As promptly as practicable after the execution of this Agreement,
Wells Fargo will file with the SEC a registration statement on Form S-4 (the
"Registration Statement") under the Securities Act and any other applicable
documents, relating to the shares of Wells Fargo Common Stock to be delivered to
the shareholders of Company pursuant to the Merger Agreement, and will use its
best efforts to cause the Registration Statement to become effective. At the
time the Registration Statement becomes effective, the Registration Statement
will comply in all material respects with the provisions of the Securities Act
and the published rules and regulations thereunder, and will not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not false or
misleading, and at the time of mailing thereof to the Company shareholders, at
the time of the Company shareholders' meeting referred to in paragraph 4(c)
hereof and at the Effective Time of the Merger the prospectus included as part
of the Registration Statement, as amended or supplemented by any amendment or
supplement filed by Wells Fargo (hereinafter the "Prospectus"), will not contain
any untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein not false or misleading; PROVIDED,
HOWEVER, that none of the provisions of this subparagraph shall apply to
statements in or omissions from the Registration Statement or the Prospectus
made in reliance upon and in conformity with information furnished by Company or
any Company Subsidiary in writing for use in the Registration Statement or the
Prospectus.
(d) Wells Fargo will file all documents required to be filed to list
the Wells Fargo Common Stock to be issued pursuant to the Merger Agreement on
the New York Stock Exchange and the Chicago Stock Exchange and use its best
efforts to effect said listings.
(e) The shares of Wells Fargo Common Stock to be issued by Wells Fargo
to the shareholders of Company pursuant to this Agreement and the Merger
Agreement will, upon such issuance and delivery to said shareholders pursuant to
the Merger Agreement, be duly authorized, validly issued, fully paid and
nonassessable. The shares of Wells Fargo Common Stock to be delivered to the
shareholders of Company pursuant to the Merger Agreement are and will be free of
any preemptive rights of the stockholders of Wells Fargo.
(f) Wells Fargo will file all documents required to obtain, prior to
the Effective Time of the Merger, all necessary Blue Sky permits and approvals,
if any, required to carry out the transactions contemplated by this Agreement,
will pay all expenses incident thereto and will use its best efforts to
24
obtain such permits and approvals.
(g) Wells Fargo will take all necessary corporate and other action and
file all documents required to obtain and will use its best efforts to obtain
all approvals of regulatory authorities, consents and approvals required of it
to carry out the transactions contemplated by this Agreement and will cooperate
with Company to obtain all such approvals and consents required by Company.
(h) Wells Fargo will hold in confidence all documents and information
concerning Company and Company's Subsidiaries furnished to it and its
representatives in connection with the transactions contemplated by this
Agreement and will not release or disclose such information to any other person,
except as required by law and except to its outside professional advisers in
connection with this Agreement, with the same undertaking from such professional
advisers. If the transactions contemplated by this Agreement shall not be
consummated, such confidence shall be maintained and such information shall not
be used in competition with Company (except to the extent that such information
can be shown to be previously known to Wells Fargo, in the public domain, or
later acquired by Wells Fargo from other legitimate sources) and, upon request,
all such documents, copies thereof or extracts therefrom shall immediately
thereafter be returned to Company.
(i) Wells Fargo will file any documents or agreements required to be
filed in connection with the Merger under the California General Corporation
Law.
(j) Wells Fargo will use its best efforts to deliver to the Closing all
opinions, certificates and other documents required to be delivered by it at the
Closing.
(k) Wells Fargo shall consult with Company as to the form and substance
of any proposed press release or other proposed public disclosure of matters
related to this Agreement or any of the transactions contemplated hereby.
(l) Wells Fargo shall give Company notice of receipt of the regulatory
approvals referred to in paragraph 7(e).
(m) [Intentionally omitted.]
(n) With respect to the indemnification of directors and officers,
Wells Fargo agrees as follows:
(i) Wells Fargo shall ensure that all rights to
indemnification and all limitations of liability existing in
favor of any person who is now, or has been at any time prior to
the date hereof, or who becomes prior to the Effective Time of
the Merger, a director or officer of Company or any Company
Subsidiary (an "Indemnified Party" and, collectively, the
"Indemnified Parties"), in Company's Articles of Incorporation
or Bylaws or similar governing documents of any Company
Subsidiary, as applicable in the particular case and as in
effect on the date hereof, shall, with respect to claims arising
from (A) facts or events that occurred before the
25
Effective Time of the Merger, or (B) this Agreement or any of
the transactions contemplated by this Agreement, whether in any
case asserted or arising before or after the Effective Time of
the Merger, survive the Merger and shall continue in full force
and effect. Nothing contained in this paragraph 5(n)(i) shall be
deemed to preclude the liquidation, consolidation, or merger of
Company or any Company Subsidiary, in which case all of such
rights to indemnification and limitations on liability shall be
deemed to survive and continue as contractual rights
notwithstanding any such liquidation or consolidation or merger;
provided, however, that in the event of liquidation or sale of
substantially all of the assets of Company, Wells Fargo shall
guarantee, to the extent of the net asset value of Company or
any Company Subsidiary as of the Effective Date of the Merger,
the indemnification obligations of Company or any Company
Subsidiary to the extent of indemnification obligations of
Company and the Company Subsidiaries described above.
Notwithstanding anything to the contrary contained in this
paragraph 5(n)(i), nothing contained herein shall require Wells
Fargo to indemnify any person who was a director or officer of
Company or any Company Subsidiary to a greater extent than
Company or any Company Subsidiary is, as of the date of this
Agreement, required to indemnify any such person;
(ii) any Indemnified Party wishing to claim indemnification
under paragraph 5(n)(i), upon learning of any such claim,
action, suit, proceeding, or investigation, shall promptly
notify Wells Fargo thereof, but the failure to so notify shall
not relieve Wells Fargo of any liability it may have to such
Indemnified Party. In the event of any such claim, action, suit,
proceeding, or investigation (whether arising before or after
the Effective Time of the Merger) (A) Wells Fargo shall have the
right to assume the defense thereof and Wells Fargo shall not be
liable to any Indemnified Party for any legal expenses of other
counsel or any other expenses subsequently incurred by such
Indemnified Party in connection with the defense thereof, except
that if Wells Fargo elects not to assume such defense or counsel
for the Indemnified Party advises that there are issues which
raise conflicts of interest between Wells Fargo and the
Indemnified Party, the Indemnified Party may retain counsel
satisfactory to them, and Wells Fargo shall pay the reasonable
fees and expenses of such counsel for the Indemnified Party
promptly as statements therefor are received, provided, however,
that Wells Fargo shall be obligated pursuant to this
subparagraph (ii) to pay for only one firm of counsel for all
Indemnified Parties in any jurisdiction unless the use of one
counsel for such Indemnified Parties would present such counsel
with a conflict of interest, and (B) such Indemnified Party
shall cooperate in the defense of any such matter;
(iii) for a period of four years after the Effective Time of
the Merger, Wells Fargo shall use its best efforts to cause to
be maintained in effect the current policies of directors' and
officers' liability insurance maintained by Company (provided
that Wells Fargo may substitute therefor policies of at least
the same coverage and amount containing terms and conditions
which are substantially no less advantageous) with respect to
claims arising from facts or events which occurred before the
Effective Time of the Merger; PROVIDED, HOWEVER, that Wells
Fargo shall not be required to maintain coverage for employees
(other than directors and
26
officers) which may currently be included in the directors' and
officers' liability policies maintained by Company; and
provided, further, however, that in no event shall Wells Fargo
be obligated to expend, in order to maintain or provide
insurance coverage pursuant to this paragraph 5(n)(iii), any
amount per annum in excess of 125% of the amount of the annual
premiums paid as of the date hereof by Company for such
insurance (the "Maximum Amount") and provided further that,
prior to the Effective Time of the Merger, Company shall notify
the appropriate directors' and officers' liability insurers of
the Merger and of all pending or threatened claims, actions,
suits, proceedings or investigations asserted or claimed against
any Indemnified Party, or circumstances likely to give rise
thereto to the extent known to the Company, in accordance with
terms and conditions of the applicable policies. If the amount
of the annual premiums necessary to maintain or procure such
insurance coverage exceeds the Maximum Amount, Wells Fargo shall
use reasonable efforts to maintain the most advantageous
policies of directors' and officers' insurance obtainable for an
annual premium equal to the Maximum Amount;
(iv) if Wells Fargo or any of its successors or assigns (A)
shall consolidate with or merge into any other corporation or
entity and shall not be the continuing or surviving corporation
or entity of such consolidation or merger or (B) shall transfer
all or substantially all of its properties and assets to any
individual, corporation or other entity, then and in each such
case, proper provision shall be made so that the successors and
assigns of Wells Fargo shall assume the obligations set forth in
this paragraph 5(n); and
(v) the provisions of this paragraph 5(n) are intended to be
for the benefit of, and shall be enforceable by, each
Indemnified Party and his or her heirs and representatives.
(o) For a period not exceeding fifteen (15) days prior to the meeting
of shareholders required by paragraph 4(c) of this Agreement, subject to
applicable securities laws and regulations and any obligations of
confidentiality to which Wells Fargo may be subject, Wells Fargo will permit
Company and its representatives upon prior notice to Wells Fargo to conduct
reasonable examination of its books, records and properties and interview
officers, employees and agents of Wells Fargo at all reasonable times when it is
open for business; provided, however, that such examination is conducted in a
manner designed to be least disruptive to Wells Fargo's operations. No such
examination by Company or its representatives shall in any way affect, diminish
or terminate any of the representations, warranties or covenants of Wells Fargo
herein expressed.
6. CONDITIONS PRECEDENT TO OBLIGATION OF COMPANY. The obligation of
Company to effect the Merger shall be subject to the satisfaction at or before
the Time of Filing of the following further conditions, which may be waived in
writing by Company:
(a) Except as they may be affected by transactions contemplated hereby
and except to the extent such representations and warranties are by their
express provisions made as of a specified date and except for activities or
transactions after the date of this Agreement made in the ordinary course of
27
business and not expressly prohibited by this Agreement, the representations and
warranties contained in paragraph 3 hereof shall be true and correct in all
respects material to Wells Fargo and its subsidiaries taken as a whole as if
made at the Time of Filing.
(b) Wells Fargo shall have, or shall have caused to be, performed and
observed in all material respects all covenants, agreements and conditions
hereof to be performed or observed by it and Merger Co. at or before the Time of
Filing.
(c) Company shall have received a favorable certificate, dated as of
the Effective Date of the Merger, signed by the Chairman, the President or any
Executive Vice President or Senior Vice President and by the Secretary or
Assistant Secretary of Wells Fargo, as to the matters set forth in subparagraphs
(a) and (b) of this paragraph 6.
(d) This Agreement and the Merger Agreement shall have been approved by
the affirmative vote of the holders of the percentage of the outstanding shares
of Company required for approval of a plan of merger in accordance with the
provisions of Company's Articles of Incorporation and the California General
Corporation Law.
(e) Wells Fargo shall have received approval by the Federal Reserve
Board and by such other governmental agencies as may be required by law of the
transactions contemplated by this Agreement and the Merger Agreement and all
waiting and appeal periods prescribed by applicable law or regulation shall have
expired.
(f) No court or governmental authority of competent jurisdiction shall
have issued an order restraining, enjoining or otherwise prohibiting the
consummation of the transactions contemplated by this Agreement.
(g) The shares of Wells Fargo Common Stock to be delivered to the
stockholders of Company pursuant to this Agreement and the Merger Agreement
shall have been authorized for listing on the New York Stock Exchange and the
Chicago Stock Exchange.
(h) Company shall have received an opinion, dated the Closing Date, of
counsel to Company or its independent accountants, substantially to the effect
that, for federal income tax purposes: (i) the Merger will constitute a
reorganization within the meaning of Sections 368(a)(1)(A) and 368(a)(2)(E) of
the Code; (ii) no gain or loss will be recognized by the holders of Company
Common Stock upon receipt of Wells Fargo Common Stock except for cash received
in lieu of fractional shares; (iii) the basis of the Wells Fargo Common Stock
received by the shareholders of Company will be the same as the basis of Company
Common Stock exchanged therefor; and (iv) the holding period of the shares of
Wells Fargo Common Stock received by the shareholders of Company will include
the holding period of the Company Common Stock, provided such shares of Company
Common Stock were held as a capital asset as of the Effective Time of the
Merger.
28
(i) The Registration Statement (as amended or supplemented) shall have
become effective under the Securities Act and shall not be subject to any stop
order, and no action, suit, proceeding or investigation by the SEC to suspend
the effectiveness of the Registration Statement shall have been initiated and be
continuing, or have been threatened and be unresolved. Wells Fargo shall have
received all state securities law or blue sky authorizations necessary to carry
out the transactions contemplated by this Agreement.
(j) Since June 30, 1999, no change shall have occurred and no
circumstances shall exist which has had or might reasonably be expected to have
a material adverse effect on the financial conditions, results of operations,
business or prospects of Wells Fargo and the Wells Fargo Subsidiaries taken as a
whole (other than changes in banking laws or regulations, or interpretations
thereof, that affect the banking industry generally or changes in the general
level of interest rates).
(k) Prior to the mailing of the Proxy Statement referred to in
paragraph 4(c), Company and the Board of Directors of Company shall have
received an opinion of Hovde Financial, Inc. addressed to Company and the Board
of Directors of Company, and for their exclusive benefit, for inclusion in said
Proxy Statement and dated effective as of the date of mailing of such Proxy
Statement, based on such matters as Hovde Financial, Inc. deems appropriate or
necessary, to the effect that the consideration to be received by stockholders
of Company pursuant to the Merger is fair from a financial point of view.
Company shall promptly provide a copy of such opinion to Wells Fargo upon
receipt.
(l) The Business Completion Payment Agreements required by paragraph
7(q) shall have been executed and delivered in substantially the form attached
hereto as Exhibit C and shall be in full force and effect as of the Effective
Time of the Merger.
7. CONDITIONS PRECEDENT TO OBLIGATION OF WELLS FARGO. The obligation of
Wells Fargo to effect the Merger shall be subject to the satisfaction at or
before the Time of Filing of the following conditions, which may be waived in
writing by Wells Fargo:
(a) Except as they may be affected by transactions contemplated hereby
and except to the extent such representations and warranties are by their
express provisions made as of a specified date and except for activities or
transactions or events occurring after the date of this Agreement made in the
ordinary course of business and not expressly prohibited by this Agreement, the
representations and warranties contained in paragraph 2 hereof shall be true and
correct in all respects material to Company and the Company Subsidiaries taken
as a whole as if made at the Time of Filing.
(b) Company shall have, or shall have caused to be, performed and
observed in all material respects all covenants, agreements and conditions
hereof to be performed or observed by it at or before the Time of Filing.
(c) This Agreement and the Merger Agreement shall have been approved by
the affirmative vote of the holders of the percentage of the outstanding shares
of Company required for approval of a plan
29
of merger in accordance with the provisions of Company's Articles of
Incorporation and the California General Corporation Law.
(d) Wells Fargo shall have received a favorable certificate dated as of
the Effective Date of the Merger signed by the Chairman or President and by the
Secretary or Assistant Secretary of Company, as to the matters set forth in
subparagraphs (a) through (c) of this paragraph 7.
(e) Wells Fargo shall have received approval by all governmental
agencies as may be required by law of the transactions contemplated by this
Agreement and the Merger Agreement and all waiting and appeal periods prescribed
by applicable law or regulation shall have expired. No approvals, licenses or
consents granted by any regulatory authority shall contain any condition or
requirement relating to Company or any Company Subsidiary that, in the good
faith judgment of Wells Fargo, is unreasonably burdensome to Wells Fargo.
(f) Company and each Company Subsidiary shall have obtained any and all
material consents or waivers from other parties to loan agreements, leases or
other contracts material to Company's or such subsidiary's business required for
the consummation of the Merger, and Company and each Company Subsidiary shall
have obtained any and all material permits, authorizations, consents, waivers
and approvals required for the lawful consummation by it of the Merger.
(g) No court or governmental authority of competent jurisdiction shall
have issued an order restraining, enjoining or otherwise prohibiting the
consummation of the transactions contemplated by this Agreement.
(h) [Intentionally omitted.]
(i) At any time since the date hereof the total number of shares of
Company Common Stock outstanding and subject to issuance upon exercise (assuming
for this purpose that phantom shares and other share-equivalents constitute
Company Common Stock) of all warrants, options, conversion rights, phantom
shares or other share-equivalents, other than any option held by Wells Fargo,
shall not have exceeded 5,498,141.
(j) The Registration Statement (as amended or supplemented) shall have
become effective under the Securities Act and shall not be subject to any stop
order, and no action, suit, proceeding or investigation by the SEC to suspend
the effectiveness of the Registration Statement shall have been initiated and be
continuing, or have been threatened or be unresolved. Wells Fargo shall have
received all state securities law or blue sky authorizations necessary to carry
out the transactions contemplated by this Agreement.
(k) Wells Fargo shall have received from the Chief Executive Officer
and Chief Financial Officer of Company a letter, dated as of the effective date
of the Registration Statement and updated through the date of Closing, in form
and substance satisfactory to Wells Fargo, to the effect that:
30
(i) the interim quarterly financial statements of Company
included or incorporated by reference in the Registration
Statement are prepared in accordance with generally accepted
accounting principles applied on a basis consistent with the
audited financial statements of Company;
(ii) the amounts reported in the interim quarterly financial
statements of Company agree with the general ledger of Company;
(iii) the annual and quarterly financial statements of Company
and the Company Subsidiaries included in, or incorporated by
reference in, the Registration Statement comply as to form in
all material respects with the applicable accounting
requirements of the Securities Act and the published rules and
regulations thereunder;
(iv) from the date of the most recent unaudited consolidated
financial statements of Company and the Company Subsidiaries as
may be included in the Registration Statement to a date five (5)
days prior to the effective date of the Registration Statement
or five (5) days prior to the Closing, there are no increases in
long-term debt, changes in the capital stock or decreases in
stockholders' equity of Company and the Company Subsidiaries,
except in each case for changes, increases or decreases which
the Registration Statement discloses have occurred or may occur
or which are described in such letters. For the same period,
there have been no decreases in consolidated net interest
income, consolidated net interest income after provision for
credit losses, consolidated income before income taxes,
consolidated net income and net income per share amounts of
Company and the Company Subsidiaries, or in income before equity
in undistributed income of subsidiaries, in each case as
compared with the comparable period of the preceding year,
except in each case for changes, increases or decreases which
the Registration Statement discloses have occurred or may occur
or which are described in such letters;
(v) they have reviewed certain amounts, percentages, numbers
of shares and financial information which are derived from the
general accounting records of Company and the Company
Subsidiaries, which appear in the Registration Statement under
the certain captions to be specified by Wells Fargo, and have
compared certain of such amounts, percentages, numbers and
financial information with the accounting records of Company and
the Company Subsidiaries and have found them to be in agreement
with financial records and analyses prepared by Company included
in the annual and quarterly financial statements, except as
disclosed in such letters.
(l) Company and the Company Subsidiaries considered as a whole shall
not have sustained since December 31, 1998 any material loss or interference
with their business from any civil disturbance or any fire, explosion, flood or
other calamity, whether or not covered by insurance.
31
(m) There shall be no reasonable basis for any proceeding, claim or
action of any nature seeking to impose, or that could result in the imposition
on Company or any Company Subsidiary of, any liability relating to the release
of hazardous substances as defined under any local, state or federal
environmental statute, regulation or ordinance including, without limitation,
the Comprehensive Environmental Response, Compensation and Liability Act of 1980
as amended, which has had or could reasonably be expected to have a material
adverse effect upon Company and its subsidiaries taken as a whole.
(n) Since June 30, 1999, no change shall have occurred and no
circumstances shall exist which has had or might reasonably be expected to have
a material adverse effect on the financial condition, results of operations,
business or prospects of Company and the Company Subsidiaries taken as a whole
(other than changes in banking laws or regulations, or interpretations thereof,
or the policies of any governmental authority that affect the banking industry
generally, changes in the general level of interest rates, changes in generally
accepted accounting principles or changes due to actions taken by the Company in
compliance with paragraph 4(m) hereof).
(o) Company shall be in full compliance with current FFIEC
Requirements. There shall be no feature of Company's data processing, operating
or platform systems that would prevent those systems from continuing to run
independently after December 31, 1999 until such time as a subsequent conversion
to Wells Fargo systems can be completed. Company's computer hardware and
software used in the receipt, transmission, processing, manipulation, storage,
retrieval, retransmission, or other utilization of data or in the operation of
mechanical or electrical systems of any kind will function at least as
effectively in all material respects after December 31, 1999 as in the case of
dates or time periods occurring prior to January 1, 2000.
(p) Company shall have taken the actions required by paragraphs 4(q)
and 4(r) hereof.
(q) Wells Fargo and Company propose to execute agreements in
substantially the form attached hereto as Exhibit C (the "Business Completion
Payment Agreements") with the employees of North County Bank (the "Bank")
identified and for the amounts specified on a list, which list shall have been
agreed upon between Wells Fargo and the Company after the date hereof. Company
shall have used its best efforts to ensure that Business Completion Payment
Agreements with at least 75% of the employees on said list shall have been
executed and delivered prior to the Effective Time of the Merger.
8. EMPLOYEE BENEFIT PLANS. Each person who is an employee of Company or
any Company Subsidiary as of the Effective Date of the Merger ("Company
Employees") shall be eligible for participation in the employee welfare and
retirement plans of Wells Fargo, as in effect from time to time, as follows:
(a) EMPLOYEE WELFARE BENEFIT PLANS. Each Company Employee shall be
eligible for participation in the employee welfare benefit plans of Wells Fargo
listed below subject to any eligibility
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requirements applicable to such plans (and not subject to pre-existing
condition exclusions, except with respect to the Wells Fargo Long Term
Disability Plan and the Wells Fargo Long Term Care Plan) and shall enter each
plan no later than the first day of the calendar quarter which begins at
least thirty-two (32) days after the Effective Date of the Merger ("Benefits
Conversion Date") (provided that the transition from Company's Plans to the
Wells Fargo Plans will be facilitated without gaps in coverage to the
participants and without duplication of costs to Wells Fargo and provided,
further, that the Company Employees shall be eligible for participation in
the Wells Fargo Salary Continuation Pay Plan immediately following the
Effective Time of the Merger):
Medical Plan
Dental Plan
Vision Plan
Short Term Disability Plan
Long Term Disability Plan
Long Term Care Plan
Flexible Benefits Plan
Basic Group Life Insurance Plan
Group Universal Life Insurance Plan
Dependent Group Life Insurance Plan
Business Travel Accident Insurance Plan
Accidental Death and Dismemberment Plan
Salary Continuation Pay Plan
Paid Time Off Program
For purposes of the foregoing, "Medical Plan" means any medical plan sponsored
by Wells Fargo that is available to similarly situated Wells Fargo employees.
Company Employees shall receive credit for years of service to Company, the
Company Subsidiaries and any predecessors of Company or the Company Subsidiaries
(to the extent credited under the vacation and short-term disability programs of
Company) for the purpose of determining benefits under the Wells Fargo Paid Time
Off Program, Salary Continuation Pay Plan, and Short Term Disability Plan.
Notwithstanding the foregoing, no Company Employee who is a participant in any
Company severance or salary continuation plan or who has an employment agreement
with Company or any Company Subsidiary at the Effective Time of the Merger shall
be eligible to participate in the Wells Fargo Salary Continuation Pay Plan.
(b) EMPLOYEE RETIREMENT BENEFIT PLANS. Each Company Employee shall be
eligible to participate in the Wells Fargo 401(k) Plan (the "401(k) Plan"),
subject to any eligibility requirements applicable to the 401(k) Plan (with full
credit for years of past service to Company and the Company Subsidiaries for the
purpose of satisfying any eligibility and vesting periods applicable to the
401(k) Plan), and shall enter the 401(k) Plan no later than the Benefits
Conversion Date.
Each Company Employee shall be eligible to participate in the Wells
Fargo Cash Balance Plan (the "Cash Balance Plan") subject to any eligibility
requirements applicable to the Cash Balance Plan.
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Wells Fargo shall not recognize a Company Employee's past service with
Company or any Company Subsidiary for any purpose under the Cash Balance
Plan. Therefore, each Company Employee shall be eligible for participation,
as a new employee, in the Wells Fargo Cash Balance Plan pursuant to the terms
thereof.
9. TERMINATION OF AGREEMENT.
(a) This Agreement may be terminated at any time prior to the Time of
Filing:
(i) by mutual written consent of the parties hereto;
(ii) by either of the parties hereto upon written notice to the
other party if the Merger shall not have been consummated by
April 30, 2000 unless such failure of consummation shall be due
to the failure of the party seeking to terminate to perform or
observe in all material respects the covenants and agreements
hereof to be performed or observed by such party; or
(iii) by Company or Wells Fargo upon written notice to the
other party if any court or governmental authority of competent
jurisdiction shall have issued a final order restraining,
enjoining or otherwise prohibiting the consummation of the
transactions contemplated by this Agreement; or
(iv) by either Wells Fargo or Company upon written notice
to the other party if the Board of Directors of Company shall in
good faith determine that a Takeover Proposal constitutes a
Superior Proposal; PROVIDED, HOWEVER, that Company shall not be
permitted to terminate this Agreement pursuant to this paragraph
(a)(iv) unless (i) it has not breached any covenant contained in
paragraph 4(h) and (ii) it delivers to Wells Fargo
simultaneously with such notice of termination the fee referred
to in paragraph 9(c) below. As used in this Agreement: (i)
"Takeover Proposal" means a bona fide proposal or offer by a
person to make a tender or exchange offer, or to engage in a
merger, consolidation or other business combination involving
Company or to acquire in any manner a substantial equity
interest in, or all or substantially all of the assets of,
Company, and (ii) "Superior Proposal" means a bona fide proposal
or offer made by a person to acquire Company pursuant to a
tender or exchange offer, a merger, consolidation or other
business combination or an acquisition of a substantial equity
interest in or of all or substantially all of the assets of
Company and the Company Subsidiaries on terms which the Board of
Directors of Company shall determine in good faith, after taking
into account the advice of counsel, to be more favorable to
Company and its shareholders than the transactions contemplated
hereby.
(v) by Wells Fargo upon written notice to Company if (A) the
Board of Directors of Company fails to recommend, withdraws, or
modifies in a manner materially adverse to Wells Fargo, its
approval or recommendation of this Agreement, or the
transactions contemplated hereby, (B) after an agreement to
engage in or the occurrence of an Acquisition Event (as
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defined below) or after a third party shall have made a proposal
to Company or Company 's shareholders to engage in an
Acquisition Event, the transactions contemplated hereby are not
approved at the meeting of Company shareholders contemplated by
paragraph 4(c), or (C) the meeting of Company shareholders
contemplated by paragraph 4(c) is not held prior to March 15,
2000, and Company has failed to comply with its obligations
under paragraph 4(c). "Acquisition Event" means any of the
following: (i) a merger, consolidation or similar transaction
involving Company, its bank subsidiary (the "Bank") or any
successor to Company or the Bank, (ii) a purchase, lease or
other acquisition in one or a series of related transactions of
assets of Company or any of the Company Subsidiaries
representing 25% or more of the consolidated assets of Company
and the Company Subsidiaries or (iii) a purchase or other
acquisition (including by way of merger, consolidation, share
exchange or any similar transaction) in one or a series of
related transactions of beneficial ownership of securities
representing 25% or more of the voting power of Company or any
Company Subsidiary in each case with or by a person or entity
other than Wells Fargo or an affiliate of Wells Fargo.
(b) Termination of this Agreement under this paragraph 9 shall not
release, or be construed as so releasing, either party hereto from any liability
or damage to the other party hereto arising out of the breaching party's willful
and material breach of the warranties and representations made by it, or willful
and material failure in performance of any of its covenants, agreements, duties
or obligations arising hereunder, and the obligations under paragraphs 4(g),
5(h) and 10 shall survive such termination.
(c) If this Agreement is terminated pursuant to paragraphs 9(a)(iv) or
9(a)(v), and if terminated pursuant to paragraph 9(a)(v) and prior thereto or
within 12 months after such termination:
(i) Company or the Bank or any successor to Company or the
Bank shall have entered into an agreement to engage in an
Acquisition Event (as defined above) or an Acquisition Event
shall have occurred; or
(ii) the Board of Directors of Company shall have authorized
or approved an Acquisition Event or shall have publicly
announced an intention to authorize or approve or shall have
recommended that the shareholders of Company approve or accept
any Acquisition Event,
then Company shall promptly, but in no event later than five business days after
the first of such events shall have occurred, pay Wells Fargo a fee equal to
$3,500,000.
10. EXPENSES. All expenses in connection with this Agreement and the
transactions contemplated hereby, including without limitation legal and
accounting fees, incurred by Company and Company Subsidiaries shall be borne by
Company, and all such expenses incurred by Wells Fargo shall be borne by Wells
Fargo; PROVIDED, HOWEVER, that if this Agreement is terminated by Wells Fargo,
Wells Fargo agrees to reimburse Company for its actual expenses in connection
with obtaining the boundary surveys required by paragraph 4(o) hereof.
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11. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns, but shall not be assignable by either party hereto without the prior
written consent of the other party hereto.
12. THIRD PARTY BENEFICIARIES. Except as otherwise contemplated by
paragraph 5(n), each party hereto intends that this Agreement shall not benefit
or create any right or cause of action in or on behalf of any person other than
the parties hereto.
13. NOTICES. Any notice or other communication provided for herein or
given hereunder to a party hereto shall be in writing and shall be delivered in
person or shall be mailed by first class registered or certified mail, postage
prepaid, addressed as follows:
If to Wells Fargo:
Wells Fargo & Company
MAC #N9305-173
Sixth and Marquette
Minneapolis, Minnesota 55479
Attention: Secretary
If to Company:
North County Bancorp
444 South Escondido Boulevard
PO Box 1476
Escondido, CA 92025
Attn: James M. Gregg, CEO
With copies to:
Fried, Bird & Crumpacker
1900 Avenue of the Stars - 25th Floor
Los Angeles, CA 90067
Attention: Keith T. Holmes, Esq.
Hovde Financial, Inc.
1826 Jefferson Place, N.W.
Washington, DC 20036
Attn: Rick Perry, Esq.
or to such other address with respect to a party as such party shall notify the
other in writing as above
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provided.
14. COMPLETE AGREEMENT. This Agreement and the Merger Agreement contain
the complete agreement between the parties hereto with respect to the Merger and
other transactions contemplated hereby and supersede all prior agreements and
understandings between the parties hereto with respect thereto.
15. CAPTIONS. The captions contained in this Agreement are for
convenience of reference only and do not form a part of this Agreement.
16. WAIVER AND OTHER ACTION. Either party hereto may, by a signed
writing, give any consent, take any action pursuant to paragraph 9 hereof or
otherwise, or waive any inaccuracies in the representations and warranties by
the other party and compliance by the other party with any of the covenants and
conditions herein.
17. AMENDMENT. At any time before the Time of Filing, the parties
hereto, by action taken by their respective Boards of Directors or pursuant to
authority delegated by their respective Boards of Directors, may amend this
Agreement; PROVIDED, HOWEVER, that no amendment after approval by the
shareholders of Company shall be made which changes in a manner adverse to such
shareholders the consideration to be provided to said shareholders pursuant to
this Agreement and the Merger Agreement.
18. GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with the laws of the State of Delaware.
19. NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES. No representation
or warranty contained in the Agreement or the Merger Agreement shall survive the
Merger or except as set forth in paragraph 9(b), the termination of this
Agreement. Paragraph 10 shall survive the Merger.
20. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
constitute but one instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
WELLS FARGO & COMPANY
By JOHN E. GANOE
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Its EXECUTIVE VICE PRESIDENT
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NORTH COUNTY BANCORP
By JAMES M. GREGG
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Its CHAIRMAN & CHIEF EXECUTIVE OFFICER
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