-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SF9zzWIGmbW9z1WpTdLoY5IhIV6zaL3nxKm03T3VMvGsUBWSZYp8d3YrJnjHpp2+ FqWaoIE11JXNXN0zE989Ag== 0000950136-95-000405.txt : 19960216 0000950136-95-000405.hdr.sgml : 19960216 ACCESSION NUMBER: 0000950136-95-000405 CONFORMED SUBMISSION TYPE: SC 14D9 PUBLIC DOCUMENT COUNT: 36 FILED AS OF DATE: 19951120 SROS: NONE SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: FIRST INTERSTATE BANCORP /DE/ CENTRAL INDEX KEY: 0000105982 STANDARD INDUSTRIAL CLASSIFICATION: 6021 IRS NUMBER: 951418530 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D9 SEC ACT: 1934 Act SEC FILE NUMBER: 005-11891 FILM NUMBER: 95594835 BUSINESS ADDRESS: STREET 1: 633 W FIFTH ST-T8-19 STREET 2: PO BOX 54068 CITY: LOS ANGELES STATE: CA ZIP: 90054 BUSINESS PHONE: 2136143001 FORMER COMPANY: FORMER CONFORMED NAME: WESTERN BANCORPORATION DATE OF NAME CHANGE: 19911124 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: FIRST INTERSTATE BANCORP /DE/ CENTRAL INDEX KEY: 0000105982 STANDARD INDUSTRIAL CLASSIFICATION: 6021 IRS NUMBER: 951418530 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D9 BUSINESS ADDRESS: STREET 1: 633 W FIFTH ST-T8-19 STREET 2: PO BOX 54068 CITY: LOS ANGELES STATE: CA ZIP: 90054 BUSINESS PHONE: 2136143001 FORMER COMPANY: FORMER CONFORMED NAME: WESTERN BANCORPORATION DATE OF NAME CHANGE: 19911124 SC 14D9 1 SCHEDULE 14D-9 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------- SCHEDULE 14D-9 SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO SECTION 14(D)(4) OF THE SECURITIES EXCHANGE ACT OF 1934 FIRST INTERSTATE BANCORP (Name of Subject Company) FIRST INTERSTATE BANCORP (Name of Person Filing Statement) COMMON STOCK, PAR VALUE $2.00 PER SHARE (INCLUDING THE ASSOCIATED COMMON STOCK PURCHASE RIGHTS) (Title of Class of Securities) 320548100 (CUSIP Number of Class of Securities) ---------------- WILLIAM J. BOGAARD, ESQ. EXECUTIVE VICE PRESIDENT AND GENERAL COUNSEL FIRST INTERSTATE BANCORP 633 WEST FIFTH STREET LOS ANGELES, CA 90071 (213) 614-3001 (NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICE AND COMMUNICATIONS ON BEHALF OF THE PERSON FILING STATEMENT) ---------------- COPY TO: FRED B. WHITE III, ESQ. SKADDEN, ARPS, SLATE, MEAGHER & FLOM 919 THIRD AVENUE NEW YORK, NEW YORK 10022 (212) 735-3000 ITEM 1. SECURITY AND SUBJECT COMPANY. The name of the subject company is First Interstate Bancorp, a Delaware corporation ("First Interstate"). The address of the principal executive offices of First Interstate is 633 West Fifth Street, Los Angeles, California 90071. The title of the class of equity securities to which this Statement relates is First Interstate's common stock, par value $2.00 per share (the "First Interstate Common Stock"), including the associated Common Stock Purchase Rights (the "Rights") issued pursuant to the Rights Agreement, dated as of November 21, 1988, as amended on November 5, 1995, between First Interstate and First Interstate Bank, Ltd., as Rights Agent (as so amended, the "Rights Agreement"). Except where the context otherwise requires, all references herein to the First Interstate Common Stock shall include the Rights. ITEM 2. TENDER OFFER OF THE BIDDER. This Statement relates to a proposed exchange offer (the "Wells Offer") to be disclosed in a Registration Statement on Form S-4 (the "Wells S-4") which Wells Fargo & Co. ("Wells"), a Delaware corporation, has publicly announced that it will file with the Securities and Exchange Commission (the "SEC") on November 20, 1995, to exchange shares of the common stock, par value $5.00 per share, of Wells (the "Wells Common Stock") for all of the outstanding shares of First Interstate Common Stock. According to a press release (the "Wells Press Release") issued by Wells on November 13, 1995, in the Wells Offer, Wells will offer to exchange each share of First Interstate Common Stock held by First Interstate shareholders for two-thirds of a share of Wells Common Stock. A copy of the Wells Press Release has been filed as Exhibit 1 hereto and is incorporated herein by reference, and all descriptions of the Wells Press Release contained herein are qualified in their entirety by such reference. According to the most recent Quarterly Report on Form 10-Q filed by Wells with the SEC, the principal executive offices of Wells are located at 420 Montgomery Street, San Francisco, California 94163. ITEM 3. IDENTITY AND BACKGROUND. (a) The name and business address of First Interstate, which is the person filing this Statement, are set forth in Item 1 above. (b) Certain contracts, agreements, arrangements or understandings between First Interstate or its affiliates and certain of First Interstate's directors and executive officers are described on pages 7-37 of the proxy statement (the "1995 Proxy Statement"), dated March 20, 1995, sent by First Interstate to its shareholders in connection with First Interstate's Annual Meeting of Stockholders held on April 28, 1995. A copy of these pages of the 1995 Proxy Statement is filed as Exhibit 2 hereto and is incorporated herein by reference. Except as described herein or in Exhibit 2 hereto, to the knowledge of First Interstate, as of the date of this Schedule 14D-9, there are no material contracts, agreements, arrangements or understandings, or any actual or potential conflicts of interest, between First Interstate or its affiliates and (i) First Interstate, its executive officers, directors or affiliates or (ii) Wells or its executive officers, directors or affiliates. On November 5, 1995, First Interstate entered into an Agreement and Plan of Merger (the "Merger Agreement") with First Bank System, Inc., a Delaware corporation ("FBS"), and Eleven Acquisition Corp. ("Merger Sub"), a Delaware corporation and a wholly owned subsidiary of FBS, pursuant to which Merger Sub will merge (the "Merger") with and into First Interstate, with First Interstate surviving the Merger as a wholly owned subsidiary of FBS. Upon consummation of the Merger, (i) subject to certain limited exceptions, each share of First Interstate Common Stock then outstanding will automatically be converted into 2.6 shares (the "Exchange Ratio") of the common stock, par value $1.25 per share, of FBS ("FBS Common Stock") and (ii) FBS will change its name to First Interstate Bancorp (sometimes referred to herein as "New First Interstate"). Under the terms of the Merger Agreement, ten persons serving as directors of First Interstate immediately prior to the effective time of the Merger (the "Effective Time") and selected solely by and at the absolute discretion of the Board of Directors of First Interstate (the "First Interstate Board") will serve as directors of New First Interstate. The remainder of 1 the Board of Directors of New First Interstate will consist of 10 persons selected solely by and at the absolute discretion of the Board of Directors of FBS from amongst those persons serving as directors of FBS immediately prior to the Merger. In addition, the Merger Agreement provides that Mr. William E. B. Siart, Chairman of the Board of Directors and Chief Executive Officer of First Interstate, will be President and Chief Operating Officer of New First Interstate. A copy of the Merger Agreement has been filed as Exhibit 3 hereto and is incorporated herein by reference, and any descriptions of the terms of the Merger Agreement contained herein are qualified in their entirety by reference thereto. In addition, although not specifically required by the Merger Agreement, First Interstate and FBS have publicly announced that Ms. Linnet F. Deily, the Chief Executive Officer, Texas region, of First Interstate, and Mr. Bruce G. Willison, the Vice Chairman and Chief Executive Officer, California region, of First Interstate, will serve as the Vice Chairman, Retail Banking, and the Vice Chairman, Corporate Banking, respectively, of New First Interstate. As of the date of this Schedule 14D-9, First Interstate is not aware of Wells' intentions with respect to the possible retention of any or all of First Interstate's executive officers following consummation of the Wells Offer. As more fully described in Item 4 below, according to the Wells Press Release, Wells intends to seek to cause the removal of all of the members of the First Interstate Board. Pursuant to the Merger Agreement, at the Effective Time, each option to purchase shares of First Interstate Common Stock (each a "First Interstate Option") issued by First Interstate pursuant to any of its stock option programs (each a "First Interstate Stock Plan") which is outstanding and unexercised immediately prior thereto will be converted automatically into an option to purchase shares of FBS Common Stock with (a) the number of shares of FBS Common Stock subject to the new FBS option (each a "New First Interstate Option") equal to the product of the number of shares of First Interstate Common Stock subject to the First Interstate Option and 2.6, rounded down to the nearest share, and (b) the exercise price per share of FBS Common Stock subject to the New First Interstate Option equal to the exercise price per share of First Interstate Common Stock under the First Interstate Option divided by 2.6, rounded up to the nearest cent. The conversion is intended to be effected in a manner such that any First Interstate Options which are "incentive stock options" within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), shall remain so. Other than with respect to the acceleration of the exercisability of such First Interstate Options in connection with the Merger, the duration and other terms of the New First Interstate Options shall be the same as the predecessor First Interstate Options. Pursuant to the terms of the First Interstate Stock Plans, upon a change in control of First Interstate (a "Change in Control"), each First Interstate Option and related stock appreciation right held by active employees will become immediately exercisable, all restrictions with respect to restricted stock will automatically lapse and, unless otherwise provided in an agreement evidencing a performance unit, all performance units shall be immediately payable in FBS Common Stock, provided in any case that such awards (other than restricted stock awards) may not be accelerated to a date less than six months after the date of grant. First Interstate Options which are currently outstanding and unexercisable were granted under the First Interstate 1991 Performance Stock Plan and the First Interstate 1991 Director Option Plan. First Interstate Options which are currently outstanding and fully exercisable were granted under the First Interstate 1991 Performance Stock Plan, the First Interstate 1988 Performance Stock Plan and the First Interstate 1983 Performance Stock Plan. Restricted shares of First Interstate Common Stock which are currently outstanding were granted under the First Interstate 1991 Performance Stock Plan and the First Interstate 1988 Performance Stock Plan. The grants of all such First Interstate Options were made under terms substantially similar to the terms contained in the First Interstate 1995 Performance Stock Plan. The grants of all such restricted shares of First Interstate Common Stock were made under terms substantially similar to the terms contained in the First Interstate 1995 Performance Stock Plan, except that the restricted period with respect to such shares expires automatically upon a Change in Control. A description of the First Interstate 1991 Director Option Plan was included on page 10 of the 1995 Proxy 2 Statement. A description of the First Interstate 1995 Performance Stock Plan was included on pages 31-37 of the 1995 Proxy Statement. In addition, copies of the First Interstate 1991 Performance Stock Plan, the First Interstate 1988 Performance Stock Plan and the First Interstate 1983 Performance Stock Plan are filed as Exhibits 4, 5 and 6 hereto and incorporated herein by reference. A description of First Interstate's 1995 Corporate Executive Incentive Plan (the "Corporate Incentive Plan") was included on page 29 of the 1995 Proxy Statement. The Corporate Incentive Plan provides that within ten days of a Change in Control, each participant therein shall receive 100% of his or her target award. In addition, First Interstate maintains for the benefit of certain of the executive officers of First Interstate and its affiliates the 1995 Management Incentive Plan and the 1995 Regional Executive Incentive Plan, each of which are substantially similar to the Corporate Incentive Plan. Copies of each of the 1995 Management Incentive Plan and the 1995 Regional Executive Incentive Plan are attached hereto as Exhibits 7 and 8, respectively, and are incorporated herein by reference. A description of the agreements for nine of First Interstate's executive officers (including Messrs. Siart, Randall, Willison and Curran, each of whom is one of the executive officers named in the 1995 Proxy Statement) (the "Tier I Agreements") was included on pages 26 and 27 of the 1995 Proxy Statement. The terms of the employment agreements with respect to certain other executive officers (which total approximately thirty agreements) (the "Tier II Agreements") are substantially similar to the Tier I Agreements, except that the severance payments under the Tier II Agreements have a multiplier of two, and include a $20,000 cash payment to cover two years' health and welfare benefit plan coverage. The Tier I Agreements and the Tier II Agreements provide for the payment of severance benefits if the employment of the affected executive officer is terminated under certain circumstances following a Change in Control. A copy of a form of Tier II Agreement is filed as Exhibit 9 hereto and is incorporated herein by reference. Approval of the Merger Agreement by the requisite vote of First Interstate's shareholders will constitute a Change in Control for purposes of First Interstate's benefit plans (including without limitation the First Interstate Stock Plans, the Corporate Incentive Plan, the 1995 Management Incentive Plan, the 1995 Regional Incentive Plan, the Tier I Agreements and the Tier II Agreements) and accordingly, certain provisions of First Interstate's benefit plans which relate to a Change in Control, including, but not limited to, the accelerated vesting and/or payment of equity-based awards under the First Interstate Stock Plans, will be triggered if such approval is obtained. The consummation of the Wells Offer would constitute a Change in Control for purposes of First Interstate's benefit plans described above. In addition, as more fully described in Item 4 below, Wells Fargo has publicly stated that it intends to commence a solicitation of written consents from First Interstate's shareholders in order to remove all of the members of the First Interstate Board and replace them with a slate of directors chosen by Wells. Such action, if successful, would also constitute a Change in Control for purposes of First Interstate's benefit plans. The Merger Agreement provides that FBS will maintain all rights of indemnification existing in favor of the directors, officers and employees of First Interstate to the fullest extent permitted under Delaware law and First Interstate's Certificate of Incorporation and By-laws and will use its best efforts to provide to the present and former officers and directors of First Interstate for six years after the Effective Time directors' and officers' liability insurance with respect to claims against such officers and directors arising from facts or events which occurred before the Effective Time on terms no less advantageous than those contained in policies currently maintained by FBS; provided, however, that the annual premium payments for such insurance shall not exceed 200% of the annual premiums paid as of the date of the Merger Agreement by First Interstate; and provided, further, however, that such coverage will have a single aggregate for such six-year period in an amount not less than the aggregate annual of such coverage currently provided by First Interstate. ITEM 4. THE SOLICITATION OR RECOMMENDATION. (A) AND (B). AS MORE FULLY DESCRIBED BELOW, THE FIRST INTERSTATE BOARD HAS RECOMMENDED THAT FIRST INTERSTATE SHAREHOLDERS REJECT THE WELLS 3 OFFER AND, WHEN AND IF SUCH OFFER IS COMMENCED, NOT TENDER THEIR SHARES OF FIRST INTERSTATE COMMON STOCK PURSUANT TO THE WELLS OFFER. THE FIRST INTERSTATE BOARD HAS ALSO REAFFIRMED ITS DETERMINATION THAT THE TERMS OF THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, FIRST INTERSTATE AND ITS SHAREHOLDERS. Background. On February 11, 1994, Wells delivered an unsolicited letter to First Interstate proposing a merger of the two companies in which each share of First Interstate Common Stock would be converted into Wells Fargo Common Stock with a then-current trading value of $90. After carefully considering that proposal, the First Interstate Board determined to decline to pursue a merger with Wells and instead to implement strategies aimed at enhancing shareholder value as an independent company. During the remainder of 1994 and throughout the first three quarters of 1995, First Interstate took a number of actions aimed at achieving this goal. These actions included implementing a corporate restructuring program designed to rationalize First Interstate's corporate structure and achieve greater operating efficiencies; announcing on March 22, 1994 a repurchase program for eight million shares of First Interstate Common Stock which was completed in November 1994; and completing a series of acquisitions designed to enhance First Interstate's competitive position in certain key markets. As these various strategies were implemented, First Interstate's business, financial condition and results of operations all continued to improve. This improvement was reflected in the market price of the First Interstate Common Stock, which rose from $63 1/4 on January 3, 1994 to $100 3/4 on September 29, 1995. Throughout this period, the First Interstate Board considered possible alternative strategies for enhancing shareholder value. These included the alternative of remaining independent, as well as the alternative of seeking a strategic partnership with either a larger or similar-sized bank holding company with a similar strategic focus and business strengths complementary to and compatible with those of First Interstate. With respect to potential strategic partnerships, the First Interstate Board continued to consider the possibility of a transaction with Wells, as well as the possibility of a strategic partnership with one of several other companies (including FBS) which, unlike a strategic partnership with Wells, would serve to further the First Interstate Board's goal of reducing the risk profile of First Interstate by achieving even greater geographic diversification. As part of First Interstate's assessment of which strategy would best enhance shareholder value, Mr. William E. B. Siart, the Chairman and Chief Executive Officer of First Interstate, from time to time engaged in exploratory conversations with his counterparts at various other large regional bank holding companies, including FBS, concerning the respective strategic directions of First Interstate and such other company, the degree to which such strategic directions were compatible, and the level of interest which such other company might have in a potential strategic partnership with First Interstate. During the first quarter of 1995, general discussions were held with Mr. John F. Grundhofer, the Chairman and Chief Executive Officer of FBS, concerning the strategic advantages of a possible combination. However, none of the discussions described in this paragraph were conducted with the aim of generating, and none resulted in, a firm merger proposal being submitted to First Interstate or any merger proposal being considered by the First Interstate Board. As the pace of consolidation in the banking industry reached unprecedented levels during the first half of 1995, Mr. Siart initiated a series of discussions at which the First Interstate Board would continue its ongoing review of the appropriate strategic direction for First Interstate in light of the significant changes affecting the industry. At the April 28, 1995 meeting of the First Interstate Board, Mr. Siart announced that at future Board meetings, management would discuss its views concerning the strategic alternatives available to First Interstate and the critical elements that would affect the Board's selection of the strategic alternative which would be in the best interests of First Interstate and its shareholders. The first such discussion was held at the July 17, 1995 meeting of the First Interstate Board. In August 1995, Messrs. Siart and Grundhofer met at Mr. Grundhofer's request and discussed corporate strategic compatibility and management philosophy. On September 7, 1995, Mr. Siart met with 4 Mr. Paul Hazen, the Chief Executive Officer and Chairman of the Board of Wells, at Mr. Hazen's request. At this meeting, Mr. Hazen stated his belief that a merger of First Interstate and Wells was very compelling. He also stated that after evaluating Wells' strategic alternatives, Wells had concluded that such a merger was a strategic imperative to Wells and that no alternative would provide values to Wells' shareholders which were comparable to the values which could be achieved in such a merger. Mr. Hazen then suggested that Mr. Siart could serve as the President and Chief Operating Officer of the combined company, and that the merger would significantly enhance shareholder value for each company's shareholders. In this regard, he noted that Wells had performed extensive analyses of the cost savings and operating efficiencies which could be achieved by consolidating the two companies' respective California branch systems. At the conclusion of the meeting, Mr. Hazen suggested a second meeting for purposes of reviewing Wells' analyses in detail. Mr. Siart responded by explaining the process for reviewing strategic alternatives previously commenced by the First Interstate Board. In particular, he summarized the presentations made at the July Board meeting, his expectations regarding the subject matter of the presentation which would be made to the First Interstate Board in October (which presentation was to include an assessment of potential strategic partners, including Wells), and the additional future presentations which were expected to be made to the First Interstate Board concerning, among other matters, developments in technology and non-bank financial providers. Mr. Hazen then inquired as to Mr. Siart's expectations concerning how long the Board's process for reviewing strategic alternatives would take. Mr. Siart responded that although he was not sure, his best guess was that the process would be complete in approximately six months (although it could take as few as four and as many as nine months). Mr. Hazen again suggested a second meeting to discuss Wells' analyses in detail, and Mr. Siart responded that he believed that it was more important for Mr. Hazen and him to determine if the two companies' management philosophies and strategic outlooks were compatible. On the same day as the meeting, Mr. Siart called Mr. Hazen and scheduled a second meeting for October 30, 1995. On October 17, 1995, the First Interstate Board met and reviewed possible strategic partnerships with five large bank holding companies, including Wells and FBS. The advantages and disadvantages of a transaction with each company were reviewed. In a telephone conversation initiated by Mr. Hazen later that day, Mr. Hazen told Mr. Siart that he intended to deliver and make public the following morning a letter proposing a merger of the two companies in which each share of First Interstate Common Stock would be converted into .625 shares of Wells Common Stock (the "Initial Wells Proposal"). In a subsequent call a short time later, Messrs. Siart and Hazen discussed under what circumstances Mr. Hazen would agree not to make his letter public. Mr. Hazen stated that Mr. Siart would have to begin merger negotiations the next day, which Mr. Siart rejected as inappropriate and inconsistent with both the strategic process the First Interstate Board had already undertaken and the interests of the shareholders of First Interstate being served by that process. Mr. Siart suggested that inasmuch as the Board's process was already underway, and that Wells was included, it seemed prudent for Wells to wait for the process to conclude. On October 18, 1995, Wells publicly announced that it had delivered an unsolicited letter to Mr. Siart the previous evening proposing a merger of the two companies. A copy of Wells' October 17 letter is filed as Exhibit 10 hereto and incorporated herein by reference. Later that day, three large regional bank holding companies, including FBS (each of which had been considered as a potential strategic partner at the previous day's Board meeting), contacted First Interstate to express an interest in initiating discussions to assess the merits of a strategic partnership. Mr. Siart contacted all of the members of the First Interstate Board to discuss the Initial Wells Proposal, the need to accelerate the Board's process for reviewing strategic alternatives and the inquiries received from these three regional bank holding companies. First Interstate's senior management, together with First Interstate's financial advisors, Goldman, Sachs & Co. ("Goldman Sachs") and Morgan Stanley & Co. Incorporated ("Morgan Stanley," and together with Goldman Sachs, the "Financial Advisors"), at the direction of the First Interstate Board, then engaged in preliminary discussions concerning potential strategic partnerships with the three large regional bank holding companies that had contacted Mr. Siart on October 18. First Interstate's 5 management and the Financial Advisors also continued to explore the values to shareholders which could be achieved (i) if First Interstate chose to remain independent rather than pursuing a strategic partnership at the present time and (ii) if a transaction with Wells were pursued. The First Interstate Board met to consider the Initial Wells Proposal on October 25, 1995. At this meeting, First Interstate's management and the Financial Advisors reviewed with the Board the status of the preliminary discussions with the three large regional bank holding companies as well as the Initial Wells Proposal. On October 26, 1995, Mr. Siart met with Mr. Hazen to discuss the possibility of pursuing a merger of First Interstate and Wells. Mr. Siart stated his desire to learn more about the Initial Wells Proposal. At this meeting, Mr. Hazen discussed Wells' reasons for publicly announcing its unsolicited proposal. Messrs. Siart and Hazen also discussed the possible advantages of a combination of First Interstate and Wells, with particular attention being paid to the cost savings and operating efficiencies which could be achieved in a merger. Messrs. Siart and Hazen were joined later that day by William J. Bogaard, First Interstate's General Counsel, George Roberts of Kohlberg Kravis Roberts & Co. ("KKR"), First Interstate's largest shareholder, Mr. Rodney L. Jacobs, the Vice Chairman and Chief Financial Officer of Wells, and Mr. Warren Buffett, Chairman and Chief Executive Officer of Berkshire Hathaway Inc., the largest shareholder of Wells. Extensive dialogue ensued concerning the two companies and their respective strategies, potential cost savings, operating efficiencies and reductions in revenue, and the consolidation of a substantial number of First Interstate's and Wells' respective California branch offices and the revenue loss associated therewith. Mr. Siart asserted that the reductions in revenue which would result from the transaction would significantly exceed those estimated by Wells (see paragraph (v) in this Item 4 below). Mr. Siart stated that he nevertheless believed that a merger of First Interstate and Wells could enhance shareholder value. Mr. Buffett stated that he had studied both companies in some detail. He also stated that one could come up with positives and negatives of one company compared to the other, but in the end, when evaluating each company, one would conclude that they were about equal and that accordingly the exchange ratio of .625 made sense to him. Mr. Roberts also stated his view, speaking as a major shareholder of First Interstate and not on behalf of First Interstate's management or the First Interstate Board, that given the other attractive strategic alternatives available to First Interstate, the substantial risk created by a merger of the two companies due to the increased concentration of assets in California, and the tremendous value of the First Interstate franchise, a minimum exchange ratio of .70 shares of Wells Common Stock for each share of First Interstate Common Stock was required in order to make the transaction equitable. During these discussions, Mr. Hazen stated that although Wells might consider increasing the exchange ratio offered to First Interstate's shareholders, the maximum exchange ratio it might be prepared to offer was .65. However, he emphasized that he and Mr. Buffett viewed an exchange ratio of .625 as fair to each company's shareholders. Mr. Roberts indicated that the possible increase of the exchange ratio to .65 seemed inadequate to him. Mr. Hazen told Mr. Siart that in no way should their conversation be construed as meaning Wells had raised its offer. On October 30, 1995, the First Interstate Board met to review the discussions that had been held with Wells and the three other potential strategic partners. Mr. Siart reported that FBS had indicated that it would consider increasing its exchange ratio from the previously stated range of 2.3 to 2.4 shares of FBS Common Stock for each First Interstate share to 2.5. Management and the Financial Advisors also discussed their views as to the values which could be achieved if First Interstate remained independent, and the risks associated with this strategy. At the conclusion of this meeting, the First Interstate Board determined to continue to explore a merger with each of Wells and FBS. With respect to Wells, it was the sense of the Board that Mr. Siart should determine if Wells would consider increasing the exchange ratio significantly above .65. Messrs. Siart and Hazen again met on the morning of October 31, 1995. At this meeting, Mr. Siart informed Mr. Hazen that the First Interstate Board had been fully informed of all of the matters discussed 6 at their October 26 meeting and was considering carefully all of the advantages and disadvantages of a potential merger with Wells, as well as the advantages and disadvantages associated with the other strategic alternatives available to First Interstate. Extensive discussions concerning potential cost savings, operating efficiencies and revenue losses also took place, with Mr. Siart voicing the various concerns of the First Interstate Board in this regard. Mr. Hazen stated that he believed that the $100 million in revenue losses estimated by Wells were on the high side. Mr. Siart stated that First Interstate might consider further exploratory discussions concerning the value to First Interstate's shareholders of a potential merger with Wells if Wells would offer an exchange ratio of approximately .68. Mr. Hazen then excused himself from the meeting. Upon his return, Mr. Hazen stated that he had consulted with Mr. Buffett, reiterated that the maximum exchange ratio that Wells and its major shareholder would consider was .65 shares of Wells Common Stock for each share of First Interstate Common Stock, and stated that Mr. Buffett fully concurred with this decision. In closing the meeting, Mr. Siart again stated that Mr. Hazen should bear in mind that First Interstate had available a number of attractive strategic alternatives. On November 1, 1995, Mr. Siart contacted Mr. Grundhofer and they agreed to meet the next day. Messrs. Siart and Hazen also talked by phone that day. Mr. Siart asked Mr. Hazen if he had reconsidered his position. Mr. Hazen stated that his position remained unchanged and that .65 was the maximum exchange ratio that Wells would consider. On November 2, 1995, Mr. Siart met with Mr. Grundhofer and Mr. Richard A. Zona, the Chief Financial Officer of FBS. At this meeting, FBS increased the exchange ratio it was prepared (subject to the approval of the FBS Board) to offer to First Interstate's shareholders to 2.6 from the previous indication of 2.5 and First Interstate and FBS continued their discussions concerning a potential merger. A number of the significant business terms relating to a merger transaction were discussed. Mr. Siart reported these developments to the members of the First Interstate Board later that day. On November 3, 1995, the First Interstate Board met to consider the potential merger with FBS and the results of Mr. Siart's conversations with Mr. Hazen. This meeting included an executive session of all of First Interstate's outside directors (other than Mr. Edward M. Carson, the former Chairman and Chief Executive Officer of First Interstate), who discussed the matters under consideration with their special outside counsel. During this period, negotiations between the legal and financial advisors of First Interstate and FBS began concerning the terms of definitive transaction agreements. On November 5, 1995, the First Interstate Board met to again consider both the potential merger with FBS and Wells' merger proposal. At this meeting, the management of First Interstate, as well as First Interstate's legal and financial advisors, made presentations regarding their due diligence findings concerning FBS, the strategic alternatives other than the potential FBS merger available to First Interstate (including a merger with Wells assuming for purposes of such presentations that Wells would actually increase its proposed exchange ratio to .65), the terms of the definitive agreements negotiated between First Interstate and FBS, the fairness opinions of each of Goldman Sachs and Morgan Stanley concerning the exchange ratio for the potential merger, the fairness opinion of Morgan Stanley concerning the .65 exchange ratio which might be proposed by Wells and the judgments of the Financial Advisors that the First Interstate Stock Option Agreement and the First Interstate Fee Letter (each as defined in Item 7 below) were within the normal range and consistent with comparable transactions. Another executive session of all of First Interstate's outside directors (other than Mr. Carson) was also held, with the outside directors consulting with both their special counsel and the Financial Advisors. Based upon its consideration of those presentations and other factors more fully described below, the First Interstate Board unanimously approved and authorized (with two directors absent) the execution and delivery of the Merger Agreement, the Reciprocal Stock Option Agreements and the Reciprocal Fee Letters (each as defined below). The Merger was publicly announced on November 6, 1995. On November 13, 1995, Wells issued the Wells Press Release, which stated that Wells intended to file a registration statement with the SEC with respect to an exchange offer pursuant to which Wells would offer to exchange two-thirds of a share of Wells Common Stock for each share of First Interstate Common Stock. The Wells Press Release also stated that Wells anticipated (i) filing proxy materials with the SEC 7 (a) to solicit written consents from shareholders of First Interstate to remove the members of the First Interstate Board and to replace them with nominees of Wells who are committed to removing any impediments to the consummation of the acquisition of First Interstate by Wells and (b) to solicit proxies from the shareholders of First Interstate against the approval of the Merger Agreement and (ii) filing an application with the Federal Reserve Board seeking its approval of Wells' acquisition of First Interstate and Wells' election of its board nominees. Finally, the Wells Press Release stated that Wells had commenced litigation against First Interstate, the members of the First Interstate Board and FBS in the Chancery Court of the Commonwealth of Delaware which is described in Item 8 below. A copy of the Wells Press Release, including a letter from Mr. Hazen to Mr. Siart included therein, is filed as Exhibit 1 hereto and is incorporated herein by reference and the foregoing description thereof is qualified in its entirety by such reference. On November 19, 1995, the First Interstate Board met to consider both the Wells Offer and the Merger. At this meeting, following an executive session of all of First Interstate's outside directors (other than Mr. Carson) with their special counsel, the management of First Interstate, as well as First Interstate's legal and financial advisors and the outside directors' special counsel, reviewed, among other things, the analyses which had been presented to the First Interstate Board at its November 5, 1995 meeting, with these analyses updated where appropriate to reflect the increase in Wells' indicated maximum exchange ratio from .65 to two-thirds of a share of Wells Common Stock for each First Interstate share. At its November 19 meeting, the First Interstate Board determined by a unanimous vote (with two directors absent) that the Wells Offer is not in the best interests of First Interstate and its shareholders. Accordingly, the First Interstate Board determined to recommend that First Interstate shareholders reject the Wells Offer and not tender their shares of First Interstate Common Stock pursuant to the Wells Offer. The First Interstate Board also reaffirmed its determination that the terms of the Merger are fair to, and in the best interests of, First Interstate and its shareholders. The factors considered by the First Interstate Board in making its determinations with respect to the Merger and the Wells Offer are described below. THE FIRST INTERSTATE BOARD RECOMMENDS THAT SHAREHOLDERS REJECT THE WELLS OFFER AND, WHEN AND IF SUCH OFFER IS COMMENCED, NOT TENDER ANY OF THEIR SHARES OF FIRST INTERSTATE COMMON STOCK OR RIGHTS PURSUANT THERETO. THE FIRST INTERSTATE BOARD BELIEVES THAT THE MERGER SHOULD PROVIDE LONG-TERM VALUE TO FIRST INTERSTATE'S SHAREHOLDERS SUPERIOR TO THAT PROVIDED BY A TRANSACTION WITH WELLS PURSUANT TO THE TERMS OF THE WELLS OFFER. A copy of the letter to First Interstate's shareholders communicating the Board's recommendation and the press release relating thereto are filed as Exhibits 11 and 12 hereto and incorporated herein by reference. A copy of such letter is also attached hereto. In reaching its determination to approve and adopt the Merger Agreement and in determining to recommend rejection of the Wells Offer, the First Interstate Board considered the following factors, which, together, constitute all material factors considered by the First Interstate Board: (i) the First Interstate Board's familiarity with and review of First Interstate's business, operations, financial condition and earnings on both an historical and a prospective basis; (ii) the First Interstate Board's review, based in part on presentations by the Financial Advisors and First Interstate management, of (a) the strategy, business, operations, earnings and financial condition of FBS on both an historical and a prospective basis and (b) the historical market price of FBS Common Stock. In this regard, the First Interstate Board noted that (I) given the geographic continuity of the regions currently served by each company, the Merger would serve to (x) further diversify the assets (and thereby reduce the attendant credit risks), liabilities and operations of First Interstate into eight additional contiguous states, with the combined institution obtaining a top three ranking (in terms of deposit market share) in ten states (as opposed to a top three ranking in only four states in a First Interstate/Wells merger) and (y) reduce to less than 30% (from in excess of 40%) 8 the total assets of First Interstate located in California, (II) First Interstate and FBS possess compatible and complementary corporate philosophies with respect to strategies for enhancing profitability, business line diversification, asset quality and risk management and (III) FBS has multiple product lines which are complementary to First Interstate's product offerings; (iii) the First Interstate Board's review, based in part on presentations by the Financial Advisors and First Interstate management, of (a) the strategy, business, operations, earnings and financial condition of Wells on both a historical and a prospective basis and (b) the historical market price of Wells Common Stock. In this regard, the First Interstate Board noted that although Wells was a highly regarded institution, its strategies were very different from those of First Interstate and a merger with Wells would create a company with significantly different characteristics than both First Interstate currently and the company to be created in the Merger with FBS. These differences include (I) substantially greater concentration in the California market (with 70% of the combined company's total assets and 78% of its real estate loans being located in California), which concentration is inconsistent with the First Interstate Board's longstanding desire to achieve greater geographic diversification, (II) a materially increased exposure to real estate lending, which exposure is inconsistent with First Interstate's credit philosophy, (III) the financial impact of a purchase accounting transaction (see paragraph (xiii) below) and (IV) a narrower business strategy with fewer product lines and revenue growth opportunities which, in the view of the First Interstate Board, would emphasize stock repurchases and other financial strategies rather than core business growth as a key means of increasing earnings per share; (iv) the anticipated cost savings and operating efficiencies available to First Interstate and FBS as a combined institution following the Merger, the potential for revenue enhancements at the combined institution and the likelihood of achieving these cost savings, operating efficiencies and revenue enhancements relative to the likelihood that they could be achieved in a merger with Wells (see also paragraphs (vi) -- (viii) below); (v) the anticipated cost savings and operating efficiencies available to First Interstate and Wells as a combined institution following an affiliation of the two institutions and the potential for revenue enhancements at the combined institution. In this regard, the First Interstate Board noted its belief that although the cost savings which might be achieved in connection with a First Interstate/Wells merger could be as high as the $800 million announced by Wells, it was likely that the decreases in revenue at the combined institution would significantly exceed the $100 million level publicly projected by Wells due to (a) the divestitures which were anticipated to be required in order to obtain regulatory approval for the transaction, (b) the decreases in the levels of service and ability to generate revenue (both through branch consolidations and substantial cuts in employment in the corporate banking and trust area) which would be required to achieve such cost savings and (c) the likelihood, based upon First Interstate's experience in acquiring other California financial institutions, that the branch consolidations required to achieve such cost savings would result in significant deposit attrition; (vi) the fact that the cost savings and operating efficiencies expected to result from the Merger primarily involve the consolidation of back office and operating systems, which cost savings and operating efficiencies are expected to be achieved without corresponding significant reductions in revenues. In comparison, the cost savings and operating efficiencies expected to result from a merger of First Interstate and Wells would, as explained in paragraph (v) above, be accomplished, in large measure, by reductions in line operations and therefore result in significant revenue reductions; (vii) the fact that First Interstate and FBS share common information systems which should greatly facilitate the integration of the two companies' operations and the achievement of cost savings and operating efficiencies at a minimal cost. In contrast, Wells utilizes a system which is incompatible with First Interstate's, which in turn could greatly impair the combined company's ability to implement the technology conversion required in the merger on a timely basis and which would require significant expenditures before any cost savings and operating efficiencies could be achieved at a later date; 9 (viii) the significant experience of the senior managements of each of First Interstate and FBS in managing the operations of a multi-bank, multi-state network and their proven record of achieving cost savings, operating efficiencies and revenue enhancements in connection with the integration of acquired companies. In particular, the First Interstate Board noted that FBS had successfully integrated 22 acquisitions in the preceding four years. In contrast, although Wells' senior management has a good reputation for efficient, low-cost management, their experience has been limited to the operation of a single bank in the State of California, and they have not managed the process of consummating a significant bank acquisition since 1988; (ix) a comparison, based upon publicly available earnings estimates for each of First Interstate, FBS and Wells for the fiscal years 1996-1998, of the reported earnings per share and cash earnings per share attributable to a share of First Interstate Common Stock (a) if First Interstate remained as a stand-alone entity and (b) on a pro-forma per share equivalent basis giving effect to each of the Merger and a merger with Wells, which demonstrates the higher per share values which could be realized by First Interstate shareholders in the Merger compared to those which could be realized either in the stand-alone case or a First Interstate-Wells combination; (x) the First Interstate Board's assessment, with the assistance of counsel, concerning the relative likelihood that each of FBS and Wells would obtain all required regulatory approvals for a transaction with First Interstate. In this regard, the First Interstate Board determined that although it was likely that each of FBS and Wells would ultimately receive all such approvals, because of significant antitrust concerns raised only in a transaction with Wells, (a) it was possible that Wells would require a significantly longer period of time than FBS to obtain all required regulatory approvals and (b) there was significant risk that the divestitures which the appropriate governmental entities would require as a condition to granting the required regulatory approvals to Wells would significantly exceed Wells' estimates of such divestitures, which would in turn contribute to reductions in revenue at the combined institution in excess of those estimated by Wells; (xi) the financial presentations of the Financial Advisors (including presentations of pro forma financial information with respect to both the Merger and a merger of First Interstate and Wells) and (a) the oral opinion of Goldman Sachs rendered on November 5, 1995 (which opinion was confirmed in writing the following day) that, as of the date of such opinion, the Exchange Ratio was fair to the shareholders of First Interstate (which opinion was not amended or withdrawn on November 19, 1995) and (b) the November 5, 1995 opinion of Morgan Stanley that, as of the date of such opinion, each of the Exchange Ratio, the exchange ratio of .625 proposed by Wells and the exchange ratio of .65 which might be proposed by Wells was fair from a financial point of view to the shareholders of First Interstate (which opinion with respect to the Exchange Ratio was reaffirmed on November 19, 1995). Copies of such opinions, setting forth the assumptions made, matters considered and review undertaken, are filed as Exhibits 13, 14, 15 and 16, respectively, to this Schedule 14D-9 and are also attached hereto. The full text of each such opinion is incorporated herein by reference and the foregoing descriptions thereof are qualified in their entirety by such reference. First Interstate shareholders are urged to read these opinions carefully in their entirety; (xii) the First Interstate Board's concerns, based upon presentations by the Financial Advisors and First Interstate management, that because the Wells Common Stock currently is trading at ratios of price to earnings, price to estimated 1996 earnings, price to book value and price to tangible book value which are among the highest in the banking industry, a risk exists that the value of the Wells Common Stock which would be received by First Interstate's shareholders in the Wells Offer could decline if these ratios are not sustained; (xiii) the First Interstate Board's concerns that because the transaction contemplated by the Wells Offer would be accounted for as a purchase rather than as a pooling of interests, (a) the combined institution would have limited flexibility to participate in the continuing unprecedented consolidation of the banking industry (whether such participation would consist of seeking to acquire additional financial institutions or seeking to sell itself and receive a control premium) due to (x) its inability, absent massive stock reissuances, to engage in a transaction accounted for as a pooling-of- 10 interests until the two years following the termination of Wells' stock repurchases and (y) the fact that no other significant United States bank holding company currently carries on its books the amount of goodwill which would be carried by the combined institution (most of which would result from the combination of First Interstate and Wells) and (b) a risk existed that the value of the Wells Common Stock received by First Interstate's shareholders in the Wells Offer would decline if the market was to reject the view of Wells that, contrary to common practice in the banking industry, the combined company should be valued with an emphasis on cash-flows rather than reported earnings. In contrast, neither of these concerns were raised by the Merger, which will be accounted for as a pooling of interests; (xiv) the favorable response of First Interstate's non-shareholder constituencies (including its customers, communities served and employees) to the Merger relative to their response to a transaction with Wells, and the positive effect such response could have on the business, financial condition and results of operations of the combined company following the Merger; (xv) the current and prospective economic, regulatory and competitive environment facing financial institutions, including First Interstate, FBS and Wells, including without limitation the unprecedented consolidation currently underway in the banking industry; and (xvi) the following additional factors which contributed to the First Interstate Board's conclusion that the Merger is in the best interests of First Interstate and its shareholders: (A) the fact that the combined entity resulting from the Merger would be the ninth largest banking institution in the United States in terms of total assets and the fifth largest in terms of market value (based on total assets and market prices as of September 30, 1995). The First Interstate Board recognized that such an institution would be likely to possess the financial resources necessary to compete more effectively in the rapidly changing marketplace for banking and financial services and would be effective in fulfilling First Interstate's long-term objectives of increasing its overall size, continuing to increase geographic diversification and enhancing its market presence while maintaining its asset quality and credit standards; (B) the expectation that the Merger will generally be a tax-free transaction to First Interstate and its shareholders; and (C) the terms of the Merger Agreement, the Reciprocal Option Agreements and the Reciprocal Fee Letters, which were generally reciprocal in nature, and certain other information regarding the Merger, including the terms and structure of the Merger, the proposed arrangements with respect to the board of the combined institution and the management structure of the combined institution following the Merger. The foregoing discussion of the information and factors considered by the First Interstate Board is not intended to be exhaustive but includes all material factors considered by the First Interstate Board. In reaching its determination to approve and recommend the Merger and to recommend rejection of the Wells Offer, the First Interstate Board did not assign any relative or specific weights to the foregoing factors, and individual directors may have given differing weights to different factors. Throughout its deliberations, the First Interstate Board received the advice of the Financial Advisors and representatives of Skadden, Arps, Slate, Meagher & Flom, the firm retained to serve as special counsel to First Interstate, and Irell & Manella, the firm retained by the outside directors of First Interstate to serve as their special counsel. ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED. First Interstate has entered into letter agreements with Goldman Sachs and Morgan Stanley dated October 24, 1995 and October 18, 1995, respectively (collectively, the "Engagement Letters"). Pursuant to the Engagement Letters, each of the Financial Advisors received an initial advisory fee of $5,000,000 (collectively, the "Advisory Fees") upon the execution of the Engagement Letters. The Engagement Letters further provide that if First Interstate executes a definitive agreement with respect to certain designated transactions (each a "Transaction"), First Interstate will pay each Financial 11 Advisor a fee (collectively, the "Initial Transaction Fees") of $5,000,000. Such amounts were paid upon execution of the Merger Agreement. If any such Transaction (including without limitation the Merger or the Wells Offer) is consummated, First Interstate will pay each Financial Advisor an additional transaction fee (collectively, the "Secondary Transaction Fees") equal to .655% of the positive difference between the value of the aggregate consideration paid or received by First Interstate or its shareholders (the "Aggregate Value"), as the case may be, and approximately $10,411,186,000. However, in no event will the sum of the Advisory Fee, the Initial Transaction Fee and the Secondary Transaction Fee for each Financial Advisor exceed 0.175% of the Aggregate Value. For purposes of calculating the amount due to the Financial Advisors, securities are valued on the basis of the average of the last sales prices for such securities on the twenty trading days ending five days prior to the consummation of the relevant transactions. In addition, First Interstate has agreed to reimburse the Financial Advisors for their reasonable expenses and agreed to indemnify them against certain liabilities arising out of or in connection with their respective engagements. First Interstate has retained Georgeson & Co., Inc. ("Georgeson") to assist First Interstate in connection with its communications with its shareholders with respect to, and to provide other services to First Interstate in connection with, the Merger and the Wells Offer. Georgeson will receive reasonable and customary compensation for its services and reimbursement of out-of-pocket expenses in connection therewith. First Interstate has agreed to indemnify Georgeson against certain liabilities arising out of or in connection with its engagement. First Interstate has retained Kekst & Co. ("Kekst") as its public relations advisor in connection with the Merger and the Wells Offer. Kekst will receive reasonable and customary compensation for its services and reimbursement of out-of-pocket expenses in connection therewith. First Interstate has agreed to indemnify Kekst against certain liabilities arising out of or in connection with its engagement. Except as set forth above, neither First Interstate nor any person acting on its behalf has employed, retained or compensated any other person to make any solicitations or recommendations to shareholders on its behalf concerning the Merger or the Wells Offer. ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES. (a) To the best knowledge of First Interstate, no transactions in First Interstate Common Stock have been effected during the past 60 days by First Interstate or any executive officer, director, affiliate or subsidiary of First Interstate except (i) the gift of 1000 shares by the Carson Family Trust (which shares were deemed to be indirectly beneficially owned by Edward M. Carson, a director of First Interstate) to a charitable organization, (ii) the gift of 30 shares on November 3, 1995 by Don C. Frisbee, a director of First Interstate, to a charitable organization and (iii) the repurchases of shares by First Interstate set forth below:
AVERAGE TOTAL NUMBER OF PRICE PER PURCHASE DATE SHARES SHARE PRICE - - ---------- ----------- ----------- ----------- 09/20/95 4,000 $100.53 $ 402,125 09/21/95 47,000 99.66 4,693,525 09/22/95 25,300 99.24 2,510,863 09/25/95 50,000 99.47 4,973,513 09/26/95 40,000 99.98 3,999,175 09/27/95 35,000 99.15 3,470,413 09/28/95 40,000 99.35 3,974,000 09/29/95 7,300 99.86 729,013 10/02/95 37,400 100.88 3,772,813 10/03/95 31,300 100.70 3,152,038 10/04/95 4,000 100.44 401,750 10/05/95 20,000 103.21 2,064,250 10/06/95 500 103.50 51,750 10/09/95 31,500 106.64 3,359,200
12 (b) To the best knowledge of First Interstate, its executive officers, directors, affiliates and subsidiaries do not presently intend to tender, pursuant to the Wells Offer, any shares of First Interstate Common Stock which are held of record or are beneficially owned by such persons or to otherwise sell any such shares. ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY. (a) Item 4 above contains a description of the various meetings of the First Interstate Board held between the date the Initial Wells Proposal was received and November 19, 1995 at which the Initial Wells Proposal, the Merger and/or the Wells Offer were reviewed and considered by the First Interstate Board with the assistance of First Interstate's management and its legal and financial advisors. As more fully described in such Item 4, at its November 19, 1995 meeting, the First Interstate Board unanimously (with two directors absent) (i) reaffirmed its determination that the terms of the Merger are fair to, and in the best interests of, First Interstate and its shareholders and accordingly ratified its prior adoption of the Merger Agreement and (ii) determined to recommend that First Interstate's shareholders reject the Wells Offer and not tender their shares of First Interstate Common Stock pursuant to the Wells Offer. The factors considered by the First Interstate Board in making its determinations with respect to the Merger and the Wells Offer are described in Item 4 above. At its November 19 meeting, the First Interstate Board determined to postpone the occurrence of a Distribution Date (as defined in the Rights Agreement) as a result of the public announcement of the Wells Offer until such later date as determined by the First Interstate Board. Except as described in this Item 7 and under Item 4 above, First Interstate is not engaged in any negotiation in response to the Wells Offer which relates to or would result in (i) an extraordinary transaction, such as a merger or reorganization, involving First Interstate or any of its subsidiaries, (ii) a purchase, sale or transfer of a material amount of assets of First Interstate or any of its subsidiaries, (iii) a tender offer for or other acquisition of securities by or of First Interstate or (iv) a material change in the present capitalization or dividend policy of First Interstate. (b) THE MERGER. The full text of the Merger Agreement is included as Exhibit 3 hereto and is incorporated herein by reference, and the descriptions of the Merger Agreement contained herein are qualified in their entirety by such reference. THIS SCHEDULE 14D-9 DOES NOT CONSTITUTE A SOLICITATION OF PROXIES FOR ANY MEETING OF FIRST INTERSTATE'S SHAREHOLDERS. SUCH SOLICITATION BY FIRST INTERSTATE WILL BE MADE ONLY PURSUANT TO SEPARATE PROXY MATERIALS COMPLYING WITH THE REQUIREMENTS OF SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED (THE "EXCHANGE ACT"). IN ADDITION, THIS SCHEDULE 14D-9 IS NEITHER AN OFFER TO SELL NOR A SOLICITATION OF OFFERS TO BUY ANY SECURITIES WHICH MAY BE ISSUED IN THE MERGER. THE ISSUANCE OF SUCH SECURITIES WILL HAVE TO BE REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND SUCH SECURITIES WILL BE OFFERED ONLY BY MEANS OF A PROSPECTUS COMPLYING WITH THE REQUIREMENTS OF THE SECURITIES ACT. The date of the special meeting of First Interstate's shareholders called to consider the Merger has not been scheduled. A Joint Proxy Statement/Prospectus of First Interstate and FBS will be filed shortly with the SEC and, upon its effectiveness, will be mailed to the respective shareholders of First Interstate and FBS in connection with the special meeting of each company's shareholders which will be held to vote upon the matters to be presented to them pursuant to the Merger Agreement. Consideration. The Merger Agreement provides, subject to the satisfaction or waiver of certain conditions contained therein, for the merger of Merger Sub with and into First Interstate, with First Interstate to be the surviving corporation of the Merger. Upon consummation of the Merger, subject to certain limited exceptions, each share of First Interstate Common Stock then outstanding will automatically be converted into 2.6 shares of FBS Common Stock. No fractional shares of FBS Common Stock will be issued in the Merger. In lieu thereof, each First Interstate shareholder who would otherwise be entitled to receive a fraction of a share of FBS Common Stock will receive an amount of cash equal to the per share market value of FBS Common Stock (based on the average of the closing sale prices of FBS 13 Common Stock as quoted on the New York Stock Exchange (the "NYSE") during the five day trading period immediately preceding the closing date of the Merger) multiplied by the fraction of a share of FBS Common Stock to which the shareholder would otherwise be entitled. In addition, at the Effective Time, (i) each share of First Interstate's 9.875% Preferred Stock issued and outstanding immediately prior to the Effective Time will be converted into the right to receive one share of FBS 9.875% Preferred Stock and (ii) each share of First Interstate's 9.0% Preferred Stock issued and outstanding immediately prior to the Effective Time will be converted into the right to receive one share of FBS 9.0% Preferred Stock. The terms of the FBS 9.875% Preferred Stock and the FBS 9.0% Preferred Stock will be substantially the same as the terms of the corresponding series of First Interstate Preferred Stock from which such shares were converted, except that the FBS preferred shares will have such voting rights as shall be necessary to ensure that the Merger qualifies as a tax-free reorganization. Representations and Covenants. Under the Merger Agreement, FBS and First Interstate make a number of representations and warranties, including without limitation representations and warranties regarding their respective capital structures, operations, financial condition and their authority to enter into the Merger Agreement and to consummate the Merger. In the Merger Agreement, each of First Interstate and FBS covenants that prior to the consummation of the Merger, it will conduct its business in the ordinary course and it will not take certain material actions outside the ordinary course without the other's consent. In addition, each party has agreed not to, and not to authorize or permit any of its officers, directors, employees or agents to, directly or indirectly solicit, initiate or encourage any inquiries relating to, or the making of any proposal which constitutes, a Takeover Proposal (as defined below), or recommend or endorse any Takeover Proposal, or participate in any discussions or negotiations, or provide third parties with any nonpublic information, relating to any such inquiry or proposal or otherwise facilitate any effort or attempt to make or implement a Takeover Proposal, provided, however, that each party may, and may authorize and permit its officers, directors, employees or agents to, provide third parties with nonpublic information, otherwise facilitate any effort or attempt by any third party to make or implement a Takeover Proposal, recommend or endorse any Takeover Proposal with or by any third party, and participate in discussions and negotiations with any third party relating to any Takeover Proposal, if such party's Board of Directors, after having consulted with and considered the advice of outside counsel, reasonably determines in good faith that the failure to do so would cause the members of such Board of Directors to breach their fiduciary duties under applicable law. Each party is obligated to advise the other party immediately following receipt of a Takeover Proposal, and to further advise the other party immediately of any developments relating thereto. As used in the Merger Agreement, "Takeover Proposal" means any tender or exchange offer, proposal for a merger, consolidation or other business combination involving First Interstate or FBS or any of their respective subsidiaries or any proposal or offer to acquire in any manner a substantial equity interest in, or a substantial portion of the assets of, First Interstate or FBS or any of their respective subsidiaries other than the transactions contemplated or permitted by the Merger Agreement. The Wells Offer constitutes a Takeover Proposal for purposes of this provision. Each of First Interstate and FBS has also agreed to hold a meeting of its shareholders for the purpose of obtaining the approvals of such shareholders required in connection with the Merger Agreement and to cause its Board of Directors to recommend that its shareholders approve the matters to be voted on by such shareholders in connection with the Merger, except that the Board of Directors of either party may fail to make such recommendation (or withdraw, modify or change such recommendation in a manner adverse to the other party) if such Board of Directors, after having consulted with and considered the advice of outside counsel, reasonably determines in good faith that the making of such recommendation (or the failure to so withdraw, modify or change such recommendation) would constitute a breach of the fiduciary duties of the members of such Board of Directors under applicable law. Conditions to the Consummation of the Merger. Each party's obligation to effect the Merger is subject to, among other things, satisfaction, at or prior to the Effective Time, of the following conditions: (i) the Merger Agreement and the transactions contemplated thereby shall have been approved and adopted by the requisite affirmative votes of the holders of First Interstate Common Stock entitled to vote thereon 14 and the issuance of the FBS Common Stock in the Merger and the amendments to the FBS Certificate of Incorporation required in connection with the Merger (collectively, the "FBS Vote Matters") shall have been approved by the requisite votes of the holders of FBS Common Stock entitled to vote thereon; (ii) the shares of FBS capital stock to be issued in the Merger shall have been authorized for listing on the NYSE, subject to official notice of issuance; (iii) all regulatory approvals required to consummate the Merger shall have been obtained and shall remain in full force and effect and all statutory waiting periods in respect thereof shall have expired, and no such approval shall contain any conditions or restrictions which the Board of Directors of either party reasonably determines in good faith will have or reasonably be expected to have a Material Adverse Effect (as defined in the Merger Agreement) on New First Interstate and its subsidiaries taken as a whole; (iv) the registration statement relating to the FBS capital stock to be issued in the Merger (the "S-4") shall have become effective under the Securities Act, and no stop order suspending the effectiveness of the S-4 shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC; and (v) no order, injunction or decree issued by any court or agency of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the Merger or any of the other transactions contemplated by the Merger Agreement shall be in effect and no statute, rule, regulation, order, injunction or decree shall have been enacted, entered or promulgated which prohibits, restricts or makes illegal consummation of the Merger. Each party's obligation to effect the Merger is also conditioned upon the accuracy of the representations and warranties made by the other party except (other than with respect to certain specified representations and warranties) where the failure of such representations and warranties to be so accurate, individually or in the aggregate, results or would reasonably be expected to result in a Material Adverse Effect on such other party; the performance in all material respects by the other party of its obligations under the Merger Agreement; the receipt by such party of a letter dated as of the effective date of the Merger from Ernst & Young LLP, the independent public accountants for FBS and First Interstate, to the effect that the Merger will qualify for pooling-of-interests accounting treatment; the receipt by such party of an opinion of its tax counsel, dated as of the Effective Time, confirming the tax treatment of the Merger under the Code; and the failure of the rights issued pursuant to the shareholder rights plan of the other party to become non-redeemable, exercisable, distributed or triggered. Waiver; Amendment. At any time prior to the Effective Time, to the extent legally allowed, FBS or First Interstate, without approval of their respective shareholders, may waive compliance with any of the agreements contained in the Merger Agreement. Subject to compliance with applicable law, the Merger Agreement may be amended by FBS and First Interstate at any time before or after approval of the matters presented in connection with the Merger to the shareholders of FBS and First Interstate, except that, after any approval of the Merger by the shareholders of First Interstate, no amendment may be made without the further approval of such shareholders which amendment reduces the amount or changes the form of the consideration to be delivered to the shareholders of First Interstate in the Merger. Termination. The Merger Agreement may be terminated by mutual agreement of both parties, or by either party (i) as a result of a breach by the other party of a covenant or agreement or any representation or warranty set forth in the Merger Agreement, in either case which the other party fails to cure within 30 days following written notice thereof (except that no cure period is provided for a breach which by its nature cannot be cured prior to the closing of the Merger) and which would entitle the non-breaching party not to consummate the transactions contemplated by the Merger Agreement; (ii) if the required approvals of the shareholders of FBS or First Interstate are not obtained by reason of the failure to obtain the required vote; (iii) if the Merger is not consummated on or before December 31, 1996 (subject to extension under certain circumstances) other than as a result of a breach of the Merger Agreement by the party seeking termination; (iv) if a permanent injunction or other order by a governmental entity prohibiting the consummation of the transactions contemplated by the Merger Agreement is issued and has become final and nonappealable or any denial by a governmental entity whose approval of the Merger is required shall have become final and nonappealable; (v) if, prior to the requisite approval of the shareholders of FBS (if First Interstate is the terminating party) or First Interstate (if FBS is the terminating party), there exists a Takeover Proposal for the party seeking termination and the Board of Directors of such party, after having consulted with and considered the advice of outside legal counsel, 15 reasonably determines in good faith that termination is necessary in the exercise of its fiduciary duties under applicable law; or (vi) if the Board of Directors of the other party withdraws, modifies or changes in a manner adverse to the terminating party its approval or recommendation of the Merger Agreement and the transactions contemplated thereby (in the case of First Interstate) or the FBS Vote Matters (in the case of FBS). Stock Option Agreements. As a condition to the execution and delivery of the Merger Agreement, on November 5, 1995, (i) First Interstate and FBS entered into a Stock Option Agreement (the "FBS Stock Option Agreement"), pursuant to which FBS granted First Interstate an option (the "FBS Option") to purchase up to 25,829,983 authorized but unissued shares of FBS Common Stock (representing 19.9% of the number of outstanding shares of FBS Common Stock on October 31, 1995), subject to adjustment, for $50.875 per share (the closing sales price of the FBS Common Stock on the last NYSE trading day prior to the grant of the FBS Option), subject to adjustment, and (ii) First Interstate and FBS entered into a Stock Option Agreement (the "First Interstate Stock Option Agreement," and together with the FBS Stock Option Agreement, the "Reciprocal Stock Option Agreements"), pursuant to which First Interstate granted FBS an option (the "First Interstate Option," and together with the FBS Option, the "Reciprocal Options") to purchase up to 15,073,106 authorized but unissued shares of First Interstate Common Stock (representing 19.9% of the number of outstanding shares of First Interstate Common Stock on October 31, 1995), subject to adjustment, for $127.75 per share (the closing sales price of First Interstate Common Stock on the last NYSE trading day prior to the grant of the First Interstate Option), subject to adjustment. Each of the Reciprocal Options will become exercisable in whole or in part at any time prior to its expiration, if, but only if, both an Initial Triggering Event (as defined below) and a Subsequent Triggering Event (as defined below) has occurred prior to the occurrence of an Exercise Termination Event (as defined below). The purchase of any shares of First Interstate Common Stock or FBS Common Stock pursuant to the Reciprocal Options is subject to compliance with applicable law, including the receipt of necessary approvals under the Bank Holding Company Act (the "BHCA"). For purposes of the following summary of the Reciprocal Stock Option Agreements, (i) "Issuer" means First Interstate with respect to the First Interstate Stock Option Agreement and FBS with respect to the FBS Stock Option Agreement and (ii) "Grantee" means FBS with respect to the First Interstate Stock Option Agreement and First Interstate with respect to the FBS Stock Option Agreement. For purposes of the Reciprocal Stock Option Agreements, the term "Initial Triggering Event" means: (i) Issuer or any of its subsidiaries, without Grantee's prior written consent, shall have entered into an agreement with any person (other than Grantee or any of its subsidiaries) to engage in, or the Board of Directors of Issuer shall have recommended that its shareholders approve any of the following (each an "Acquisition Transaction"): (x) a merger, consolidation or similar transaction involving Issuer or any Significant Subsidiary (as defined in Rule 1-02 of Regulation S-X promulgated by the SEC) of Issuer (other than mergers, consolidations or similar transactions involving solely Issuer and/or one or more of its subsidiaries and other than a merger or consolidation as to which the common shareholders of Issuer immediately prior thereto in the aggregate own at least 70% of the common stock of the publicly held surviving or successor corporation immediately following consummation thereof), (y) a purchase, lease or other acquisition of all or substantially all of the assets or deposits of Issuer or any of its Significant Subsidiaries, or (z) a purchase or other acquisition (including by way of merger, consolidation, share exchange or otherwise) of securities representing 10% or more of the voting power of Issuer or any of its Significant Subsidiaries; (ii) any person (other than Grantee or any of its subsidiaries) shall have acquired beneficial ownership or the right to acquire beneficial ownership of 10% or more of the outstanding shares of Issuer common stock; (iii) the shareholders of Issuer shall have voted and failed to approve the matters required to be approved by such shareholders in connection with the Merger at a meeting held for that purpose, or such meeting shall not have been held in violation of the Merger Agreement or shall have been cancelled prior to termination of the Merger Agreement and, prior to (x) such meeting or (y) if such meeting has not been held or has been cancelled, such termination, it shall have been publicly announced that any person (other than Grantee or any of its subsidiaries) shall have made a proposal to engage in any Acquisition Transaction; (iv) Issuer's Board of Directors shall have withdrawn or modified (or publicly announced its intention to withdraw or modify) its recommendation that the shareholders of Issuer approve the matters required to be approved by them in connection with the Merger, or Issuer or 16 any of its subsidiaries, without Grantee's prior written consent, shall have authorized, recommended or proposed (or publicly announced its intention to authorize, recommend or propose) an agreement to engage in an Acquisition Transaction with any person other than Grantee or any of its subsidiaries; (v) any person other than Grantee or any of its subsidiaries shall have made a proposal to Issuer or its shareholders to engage in any Acquisition Transaction and such proposal has been publicly announced; (vi) any person (other than Grantee or any of its subsidiaries) shall have filed with the SEC a registration statement with respect to a potential exchange offer that would constitute an Acquisition Transaction (or filed a preliminary proxy statement with the SEC with respect to a potential vote by its shareholders to approve the issuance of shares to be offered in such an exchange offer); (vii) Issuer shall have willfully breached any covenant or obligation contained in the Merger Agreement in anticipation of engaging in any Acquisition Transaction, and following such breach Grantee would be entitled to terminate the Merger Agreement (whether immediately or after the giving of notice or passage of time or both); or (viii) any person (other than Grantee or any of its subsidiaries), other than in connection with a transaction to which Grantee shall have given its prior written consent, shall have filed an application or notice with the Federal Reserve Board or other federal or state bank regulatory authority, which application or notice has been accepted for processing, for approval to engage in any Acquisition Transaction. The term "Subsequent Triggering Event" means (i) the acquisition by any person (other than Grantee or any of its subsidiaries) of beneficial ownership of 20% or more of the then outstanding Issuer common stock; or (ii) the occurrence of an Initial Triggering Event described in clause (i) of the immediately preceding paragraph above, except that the percentage referred to in clause (z) thereof is 20%. The term "Exercise Termination Event" means any of the following: (i) the Effective Time of the Merger; (ii) termination of the Merger Agreement in accordance with the provisions thereof if such termination occurs prior to the occurrence of an Initial Triggering Event; (iii) the passage of 18 months (subject to extension as provided in the Reciprocal Stock Option Agreements) after termination of the Merger Agreement if such termination is concurrent with or follows the occurrence of an Initial Triggering Event; (iv) the date on which the shareholders of Grantee shall have voted and failed to adopt and approve the matters required to be approved by them pursuant to the Merger Agreement (unless (A) Issuer is then in material breach of its covenants or agreements contained in the Merger Agreement or (B) on or prior to such date, the shareholders of Issuer shall have also voted and failed to approve the matters required to be approved by them pursuant to the Merger Agreement); or (v) the date on which the Reciprocal Option granted by Grantee shall have become exercisable in accordance with its terms. Notwithstanding anything to the contrary contained in the Reciprocal Stock Option Agreements, neither of the Reciprocal Options may be exercised at any time when the Grantee thereunder is in breach of any of its covenants or agreements contained in the Merger Agreement such that the Issuer thereof shall be entitled (without regard to any grace period provided therein) to terminate the Merger Agreement pursuant to the terms thereof, and each of the Reciprocal Stock Option Agreements shall automatically terminate upon the termination of the Merger Agreement by the Issuer pursuant to the terms thereof as a result of the breach by the Grantee of its covenants or agreements contained therein. Notwithstanding any other provisions of the Reciprocal Stock Option Agreements, the Total Profit (as hereinafter defined) which Grantee may realize from the Reciprocal Option granted to it may not exceed $100 million and, if the Total Profit otherwise would exceed such amount, Grantee, at its sole election, shall either (a) reduce the number of shares of common stock of the Issuer subject to such option, (b) deliver to Issuer for cancellation shares of common stock of the Issuer previously purchased by Grantee through exercise of such option ("Option Shares"), (c) pay cash to Issuer or (d) elect to do any combination thereof, such that Grantee's actually realized Total Profit will not exceed $100 million after taking into account such actions. For these purposes, the term "Total Profit" means the aggregate amount (before taxes) of (i) the amount received by Grantee pursuant to Issuer's repurchase of such option (or any portion thereof) in accordance with the terms of the applicable Reciprocal Stock Option Agreement; (ii) (x) the amount received by Grantee pursuant to Issuer's repurchase of Option Shares in accordance with the terms of the applicable Reciprocal Stock Option Agreement, less (y) Grantee's purchase price for such Option Shares; (iii) (x) the net cash amounts received by Grantee pursuant to the 17 sale of Option Shares (or any other securities into which such Option Shares are converted or exchanged) to any unaffiliated party, less (y) Grantee's purchase price for such Option Shares; and (iv) any amounts received by Grantee on the transfer of such option (or any portion thereof) to any unaffiliated party. The preceding description of the Reciprocal Stock Option Agreements is qualified in its entirety by reference to the First Interstate Stock Option Agreement and the FBS Stock Option Agreement, copies of which are set forth as Exhibits 17 and 18 hereto, respectively, and which are incorporated herein by reference. For purposes of the First Interstate Stock Option Agreement, various actions taken by Wells in connection with the Wells Offer have resulted in the occurrence of an Initial Triggering Event. In addition, if Wells acquires more than 20% of the outstanding First Interstate Common Stock pursuant to the Wells Offer or otherwise, or if the First Interstate Board recommends that First Interstate shareholders accept the Wells Offer, a Subsequent Triggering Event will occur for purposes of the First Interstate Stock Option Agreement. Termination Fees. As a further condition to the execution and delivery of the Merger Agreement, First Interstate and FBS executed reciprocal transaction termination fee letter agreements, each dated as of November 5, 1995 (collectively, the "Reciprocal Fee Letters"). Pursuant to the Reciprocal Fee Letters, First Interstate (pursuant to the "First Interstate Fee Letter") and FBS (pursuant to the "FBS Fee Letter") each agreed to pay (as a "Payer") the other party (as the "Recipient") a cash fee of $25 million in the event certain First Trigger Events (as defined below) occur prior to or concurrently with the termination of the Merger Agreement, except where a Nullifying Event (as defined below) has occurred and is continuing at such time. Pursuant to the Reciprocal Fee Letters, First Interstate and FBS each also agreed, subject to certain conditions, to pay the other party an additional $75 million cash fee if (i) the Merger Agreement is terminated, (ii) prior to or concurrently with such termination a First Trigger Event shall have occurred and (iii) prior to, concurrently with or within 18 months following such termination an Acquisition Event (as defined below) occurs, unless a Nullifying Event has occurred and is continuing at the time the Merger Agreement is terminated. For purposes of the following summary of the Reciprocal Fee Letters, the term (i) "Payer" means First Interstate with respect to the First Interstate Fee Letter and FBS with respect to the FBS Fee Letter and (ii) "Recipient" means FBS with respect to the First Interstate Fee Letter and First Interstate with respect to the FBS Fee Letter. Any of the following events constitutes a First Trigger Event: (i) Payer's Board of Directors shall have failed to approve or recommend that its shareholders vote in favor of the requisite matters to be approved by such shareholders in connection with the Merger, or shall have withdrawn or modified in a manner adverse to the Recipient its approval or recommendation of such matters, or shall have resolved or publicly announced an intention to do either of the foregoing; (ii) Payer or its Board of Directors shall have recommended that the shareholders of Payer approve any Acquisition Proposal (as defined below) or shall have entered into an agreement with respect to, authorized, approved, proposed or publicly announced its intention to enter into, any Acquisition Proposal; (iii) the matters to be voted on by Payer's shareholders in connection with the Merger shall not have been approved at a meeting of Payer's shareholders which has been held for that purpose prior to termination of the Merger Agreement in accordance with its terms, if prior thereto it shall have been publicly announced that any third party shall have made, or disclosed an intention to make, an Acquisition Proposal; (iv) a third party shall have acquired beneficial ownership or the right to acquire beneficial ownership of 50% or more of the then outstanding shares of the stock then entitled to vote generally in the election of directors of Payer; or 18 (v) following the making of an Acquisition Proposal with respect to Payer, Payer shall have breached any covenant or agreement contained in the Merger Agreement such that Recipient would be entitled to terminate the Merger Agreement pursuant to the terms thereof (without regard to any grace period provided for therein), unless such breach is promptly cured without jeopardizing consummation of the Merger. The Reciprocal Fee Letters define the term "Acquisition Proposal" to mean the occurrence of any (i) publicly announced proposal, (ii) regulatory application or notice (whether in draft or final form), (iii) agreement or understanding, (iv) disclosure of an intention to make a proposal; or (v) amendment to any of the foregoing, made or filed on or after November 5, 1995, in each case with respect to any of the following transactions with a third party: (A) a merger or consolidation, or any similar transaction, involving Payer or any of its subsidiaries (other than mergers, consolidations or similar transactions involving solely Payer and/or one or more of its subsidiaries and other than a merger or consolidation as to which the common shareholders of Payer immediately prior thereto in the aggregate own at least 70% of the common stock of the publicly held surviving or successor corporation (or any publicly held or ultimate parent company thereof) immediately following consummation thereof); (B) a purchase, lease or other acquisition of all or substantially all of the assets or deposits of Payer or any of its subsidiaries; or (C) a purchase or other acquisition (including by way of merger, consolidation, share exchange or otherwise) of securities representing 20% or more of the voting power of Payer. The Reciprocal Fee Letters define "Acquisition Event" to mean the consummation of any Acquisition Proposal, except that for such purposes the percentage contained in clause (C) above shall be 50% instead of 20%. The Reciprocal Fee Letters define the term "Nullifying Event" to mean any of the following events occurring and continuing at a time when Payer is not in material breach of any of its covenants or agreements contained in the Merger Agreement: (i) Recipient is in breach of any of its covenants or agreements contained in the Merger Agreement such that Payer is entitled to terminate the Merger Agreement (without regard to any grace period provided for therein), (ii) the shareholders of Recipient shall have voted and failed to approve the matters required to be approved by such shareholders pursuant to the Merger Agreement (unless the matters to be voted on by the Payer's shareholders pursuant to the Merger Agreement shall not have been approved at a meeting of Payer's shareholders which was held on or prior to such date for the purpose of voting with respect thereto) or (iii) the Board of Directors of Recipient shall have failed to approve or recommend the matters required to be approved by Recipient's shareholders pursuant to the Merger Agreement or shall have withdrawn, modified or changed in any manner adverse to Payer its approval or recommendation of such matters or shall have resolved or publicly announced its intention to do any of the foregoing. For purposes of the First Interstate Termination Fee Letter, various actions taken by Wells in connection with the Wells Offer constitute the public announcement of an Acquisition Proposal. In addition, if Wells acquires more than 50% of the outstanding First Interstate Common Stock pursuant to the Wells Offer or otherwise, an Acquisition Event shall have occurred for purposes of the First Interstate Fee Letter. The description of the Reciprocal Fee Letters is qualified in its entirety by reference to the First Interstate Fee Letter and the FBS Fee Letter, copies of which are set forth as Exhibits 19 and 20 hereto, respectively, and which are incorporated herein by reference. ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED. Litigation. Certain present and former members of the First Interstate Board have been named as defendants in several purported shareholder class actions in California, and certain present members of the First Interstate Board and First Interstate have been named as defendants in several purported shareholder class actions in Delaware, alleging that the First Interstate Board will breach or has breached its fiduciary duties to the shareholders of First Interstate in responding to the Initial Wells Proposal. In Delaware, the following five actions were filed on October 18 and 19, 1995: Williamson v. Bryson, et al., Del. Ch., C.A. No. 14623; Shaev v. First Interstate Bancorp, et al., Del. Ch., C.A. No. 14629; Bernstein v. Carson, et al., Del. ch., C.A. No. 14630; Katz v. First Interstate Bancorp, et al., Del. Ch., C.A. No. 14632 and Sachs and Felder v. First Interstate Bancorp, et al., Del. Ch., C.A. No. 14633. On October 25, 1995, an 19 amended purported class action complaint to consolidate these actions was filed. On October 27, 1995, these actions were consolidated in an action captioned In re First Interstate Bancorp Shareholder Litig., Del. Ch., Consol. C.A. No. 14623 (the "Delaware Consolidated Action"). The Defendants in the Delaware Consolidated Action have filed an answer denying the claims. The parties in the Delaware Consolidated Action have agreed to a schedule of discovery in an order that was entered on November 8, 1995. On November 13, 1995, the Delaware shareholder plaintiffs sought leave to file a Second Amended and Supplemental Class Action Complaint (the "Second Amended Complaint"). Among other things, the proposed Second Amended Complaint seeks to add FBS and Merger Sub as parties and to assert aiding and abetting claims against them. Among other claims, the proposed Second Amended Complaint alleges that the First Interstate defendants breached their fiduciary duties by failing to conduct a fair bidding contest for the company. In addition, it alleges that the defendants have implemented certain measures which may impede any proxy solicitation or consent solicitation that Wells may undertake. The plaintiffs seek a variety of injunctive and other relief including an order enjoining the Merger and a declaration that the Reciprocal Fee Letters and the Reciprocal Stock Option Agreements are null and void. The defendants intend to defend these claims vigorously. Six purported class actions have been filed in the Superior Court of the State of California, County of Los Angeles. Those purported class actions (the "California Actions") are entitled: Mesko v. Bryson, et al., Case No. BC137379, Eaves v. Bryson, et al., Case No. BC137380, Grill v. Bryson, et al., Case No. BC137508, Mondshein v. Bryson, et al., Case No. BC137509, Kaplan v. Bryson, et al, Case No. BC 138630 and Kaplan v. Bryson, et al., Case No. 138369. Defendants in these six actions have moved the Court to stay the actions pending the resolution of the Delaware Consolidated Action. The complaints filed in the six California actions are similar and allege that the directors of First Interstate will breach their fiduciary duty in responding to the Initial Wells Proposal. In addition, these complaints allege negligent breach of fiduciary duty, abuse of control and tortious interference with prospective economic advantage. Plaintiffs in the California Actions seek declaratory relief as well as permanent and preliminary injunctive relief enjoining the defendants from taking steps to prevent or frustrate the sale of First Interstate to Wells. In addition, Plaintiffs seek monetary damages of an unspecified amount together with prejudgment interest and attorneys' and experts' fees. The defendants intend to defend the California Actions vigorously. In addition, on November 13, 1995, Wells filed in the Delaware Chancery Court a Verified Complaint for Preliminary and Permanent Injunctive Relief and Declaratory Judgment (the "Wells Action") against First Interstate, and the members of the First Interstate Board, FBS and Merger Sub. The Wells Action alleges, among other things, that First Interstate and its directors have breached their fiduciary duties by entering into the Merger Agreement and by agreeing to the First Interstate Fee Letter and the First Interstate Stock Option Agreement. In addition, it alleges that the defendants have implemented or may implement certain measures which may impede any proxy solicitation or consent solicitation that Wells may undertake. For example, Wells has alleged that the First Interstate defendants could amend the Rights Agreement to provide that the power to redeem the Rights is exercisable only by the current members of the First Interstate Board if Wells succeeds in replacing them with directors nominated by Wells. Wells has also alleged that if certain provisions of First Interstate's bylaws regarding the nomination of directors were to apply in the context of a consent solicitation, such application of these provisions of the bylaws would be inconsistent with the provisions of the Delaware General Corporation Law. ("DGCL"). The Wells Action alleges that FBS has aided and abetted First Interstate and its directors' alleged breaches of fiduciary duty. Among other relief, Wells seeks to invalidate the First Interstate Fee Letter and First Interstate Stock Option Agreement and to enjoin First Interstate from consummating the Merger. Wells also seeks to enjoin the First Interstate defendants from including any provisions similar to the First Interstate Fee Letter of the First Interstate Stock Option Agreement in any modified or future agreement with FBS. In addition, Wells seeks to enjoin any action by defendants which could interfere with any proxy solicitation or consent solicitation that Wells may undertake. Wells seeks declaratory relief in the form of an order declaring, among other things, that its exchange offer, proxy solicitation and consent solicitation will not constitute tortious interference with the Merger Agreement or any other business-related tort; that Section 203 of the DGCL would not apply to any second-step merger with 20 Wells; that the Merger Agreement, the First Interstate Fee Letter and the First Interstate Stock Option Agreement are void and unenforceable; and that the Wells Offer would be a Qualified Offer (as defined below) within the meaning of the Rights Agreement. With respect to the Rights Agreement, Wells seeks an order requiring First Interstate to redeem the Rights, or an order requiring First Interstate to amend the Rights Agreement so as to make it inapplicable to the Wells Offer or to any second-step merger which follows the Wells Offer. The defendants intend to defend vigorously against the claims asserted by Wells. A copy of each of the complaints described above and certain materials filed by First Interstate in response thereto are filed as Exhibits hereto and incorporated herein by reference. All of the descriptions of such matters contained herein are qualified in their entirety by reference thereto. The Rights Agreement. On November 21, 1988, the First Interstate Board declared a dividend of one Right for each outstanding share of First Interstate Common Stock. The dividend was payable on December 30, 1988 (the "Record Date") to shareholders of record on that date. Each Right entitles the registered holder to purchase from First Interstate one share of First Interstate Common Stock at a price of $170.00 per share (the "Purchase Price"), subject to adjustment. The description and terms of the Rights are set forth in the Rights Agreement. Until the earlier to occur of (i) 10 days following a public announcement that a person or group of affiliated or associated persons (an "Acquiring Person") has acquired beneficial ownership of 20% or more of the outstanding shares of First Interstate Common Stock other than pursuant to a Qualified Offer (as defined below), or (ii) 10 business days (or such later date as may be determined by action of the First Interstate Board prior to such time as any person becomes an Acquiring Person) following the commencement of, or announcement of an intention to make, a tender offer or exchange offer the consummation of which would result in the beneficial ownership by a person or group of 20% or more of such outstanding First Interstate Common Stock (the earlier of such dates being called the "Distribution Date"), the Rights will be evidenced, with respect to the First Interstate Common Stock certificates outstanding as of the record date, by such First Interstate Common Stock certificate. The Rights Agreement provides that, until the Distribution Date, the Rights will be transferred with and only with the shares of First Interstate Common Stock. Until the Distribution Date (or earlier redemption or expiration of the Rights) new First Interstate Common Stock certificates issued after the Record Date upon transfer or new issuance of the First Interstate Common Stock will contain a notation incorporating the Rights Agreement by reference. Until the Distribution Date (or earlier redemption or expiration of the Rights) the surrender for transfer of any certificates for First Interstate Common Stock, outstanding as of the Record Date, even without such notation, will also constitute the transfer of the Rights associated with the shares of First Interstate Common Stock represented by such certificate. As soon as practicable following the Distribution Date, separate certificates evidencing the Rights ("Right Certificates") will be mailed to holders of record of the shares of First Interstate Common Stock as of the close of business on the Distribution Date and such separate Right Certificates alone will evidence the Rights. The Rights are not exercisable until the Distribution Date. The Rights will expire on December 31, 1998 (the "Final Expiration Date"), unless the Final Expiration Date is extended or unless the Rights are earlier redeemed by First Interstate, as described below. A Qualified Offer is a tender offer or exchange offer for all outstanding shares of First Interstate Common Stock which is determined by the non-management directors to be fair to and otherwise in the best interests of First Interstate and its shareholders. In the event that First Interstate is acquired in a merger or other business combination transaction (other than a merger which follows a Qualified Offer at the same or a higher price) or 50% or more of its consolidated assets or earning power are sold (any such event, a "Flip-Over Event"), proper provision will be made so that each holder of a Right will thereafter have the right to receive, upon the exercise thereof at the then current exercise price of the Right, that number of shares of common stock of the acquiring company which at the time of such transaction will have a market value of two times the exercise price of the Right. In the event that any person becomes an Acquiring Person (unless such person 21 first acquires 20% or more of the outstanding shares of First Interstate Common Stock by a purchase pursuant to a Qualified Offer) (a "Flip-in Event"), proper provision shall be made so that each holder of a Right, other than Rights beneficially owned by the Acquiring Person (which will thereafter be void), will thereafter have the right to receive upon exercise that number of shares of First Interstate Common Stock having a market value of two times the exercise price of the Right. At any time after the acquisition by a person or group of affiliated or associated persons of beneficial ownership of 20% or more of the outstanding shares of First Interstate Common Stock and prior to the acquisition by such person or group of 50% or more of such shares, the First Interstate Board may exchange the Rights (other than Rights owned by such person or group which have become void), in whole or in part, at an exchange ratio of one share of First Interstate Common Stock per Right (subject to adjustment). At any time prior to the acquisition by a person or group of affiliated or associated persons of beneficial ownership of 20% or more of the outstanding shares of First Interstate Common Stock, the First Interstate Board may redeem the Rights in whole, but not in part, at a price of $.001 per Right, rounded upward for each holder to the nearest $.01 (the "Redemption Price"). The redemption of the Rights may be made effective at such time on such basis and with such conditions as the First Interstate Board in its sole discretion may establish. Immediately upon any redemption of the Rights, the right to exercise the Rights will terminate and the only right of the holders of Rights will be to receive the Redemption Price. The terms of the Rights may be amended by the First Interstate Board without the consent of the holders of the Rights, including an amendment to lower the threshold for exercisability of the Rights from 20% to not less than the greater of (i) any percentage greater than the largest percentage of the outstanding shares of First Interstate Common Stock then known to First Interstate to be beneficially owned by any person or group of affiliated or associated persons and (ii) 10%, except that from and after such time as any person becomes an Acquiring Person no such amendment may adversely affect the interests of the holders of the Rights. Until a Right is exercised, the holder thereof, as such, will have no rights as a shareholder of First Interstate, including, without limitation, the right to vote or to receive dividends. The Rights have certain antitakeover effects. The Rights will cause substantial dilution to a person or group that attempts to acquire First Interstate in a manner which causes a Triggering Event to occur unless the offer is conditioned on a substantial number of Rights being acquired. The Rights should not affect any prospective offeror willing to make an offer for all outstanding shares of First Interstate Common Stock at a fair price and otherwise in the best interests of First Interstate and its shareholders as determined by the First Interstate Board or affect any prospective offeror willing to negotiate with the First Interstate Board. The Rights should not interfere with any merger or other business combination approved by the First Interstate Board since, pursuant to the Rights Agreement, the Rights are not exercisable in such an event. In connection with the execution of the Merger Agreement, First Interstate executed an amendment (the "Amendment") to the Rights Agreement in order to (x) amend the definition of "Acquiring Person" set forth in the Rights Agreement to provide that so long as FBS is in compliance with all material terms, conditions and obligations imposed upon it by the Merger Agreement and the First Interstate Stock Option Agreement, neither FBS nor any affiliated or associated party (collectively with FBS, the "FBS Parties") will be deemed to be an Acquiring Person by virtue of the fact that FBS is the beneficial owner solely of First Interstate Common Stock (i) of which any FBS Party is or becomes the Beneficial Owner by reason of the approval, execution or delivery of the Merger Agreement or the First Interstate Stock Option Agreement, or by reason of the consummation of any transaction contemplated in the Merger Agreement and/or the First Interstate Stock Option Agreement, (ii) of which any FBS Party is the Beneficial Owner on November 5, 1995, (iii) of which any FBS Party becomes the Beneficial Owner after November 5, 1995, provided, however, that the aggregate number of shares of First Interstate Common Stock which may be beneficially owned by the FBS Parties pursuant to this clause (iii) shall not exceed 5% of the Common Shares outstanding, (iv) acquired in satisfaction of a debt contracted prior to November 5, 1995, in good faith, (v) held by any FBS Party in a bona fide fiduciary or depository capacity 22 or (vi) owned in the ordinary course of business by either (A) an investment company registered under the Investment Company Act of 1940, as amended, or (B) an investment account, for either of which any FBS Party acts as investment advisor and (y) to exclude the transactions contemplated by the Merger Agreement from constituting a Flip-Over Event. As more fully described above (see Item 7(a)), the First Interstate Board has taken action to postpone the Distribution Date. Based upon public announcements made by Wells, it is anticipated that consummation of the Wells Offer will be conditioned upon (i) (x) the Rights having been invalidated or otherwise rendered inapplicable to the Wells Offer and the second-step merger of First Interstate with Wells, (y) no Distribution Date having occurred under the Rights Agreement and (z) Wells not having become an Acquiring Person under the Rights Agreement, or (ii) the Rights having been validly redeemed by the First Interstate Board prior to the time a Flip-in Event or a Flip-over Event shall have occurred (which redemption would be effected by the Board if Wells was successful in removing all of the members of the First Interstate Board and replacing them with a slate of directors chosen by Wells). Delaware Takeover Statute. First Interstate is incorporated under the laws of the State of Delaware. Section 203 of the DGCL (the "Delaware Takeover Statute"), in general, prevents an "Interested Stockholder" (defined generally as a person that is the "owner" (as defined in the Delaware Takeover Statute) of 15% or more of a corporations's outstanding voting stock) from engaging in a "Business Combination" (defined as a variety of transactions, including mergers) with a Delaware corporation for three years following the date such person became an Interested Stockholder unless: (i) before such person became an Interested Stockholder, the Board of Directors of the corporation approved the transaction in which the Interested Stockholder became an Interested Stockholder or approved the Business Combination; (ii) upon consummation of the transaction which resulted in the Interested Stockholder becoming an Interested Stockholder, the Interested Stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced (excluding stock held by directors who are also officers and employee stock ownership plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer), or (iii) following the transaction in which such person became an Interested Stockholder, the Business Combination is (x) approved by the Board of Directors of the corporation and (y) authorized at a meeting of shareholders by an affirmative vote of the holders of two-thirds of the outstanding voting stock of the corporation not owned by the Interested Stockholder. The Delaware Takeover Statute provides that during the three-year period following the date a person becomes an Interested Stockholder, the corporation may not merge or consolidate with an Interested Stockholder or any affiliate or associate thereof, and also may not engage in certain other transactions with an Interested Stockholder or any affiliate or associate thereof, including, without limitation, (i) any sale, lease, exchange, mortgage, pledge, transfer or other disposition of assets (except proportionately as a stockholder of the corporation) having an aggregate market value equal to 10% or more of the aggregate market value of either the aggregate market value of all of the assets of the corporation or the aggregate market value of all of the outstanding stock of the corporation, (ii) any transaction which results in the issuance or transfer by the corporation or by certain subsidiaries thereof of any stock of the corporation to the Interested Stockholder, subject to certain exceptions, (iii) any transaction involving the corporation or any majority owned subsidiary thereof which has the effect of increasing the proportionate share of the stock of any class or series, or securities convertible into the stock of any class or series of the corporation or any such subsidiary which is owned by the Interested Stockholder (except as a result of immaterial changes due to fractional share adjustments or as result of any purchase or redemption of any share of stock not caused, directly or indirectly, by the Interested Stockholder), or (iv) any receipt by the Interested Stockholder of the benefit (except proportionately as a shareholder of such corporation) of any loans, advances, guarantees, pledges or other financial benefits provided by or through the corporation. In connection with its approval of the Merger Agreement, the First Interstate Board took action to ensure that the Delaware Takeover Statute would not apply to the Merger Agreement, the First Interstate Stock Option Agreement or the consummation of the transactions contemplated thereby. 23 ITEM 9. MATERIAL TO BE FILED AS EXHIBITS. The following Exhibits are filed herewith: Exhibit 1: Press Release of Wells, dated November 13, 1995 (including the letter from Wells to First Interstate contained therein). Exhibit 2: Pages 7 through 37 of First Interstate's 1995 Annual Meeting Proxy Statement, dated March 20, 1995. Exhibit 3: Agreement and Plan of Merger, dated as of November 5, 1995, by and among FBS, FBS Merger Sub and First Interstate. Exhibit 4: First Interstate 1991 Performance Stock Plan. Exhibit 5: First Interstate 1988 Performance Stock Plan. Exhibit 6: First Interstate 1983 Performance Stock Plan. Exhibit 7: First Interstate 1995 Management Incentive Plan. Exhibit 8: First Interstate 1995 Regional Executive Incentive Plan. Exhibit 9: First Interstate Tier II Employment Agreement. Exhibit 10: Letter, dated October 17, 1995, from Wells to First Interstate regarding the Initial Wells Proposal. Exhibit 11: Letter to Shareholders of First Interstate, dated November 20, 1995. * Exhibit 12: Press Release issued by First Interstate dated November 20, 1995. Exhibit 13: Opinion of Goldman, Sachs & Co., dated November 6, 1995.* Exhibit 14: Opinion of Goldman, Sachs & Co., dated November 19, 1995.* Exhibit 15: Opinion of Morgan Stanley & Co. Incorporated, dated November 5, 1995.* Exhibit 16: Opinion of Morgan Stanley & Co. Incorporated, dated November 19, 1995.* Exhibit 17: Stock Option Agreement, dated November 5, 1995, between FBS (as "Grantee") and First Interstate (as "Issuer"). Exhibit 18: Stock Option Agreement, dated November 5, 1995, between First Interstate (as "Grantee") and FBS (as "Issuer"). Exhibit 19: Letter Agreement, dated November 5, 1995, between First Interstate (as "Payer") and FBS (as "Recipient") in regard to termination fees. Exhibit 20: Letter Agreement, dated November 5, 1995, between FBS (as "Payer") and First Interstate (as "Recipient") in regard to termination fees. Exhibit 21: Complaint in Williamson v. Bryson, et al. (Delaware Chancery Court). Exhibit 22: Complaint in Shaev v. First Interstate Bancorp, et al. (Delaware Chancery Court). Exhibit 23: Complaint in Bernstein v. Carson, et al. (Delaware Chancery Court). Exhibit 24: Complaint in Katz v. First Interstate Bancorp, et al. (Delaware Chancery Court). Exhibit 25: Complaint in Sachs and Felder v. First Interstate Bancorp, et al. (Delaware Chancery Court). Exhibit 26: Amended Class Action Complaint in Williamson, et al. v. First Interstate Bancorp, et al. (In re First Interstate Bancorp Shareholder Litig.) (Delaware Chancery Court). - - ------------ * Included in copies mailed to shareholders. 24 Exhibit 27: Answer in In re First Interstate Bancorp Shareholder Litig. (Delaware Chancery Court). Exhibit 28: Second Amended and Supplemental Class Action Complaint in In re First Interstate Bancorp Shareholder Litig. (Delaware Chancery Court). Exhibit 29: Complaint in Mesko v. Bryson, et al. (California Superior Court). Exhibit 30: Complaint in Eaves v. Bryson, et al. (California Superior Court). Exhibit 31: Complaint in Grill v. Bryson, et al. (California Superior Court). Exhibit 32: Complaint in Mondshein v. Bryson, et al. (California Superior Court). Exhibit 33: Complaint in Deborah Kaplan v. Bryson, et al. (California Superior Court). Exhibit 34: Complaint in Theodore N. Kaplan v. Bryson, et al. (California Superior Court). Exhibit 35: Complaint in Wells Fargo & Company v. First Interstate Bancorp, et al. (Delaware Chancery Court). 25 SIGNATURE After reasonable inquiry and to the best of its knowledge and belief, the undersigned certifies that the information set forth in this statement is true, complete and correct. FIRST INTERSTATE BANCORP By: /s/ William J. Bogaard ----------------------------------- William J. Bogaard Executive Vice President and General Counsel Dated: November 20, 1995 26 EX-99.1 2 WELLS PRESS RELEASE DATED NOVEMBER 13, 1995 BW 9:01 WELLS FARGO INCREASES OFFER FOR FIRST INTERSTATE; ANNOUNCES EXCHANGE OFFER FOR COMMON STOCK; Intends to begin consent and proxy solicitations Business Editors SAN FRANCISCO--(BUSINESS WIRE)--Nov. 13, 1995--Wells Fargo & Co. (NYSE: WFC) today announced that it intends to take its offer to acquire First Interstate Bancorp (NYSE: I) directly to the stockholders of First Inter- state by beginning an exchange offer. Wells Fargo will offer stockholders of First Interstate an opportunity to tender their shares in an exchange offer in which each First Interstate share tendered would be exchanged for two-thirds of a share of Wells Fargo common stock. Based on the closing price of Wells Fargo common stock on November 10, the value of the exchange offer is $143.58 per share of First Interstate common stock. First Interstate has approximately 75.7 million shares outstanding, giving the transaction a total value of approximately $10.9 billion. "Our offer is superior to First Bank System's and we believe it is too compelling to ignore," said Paul Hazen, chairman of Wells Fargo & Co. "Our Board and major stockholders are fully supportive of the steps we are announcing today and are determined that Wells Fargo be successful in acquiring First Interstate. We are convinced that First Interstate stockholders will appreciate the extraordinary value of our proposal." The terms and conditions of the exchange offer are to be set forth in a registration statement that will be filed promptly with the Securities and Exchange Commission (SEC). The exchange offer will begin when the registration statement is declared effective by the SEC. The exchange offer will be conditioned on, among other things, the acquisition of a majority of First Interstate common stock, the redemption or invalidation of First Interstate's "poison pill", receipt of all necessary governmental regulatory approvals and consents, and approval by Wells Fargo stockholders of the issuance of Wells Fargo shares in the exchange offer. Wells Fargo intends to file an application today with the Federal Reserve Bank of San Francisco to approve the acquisition by Wells Fargo of First Interstate under the Bank Holding Company Act of 1956. The Company anticipates no difficulty in obtaining approval by the Federal Reserve Board on a timely basis, and is committed to making all appropriate divestitures. In addition, Wells Fargo said that it anticipates filing preliminary materials with the SEC for the solicitation of written consents from stockholders of First Interstate to remove First Interstate's current board of directors and to replace them with nominees of Wells Fargo who are committed to removing any impediments to the consummation of the acquisition of First Interstate by Wells Fargo. Wells Fargo also intends to file preliminary proxy materials with the SEC. These would be used in connection with the solicitation of First Interstate stockholders for proxies to vote against approval of the merger with First Bank System at any meeting of stockholders of First Interstate to be called to consider that merger proposal. Finally, Wells Fargo today is filing a complaint against First Interstate, First Interstate's Board of Directors and First Bank System in the Delaware Chancery Court. The complaint seeks to invalidate the break-up fees and lock-up option granted to First Bank System by First Interstate. In addition, the complaint seeks injunctive relief requiring the First Interstate Board to redeem the First Interstate poison pill and to prevent First Interstate from using anti-takeover devices or taking other actions intended to impede or delay the acquisition of First Interstate by Wells Fargo. "We want to do everything we can to keep California banking strong and to keep banking headquarters in our state, not thousands of miles away," said Hazen. "We strongly believe that our merger proposal serves the best interests of California's many constituents. Our combined companies will bolster competition, bring customers a wider range of products and services and create the potential for new jobs. We believe stockholders deserve the opportunity to vote on the merits of each merger proposal." NOTE TO EDITORS: Following this release is the full text of a letter being delivered today by Paul Hazen to Wil- liam Siart, Chairman and CEO of First Interstate Bancorp. 2 November 13, 1995 Mr. William Siart Chairman and Chief Executive Officer First Interstate Bancorp 633 West Fifth Street Los Angeles, CA 90071 Dear Bill: We were disappointed to learn that First Interstate had agreed to merge with First Bank System in a transaction that would offer First Interstate stockholders less value than they would receive pursuant to our then pending merger proposal, which offered .65 of a share of Wells Fargo common stock for each share of First Interstate common stock. From our prior conversations you know how determined Wells Fargo is to combine the operations of our two companies. We remain more determined than ever. Accordingly, Wells Fargo today announced that it intends to file with the Securities and Exchange Commission a registration statement with respect to an exchange offer pursuant to which Wells Fargo will offer to exchange 2/3 of a share of Wells Fargo common stock for each outstanding share of First Interstate common stock. We note that your agreement with First Bank System authorized First Interstate to terminate it if your "Board of Directors, after having consulted with and considered the advice of outside legal counsel, reasonably determines in good faith that such action is necessary in the exercise of its fiduciary duties under applicable laws." In light of the higher value of the proposal we intend to make directly to your stockholders, it is our firm conviction that the fiduciary duties owed by your Board to First Interstate stockholders compel your Board to exercise that termination right forthwith. As you know, our strong preference is to combine our two companies in a transaction endorsed by First Interstate's Board of Directors. In that connection, Wells Fargo would be prepared to enter into a merger agreement with First Interstate providing your stockholders with the same consideration as offered in our exchange offer, and we would not seek any break-up fees or lock-up options. In the event that your Board of Directors would rather not terminate the agreement with First Bank System, if you and First Bank System would agree, we would agree to a different process by which Wells Fargo and First Bank System would each be given 10 days to submit its best and final merger proposal, and First Interstate would agree to submit both proposals promptly to its stockholders in a manner fair and acceptable to both bidders so that the stockholders would be able to decide for themselves which proposal is in their best interests. Your Board would approve each proposal, in the alternative, for Delaware law purposes. As you know, the economic benefit to our respective stockholders that can be generated from the combination of our two companies is enormous, and far outstrips the benefits of a First Interstate - First Bank System combination. As a result, we are confident that the First Interstate Board and its advisors will conclude that our proposal, evaluated on an impartial basis, offers significantly more value to First Interstate stockholders than the First Bank System transaction. We look forward to receiving your prompt response. Enclosed is a copy of the press release we are issuing today about our exchange offer and related matters. Sincerely, /s/ Paul Hazen ------------------ Paul Hazen Chairman and CEO Enclosure EX-99.2 3 INFORMATION REGARDING BOARD OF DIRECTORS EXHIBIT 2 INFORMATION REGARDING THE BOARD OF DIRECTORS COMMITTEES OF THE BOARD The Corporation's Board of Directors has six standing committees: Executive, Audit, Compensation, Compliance, Credit and Nominating. Except for the Executive and Compliance Committees, each of these committees is composed of members who are not officers or employees of the Corporation or its subsidiaries. The membership and principal responsibilities of those committees are described below. The Management Advisory Committee, a standing committee which met twice during 1994, was dissolved on May 4, 1994. Members of the Management Advisory Committee during 1994 were William F. Kieschnick (Chairman), John E. Bryson, George M. Keller and Richard J. Stegemeier. Executive Committee Members: Edward M. Carson (Chairman), William F. Kieschnick, William F. Miller, J. J. Pinola, Forrest N. Shumway and William E. B. Siart. Between meetings of the Board of Directors, the Executive Committee has all powers which may be delegated to it under Delaware law. In general, the Executive Committee may supervise the management of all business of the Corporation except for matters which by law specifically require the action of the full Board or the stockholders. The Executive Committee did not meet during 1994. Audit Committee Members: Don C. Frisbee (Chairman), John E. Bryson, Ralph P. Davidson, Thomas L. Lee and Daniel M. Tellep. The Audit Committee reviews with the independent public accountants the scope and results of the annual audit, monitors the adequacy of the Corporation's system of internal controls and procedures, oversees the Corporation's internal audit activities, recommends the selection of the independent public accountants subject to approval of the Board and ratification by the stockholders, and meets periodically with representatives of bank regulatory agencies to discuss the condition of the Corporation and the subsidiary banks. Mary M. Gates served as a member of the Audit Committee until her death in June 1994. During 1994, the Audit Committee met six times. Compensation Committee Members: George M. Keller (Chairman), John E. Bryson, William F. Kieschnick, Richard J. Stegemeier and Daniel M. Tellep. The Compensation Committee reviews and approves the compensation of all officers whose salary exceeds $150,000 per year other than officers who are also Directors, whose salaries are fixed by the Board of Directors. This Committee administers the several performance stock plans of the Corporation, providing for the award of stock, stock options and other derivative securities. The Committee also administers and makes awards under the Corporation's Executive Incentive Plan, Regional Executive Incentive Plan and Management Incentive Plan, and, if approved by the stockholders at the Annual Meeting of Stockholders, the new Corporate Executive Incentive Plan and the 1995 Performance Stock Plan. It also approves benefit plans and programs for the employees of the Corporation and its subsidiaries. During 1994, the Compensation Committee met seven times. Compliance Committee Members: William F. Miller (Chairman), Jewel Plummer Cobb, Myron Du Bain and William E. B. Siart. The Compliance Committee reviews the Corporation's compliance program, the laws and regulations governing its activities, the Corporation's response to changes in laws and regulations, and management reports on the effectiveness of subsidiaries' compliance activities. The Compliance Committee met five times during 1994. Credit Committee Members: Myron Du Bain (Chairman), William F. Miller, J. J. Pinola and Steven B. Sample. The Credit Committee reviews and approves all appropriate credit policies and Risk Management standards by which the Corporation's credit process is managed. This Committee reviews sufficient information on a regular basis to ensure that the credit process is managed consistent with the Corporation's policies and regulatory and accounting standards; meets periodically with representatives of bank regulatory agencies to discuss the condition of the Corporation and the subsidiary banks; reviews management's evaluation of the Corporation's credit risk elements and performance objectives; reviews, on a quarterly basis, management's evaluation of the Corporation's consolidated Allowance for Credit Losses; and reviews with the Corporation's independent public accountants any report or opinion related to the credit Risk Management process of the Corporation, including the adequacy of the Allowance. The Committee also reviews and approves the Corporation's independent credit review program and, on a regular basis, receives reports and recommendations made by the Corporation's Senior Credit Review Officer to ensure that the program is managed consistent with standards. The Credit Committee met five times during 1994. Nominating Committee Members: Richard J. Stegemeier (Chairman), Ralph P. Davidson, Myron Du Bain, George M. Keller, Steven B. Sample and Forrest N. Shumway. The Nominating Committee considers and reviews the qualifications of potential nominees for Director and recommends to the Board of Directors a slate of nominees for election as 2 Directors at the Annual Meeting of Stockholders and, when vacancies occur, candidates for election by the Board of Directors. The Committee will consider nominees recommended by stockholders. Such recommendations for nominees for election at the 1996 Annual Meeting should be submitted in writing to the Committee in care of the Secretary of the Corporation at its address set forth on the first page of this Proxy Statement. During 1994, the Nominating Committee met one time. Under the Corporation's Bylaws, nominations of persons for election to the Board of Directors may be made at a meeting of stockholders by any stockholder of the Corporation, provided that the Secretary of the Corporation receives written notice not less than thirty (30) days nor more than sixty (60) days prior to the meeting. If less than forty (40) days' notice or prior public disclosure of the date of the meeting is given or made by the Corporation to stockholders, the notice of a nomination must be received not later than the close of business on the 10th day following the day on which such notice of the date of the meeting was mailed or such public disclosure was made. Notices of nominations must state the nominee's name, age, business and residential addresses and principal occupation or employment. The notice must also include the class and number of shares of the Corporation beneficially owned by such nominee and any other information about the nominee required to be disclosed in solicitations for proxies for the election of directors pursuant to Regulation 14A under the Securities Exchange Act of 1934. In addition, the notice must state the name and record address of the nominating stockholder and the class and number of shares of the Corporation beneficially owned by the stockholder. The Board of Directors believes that this notification procedure gives the Board and the stockholders a better opportunity to consider the qualifications of nominees for Director. DIRECTORS' FEES AND OTHER COMPENSATION Directors who are salaried officers of the Corporation receive no fees as Directors of the Corporation. All other Directors are paid an annual retainer for Board service of $20,000, and an attendance fee of $1,000 and $600 for each Board and committee meeting attended, respectively. Directors are also reimbursed for any expenses incurred in connection with attendance at regular or special meetings of the Board or any of its committees. The Chairmen of the standing committees are paid an additional $5,000 annual retainer. The Corporation has a standard arrangement pursuant to which Directors may elect to defer all or part of their Directors' fees. During 1994 Messrs. Bryson, Du Bain, Keller and Dr. Sample deferred the annual retainer and all attendance fees. During 1994 the Corporation continued to provide Mr. Pinola, as former Chairman of the Board and Chief Executive Officer, with certain services and property, resulting in imputed income to him of approximately $15,511. The Corporation paid Mr. Pinola a tax gross-up amount of approximately $18,096 in connection with such imputed income. 3 DIRECTORS' RETIREMENT PLAN The Corporation adopted the First Interstate Bancorp Retirement Plan for Directors, effective January 1, 1988, to provide retirement benefits to eligible Directors who have not served as while being employed by the Corporation or any of its subsidiaries, and who retire from Board service with at least five years of service as a Director. Each eligible Director is entitled to an annual retirement benefit equal to the annual retainer for Directors as in effect at the time of the eligible Director's resignation or retirement, or the Director may elect, not less than one year prior to retirement, to receive a lump sum payment upon retirement. Upon attainment of the later of age 65 or retirement, an eligible Director will receive one year of retirement payments for each year of service as an outside Director, with a maximum payment period of 20 years and with certain spousal rights in the event of death. 1991 DIRECTOR OPTION PLAN The First Interstate 1991 Director Option Plan ("Director Plan") was authorized by the Board of Directors on October 15, 1990, and approved by the Corporation's stockholders on April 19, 1991. A total of 200,000 shares of Common Stock has been reserved for issuance under the Director Plan, which provides for the non-discretionary granting of non-qualified options to purchase Common Stock to Directors who have not served as Directors while being employed by the Corporation or any of its subsidiaries. Each option grant is exercisable in its entirety one year from its date of grant. The Director Plan is designed to operate automatically and not require administration. To the extent that administration is necessary, the Director Plan is administered by the Compensation Committee of the Board of Directors. The purchase price of the Common Stock covered by each option is 100% of the fair market value of the stock on the date of the option grant. The options are generally non-transferable. Each option has a termination date, but in any event, all options granted under the Director Plan terminate upon the first to occur of the following events: (i) the expiration of ten years from the date the option is granted; (ii) the expiration of three months from the date an optionee ceases to serve as a Director for any reason other than death, disability or retirement eligibility; (iii) the expiration of one year from the date an optionee ceases to serve as a Director of the Corporation because of disability or death; (iv) the expiration of three years from the date an optionee ceases to serve as a Director of the Corporation if the Director is eligible for retirement benefits under the First Interstate Bancorp Retirement Plan for Directors; or (v) the termination of the Director Plan pursuant to its terms. Upon first being elected, each eligible Director is awarded an option to purchase 5,000 shares of Common Stock. Thereafter, on the first business day following each annual stockholders meeting of the Corporation, each eligible Director is granted an option to purchase 1,000 shares of Common Stock. 4 INSURANCE AGREEMENTS FOR DIRECTORS The Corporation Purchased universal life insurance policies on the lives of outside Directors, except for Messrs. Lee and Davidson and Mrs. Gates. The death benefits of the policies depend on the length of time a Director has served and do not exceed $200,000 (except in the case of Mr. Pinola whose death benefit is $2,000,000). The Corporation will continue to pay the premium on such policies for the period the Director remains a member of the Board. The Directors have entered into "split-dollar" life insurance agreements which provide that a Director will become fully entitled to the Policy upon the occurrence of certain events, including continuation of service to a future date and resignation for good reason following a change in control. If a Director becomes entitled to the policy, the cash value of the policy reduces the payment of benefits under the Directors; Retirement Plan and deferrals of Director's fees. During 1994, the Directors covered by these insurance agreements received imputed income ranging from $30 to $13,160 and tax gross-up amounts ranging from $28 to $12,463 relating to such imputed income. The varying amounts were due to factors such as the Director's age and length of service. ATTENDANCE AT BOARD AND COMMITTEE MEETINGS During 1994, each incumbent Director of the Corporation attended at least 75% of the meetings of the Board of Directors and the committees on which he or she served, with the exception of Mr. Frisbee. The Board of Directors held ten meetings during the year 1994. 5 BENEFICIAL OWNERSHIP OF THE CORPORATION'S SECURITIES BY MANAGEMENT The following table sets forth the number of shares of each class of equity securities of the Corporation beneficially owned as of February 21, 1995 by each Director and executive officer named in the Summary Compensation Table and by all Directors and executive officers as a group, with the exception of shares held in the Employee Savings Plan, which are reported as of December 31, 1994. For the purposes of this Proxy Statement, beneficial ownership is defined in accordance with the rules of the Securities and Exchange Commission and means generally the power to vote or dispose of securities, regardless of any economic interest.
PERCENT COMMON STOCK TOTAL OF COMMON OPTION COMMON COMMON NAME OF BENEFICIAL OWNER(1) STOCK(2) SHARES(3) STOCK STOCK --------------------------- -------- --------- ----- ----- John E. Bryson(4)(5)...................... 1,140 6,500 7,640 * Edward M. Carson(4)(6).................... 31,644 223,750 255,394 * Dr. Jewel Plummer Cobb.................... 1,776 6,514 8,290 * James J. Curran(6)(7)..................... 21,891 64,750 86,641 * Ralph P. Davidson......................... 1,500 8,000 9,500 * Myron Du Bain(4).......................... 28,939 8,000 36,939 * Don C. Frisbee............................ 872 3,000 3,872 * Mary M. Gates(8).......................... 2,335 6,000 8,335 * George M. Keller(4)....................... 5,896 5,000 10,896 * William F. Kieschnick(4).................. 7,100 1,000 8,100 * Thomas L. Lee............................. 1,300 5,000 6,300 * Dr. William F. Miller(4).................. 2,310 8,000 10,310 * J. J. Pinola(4)........................... 8,842 0 8,842 * William S. Randall(5)(6).................. 29,690 86,250 115,940 * Dr. Steven B. Sample...................... 500 6,500 7,000 * Forrest N. Shumway(4)..................... 2,000 8,000 10,000 * William E. B. Siart(6).................... 46,254 168,750 215,004 * Richard J. Stegemeier(4).................. 4,800 3,000 7,800 * Daniel M. Tellep.......................... 500 7,000 7,500 * Bruce G. Willison(5)(6)(7)................ 24,254 91,250 115,504 * All Directors and executive officers as a group (30 persons)(4)(5)(6) (7)(8)(9)(10)(11)........................ 282,327 1,009,739 1,292,066 1.69%
- - ---------- * Represents less than 1% of the outstanding Common Stock. 6 (1) Subject to applicable community property and similar statutes, the persons listed as beneficial owners of the shares have sole voting and investment power with respect to such shares except as noted. (2) Fractional shares resulting from participation in the Dividend Reinvestment and Stock Purchase Plan and the Employee Savings Plan of First Interstate Bancorp have been rounded to the nearest whole share. (3) Reflects the number of shares that could be purchased by exercise of options presently exercis- able or exercisable within 60 days from February 21, 1995, under the Corporation's stock option plans. (4) Includes the following shares of Common Stock held by a living or family trust formed by the named individual in which voting or investment power may be shared: Mr. Bryson, 500 shares; Mr. Carson, 30,482 shares; Mr. Du Bain, 23,839 shares; Mr. Keller, 5,896 shares; Mr. Kieschnick, 7,100 shares; Dr. Miller, 2,310 shares; Mr. Pinola, 8,842 shares; Mr. Shumway, 2,000 shares; and Mr. Stegemeier, 4,800 shares. Also includes 4,000 shares of Common Stock held in an Individual Retirement Account by Mr. Du Bain. (5) Includes shares held jointly, or in other capacities, as to which in some cases beneficial ownership may be disclaimed. (6) Includes the following shares held by the Trustee of the Employee Savings Plan in the accounts of the named individuals as of December 31, 1994: Edward M. Carson ................................. 801 William E. B. Siart .............................. 16,527 William S. Randall ............................... 9,830 Bruce G. Willison ................................ 4,972 James J. Curran .................................. 13,338 All executive officers as a group (15 persons) ... 56,479 (7) Includes the following performance units awarded pursuant to the 1991, 1992 and 1993 annual incentive plans and issued under the 1991 Performance Stock Plan (each performance stock unit represents one share of Common Stock): Mr. Willison ..................................... 1,777 Mr. Curran ....................................... 1,543 All executive officers as a group (15 persons) ... 7,692 The performance stock units will be paid in Common Stock or cash upon the occurrence of certain events, at the executive officer's election, including the first to occur of termination of employment, retirement or a specified date. Additional performance unit credit will be received based on the value of dividends paid on the underlying performance stock units. (8) Mrs. Gates' stock ownership is reported as of June 9, 1994, the date of her death. (9) Includes 97,213 shares of Common Stock held in living or family trusts in which voting or investment power may be shared. (10) No Directors or executive officers owned any shares of Series F or Series G Preferred Stock of the Corporation. 7 (11) Includes shares of Restricted Stock awarded by the Compensation Committee pursuant to the Corporation's 1991 Performance Stock Plan. BY OTHERS The following entities are the only stockholders known to the Corporation to be the beneficial owners of more than 5% of the Corporation's equity securities outstanding at December 31, 1994: AMOUNT AND NATURE OF NAME AND ADDRESS OF BENEFICIAL PERCENT OF TITLE OF CLASS BENEFICIAL OWNER OWNERSHIP CLASS - - -------------- ---------------- --------- ----- Common Stock DI Associates and KKR Associates 6,131,693(l) 8.26% c/o Kohlberg Kravis Roberts & Co. 9 West 57th Street New York, NY 10019 Common Stock Oppenheimer Group, Inc. 5,170,191(2) 6.78%(2) Oppenheimer Tower, World Financial Center New York, NY 10281 - - ---------- (1) This information is based upon a Schedule 13D dated February 3, 1993 filed with the Securities and Exchange Commission ("SEC") jointly by DI Associates ("DI") and KKR Associates ("KKR") DI and KKR have sole voting and dispositive power as to all of the shares. (2) This information is based upon a Schedule 13G dated February 1, 1995 filed with the SEC by Oppenheimer Group, Inc. ("Group"), as a parent holding company on behalf of Oppenheimer & Co., L.P. and Group's subsidiary companies and/or certain investment advisory clients or discretionary accounts of such subsidiaries. Group does not have sole voting and dispositive power with respect to any of the shares, and has shared voting and dispositive power as to all of the shares. An investment advisory subsidiary, Oppenheimer Capital, has shared voting and dispositive power as to 5,130,281 of such shares, and sole voting and dispositive power as to none of the shares. COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934 Section 16(a) of the Securities Exchange Act of 1934 requires the Corporation's executive officers and Directors, and persons who own more than ten percent of a registered class of the Corporation's equity securities, to file reports of ownership and changes in ownership with the Securities and Exchange Commission. The Corporation believes that during 1994 it complied with all Section 16(a) filing requirements applicable to its executive officers, Directors and greater than ten percent beneficial owners, except for the following reports. One report on Form 4 was filed late for Mr. Davidson, who inadvertently failed to 8 report the sale in 1994 of 500 shares of Common Stock by his wife. An amended Form 4 reflecting the sale was filed approximately one month after the due date. An amended Form 4 was also filed in 1994 for Mr. Willison to reflect his gift in 1992 of 50 shares of Common Stock to his son; the amendment was filed immediately upon his discovery of the omission. 9 Pursuant to Item 402(a)(9) of Regulation S-K of the Securities and Exchange Commission ("SEC"), the following Report of the Compensation Committee on Executive Compensation and the Common Stock Performance Graph on page 21 shall not be deemed to be filed with the SEC for purposes of the Securities Exchange Act of 1934. In addition, they shall not be deemed to be incorporated by reference into any of the Corporation's past or future filings under the Securities Act of 1933 or the Securities Exchange Act of 1934. REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION The members of the First Interstate Bancorp Compensation Committee are all non-employee Directors, and no member of the Committee is a former officer or employee of the Corporation or any of its subsidiaries. Mr. Stegemeier was selected by the Board of Directors to serve on the Compensation Committee on May 4, 1994, and participated in the modification of existing employment agreements, the evaluation of corporate and regional performance and the assignment of incentive awards for 1994. The Compensation Committee of the Board is committed to providing a total compensation program which supports the Corporation's business strategy and enhances shareholder value. The Committee is responsible for the review and approval of total compensation elements, including the competitive market posture, the level of pay at risk, and the mixture of pay components for the Corporation's executives and key management employees. In addition to these broad responsibilities, the Compensation Committee reviews and approves employment agreements, base salary increases, annual incentive awards and stock option grants to executives and other key management employees, including the five named executives on the Summary Compensation Table in the Proxy Statement. The base salaries of the Chairman of the Board and Chief Executive Officer and the President receive final approval from the Board of Directors. COMPENSATION PHILOSOPHY The Corporation's overall compensation philosophy, endorsed by the Compensation Committee, is to encourage and reward financial performance and, through the encouragement of stock ownership, to align the interests of management with those of the stockholders. The Committee bases its compensation decisions on the executives' performance, as defined in this Report, and experience and on the competitive compensation levels at other banks. The banks with which the Corporation compares its compensation levels include a group of superregional banks with similar characteristics as the Corporation and its subsidiary banks, i.e., retail focus, multi-state operations, with a minimum of 400 branches and $20 billion in assets. Many of these banks are represented in the KBW 50 Index published by Keefe, Bruyette & Woods, Inc., which is used by the Corporation as its peer comparison on the Common Stock Performance Graph in the Proxy Statement. The decisions of the Compensation Committee are based on the principle that a substantial portion of annual compensation for the Chairman of the Board and Chief Executive Officer and the President and other executive officers should be contingent upon the Corporation's performance and return to stockholders. Officers and employees participating in the executive incentive plans have approximately 50% to 55% of their direct compensation (base salary plus bonus) dependent on measured achievement of corporate and regional goals. 10 COMPENSATION PROGRAM ELEMENTS The Corporation's executive compensation program consists of three elements: -- Base salary -- Annual incentive compensation -- Long-term incentive compensation Base Salary Each executive officer's base salary is reviewed annually. When determining salary levels, the Compensation Committee considers internal equity (the relationship of an executive's salary to the value of his or her position to the Corporation as measured by the midpoint of the position's salary grade and the appropriateness of such salary level compared to the salaries of other executives), the average of competitive pay practices and the executive's performance. While all three of these determinants are considered by the Committee, adjustments to salaries are based on individual performance. Competitive salary data enables the Compensation Committee to assess the salary of each executive officer relative to the market, and internal equity considerations require the differentiation of salaries based on job size, experience, responsibility level and organizational complexity. The base salaries of executives range from somewhat below the median to slightly above the median of the competitive market. The 1994 base salary increases approved for executive officers, including the five named executives on the Summary Compensation Table in the Proxy Statement, reflected the Committee's assessment that these executives contributed substantially to the Corporation's performance in exceeding its overall goals, as described below. 1994 Annual Incentive Compensation The Corporate Executive Incentive Plan (the "Executive Incentive Plan"), the Regional Executive Incentive Plan and the Management Incentive Plan provide annual incentive compensation opportunities to executive officers based on the Corporation's performance and the performance of the subsidiary banks. Incentive awards for Mr. Carson and Mr. Siart are based on the performance of the entire Corporation against goals established by the Committee at the start of the year. The awards for the Chief Executive Officers of the California, Texas, Northwest and Southwest regions are based 50% on the achievement of specific regional goals, as set at the beginning of each year, and 50% on the Corporation's performance. The objectives are established by executive management and reviewed and approved by the Compensation Committee. The specific goal categories and their weighing for the Corporation and for the regions are identified below. The actual level of performance required for each of the goals is confidential for competitive reasons. The primary goal category for the Corporation for 1994 was return on equity, with 50% weighing based on the Corporation's performance relative to the peer bank group median return on equity over an eleven year historical performance period. The remaining 50% weighing was based on the Corporation's 11 performance relative to the peer bank group median return on equity in 1994. Performance against both goals placed the Corporation in the highest performing quartile of its peer group. Each of the four regions had their own unique objectives for net income, revenue and efficiency ratio (which measures expenses relative to revenue). The weights for the goal categories in all four regions were 60% net income, 20% revenue and 20% efficiency ratio. Three of the four regions exceeded all of their goals, while all four exceeded their net income goals. The incentive awards for the Chairman of the Board and Chief Executive Officer and the President were directly based on the Corporation's achievement percentage against its goals applied to the target award percentage for these two positions. Fifty percent (50%) of the incentive awards for the regional Chief Executive Officers was directly linked to their own region's performance against the region's goals described above, and 50% was linked to the Corporation's performance against its goals, also described above. The executive officers serving on the Corporation's Executive Operating Committee, including the five named executives on the Summary Compensation Table, receive 25% of their annual incentive award in stock. Such executive officers may elect to defer payment of the stock award in the form of performance stock units, each of which represents one share of Common Stock. Any dividends paid on the Common Stock underlying the performance stock units are credited and converted into additional performance stock units. At the time of distribution, shares of Common Stock will be issued equal to the number of whole performance stock units, and any fractional performance stock unit will be payable in cash. Executive officers who do not participate in either the Executive Incentive Plan or Regional Executive Incentive Plan participate in the Management Incentive Plan. The Management Incentive Plan provides for awards based on a blend of corporate performance and the performance of the unit by which the participant is employed. Adjustments are made to the blended awards based on individual performance. Long-term Incentive Compensation The Compensation Committee believes that awards of stock options promote the interests of the stockholders by providing performance incentives to senior executives and key employees who are responsible for the management, growth and financial success of the Corporation. Options are priced at 100% of the market value on the date of grant, and the Compensation Committee's policy precludes any subsequent repricing of options. Since recipients of stock options will not profit from their options until the price of the Corporation's stock exceeds the grant price, the executives are motivated to manage their businesses in ways that over the long term will benefit stockholders through increased stock price. The Chairman of the Board and Chief Executive Officer considers the level of the optionee's job responsibility, his or her potential impact on the Corporation's performance and the median to 75th percentile of competitive practice in arriving at the number of shares to be recommended to the Compensation Committee. Stock option guidelines have been established using the Black-Scholes Pricing Model. Each year the Corporation uses compensation surveys published by various consulting firms and includes the same superregional banks described above in the section on Compensation Philosophy. 12 Organizational performance and individual performance are also factors which serve to increase or decrease option recommendations from the guidelines. The regional Chief Executive Officers' option grants in 1994 were at the median of competitive practice as calculated by the Black-Scholes Pricing Model. The Committee, in granting options, did not consider either the amount and value of options currently held or the number of shares owned by those individuals who were granted options in 1994. The Corporation has established ownership level guidelines for equity holdings in the Corporation by senior managers. The Corporation does not grant tandem stock appreciation rights to its executive officers. In addition, the Corporation currently uses restricted stock as a compensation vehicle only on a very selective basis. Compensation of Mr Carson In assessing the accomplishments of Mr. Carson, the Compensation Committee considered that, under his direction, the results for 1994 demonstrate continued significant strengthening in the Corporation's performance. Net income for the Corporation for 1994 was $733.5 million, compared to income of $561.4 million for 1993, which is before the cumulative effect of accounting changes and an extraordinary item. Return on average common equity for the Corporation in 1994 was 21.56%, up from 17.33% in 1993 and significantly higher than the peer bank group median return on equity of 16.59% for 1994. The Corporation's return on average assets for 1994 was 1.38%, compared to 1.14% in 1993. In addition, no provision for credit losses for the Corporation was reported for 1994. The Compensation Committee believes that Mr. Carson's base salary should approximate the average of the competitive market and that his total compensation, including incentive pay, should be related to the Corporation's performance as compared to its competitive market. The Corporation's performance for 1994 as compared to its competitive market was in the top quartile for return on equity. Mr. Carson's 1994 base salary is slightly above the median base salary of chief executive officers of the banks identified above as the Corporation's competitive market. His direct compensation for 1994 is estimated to be between the 50th and 75th percentiles when compared to the Corporation's competitive market. In determining his 1994 incentive award, the Committee took into account Mr. Carson's accomplishments as specified above. The present value of the 1994 grant to Mr. Carson of 50,000 options, as determined by the Black- Scholes Pricing Model, was approximately 25% lower than the competitive market long-term incentive value. In Mr. Carson's case, the option grant will have an effective term of four years, instead of the normal ten years, when he retires this year. The Black-Scholes valuation methodology results in a lower value as the term of the grant shortens. In addition to the annual incentive compensation awarded to Mr. Carson under the Executive Incentive Plan and the 1991 Performance Stock Plan, the Committee made an award to him in recognition of his significant contribution to the Corporation. 13 The Tax Deductibility Limitation As a result of the Omnibus Budget Reconciliation Act of 1993, Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"), provides that any publicly held corporation will be denied a deduction for compensation paid to a "covered employee" to the extent that the compensation exceeds $1,000,000. The deduction limit applies to any compensation that could otherwise be deducted except for specific types of payments. As one of the exclusions, the deduction limit does not apply to "compensation that meets the requirements for performance-based compensation". Under the requirements for performance-based compensation set forth in the proposed Internal Revenue Service regulations, compensation will not be subject to the deduction limit if (1) it is payable on account of the attainment of one or more performance goals; (2) the performance goals are established by a compensation committee of the board of directors; (3) the material terms of the compensation and the performance goals are disclosed to and approved by the stockholders before payment; and (4) the compensation committee certifies that the performance goals have been satisfied before payment. Awards issued under First Interstate's 1991 Performance Stock Plan satisfy the requirements of the regulations, because the 1991 Performance Stock Plan was approved by the stockholders in accordance with Section 16(b) of the Securities Exchange Act of 1934 and because the Plan provides for an aggregate limit on the number of shares with respect to which awards may be made under the Plan. At the 1995 Annual Meeting, the 1995 Performance Stock Plan will be presented to the stockholders for their approval. If approved by the stockholders, the Corporation believes that stock options granted under this Plan, and stock awards issued under this Plan which are based upon the achievement of the performance goals established under the Executive Incentive Plan, will satisfy the requirements for performance-based compensation set forth in the proposed Internal Revenue Service regulations. The Compensation Committee has decided to introduce in 1995 additional goal categories to the annual Executive Incentive Plan which should serve to enhance its qualification as performance-based compensation. The additional goal categories will affect those executives who are identified in the statute as "covered employees". Under Section 162(m) of the Code, the term "covered employees" refers to the Chief Executive Officer and those individuals whose compensation is required to be reported to the stockholders under the Securities Exchange Act of 1934 who are employed on the last day of the taxable year. Therefore, the Proxy Statement contains a detailed description of the terms and conditions of the Executive Incentive Plan, including the class of employees eligible to receive compensation under performance goals, a general description of the terms of the goals and the maximum dollar amount that could be paid to any one participant for the plan years 1995 through 1999 if the performance goals are satisfied. At the 1995 Annual Meeting of Stockholders, the Executive Incentive Plan will be presented to the stockholders for their approval. The Board of Directors adopted the Executive Incentive Plan on February 21, 1995, subject to the approval of the stockholders. 14 EMPLOYMENT AGREEMENTS In 1994, the Compensation Committee invited an independent outside compensation consulting firm to assess the appropriateness of the Corporation's existing executive Employment Agreements. The consultant's review included a review of current practices with respect to such agreements by employers of similar size across major industries and within the banking segment peers. The consultant's report to the Committee suggested that modifications to certain elements within these Employment Agreements were appropriate in order to ensure the effectiveness, and to maintain the overall competitiveness, of the Corporation's Employment Agreements. Amended and Restated Employment Agreements were therefore reviewed and approved by the Compensation Committee on June 20,1994 and by the Board of Directors on July 18, 1994. It is the Committee's belief that, upon a termination of employment, a minimum amount of disruption takes place when the terms and conditions of payments and benefits upon termination have been incorporated into an agreement. In addition, the agreements also serve to enhance continuity of management in the event of a change in control. Therefore, the Proxy Statement contains a description of the terms and conditions of the Employment Agreements, as amended and restated, including the class of employees eligible for these Agreements. COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS George M. Keller, Chairman John E. Bryson William F. Kieschnick Richard J. Stegemeier Daniel M. Tellep 15 COMMON STOCK PERFORMANCE GRAPH The following Common Stock Performance Graph compares the yearly percentage change, on a dividend reinvested basis, in the cumulative total stockholder return on the Common Stock with the cumulative total return of the Standard & Poor's 500 Stock Index (which includes the Corporation) and the KBW 50 Index, published by Keefe, Bruyette & Woods, Inc., for the five-year period commencing December 31, 1989. The stock price performance depicted in the Performance Graph is not necessarily indicative of future price performance. COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN (1) FIRST INTERSTATE BANCORP, S&P 500 INDEX AND KBW 50 INDEX
1989 1990 1991 1992 1993 1994 - - ---------------------------------------------------------------------------------------------------- First Interstate Bancorp $ 100.00 $ 63.94 $ 85.86 $ 137.40 $ 192.99 $ 211.22 KBW 50 Index $ 100.00 $ 71.81 $ 113.67 $ 144.84 $ 152.86 $ 145.07 S & P 500 Index $ 100.00 $ 96.89 $ 126.41 $ 136.04 $ 149.75 $ 151.73
- - ---------- (1) Assumes $100 invested on December 31, 1989 in First Interstate Bancorp Common Stock, S&P 500 Index and KBW 50 Index and assumes quarterly dividend reinvestment. 16 EXECUTIVE OFFICERS' COMPENSATION AND OTHER INFORMATION SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION The following table sets forth the compensation for the Chief Executive Officer of the Corporation and the four most highly compensated executive officers of the Corporation (other than the Chief Executive Officer) who served as executive officers on December 31, 1994: SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION -------------------------------- ANNUAL COMPENSATION AWARDS PAYOUTS ------------------- ------------------------ ------- ANNUAL RESTRICTED SECURITIES COMPEN- STOCK UNDERLYING LTIP SATION AWARDS OPTIONS/ PAYOUTS ALL OTHER NAME AND PRINCIPAL POSITION YEAR SALARY($)(1) BONUS($)(2) ($)(3) ($)(4) SARS(#)(5) ($) COMPENSATION($)(6) - - --------------------------- ---- ------------ ----------- ------ ------ ---------- --- ------------------ Edward M. Carson 1994 $783,333 $1,500,000 -- -0- 50,000 -0- $56,699 Chairman of the 1993 784,133 1,062,000 -- -0- 75,000 -0- 35,229 Board (7) 1992 718,967 1,118,000 -0- 60,000 -0- William E. B. Siart 1994 629,500 930,000 -- -0- 30,000 -0- 19,638 President and 1993 645,358 836,000 -- -0- 45,000 -0- 18,556 Chief Executive 1992 571,483 884,000 -0- 45,000 -0- Officer (8) William S. Randall 1994 440,852 498,400 -- -0- 17,000 -0- 14,530 Executive Vice 1993 453,833 453,000 -- -0- 20,000 -0- 22,839 President and Chief 1992 408,833 491,000 -0- 20,000 -0- Operating Officer (9) Bruce G. Willison 1994 430,833 513,300 -- -0- 17,000 -0- 11,420 Chief Executive 1993 405,833 455,000 -- -0- 20,000 -0- 25,057 Officer, California 1992 381,967 484,000 -0- 20,000 -0- Region (10) James J. Curran 1994 375,004 444,600 -- -0- 17,000 -0- 12,877 Chief Executive 1993 374,200 395,000 -- -0- 20,000 -0- 11,383 Officer 1992 357,500 415,000 -- -0- 18,000 -0- Northwest Region (11)
- - ---------- (1) Included in this column are salaries and directors' fees paid for services rendered to the Corporation's subsidiaries before any salary reduction for contributions to the Corporation's Employee Savings Plan under section 401(k) of the Internal Revenue Code of 1986, as amended (the "Code"), and salary reductions for contributions for welfare plan coverages under section 125 of the Code. (2) The bonus amounts are payable pursuant to the Corporation's Executive Incentive Plan, Regional Executive Incentive Plan and 1991 Performance Stock Plan, as applicable. In addition, the bonus for Mr. Carson includes an award in recognition of his significant contribution to the Corporation. This column reflects amounts awarded, even if deferred. (3) "Other Annual Compensation", if any, is only required to be reported for 1993 and 1994; amounts which total the lesser of $50,000 or 10% of the total annual salary and bonus for the named executive officer have been omitted. 17 (4) Of the persons named above, only Mr. Randall had restricted stock holdings at December 31, 1994, aggregating 3,000 shares with a value of $202,857, based on a year-end stock price of $67.625. None of the restricted stock awards vested in less than three years from the date of grant. Holders of restricted stock accrue dividends at the same time and at the same rate as other holders of Common Stock. In the event of a change in control of the Corporation, the restrictions on restricted stock lapse immediately. Restricted stock awards are valued at the closing stock price on the date of grant. (5) No tandem Stock Appreciation Rights ("SARs") have been granted since 1991, and no freestanding SARs have ever been granted. (6) "All Other Compensation" is only required to be reported for 1993 and 1994. The total amounts shown in this column for 1994 consist of the following: (i) Mr. Carson, $23,500 for matching Corporation contributions under the Employee Savings Plan and Supplemental Savings Plan; $29,955 for the benefit attributable to payments of premiums on universal life insurance; of $3,243 relating to brokerage fees on stock option exercises; (ii) Mr. Siart, $18,450 for matching Corporation contributions under the Employee Savings Plan and Supplemental Savings Plan; and $1,188 for the benefit attributable to payments of premiums on universal life insurance; (iii) Mr. Randall, $13,726 for matching Corporation contributions under the Employee Savings Plan and Supplemental Savings Plan; and $1,304 for the benefit attributable to payments of premiums on universal life insurance; (iv) Mr. Willison, $10,675 for matching Corporation contributions under the Employee Savings Plan and Supplemental Savings Plan; and $745 for the -benefit attributable to payments of premiums on universal life insurance; and (v) Mr. Curran, $11,250 for matching Corporation contributions under the Employee Savings Plan and Supplemental Savings Plan; and $1,627 for the benefit attributable to payments of premiums on universal life insurance. The Corporation has purchased universal life insurance policies on the lives of the named executives, who have no immediate right to receive the cash surrender value of the policies and may never have any right to receive the cash surrender value. If, and only if, certain conditions are met, will the executives become vested in the cash surrender value. An executive's benefits under various deferred compensation plans will be reduced dollar for dollar by the amount of the cash surrender value of the policy at the time it vests. The premiums paid on the policies are designed to produce a cash surrender value which is less than the accrued benefits under the various plans. (7) Mr. Carson also served as Chief Executive Officer of the Corporation through December 31, 1994. (8) Mr. Siart served as President of the Corporation throughout 1994, and was also named its Chief Executive Officer on January 1, 1995. (9) Mr. Randall became Executive Vice President and Chief Operating Officer of the Corporation on January 1, 1995. He was Chief Executive Officer, Southwest Region, through December 31, 1994, and also served as Chairman of the Board, President and Chief Executive Officer of First Interstate Bank of Arizona through December 31, 1994. (10) Mr. Willison serves as Chairman of the Board, President and Chief Executive Officer of First Interstate Bank of California. (11) Mr. Curran's position includes serving as Chairman of the Board, President and Chief Executive Officer of First Interstate Bank of Oregon, and Chief Executive Officer and President of First Interstate Banks of Idaho, Montana and Washington. STOCK OPTIONS The following tables summarize grants of options and exercises of options to purchase Common Stock during 1994 to or by the executive officers of the Corporation named in the Summary Compensation Table above, and the grant date present value of options held by such persons at the end of 1994. All outstanding SARs were surrendered by the executive officers of the Corporation in 1993, and no SARs were granted during 1994. 18 OPTION/SAR GRANTS IN LAST FISCAL YEAR (1994)
NUMBER OF % OF TOTAL SECURITIES OPTIONS/SARS EXERCISE OR UNDERLYING GRANTED TO BASE PRICE GRANT DATE OPTIONS/SARS EMPLOYEES IN PER SHARE EXPIRATION PRESENT NAME GRANTED(#)(1) FISCAL YEAR ($/SH) DATE VALUE(2) ---- ------------- ----------- ------ ---- -------- Edward M. Carson........ 50,000 6.0% $66.875 1/2/98 $672,000(3) William E. B. Siart..... 30,000 3.6 66.875 2/22/04 426,900(4) William S. Randall...... 17,000 2.0 66.875 2/22/04 241,910(4) Bruce G. Willison....... 17,000 2.0 66.875 2/22/04 241,910(4) James J. Curran......... 17,000 2.0 66.875 2/22/04 241,910(4)
- - ---------- (1) Options were granted under the 1991 Performance Stock Plan, which provides for the granting of options at an option exercise price of 100% of the fair market value of the stock on the date of grant. Options granted in 1994 are exercisable beginning 12 months after the grant date, with 25% of the shares covered thereby becoming exercisable at that time and with an additional 25% of the option shares becoming exercisable on each successive anniversary date, with full vesting occurring on the fourth anniversary date. Mr. Carson's options vest according to the same schedule, except that any unexercised options will become immediately exercisable upon his retirement in 1995. In the event of a change in control of the Corporation, stock options become immediately exercisable to their full extent. (2) Present market value determinations were made using the Black-Scholes option pricing model. There is no assurance that any value realized by optionees will be at or near the value estimated by that model. The ultimate values of the options will depend on the future market price of the Common Stock, which cannot be forecast with reasonable accuracy. The actual value, if any, an optionee will realize upon exercise of an option will depend upon the excess, if any, of the market value of the Common Stock on the date the option is exercised over the exercise price of the option. The assumptions and calculations used for the model were provided to the Corporation by an independent consulting firm. (3) The estimated grant date present value for Mr. Carson under the Black-Scholes model is based on the following assumptions and adjustments: an exercise price of $66.875 per share, equal to the fair market value of the underlying stock on the date of grant; an annual dividend yield of $2.00 per share, representing the annualized dividend paid on a share of Common Stock at the date of grant; a stock price volatility of 27.898%, based on daily stock prices for the one-year period prior to the grant date; and an option term of four years to reflect that he will retire in 1995. In addition, the calculation was based on an interest rate of 5.12%, representing the interest rate on a U.S. Treasury security on the date of grant with a maturity date corresponding to that of the four-year option term. Reductions of approximately 5.0% were made to reflect the probability of forfeiture due to termination prior to vesting, and approximately 5.72% to reflect the probability of a shortened option term due to termination of employment prior to the option expiration date. (4) The estimated grant date present value under the Black-Scholes model is based on the same assumptions and adjustments used to calculate Mr. Carson's present value as to exercise price, volatility and dividends. Different assumptions and adjustments were made, however, as follows: an option term of 10 years; an interest rate of 5.97%, representing the interest rate on a U.S. Treasury security on the date of grant with a maturity date corresponding to that of the ten-year option term; and reductions of approximately 21.70% to reflect the probability of forfeiture due to termination prior to vesting, and approximately 13.39% to reflect the probability of a shortened option term due to termination of employment prior to the option expiration date. 19 AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR (1994) AND FISCAL YEAR-END OPTION/SAR VALUES
NUMBER OF SECURITIES UNDERLYING UNEXERCISED VALUE OF UNEXERCISED OPTIONS/SARS IN-THE-MONEY OPTIONS/SARS AT FISCAL YEAR-END(#)(3) AT FISCAL YEAR-END($)(4) SHARES ACQUIRED VALUE ------------------------ --------------------------- NAME ON EXERTS(#)(1) REALIZED($)(2) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE - - ---- --------------- -------------- ----------- ------------- ----------- ------------- Edward M. Carson ............. 42,000 $1,126,375 132,000 145,000 $3,922,938 $2,235,000 William E. B. Siart .......... 4,000 132,000 132,000 93,000 3,579,313 1,528,313 William S. Randall ........... 7,000 290,125 69,250 44,750 1,810,781 673,469 Bruce G. Willison ............ 1,600 62,000 73,250 45,750 1,951,906 707,594 James J. Curran .............. 3,000 126,875 48,250 43,750 1,463,781 643,219
- - ---------------- (1) No tandem SARs have been granted since 1991, and no freestanding SARs have ever been granted. All unexercised SARs were surrendered in 1993. (2) Value is based upon the difference between the market value at the date of exercise and the exercise price. (3) In the event of a change in control of the Corporation, stock options become immediately exercisable to their full extent. (4) Value is based upon the difference between the market value at the end of 1994 and the exercise price. PENSION PLANS The following table indicates the estimated annual benefit payable to a covered participant at normal retirement age under The Retirement Plan for Employees of First Interstate Bancorp and its Affiliates ("Retirement Plan") based on covered compensation and years of service with the Corporation and its subsidiaries. The table includes benefits under the Corporation's Excess Benefit Retirement Plan ("Excess Plan") and Supplemental Executive Retirement Plan ("SERP"), both of which are unfunded. The Excess Plan provides benefits that would otherwise be denied a participant by reason of certain Internal Revenue Code limitations on the Retirement Plan. The SERP covers a select group of management who have attained age 55 and supplements the basic Retirement Plan by including bonuses in the definition of covered compensation. PENSION PLAN TABLE YEARS OF SERVICE(1) -------------------------------------------------------------- REMUNERATION 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS - - ------------ -------- -------- -------- -------- -------- $ 300,000$ 83,677 $ 111,569 $ 139,461 $ 167,353 $ 195,245 400,000 112,177 149,569 186,961 224,353 261,745 500,000 140,677 187,569 234,461 281,353 328,245 600,000 169,177 225,569 281,961 338,353 394,745 1,200,000 340,177 453,569 566,961 680,353 793,745 1,400,000 397,177 529,569 661,961 794,353 926,745 (1) The maximum number of years of service that may be credited under the pension plans is 35. Mr. Carson has 43 years of service, of which 35 years of service are credited. 20 The compensation covered by the pension plans for the individuals named in the Summary Compensation Table includes basic monthly salary or wage rate and certain bonuses described in the Summary Compensation Table and excludes director's fees, amounts paid for life insurance premiums, matching amounts under the Corporation's Employee Savings Plan and imputed income. The remuneration of a participant is an average of the compensation (as stated in the Summary Compensation Table) covered by such plans for the five of the last ten calendar years of the participant's employment with the Corporation for which such average is highest. The remuneration covered by the pension plans for Mr. Carson is $1,296,111; Mr. Siart, $549,000; Mr. Randall, $396,004; Mr. Willison, $372,000; and Mr. Curran, $525,727. The credited service in full years for Mr. Carson is 35 years; Mr. Siart, 16 years; Mr. Randall, 25 years; Mr. Willison, 16 years; and Mr. Curran, 17 years. The benefits shown in the table are computed on a single-life annuity basis and are not reduced or adjusted for receipt of Social Security benefits or other offset amounts. EMPLOYMENT AGREEMENTS In January, 1995, the Corporation entered into amended and restated employment agreements with certain of its key executives which are designed to encourage them to remain employees of the Corporation by providing them with greater security. Similar agreements have been entered into between some of the Corporation's bank subsidiaries and certain of their key executives. Messrs. Siart, Randall, Willison and Curran are parties to such agreements. Absent a change in control as defined in the agreements, the amended and restated employment agreements are continuous and generally may be terminated with 14 months' notice. The agreements, as amended, provide for liquidated damages equal to 24 months' base salary in the event that the executive is terminated for a non-allowable reason. Unless the Corporation decides otherwise, such damages are payable at the same time and in the same manner as if the executive had remained employed by the Corporation. As defined in the agreements, as amended, a change in control occurs when any person or group becomes the beneficial owner of the Corporation's securities having 20% or more of the combined voting power of its then outstanding securities, when a majority of the Corporation's Board of Directors is replaced as a result of a contest for the election of Directors, or upon the occurrence of certain mergers, acquisitions and other events. In the event of a change in control, the term of the agreements, as amended, is extended to the date two years following the change in control, and the duties of executives may not thereafter be modified. In addition, if an executive is terminated without cause, as defined in the agreements, after a change in control, such person is entitled to a payment equal to the sum of three times annual base salary and target bonus for the year in which the executive's employment terminates, an amount equivalent to three additional years of participation in the Corporation's retirement plan, and $30,000 to cover the cost of three years' health and welfare benefit plan coverage. A prorated portion of any bonus that may be accelerated as a result of a change in control will be deducted from the payment. Such a payment to an executive is payable as a cash lump sum within ten days following termination of employment. 21 Mr. Carson remains a party to the original employment agreement entered into effective January 1, 1990, due to his retirement as Chief Executive Officer of the Corporation at the end of 1994, and his upcoming retirement in April as Chairman. Mr. Carson's employment agreement is similar to the amended and restated employment agreements described above, except that his agreement provides for liquidated damages equal to 12 months' base salary if he is terminated for a non-allowable reason, and that upon the attainment of age 65, no additional amounts would be payable in respect of termination of employment following a change in control. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION During 1994, the Compensation Committee of the Corporation's Board of Directors consisted of Messrs. Keller (Chairman), Bryson, Kieschnick, Stegemeier and Tellep. The Corporation instituted an executive loan program on January 14, 1991 to provide fixed rate principal residence mortgage loans and general purpose loans at favorable rates to members of the Managing Committee of the Corporation. All loan requests under the new executive loan program require the approval of the Chairman or the President of the Corporation and the Compensation Committee of the Board of Directors and are documented in accordance with standard requirements for loans made outside the program. Two of the individuals named in the Summary Compensation Table had loans under the program. Mr. Siart had a principal residence mortgage loan, with a principal balance of $874,502 at December 31, 1994, a maximum balance during 1994 of $885,221 and an interest rate of 6.34%. Mr. Willison obtained a general purpose loan in 1994 under the program in the form of a floating rate installment note in the principal amount of $150,000. The note had a maximum balance during 1994 of $150,000 and an interest rate of 5.76% from the date of origination through October 27, 1994, and an interest rate of 7.32% from October 28 through December 31, 1994. No other executive officers have loans under the program. RELATED TRANSACTIONS During 1994 a number of the Corporation's subsidiary banks had loan transactions, in the ordinary course of business, with officers and Directors of the Corporation. There were also, during 1994, a number of loan transactions in the ordinary course of business between the Corporation's subsidiary banks and associates of officers and Directors of the Corporation. Except as described in the Compensation Committee Interlocks and Insider Participation section above, all of such transactions were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons and did not involve more than a normal risk of collectibility or present other unfavorable features. ITEM 2. RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS By resolution of the Board of Directors, the firm of Ernst & Young LLP, Certified Public Accountants, was chosen as the independent public accountants to examine the accounts of the 22 Corporation for the year 1995. In accordance with that same resolution, this selection is being presented to the stockholders for ratification. Ernst & Young LLP has audited the Corporation's books annually since 1958 and is considered well qualified. Representatives of the firm are expected to be present at the Annual Meeting of Stockholders on April 28, 1995 with an opportunity to make a statement if they desire to do so, and are expected to be available to respond to appropriate questions. If the stockholders do not ratify the employment of Ernst & Young LLP, the selection of independent accountants will be reconsidered by the Board of Directors. THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE SELECTION OF ERNST & YOUNG LLP AS THE CORPORATION'S INDEPENDENT PUBLIC ACCOUNTANTS FOR THE YEAR 1995. ITEM 3. PROPOSAL FOR APPROVAL OF CORPORATE EXECUTIVE INCENTIVE PLAN The First Interstate Bancorp Corporate Executive Incentive Plan (the "Executive Incentive Plan") was authorized by the Corporation's Compensation Committee and was adopted by the Board of Directors of the Corporation on February 21, 1995, subject to the affirmative vote of the holders of at least a majority of the shares of the Corporation's voting stock present in person or by proxy and entitled to a vote at the 1995 Annual Meeting. The Executive Incentive Plan is only effective if approved by stockholders. Commencing in 1995, the Executive Incentive Plan, the 1995 Performance Stock Plan, if approved by the stockholders at the 1995 Annual Meeting, and the 1991 Performance Stock Plan are the exclusive means for the Corporation's Chairman of the Board, President and Chief Executive Officer, and Executive Vice President and Chief Operating Officer to earn annual incentive compensation. The Chief Executive Officers of each Region will earn Awards under the Executive Incentive Plan based on achievement of goals established for the Corporation. In addition to participating in the Executive Incentive Plan, the 1995 Performance Stock Plan, if approved, and the 1991 Performance Stock Plan, the Chief Executive Officers of the Regions will also participate in the First Interstate Bancorp annual Regional Executive Incentive Plan, which rewards the Chief Executive Officer of each Region for the performance of his or her Region. SUMMARY OF CORPORATE EXECUTIVE INCENTIVE PLAN The full text of the Executive Incentive Plan is set forth in Exhibit A to this Proxy Statement. The following summary of the provisions of the Executive Incentive Plan is qualified in its entirety by reference to the text of the Executive Incentive Plan. Purpose The purpose of the Executive Incentive Plan is to focus the efforts of certain key executive employees on the continued improvement in the performance of the Corporation and to aid the Corporation in attracting, motivating and retaining superior executives by providing an incentive 23 and reward to those key employees who contribute most to the operating progress and performance of the Corporation. Eligibility The Chairman of the Board, the President and Chief Executive Officer of the Corporation, the Executive Vice President and Chief Operating Officer of the Corporation, and the Chief Executive Officers of the California, Northwest, Southwest, and Texas Regions are eligible to receive Awards as defined in the Executive Incentive Plan. At present, these are the seven key employees eligible to participate in the Executive Incentive Plan. Administration The Executive Incentive Plan will be administered by the Compensation Committee of the Board of Directors of the Corporation (the "Committee"), which Committee will consist of at least two Directors, each of which is a "disinterested person" as defined in Rule 16b-3 under the Securities Exchange Act of 1934 and an "outside director" as defined in Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"). Awards The Executive Incentive Plan authorizes the payment of cash Awards, as defined therein, based on the attainment of specific goals for the Corporation with respect to return on equity, revenue, gross income, pretax income, deposits, assets, non-interest expenses, non-performing assets and total shareholder return, which goals will be established in writing and approved by the Committee prior to the beginning of each year (not later than 90 days after the commencement of the period of service to which the performance goals relate). Awards are based on a formula of multiplying year-end base salary by a percentage determined by the level of achievement. The maximum attainable Award is 135% of year-end base salary for Messrs. Carson and Siart, 123.75% of year-end base salary for Mr. Randall, and 56.25% of year-end base salary for the remaining Participants. For purposes of calculating Awards, year-end base salary shall not be treated as increasing in any Performance Year by more than the average salary increases for employees at this level at comparable banks, taking into consideration increases on account of promotions. An Award will be made to a Participant, as defined in the Executive Incentive Plan, after the completion of the year based upon the satisfaction of the Corporation's goals under the Executive Incentive Plan, which achievement has been certified by the Committee, in writing, as having satisfied such goals. The Committee has the discretion to reduce an Award that becomes payable upon attainment of the goal. The Committee or the Board of Directors of the Corporation may neither increase an Award to a Participant beyond the Award established for a specific level of achievement nor alter the allocation of the Awards among the Participants. Since any such Awards will not exceed the Awards which can be earned for specified goals, it is generally expected that such Awards will be "performance based" and as such the deduction limitation contained in the Omnibus Budget Reconciliation Act of 1993 will not apply to such compensation. 24 The following chart specifies the maximum Award that can be granted to each Participant under the Executive Incentive Plan for the 1995 Performance Year: NAME AND POSITION DOLLAR VALUE ($) ----------------- ---------------- Edward M. Carson, Chairman of the Board $1,066,500 William E. B. Siart, 972,000 President and Chief Executive Officer of the Corporation William S. Randall, 643,500 Executive Vice President and Chief Operating Officer of the Corporation Bruce G. Willison, 253,125 Chief Executive Officer, California Region James J. Curran, 222,188 Chief Executive Officer, Northwest Region Linnet F Deily, 202,500 Chief Executive Officer, Texas Region John S. Lewis, 154,688 Chief Executive Officer, Southwest Region The maximum Award that can be paid to a Participant for any one year during the years 1996 through 1999 is $1,500,000. The actual amount of the Award will be based on corporate performance. Designation of a maximum amount is required to satisfy proposed Treasury regulations under Section 162(m) of the Code. Change in Control In the event of a change in control, within ten days after the change in control of the Corporation, each Participant will be paid 100% of his or her target Award for the year in which the change in control occurs, based on the base pay rate then in effect. Deferrals Awards are generally payable shortly after the end of the Performance Year for which the Award has been earned. A Participant may elect, however, to defer commencement of payment for a period extending until the termination of employment. Participants may elect that deferred amounts earn interest (at a rate specified in the Executive Incentive Plan) or, in the alternative, be invested in the form of Performance Units under the 1995 Performance Stock Plan (see the discussion of the 1995 Performance Stock Plan under Item 4 of this Proxy Statement, "Proposal For Approval of 1995 Performance Stock Plan"). Amendments and Discontinuance The Board of Directors of the Corporation or the Committee may, at any time, modify, terminate or suspend the provisions of the Executive Incentive Plan. 25 THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL FOR APPROVAL OF THE CORPORATE EXECUTIVE INCENTIVE PLAN. ITEM 4 PROPOSAL FOR APPROVAL OF 1995 PERFORMANCE STOCK PLAN The First Interstate Bancorp 1995 Performance Stock Plan (the "1995 Performance Stock Plan") was authorized by the Corporation's Board of Directors on February 21, 1995, subject to the affirmative vote of the holders of at least a majority of the shares of the Corporation's Common Stock present in person or by proxy and entitled to vote at the 1995 Annual Meeting. The 1995 Performance Stock Plan authorizes the granting of stock awards, performance units, stock options, stock appreciation rights and restricted stock awards of up to 5,000,000 shares of Common Stock to key employees of the Corporation and its subsidiaries who are responsible for the management, growth and financial success of the Corporation. The Board of Directors believes that the future success of the Corporation and its subsidiaries is dependent upon the quality and continuity of management, and that compensation programs have been important in attracting and retaining individuals of superior ability and in motivating their efforts on behalf of the Corporation and its business interests. As of February 21, 1995, approximately 500,000 shares of Common Stock were available to grant additional awards under the First Interstate Bancorp 1991 Performance Stock Plan (the "1991 Stock Plan"). Regardless of whether the 1995 Performance Stock Plan is approved by the stockholders, the Board of Directors intends to continue to grant additional awards under the 1991 Stock Plan. SUMMARY OF 1995 PERFORMANCE STOCK PLAN The full text of the 1995 Performance Stock Plan is set forth in Exhibit B to this Proxy Statement. The following summary of provisions of the 1995 Performance Stock Plan is qualified in its entirety by reference to the text of the 1995 Performance Stock Plan. Shares Subject to the Plan The 1995 Performance Stock Plan permits the Corporation to grant stock awards, performance units, accelerated ownership stock options, incentive stock options, non-qualified stock options, stock appreciation rights and restricted stock awards. The aggregate number of shares of Common Stock reserved for awards under the 1995 Performance Stock Plan is 5,000,000 shares. Eligibility Key employees of the Corporation and its subsidiaries (including officers, whether or not directors) are eligible to receive awards under the 1995 Performance Stock Plan. At present there are approximately 1,000 employees eligible to participate in the 1995 Performance Stock Plan. The Corporation has full discretion to select those key employees who will receive awards under 26 the 1995 Performance Stock Plan. Directors who are not officers are not eligible to participate in the Plan. Plan Benefits The nature and amounts of any awards under the 1995 Performance Stock Plan will be determined by the Committee in its sole discretion, except that special rules exist under the Plan with respect to the issuance of awards of Common Stock to participants in the Executive Incentive Plan. See the discussion below under "Stock Awards." Except in the case of such stock awards, benefits and amounts are not presently determinable that may be received by each of the executive officers identified in the Summary Compensation Table of this Proxy Statement, all executive officers as a group and all other key employees under the 1995 Performance Stock Plan. Administration The 1995 Performance Stock Plan will be administered by the members of the Compensation Committee (the "Committee") of the Board of Directors, which Committee will consist of at least two Directors, each of which is a "disinterested person" as defined in Rule 16b-3 under the Securities Exchange Act of 1934 and an "outside director" as defined in Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"). Adjustments and Other Provisions The 1995 Performance Stock Plan provides for adjustments in the number of shares reserved and in option prices in the event of a stock dividend or stock split and for other equitable adjustments in the event of a recapitalization, merger or similar occurrence. Any shares of Common Stock or other securities received by a holder of restricted stock with respect to such restricted stock by reason of any such change is subject to the same restrictions. Similar adjustments will be made to performance units. Stock Awards An award of Common Stock may be made to an employee at the discretion of the Committee, and is not subject to any restrictions under the 1995 Performance Stock Plan. Special rules apply under the Plan however, with regard to stock awards to participants in the Executive Incentive Plan. In the case of participants in the 1995 Performance Stock Plan who are also participants in the Executive Incentive Plan, the award of Common Stock will be based on the achievement of the performance goals established under the Executive Incentive Plan for the year in question. For each year that the goals established under the Executive Incentive Plan are attained, each participant may receive a maximum stock award based on the achievement of such goals equal to that number of shares of Common Stock which is equivalent in value to one-third of the participant's cash award under the Executive Incentive Plan, based on the fair market value of the Common Stock on the date such award is approved by the Committee. In 1995, stock awards to participants in the Executive Incentive Plan will not exceed the following: 27 NAME AND POSITION DOLLAR VALUE($) ----------------- --------------- Edward M. Carson, Chairman of the Board $355,500 William E. B. Siart, 324,000 President and Chief Executive Officer of the Corporation William S. Randall, 214,500 Executive Vice President and Chief Operating Officer of the Corporation Bruce G. Willison, 84,375 Chief Executive Officer, California Region James J. Curran, 74,062 Chief Executive Officer, Northwest Region Linnet F Deily, 67,500 Chief Executive Officer, Texas Region John S. Lewis, 51,562 Chief Executive Officer, Southwest Region The maximum value of the stock award to a participant for any one year during the years 1996 through 1999 is $500,000. The actual amount of a stock award will be based on corporate performance. Designation of a maximum amount is required to satisfy proposed Treasury regulations under Section 162(m) of the Code. Stock Options Stock options granted under the 1995 Performance Stock Plan may be either incentive stock options, qualifying for special tax treatment under Section 422 of the Code, or non-qualified stock options. Each option will be evidenced by a written document containing such terms and provisions consistent with the 1995 Performance Stock Plan as the Committee approves. The exercise price of each option will be not less than the fair market value of the shares covered by the option on the date of grant. As of February 21, 1995, the fair market value of a share of Common Stock was $79.75. Payment on each option exercised must be made in cash or in whole shares of Common Stock already owned by the optionee for at least six months or partly in cash and partly in Common Stock. Common Stock received by the Corporation in payment of the option price will be valued at its fair market value on the date of exercise. Each option will be exercisable in one or more installments within a fixed option period and during employment, subject to certain restrictions or extensions in the event of death, retirement or termination, but in no event more than ten years from the date of grant. Unless otherwise provided in the employee's stock option agreement, no option will be transferable other than by will or the laws of descent and distribution. No employee may be issued stock options (including those containing stock appreciation rights, as described below) for more than 150,000 shares of Common Stock in any single calendar year pursuant to the 1995 Performance Stock Plan. 28 Accelerated Ownership Stock Option If an employee's stock option agreement so provides, an employee, in connection with the grant of stock options, will be granted an accelerated ownership non-qualified stock option ("AO") to purchase at the fair market value, as of the date of exercise of the underlying option, additional shares of Common Stock equal to the number of shares of Common Stock used by the employee in payment of the purchase price of the underlying option. An AO is only available during the period that the optionee remains an employee, and, in addition, the optionee must remain an employee at least six months after the exercise of the underlying option in order for the AO to vest. The AO may be exercised once it vests only for the remaining term of the underlying option agreement. Stock Appreciation Rights The Committee may issue stock appreciation rights in tandem with stock options granted under the 1995 Performance Stock Plan. Employees who are granted stock options containing stock appreciation rights may elect to surrender, rather than exercise, such options and to receive the excess of the fair market value of the Common Stock subject to the options on the date of surrender over the option price. Such excess may be paid in Common Stock, in cash, or in a combination of Common Stock and cash, as determined by the Committee. Performance Units An award of performance units may be made to an employee. A performance unit that only requires the passage of time to vest is commonly called a "stock unit." If performance conditions are also required of an employee, the award is commonly called a "performance unit." Each stock unit or performance unit represents one share of Common Stock which, at the time and to the extent vested, will be payable by the delivery of one share of Common Stock. Alternatively, as provided in the applicable agreement, cash may be payable to the employee based upon the fair market value of the Common Stock at the time of payment. In addition, an employee who has been awarded a stock unit or performance unit shall receive additional unit credit based on the value of any dividends which would have been paid to the employee if he or she owned the Common Stock represented by the units. Certain performance units may be attributable to an employee's election to defer compensation under the Management Incentive Plan, the Regional Incentive Plan, the Executive Incentive Plan, or any successor plans. Performance units will be payable at the time selected by the employee and permitted by the Committee. The maximum number of performance units which may be issued to employees under the 1995 Performance Stock Plan will not exceed 150,000 in any single calendar year. Restricted Stock Awards The Committee may issue restricted stock awards. Each restricted stock award will be evidenced by a written document containing such terms and provisions including the price, if any, 29 to be paid by the recipient, consistent with the 1995 Performance Stock Plan as the Committee approves. The Committee will determine the restricted period during which the restricted stock and dividends paid with respect to the restricted stock may not be sold, assigned, transferred, pledged or otherwise encumbered, except as permitted by the 1995 Performance Stock Plan or the restricted stock agreement. The Committee may at any time reduce or terminate the restricted period. If a holder of restricted stock ceases to be an employee of the Corporation or a subsidiary during the restricted period for any reason other than death, disability or retirement, all shares of restricted stock which are then subject to the restrictions imposed by the Committee will be forfeited and returned to the Corporation. If a holder of restricted stock ceases to be an employee of the Corporation or a subsidiary during the restricted period by reason of death, disability or retirement, shares of the restricted stock shall, to the extent determined by the Committee, become free of the restriction. Change in Control In the event of a change in control as defined in the 1995 Performance Stock Plan, each option, accelerated ownership stock option and stock appreciation right will become immediately exercisable, the restricted period for restricted stock will immediately expire, and, unless otherwise provided in performance unit agreements, all performance units will be immediately payable in Common Stock in the maximum amount available under the terms of the agreement. Amendments and Discontinuance The Board of Directors may amend or terminate the 1995 Performance Stock Plan in any respect, provided no such action shall, without consent of the participants, affect or impair any award previously granted. In addition, no such action shall be taken without stockholder approval if required by Rule 16b-3 of the Securities Exchange Act of 1934 or the federal tax rules applicable to incentive stock options or other applicable law. Federal Income Tax Consequences The following is a general summary of the principal federal income tax consequences of stock options granted under the 1995 Performance Stock Plan. The summary is based on the Corporation's understanding of the currently applicable provisions of the Code and Treasury regulations, as well as administrative and judicial interpretations. State, local and foreign tax consequences of options granted under the 1995 Performance Stock Plan are not covered in this summary, which is not intended to cover all tax consequences that may apply to an optionee or to the Corporation. Incentive Stock Options. If an optionee holds the shares acquired upon the exercise of an incentive stock option for more than one year after exercise and two years after the date of grant of the option, and if at all times from the date of grant of the option until three months preceding the exercise of the option (one year in the case of disability) the optionee was an employee of the 30 corporation or a subsidiary, (a) the optionee will not be taxed at the time the option is granted or exercised; (b) the difference between the option price and the amount realized upon disposition of the shares will constitute long-term capital gain or loss, as the case may be; and (c) the Corporation will not be allowed an income tax deduction for granting the option or issuing shares pursuant to the exercise of the option. If after the exercise of an incentive stock option the optionee fails to observe the holding rule, the portion of any gain realized upon disposition of the shares which does not exceed the excess of the value at date of exercise over the option price will be treated as ordinary income. The balance of any gain (or any loss) will be treated as capital gain (or loss), long-term or short-term, depending on the length of time the stock was held after the option was exercised. To the extent the optionee is subject to the alternative minimum tax provisions of the Code, the amount by which the fair market value of the shares at the time the incentive stock option is exercised exceeds the option price will be an item of tax preference which must be included when making the alternative minimum tax calculation for the tax year in which the incentive stock option is exercised. The Corporation will be entitled to a deduction equal to the amount of ordinary income upon which the optionee is taxed. If an optionee exercises an incentive stock option at a time when he or she was not an employee of the Corporation or a subsidiary within the preceding three months (one year in the case of disability), the option will be treated as a nonqualified option with the consequences described below. Non-Qualified Options. Under present Treasury regulations holding that an option does not have a readily ascertainable fair market value unless it is freely transferable and meets certain other conditions, an optionee who is granted a non-qualified option will not realize taxable income at the time the option is granted. If an optionee exercises the option by paying cash to acquire the shares subject to option, he or she will be taxed in the year of exercise at ordinary income tax rates on an amount equal to the excess of the fair market value of the shares on the date of exercise over the option price. The Corporation will receive a corresponding deduction. The optionee's basis in the shares so acquired will be equal to the option price plus the amount of ordinary income upon which he or she is taxed. Upon subsequent disposition of the shares, an optionee will realize capital gain or loss, long-term or short-term, depending upon the length of time he or she has held the shares since the option was exercised. Payment of Option Exercise Price With Shares. If an optionee uses existing shares in full or partial payment of the option exercise price, the optionee generally will not recognize taxable income with respect to the shares surrendered. The optionee's tax basis and holding period for the shares surrendered generally will apply to an equal number of shares issued pursuant to the exercise. However, if the shares surrendered were originally acquired through an incentive stock option exercise, an exchange within two years of such earlier incentive stock option grant or within one year of such earlier incentive stock option exercise win be a disqualifying disposition of such shares surrendered. In such case, the holding period for the shares surrendered cannot be used to meet the one year and two year periods for determining a disqualifying disposition of the new shares acquired in the exchange. With an incentive stock option, no taxable income will be recognized by the optionee on the exercise of the incentive stock option with existing shares (except as described above with respect to a disqualifying disposition of the shares surrendered). The shares issued in excess of 31 the number of shares surrendered will have a tax basis equal to zero (or the amount of cash, if any, used in the exercise). The holding period for such excess shares will be measured from the date of exercise. With a non-qualified option, the optionee will recognize the same amount of ordinary income on the exercise, as described above (i.e., regardless of whether the exercise price is paid in cash or in shares). The shares issued in excess of the number of shares surrendered will have a tax basis equal to the amount of ordinary income recognized on the exercise plus the amount of cash (if any) used in the exercise. The holding period for such excess shares will be measured from the date of exercise. Deductibility of Benefits. As discussed above, the Corporation generally will be entitled to a deduction at the time an optionee is subject to ordinary income tax, and such deduction will be equal to the amount of ordinary income upon which an optionee is taxed. The Corporation believes that stock options granted under the 1995 Performance Stock Plan will qualify as "performance-based" under Section 162(m) of the Code, and therefore, compensation attributable to such options will be deductible without regard to the $1,000,000 limitation of Code Section 162(m). (See discussion of Section 162(m) at "Compensation Program Elements - The Tax Deductibility Limitation" in the Report of the Compensation Committee on Executive Compensation above). Tax Withholding and Reporting. The Corporation has the right and obligation to withhold any sums required by federal, state, local and foreign tax laws to be withheld with respect to the exercise of stock options. Such withholding may be in cash or in shares, or the Corporation may require the person exercising the stock option to pay such sums to the Corporation to satisfy the withholding requirements. The Corporation is also required to file information returns with the appropriate taxing authorities with respect to the exercise of stock options as well as with respect to any disqualifying disposition of an incentive stock option. THE BOARDS OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL FOR APPROVAL OF THE 1995 PERFORMANCE STOCK PLAN. 32 EX-99.3 4 AGREEMENT AND PLAN OF MERGER AGREEMENT AND PLAN OF MERGER AGREEMENT AND PLAN OF MERGER, dated as of November 5, 1995, by and among First Bank System, Inc., a Delaware corporation ("Parent"), Eleven Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of Parent ("Merger Sub"), and First Interstate Bancorp, a Delaware corporation ("Subject Company"). WHEREAS, the Boards of Directors of Parent and Subject Company have determined that it is in the best interests of their respective companies and their stockholders to consummate the strategic business combination transaction provided for herein in which Merger Sub will, subject to the terms and conditions set forth herein, merge (the "Merger") with and into Subject Company, so that Subject Company is the surviving corporation in the Merger; and WHEREAS, as a condition to, and immediately after the execution of, this Agreement, Parent and Subject Company are entering into (i) a Parent Stock Option Agreement (the "Parent Option Agreement") pursuant to which Parent has granted Subject Company an option exercisable upon the occurrence of certain events and (ii) the Parent Fee Letter (as defined below); and WHEREAS, as a condition to, and immediately after the execution of, this Agreement, Parent and Subject Company are entering into (i) a Subject Company Stock Option Agreement (the "Subject Company Option Agreement"; and together with the Parent Option Agreement, the "Option Agreements") pursuant to which Subject Company has granted Parent an option exercisable upon the occurrence of certain events and (ii) the Subject Company Fee Letter (as defined below); and WHEREAS, the parties desire to make certain representations, warranties and agreements in connection with the Merger and also to prescribe certain conditions to the Merger. NOW, THEREFORE, in consideration of the mutual covenants, representations, warranties and agreements contained herein, and intending to be legally bound hereby, the parties agree as follows: ARTICLE I THE MERGER 1.1 The Merger. Subject to the terms and conditions of this Agreement, in accordance with the Delaware General Corporation Law (the "DGCL"), at the Effective Time (as defined in Section 1.2 hereof), Merger Sub shall merge with and into Subject Company. Subject Company shall be the surviving corporation (hereinafter sometimes called the "Surviving Corporation") in the Merger, and shall continue its corporate existence under the laws of the State of Delaware. The name of the Surviving Corporation shall be Eleven Acquisition Corp. Upon consummation of the Merger, the separate corporate existence of Merger Sub shall terminate. 1.2 Effective Time. The Merger shall become effective as set forth in the certificate of merger (the "Certificate of Merger") which shall be filed with the Secretary of State of the State of Delaware (the "Delaware Secretary") on the Closing Date (as defined in Section 9.1 hereof). The term "Effective Time" shall be the date and time when the Merger becomes effective, as set forth in the Certificate of Merger. 1.3 Effects of the Merger. At and after the Effective Time, the Merger shall have the effects set forth in the DGCL. 1.4 Conversion of Subject Company Common Stock, Subject Company Preferred Stock. At the Effective Time, subject to Section 2.2(e) hereof, by virtue of the Merger and without any action on the part of Parent, Merger Sub, Subject Company or the holder of any of the following securities: (a) Each share of the common stock, par value $2.00 per share, of Subject Company (the "Subject Company Common Stock") issued and outstanding immediately prior to the Effective Time (other than shares of Subject Company Common Stock held (x) in Subject Company's treasury or (y) directly or indirectly by Parent or Subject Company or any of their respective Subsidiaries (as defined below) (except for Trust Account Shares and DPC shares, as such terms are defined below)), together with the rights (the "Subject Company Rights") attached thereto issued pursuant to the Rights Agreement, dated as of November 21, 1988, as amended, between Subject Company and First Interstate Bank, Ltd., as Rights Agent (the "Subject Company Rights Agreement"), shall be converted into the right to receive 2.60 shares (the "Common Exchange Ratio") of the common stock, par value $1.25 per share, of Parent ("Parent Common Stock"), together with the number of rights ("Parent Rights") issued pursuant to the Parent Rights Agreement (as defined in Section 4.2 hereof) associated therewith. (b) Each share of 9.875% preferred stock, Series F, of Subject Company (the "Subject Company 9.875% Preferred") issued and outstanding immediately prior to the Effective Time shall be converted into the right to receive one share of 9.875% preferred stock of Parent (the "Parent 9.875% Preferred"). The terms of the Parent 9.875% Preferred shall be substantially the same as the terms of the Subject Company 9.875% Preferred, provided, however, that the terms of such Parent 9.875% Preferred shall have such voting rights as the parties shall reasonably agree are necessary in order to ensure that the Merger constitutes a reorganization within the meaning of Section 368(a) of the Code. (c) Each share of 9.0% preferred stock, Series G, of Subject Company (the "Subject Company 9.0% Preferred," and together with the Subject Company 9.875% Preferred, the "Subject Company Preferred Stock") issued and outstanding immediately prior to the Effective Time shall be converted into the right to receive one share of 9.0% preferred stock of Parent (the "Parent 9.0% Preferred," and together with the Parent 9.875% Preferred, the "Parent New Preferred"). The terms of the Parent 9.0% Preferred shall be substantially the same as the terms of the Subject Company 9.0% Preferred, provided, however, that the terms of such Parent 9.0% Preferred shall have such voting rights as the parties shall reasonably agree are necessary in order to ensure that the Merger constitutes a reorganization within the meaning of Section 368(a) of the Code. For purposes of this Agreement (i) the Subject Company Common Stock and Subject Company Preferred Stock are referred to herein as the "Subject Company Capital Stock," and (ii) the Parent Common Stock and Parent Preferred Stock (as defined below) are collectively referred to as the "Parent Capital Stock." (d) All of the shares of Subject Company Common Stock converted into Parent Common Stock pursuant to this Article I shall no longer be outstanding and shall automatically be cancelled and shall cease to exist as of the Effective Time, and each certificate (each a "Common Certificate") previously representing any such shares of Subject Company Common Stock shall thereafter represent the right to receive (i) a certificate representing the number of whole shares of Parent Common Stock and (ii) the cash in lieu of fractional shares into which the shares of Subject Company Common Stock represented by such Common Certificate have been converted pursuant to this Section 1.4 and Section 2.2(e) hereof. Common Certificates previously representing shares of Subject Company Common Stock shall be exchanged for certificates representing whole shares of Parent Common Stock and cash in lieu of fractional shares issued in consideration therefor upon the surrender of such Common Certificates in accordance with Section 2.2 hereof, without any interest thereon. If prior to the Effective Time the outstanding shares of Parent Common Stock shall have been increased, decreased, changed into or exchanged for a different number or kind of shares or securities as a result of a reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split, or other similar change in Parent's capitalization, then an appropriate and proportionate adjustment shall be made to the Common Exchange Ratio. (e) All of the shares of Subject Company Preferred Stock converted into Parent New Preferred pursuant to this Article I shall no longer be outstanding and shall automatically be cancelled and shall cease to exist as of the Effective Time, and each certificate (each a "Preferred Certificate," and collectively with the Common Certificates, the "Certificates") previously representing any such shares of Subject Company Preferred Stock shall thereafter represent the right to receive a certificate representing the number of shares of corresponding Parent New Preferred into which the shares of Subject Company Preferred Stock represented by such Preferred Certificate have been converted pursuant to this Section 1.4. Preferred Certificates previously representing shares of Subject Company Preferred Stock shall be exchanged for certificates representing shares of corresponding Parent New Preferred issued in consideration therefor upon the surrender of such Preferred Certificates in accordance with Section 2.2 hereof, without any interest thereon. (f) At the Effective Time, all shares of Subject Company Capital Stock that are owned by Subject Company as treasury stock and all shares of Subject Company Capital Stock that are owned directly or indirectly by Parent or Subject Company or any of their respective Subsidiaries (other than shares of Subject Company Capital Stock held directly or indirectly in trust accounts, managed accounts and the like or otherwise held in a fiduciary capacity that are beneficially owned by third parties (any such shares, and shares of Parent Common Stock which are similarly held, whether held directly or indirectly by Parent or Subject Company or any of their respective Subsidiaries, as the case may be, being referred to herein as "Trust Account Shares") and other than any shares of Subject Company Capital Stock held by Parent or Subject Company or any of their respective Subsidiaries in respect of a debt previously contracted (any such shares of Subject Company Capital Stock, and shares of Parent Common Stock which are similarly held, whether held directly or indirectly by Parent or Subject Company or any of their respective Subsidiaries, being referred to herein as "DPC Shares")) shall be cancelled and shall cease to exist and no stock of Parent or other consideration shall be delivered in exchange therefor. All shares of Parent Common Stock that are owned by Subject Company or any of its Subsidiaries (other than Trust Account Shares and DPC Shares) shall become treasury stock of Parent. (g) At the Effective Time, Parent shall assume the obligations of Subject Company under the Deposit Agreement, dated as of November 14, 1991, between Subject Company and First Interstate Bank of California, as depositary (relating to the Subject Company 9.875% Preferred) and the Deposit Agreement, dated as of May 29, 1992, between Subject Company and First Interstate Bank of California, as depositary (relating to the Subject Company 9.0% Preferred). Parent shall instruct the applicable depositary to treat the shares of Parent 9.875% Preferred and Parent 9.0% Preferred received by such depositary in exchange for and upon conversion of the shares of Subject Company 9.875% Preferred and Subject Company 9.0% Preferred, respectively, as new deposited securities under the applicable deposit agreement. In accordance with the terms of the relevant deposit agreement, the depositary receipts then outstanding shall thereafter represent the shares of Parent 9.875% Preferred and Parent 9.0% Preferred so received upon conversion and exchange for the shares of Subject Company 9.875% Preferred and Subject Company 9.0% Preferred, respectively. Parent shall request that such depositary call for the surrender of all outstanding receipts to be exchanged for new receipts (the "New Parent Depositary Shares") specifically describing the relevant series of Parent New Preferred. 1.5 Parent Common Stock; Parent Preferred Stock. At and after the Effective Time, each share of Parent Common Stock and each share of Parent Preferred Stock issued and outstanding immediately prior to the Effective Time shall remain an issued and outstanding share of common stock or preferred stock, as the case may be, of Parent and shall not be affected by the Merger. 1.6 Merger Sub Stock. At and after the Effective Time, each share of Merger Sub common stock issued and outstanding immediately prior to the Merger shall remain issued and outstanding and shall constitute a share of the common stock of the Surviving Corporation. 1.7 Options. (a) At the Effective Time, each option granted by Subject Company to purchase shares of Subject Company Common Stock (each a "Subject Company Option") which is outstanding and unexercised immediately prior thereto shall cease to represent a right to acquire shares of Subject Company Common Stock and shall be converted automatically into an option to purchase shares of Parent Common Stock in an amount and at an exercise price determined as provided below (and otherwise subject to the terms of the Subject Company 1995 Performance Stock Plan, the Subject Company 1991 Performance Stock Plan (as amended), the Subject Company 1988 Performance Stock Plan (as amended), the Subject Company 1983 Performance Stock Plan (as amended), the Subject Company Performance Stock Plan of 1980 (as amended and restated) and the Subject Company 1991 Director Option Plan (as amended and restated), as the case may be (collectively, the "Subject Company Stock Option Plans"), and the agreements evidencing grants thereunder, including, but not limited to, the accelerated vesting of such options which shall occur in connection with and by virtue of the Merger as and to the extent required by such plans and agreements)): (1) the number of shares of Parent Common Stock to be subject to the new option shall be equal to the product of the number of shares of Subject Company Common Stock subject to the original option and the Common Exchange Ratio, provided that any fractional shares of Parent Common Stock resulting from such multiplication shall be rounded down to the nearest share; and (2) the exercise price per share of Parent Common Stock under the new option shall be equal to the exercise price per share of Subject Company Common Stock under the original option divided by the Common Exchange Ratio, provided that such exercise price shall be rounded up to the nearest cent. The adjustment provided herein with respect to any options which are "incentive stock options" (as defined in Section 422 of the Internal Revenue Code of 1986, as amended (the "Code")) shall be and is intended to be effected in a manner which is consistent with Section 424(a) of the Code and, to the extent it is not so consistent, such Section 424(a) shall override anything to the contrary contained herein. The duration and other terms of the new option shall be the same as the original option (subject to Section 6.7(b) hereof) except that all references to Subject Company shall be deemed to be references to Parent. 1.8 Certificates of Incorporation. At the Effective Time, (i) the Certificate of Incorporation of Subject Company, as in effect at the Effective Time, shall be the Certificate of Incorporation of the Surviving Corporation and (ii) the Certificate of Incorporation of Parent, as amended to reflect the amendments thereto contemplated by this Agreement and as otherwise in effect at the Effective Time, shall be the Certificate of Incorporation of Parent. 1.9 Bylaws. At the Effective Time, the Bylaws of Subject Company, as in effect immediately prior to the Effective Time, shall be the Bylaws of the Surviving Corporation until thereafter amended in accordance with applicable law. 1.10 Tax Consequences. It is intended that the Merger shall constitute a reorganization within the meaning of Section 368(a) of the Code, and that this Agreement shall constitute a "plan of reorganization" for purposes of the Code. 1.11 Management Succession. At the Effective Time, John F. Grundhofer shall be Chairman of the Board and Chief Executive Officer of Parent. At the Effective Time, William E. B. Siart shall be the President and Chief Operating Officer of Parent. 1.12 Board of Directors. At the Effective Time, the total number of persons serving on the Board of Directors of Parent shall be 20 (unless otherwise agreed in writing by the parties hereto prior to the Effective Time), 10 of whom shall be Parent Directors and 10 of whom shall be Subject Company Directors (as such terms are defined below). The persons to serve initially on the Board of Directors of Parent at the Effective Time who are Parent Directors shall be selected solely by and at the absolute discretion of the Board of Directors of Parent prior to the Effective Time from among persons who are members of the Board of Directors of Parent prior to the Effective Time; and the persons to serve on the Board of Directors of Parent at the Effective Time who are Subject Company Directors shall be selected solely by and at the absolute discretion of the Board of Directors of Subject Company prior to the Effective Time from among persons who are members of the Board of Directors of Subject Company prior to the Effective Time. Thereafter, the Board of Directors of Parent shall consist of an even number of directors. To the extent practicable, from and after the Effective Time, and until the third anniversary thereof, each class of directors of Parent shall contain an equal number of Parent Directors and Subject Company Directors, and each Committee of the Board of Directors of Parent shall contain an equal number of Parent Directors and Subject Company Directors. If at any time during the three-year period following the Effective Time the number of Parent Directors and Subject Company Directors serving, or that would be serving following the next annual meeting of stockholders, as directors of Parent, would not be equal, then, subject to the fiduciary duties of the directors, the Board of Directors and the Nominating Committee of Parent shall take such steps as may be requested by the Parent Directors (if the number of Parent Directors is, or would otherwise become, less than the number of Subject Company Directors) or the Subject Company Directors (if the number of Subject Company Directors is, or would otherwise become, less than the number of Parent Directors) to assure that there shall be an equal number of Parent Directors and Subject Company Directors, including by nominating and/or electing a person or persons designated by the Parent Directors or the Subject Company Directors, as applicable. The term "Parent Directors" means (i) any person serving as a director of Parent prior to the Effective Time who remains a director of Parent at the Effective Time and (ii) any person who becomes a director of Parent pursuant to the immediately preceding sentence and who is designated by the Parent Directors; and the term "Subject Company Director" means (i) any person serving as a director of Subject Company prior to the Effective Time who becomes a director of Parent at the Effective Time and (ii) any person who becomes a director of Parent pursuant to the immediately preceding sentence and who is designated by the Subject Company Directors. 1.13 Name. Effective immediately upon the consummation of the Merger, the name of Parent shall be First Interstate Bancorp. ARTICLE II EXCHANGE OF SHARES 2.1 Parent to Make Shares Available. At or prior to the Effective Time, Parent shall deposit, or shall cause to be deposited, with a bank or trust company which will be a Subsidiary of Parent (the "Exchange Agent"), for the benefit of the holders of Certificates, for exchange in accordance with this Article II, certificates representing the shares of Parent Common Stock and Parent New Preferred and an estimated amount of cash in lieu of any fractional shares (the cash payable in lieu of fractional shares and certificates for shares of Parent Common Stock and Parent New Preferred, together with any dividends or distributions with respect thereto, being hereinafter referred to as the "Exchange Fund") to be issued pursuant to Section 1.4 and paid pursuant to Section 2.2(a) in exchange for outstanding shares of Subject Company Capital Stock. 2.2 Exchange of Shares. (a) As soon as practicable after the Effective Time, and in no event later than ten business days thereafter, the Exchange Agent shall mail to each holder of record of a Certificate or Certificates a form letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon delivery of the Certificates to the Exchange Agent) and instructions for use in effecting the surrender of the Certificates in exchange for certificates representing, as the case may be, the shares of Parent Common Stock or Parent New Preferred and the cash in lieu of fractional shares, if any, into which the shares of Subject Company Capital Stock represented by such Certificate or Certificates shall have been converted pursuant to this Agreement. Upon proper surrender of a Certificate for exchange and cancellation to the Exchange Agent, together with such properly completed letter of transmittal, duly executed, the holder of such Certificate shall be entitled to receive in exchange therefor, as applicable, (i) a certificate representing that number of shares of Parent Common Stock, if any, to which such holder of Subject Company Common Stock shall have become entitled pursuant to the provisions of Article I hereof, (ii) certificates representing that number of shares of Parent 9.875% Preferred and Parent 9.0% Preferred, if any, to which such holder of Subject Company Preferred Stock shall have become entitled pursuant to the provisions of Article I hereof and (iii) a check representing the amount of cash in lieu of fractional shares, if any, which such holder has the right to receive in respect of the Certificate surrendered pursuant to the provisions of this Article II, and the Certificate so surrendered shall forthwith be cancelled. No interest will be paid or accrued on the cash in lieu of fractional shares and unpaid dividends and distributions, if any, payable to holders of Certificates. (b) No dividends or other distributions with a record date after the Effective Time with respect to Parent Common Stock or Parent New Preferred shall be paid to the holder of any unsurrendered Certificate until the holder thereof shall surrender such Certificate in accordance with this Article II. After the surrender of a Certificate in accordance with this Article II, the record holder thereof shall be entitled to receive any such dividends or other distributions, without any interest thereon, which theretofore had become payable with respect to shares of Parent Common Stock or Parent New Preferred represented by such Certificate. (c) If any certificate representing shares of Parent Common Stock or Parent New Preferred is to be issued in a name other than that in which the Certificate surrendered in exchange therefor is registered, it shall be a condition of the issuance thereof that the Certificate so surrendered shall be properly endorsed (or accompanied by an appropriate instrument of transfer) and otherwise in proper form for transfer, and that the person requesting such exchange shall pay to the Exchange Agent in advance any transfer or other taxes required by reason of the issuance of a certificate representing shares of Parent Common Stock or Parent New Preferred in any name other than that of the registered holder of the Certificate surrendered, or required for any other reason, or shall establish to the satisfaction of the Exchange Agent that such tax has been paid or is not payable. (d) At or after the Effective Time, there shall be no transfers on the stock transfer books of Subject Company of the shares of Subject Company Capital Stock which were issued and outstanding immediately prior to the Effective Time. If, after the Effective Time, Certificates representing such shares are presented for transfer to the Exchange Agent, they shall be cancelled and exchanged for certificates representing shares of Parent Capital Stock as provided in this Article II. (e) Notwithstanding anything to the contrary contained herein, no certificates or scrip representing fractional shares of Parent Common Stock shall be issued upon the surrender for exchange of Common Certificates, no dividend or distribution with respect to Parent Common Stock shall be payable on or with respect to any fractional share, and such fractional share interests shall not entitle the owner thereof to vote or to any other rights of a stockholder of Parent. In lieu of the issuance of any such fractional share, Parent shall pay to each former stockholder of Subject Company who otherwise would be entitled to receive such fractional share an amount in cash determined by multiplying (i) the average of the closing sale prices of Parent Common Stock on the New York Stock Exchange (the "NYSE") as reported by The Wall Street Journal for the five trading days immediately preceding the date on which the Effective Time occurs by (ii) the fraction of a share of Parent Common Stock to which such holder would otherwise be entitled to receive pursuant to Section 1.4 hereto. (f) Any portion of the Exchange Fund that remains unclaimed by the stockholders of Subject Company for twelve months after the Effective Time shall be paid to Parent. Any stockholders of Subject Company who have not theretofore complied with this Article II shall thereafter look only to Parent for payment of the shares of Parent Common Stock or Parent New Preferred, cash in lieu of any fractional shares and unpaid dividends and distributions on the Parent Common Stock or Parent New Preferred deliverable in respect of each share of Subject Company Common Stock or Subject Company Preferred Stock, as the case may be, such stockholder holds as determined pursuant to this Agreement, in each case, without any interest thereon. Notwithstanding anything to the contrary contained herein, none of Parent, Subject Company, the Exchange Agent or any other person shall be liable to any former holder of shares of Subject Company Common Stock or Subject Company Preferred for any amount properly delivered to a public official pursuant to applicable abandoned property, escheat or similar laws. (g) In the event any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming such Certificate to be lost, stolen or destroyed and, if required by Parent, the posting by such person of a bond in such amount as Parent may determine is reasonably necessary as indemnity against any claim that may be made against it with respect to such Certificate, the Exchange Agent will issue in exchange for such lost, stolen or destroyed Certificate the shares of Parent Common Stock and cash in lieu of fractional shares or Parent New Preferred, as the case may be, deliverable in respect thereof pursuant to this Agreement. ARTICLE III REPRESENTATIONS AND WARRANTIES OF SUBJECT COMPANY Subject Company hereby represents and warrants to Parent as follows: 3.1 Corporate Organization. (a) Subject Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. Subject Company has the corporate power and authority to own or lease all of its properties and assets and to carry on its business as it is now being conducted, and is duly licensed or qualified to do business in each jurisdiction in which the nature of the business conducted by it or the character or location of the properties and assets owned or leased by it makes such licensing or qualification necessary, except where the failure to be so licensed or qualified would not have or reasonably be expected to have a Material Adverse Effect (as defined below) on Subject Company. As used in this Agreement, the term "Material Adverse Effect" means, with respect to Parent, Merger Sub, Subject Company or the Surviving Corporation, as the case may be, a material adverse effect on the business, results of operations or financial condition of such party and its Subsidiaries taken as a whole or a material adverse effect on such party's ability to consummate the transactions contemplated hereby; provided, however, that in determining whether a Material Adverse Effect has occurred there shall be excluded any effect on the referenced party the cause of which is (i) any change in banking and similar laws, rules or regulations of general applicability or interpretations thereof by courts or governmental authorities, (ii) any change in generally accepted accounting principles or regulatory accounting requirements applicable to banks, thrifts or their holding companies generally, (iii) any action or omission of Subject Company or Parent or any Subsidiary of either of them taken with the prior written consent of Parent or Subject Company, as applicable, in contemplation of the Merger, (iv) any changes in general economic conditions affecting banks, thrifts or their holding companies generally and (v) in the case of members of the Savings Association Insurance Fund ("SAIF") of the Federal Deposit Insurance Corporation, the funding of the SAIF. As used in this Agreement, the word "Subsidiary" when used with respect to any party means any bank, corporation, partnership or other organization, whether incorporated or unincorporated, which is consolidated with such party for financial reporting purposes. Subject Company is duly registered as a bank holding company under the Bank Holding Company Act of 1956, as amended (the "BHC Act"). The copies of the Certificate of Incorporation and Bylaws of Subject Company which have previously been made available to Parent, are true, complete and correct copies of such documents as in effect as of the date of this Agreement. (b) Each Subject Company Subsidiary (i) is duly organized and validly existing as a bank, corporation or partnership under the laws of its jurisdiction of organization, (ii) is duly qualified to do business and in good standing in all jurisdictions (whether federal, state, local or foreign) where its ownership or leasing of property or the conduct of its business requires it to be so qualified and in which the failure to be so qualified would have or reasonably be expected to have a Material Adverse Effect on Subject Company, and (iii) has all requisite corporate power and authority to own or lease its properties and assets and to carry on its business as now conducted. 3.2 Capitalization. (a) The authorized capital stock of Subject Company consists of 250,000,000 shares of Subject Company Common Stock, 15,000,000 shares of preferred stock, no par value, and 43,500,000 shares of Class A Common Stock, par value $0.01 per share ("Class A Common Stock"). At the close of business on October 31, 1995, there were 75,744,254 shares of Subject Company Common Stock outstanding, 1,750,000 shares of Subject Company Preferred Stock outstanding (evidenced by 14,000,000 Subject Company Depositary Shares, 8,000,000 of which each represent a one-eighth interest in a share of Subject Company 9.875% Preferred and 6,000,000 of which each represent a one- eighth interest in a share of Subject Company 9.0% Cumulative Preferred), no Shares of Class A Common Stock outstanding, and 8,541,742 shares of Subject Company Common Stock held in Subject Company's treasury. As of October 31, 1995, no shares of Subject Company Common Stock or Subject Company Preferred Stock were reserved for issuance, except (i) 392,936 shares of Subject Company Common Stock were reserved for issuance pursuant to Subject Company's dividend reinvestment and stock purchase plans, (ii) 3,740,384 shares of Subject Company Common Stock were reserved for issuance upon the exercise of stock options pursuant to the Subject Company Stock Option Plans, and (iii) the shares of Subject Company Common Stock reserved for issuance upon exercise of the Subject Company Rights distributed to holders of Subject Company Common Stock pursuant to the Subject Company Rights Agreement. All of the issued and outstanding shares of Subject Company Common Stock and Subject Company Preferred Stock have been duly authorized and validly issued and are fully paid, nonassessable and free of preemptive rights, with no personal liability attaching to the ownership thereof. As of the date of this Agreement, except (i) as set forth in Section 3.2(a) of the Subject Company Disclosure Schedule (as defined below), (ii) for the Subject Company Option Agreement, (iii) for the Subject Company Rights Agreement (a true and correct copy of which, including all amendments thereto, has been made available to Parent) and (iv) as set forth elsewhere in this Section 3.2(a), Subject Company does not have and is not bound by any outstanding subscriptions, options, warrants, calls, commitments or agreements of any character calling for the purchase or issuance of any shares of Subject Company Common Stock or Subject Company Preferred Stock or any other equity securities of Subject Company or any securities representing the right to purchase or otherwise receive any shares of Subject Company Common Stock or Subject Company Preferred Stock. Except (i) as set forth in Section 3.2(a) of the disclosure schedule of Subject Company delivered to Parent concurrently herewith (the "Subject Company Disclosure Schedule"), (ii) for options permitted by this Agreement to be granted subsequent to the date of this Agreement, and (iii) for the Subject Company Option Agreement, since October 31, 1995 Subject Company has not issued any shares of its capital stock or any securities convertible into or exercisable for any shares of its capital stock, other than pursuant to Subject Company's dividend reinvestment and stock purchase plans, the exercise of employee stock options granted prior to such date and as disclosed in Section 3.2(a) of the Subject Company Disclosure Schedule, and the issuance of rights pursuant to the Subject Company Rights Agreement. (b) Except as set forth in Section 3.2(b) of the Subject Company Disclosure Schedule, Subject Company owns, directly or indirectly, at least 99% of the issued and outstanding shares of capital stock of each of the material Subject Company Subsidiaries, free and clear of any liens, charges, encumbrances, adverse rights or claims and security interests whatsoever ("Liens"), and all of such shares are duly authorized and validly issued and are fully paid, nonassessable and free of preemptive rights, with no personal liability attaching to the ownership thereof. No Subject Company Subsidiary has or is bound by any outstanding subscriptions, options, warrants, calls, commitments or agreements of any character calling for the purchase or issuance of any shares of capital stock or any other equity security of such Subsidiary or any securities representing the right to purchase or otherwise receive any shares of capital stock or any other equity security of such Subsidiary. Assuming compliance by Parent with Section 1.7 hereof, at the Effective Time, there will not be any outstanding subscriptions, options, warrants, calls, commitments or agreements of any character by which Subject Company or any of its Subsidiaries will be bound calling for the purchase or issuance of any shares of the capital stock of Subject Company or any of its Subsidiaries. 3.3 Authority; No Violation. (a) Subject Company has full corporate power and authority to execute and deliver this Agreement, the Fee Letter, of even date herewith, between Parent and Subject Company (the "Subject Company Fee Letter") pursuant to which Subject Company will in certain circumstances pay certain amounts to Parent, the Subject Company Option Agreement and the other documents contemplated to be executed and delivered by Subject Company in connection with the transactions contemplated hereby (this Agreement, together with the Subject Company Fee Letter, the Subject Company Option Agreement and such other documents, collectively, the "Subject Company Documents"), and to consummate the transactions contemplated hereby and thereby. The execution and delivery of each of the Subject Company Documents and the consummation of the transactions contemplated hereby and thereby have been duly and validly approved by the Board of Directors of Subject Company. The Board of Directors of Subject Company has directed that the agreement of merger (within the meaning of Section 251 of the DGCL) contained in this Agreement and the transactions contemplated hereby be submitted to Subject Company's stockholders for approval at a meeting of such stockholders and, except for the adoption of this Agreement by the affirmative vote of the holders of a majority of the outstanding shares of Subject Company Common Stock, no other corporate proceedings on the part of Subject Company are necessary to approve the Subject Company Documents and to consummate the transactions contemplated hereby and thereby. Each of the Subject Company Documents has been duly and validly executed and delivered by Subject Company and (assuming due authorization, execution and delivery by Parent and Merger Sub) this Agreement constitutes a valid and binding obligation of Subject Company, enforceable against Subject Company in accordance with its terms, except as enforcement may be limited by general principles of equity whether applied in a court of law or a court of equity and by bankruptcy, insolvency and similar laws affecting creditors' rights and remedies generally. (b) Except as set forth in Section 3.3(b) of the Subject Company Disclosure Schedule, neither the execution and delivery of the Subject Company Documents by Subject Company nor the consummation by Subject Company of the transactions contemplated hereby and thereby, nor compliance by Subject Company with any of the terms or provisions hereof or thereof, will (i) violate any provision of the Certificate of Incorporation or Bylaws of Subject Company or any of the similar governing documents of any of its Subsidiaries or (ii) assuming that the consents and approvals referred to in Section 3.4 are duly obtained, (x) violate any statute, code, ordinance, rule, regulation, judgment, order, writ, decree or injunction applicable to Subject Company or any of its Subsidiaries or any of their respective properties or assets, or (y) violate, conflict with, result in a breach of any provision of or the loss of any benefit under, constitute a default (or an event which, with notice or lapse of time, or both, would constitute a default) under, result in the termination of or a right of termination or cancellation under, accelerate the performance required by, or result in the creation of any Lien upon any of the respective properties or assets of Subject Company or any of its Subsidiaries under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, deed of trust, license, lease, agreement or other instrument or obligation to which Subject Company or any of its Subsidiaries is a party, or by which they or any of their respective properties or assets may be bound or affected, except (in the case of clause (ii) above) for such violations, conflicts, breaches or defaults which, either individually or in the aggregate, will not have and would not reasonably be expected to have a Material Adverse Effect on Subject Company. 3.4 Consents and Approvals. Except for (i) the filing of applications and notices, as applicable, with the Board of Governors of the Federal Reserve System (the "Federal Reserve Board") under the BHC Act and approval of such applications and notices, (ii) the filing of any requisite applications with the Office of the Comptroller of the Currency (the "OCC") and the approval of such applications, (iii) the filing of any required applications or notices with any state agencies and approval of such applications and notices (the "State Approvals"), (iv) the filing of any requisite applications with the Office of Thrift Supervision and the approval of such applications, (v) approval of the listing of the Parent Capital Stock to be issued in the Merger on the NYSE, (vi) the filing with the Securities and Exchange Commission (the "SEC") of a joint proxy statement in definitive form relating to the meetings of Parent's and Subject Company's stockholders to be held in connection with this Agreement and the transactions contemplated hereby (the "Joint Proxy Statement") and the filing and declaration of effectiveness of the registration statement on Form S- 4 (the "S-4") in which the Joint Proxy Statement will be included as a prospectus, (vii) the filing of the Certificate of Merger with the Delaware Secretary pursuant to the DGCL, (viii) such filings and approvals as are required to be made or obtained under the securities or "Blue Sky" laws of various states in connection with the issuance of the shares of Parent Capital Stock pursuant to this Agreement, (ix) the adoption of the agreement of merger (within the meaning of Section 251 of the DGCL) contained in this Agreement by the requisite vote of the stockholders of Subject Company and the approval of the Parent Vote Matters (as defined below) by the requisite votes of the stockholders of Parent, (x) the consents and approvals set forth in Section 3.4 of the Subject Company Disclosure Schedule, and (xi) the consents and approvals of third parties which are not Governmental Entities (as defined below), the failure of which to obtain will not have and would not be reasonably expected to have a Material Adverse Effect, no consents or approvals of, or filings or registrations with, any court, administrative agency or commission or other governmental authority or instrumentality (each a "Governmental Entity") or with any third party are necessary in connection with (A) the execution and delivery by Subject Company of the Subject Company Documents and (B) the consummation by Subject Company of the Merger and the other transactions contemplated hereby and thereby. 3.5 Reports. Subject Company and each of its Subsidiaries have timely filed all material reports, registrations and statements, together with any amendments required to be made with respect thereto, that they were required to file since January 1, 1993 with (i) the Federal Reserve Board, (ii) the OCC, (iii) any state regulatory authority (each a "State Regulator"), (iv) the SEC (Form BD), (v) the FDIC, (vi) any self-regulatory organization ("SRO") and (vii) any foreign financial or self-regulatory organization (collectively "Regulatory Agencies") and have paid all fees and assessments due and payable in connection therewith. Except for normal examinations conducted by a Regulatory Agency in the regular course of the business of Subject Company and its Subsidiaries or as set forth in Section 3.5 of the Subject Company Disclosure Schedule, no Regulatory Agency has initiated any proceeding or, to the best knowledge of Subject Company, investigation into the business or operations of Subject Company or any of its Subsidiaries since January 1, 1993. Except as set forth in Section 3.5 of the Subject Company Disclosure Schedule, there is no material unresolved violation, criticism or exception by any Regulatory Agency with respect to any report or statement relating to any examinations of Subject Company or any of its Subsidiaries. The deposits of each Subject Company Subsidiary that is an insured institution are insured by the FDIC in accordance with the Federal Deposit Insurance Act up to applicable limits. 3.6 Financial Statements. Subject Company has previously made available to Parent copies of (a) the consolidated balance sheets of Subject Company and its Subsidiaries, as of December 31, for the fiscal years 1993 and 1994, and the related consolidated statements of operations, shareholders' equity and cash flows for the fiscal years 1992 through 1994, inclusive, as reported in Subject Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994 filed with the SEC under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), in each case accompanied by the audit report of Ernst & Young LLP, independent auditors with respect to Subject Company, (b) the unaudited consolidated balance sheet of Subject Company and its Subsidiaries as of June 30, 1994 and June 30, 1995 and the related unaudited consolidated statements of operations, shareholders' equity and cash flows for the periods then ended as reported in Subject Company's Quarterly Report on Form 10-Q for the period ended June 30, 1995 filed with the SEC under the Exchange Act and (c) the unaudited consolidated balance sheet of Subject Company and its Subsidiaries as of September 30, 1995 and the related unaudited consolidated statements of operations, shareholders' equity and cash flows for the period then ended. The December 31, 1994 consolidated balance sheet of Subject Company (including the related notes, where applicable) fairly presents the consolidated financial position of Subject Company and its Subsidiaries as of the date thereof, and the other financial statements referred to in this Section 3.6 (including the related notes, where applicable) fairly present, and the financial statements referred to in Section 6.13 hereof will fairly present (subject, in the case of the unaudited statements, to recurring audit adjustments normal in nature and amount), the results of the consolidated operations and changes in stockholders' equity and consolidated financial position of Subject Company and its Subsidiaries for the respective fiscal periods or as of the respective dates therein set forth. Each of such statements (including the related notes, where applicable) complies, and the financial statements referred to in Section 6.13 hereof will comply, in all material respects with applicable accounting requirements and with the published rules and regulations of the SEC with respect thereto and each of such statements (including the related notes, where applicable) has been, and the financial statements referred to in Section 6.13 will be, prepared in accordance with generally accepted accounting principles ("GAAP") consistently applied during the periods involved, except in each case as indicated in such statements or in the notes thereto or, in the case of unaudited statements, as permitted by Form 10-Q. The books and records of Subject Company and its Subsidiaries have been, and are being, maintained in all material respects in accordance with GAAP and any other applicable legal and accounting requirements and reflect only actual transactions. 3.7 Broker's Fees. Except as set forth in Section 3.7 of the Subject Company Disclosure Schedule, neither Subject Company nor any Subject Company Subsidiary nor any of their respective officers or directors has employed any broker or finder or incurred any liability for any broker's fees, commissions or finder's fees in connection with any of the transactions contemplated by the Subject Company Documents. 3.8 Absence of Certain Changes or Events. (a) Except as publicly disclosed in Subject Company Reports (as defined in Section 3.12) filed prior to the date hereof, since June 30, 1995, no event (including, without limitation, any earthquake or other act of God) has occurred which has had or would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on Subject Company or the Surviving Corporation. (b) Except as set forth in Section 3.8(b) of the Subject Company Disclosure Schedule, since June 30, 1995, Subject Company and its Subsidiaries have carried on their respective businesses in all material respects in the ordinary course of business, and neither Subject Company nor any of its Subsidiaries has (i) except for normal increases in the ordinary course of business consistent with past practice and except as required by applicable law, increased the wages, salaries, compensation, pension or other fringe benefits or perquisites payable to any named executive officer (within the meaning of Regulation S-K of the SEC) or director, other than persons newly hired for such position, from the amount thereof in effect as of June 30, 1995, or granted any severance or termination pay, entered into any contract to make or grant any severance or termination pay, or paid any bonus, in each case to any such named executive officer or director, other than pursuant to preexisting agreements or arrangements or (ii) suffered any strike, work stoppage, slow-down or other labor disturbance. 3.9 Legal Proceedings. (a) Neither Subject Company nor any of its Subsidiaries is a party to any, and there are no pending or, to the best of Subject Company's knowledge, threatened, legal, administrative, arbitral or other proceedings, claims, actions or governmental or regulatory investigations of any nature against Subject Company or any of its Subsidiaries or challenging the validity or propriety of the transactions contemplated by the Subject Company Documents as to which there is a reasonable probability of an adverse determination and which, if adversely determined, would, individually or in the aggregate, have or reasonably be expected to have a Material Adverse Effect on Subject Company. (b) There is no injunction, order, judgment, decree or regulatory restriction imposed upon Subject Company, any of its Subsidiaries or the assets of Subject Company or any of its Subsidiaries which has had, or would reasonably be expected to have, a Material Adverse Effect on Subject Company. 3.10 Taxes and Tax Returns. (a) Subject Company and each of its Subsidiaries has timely filed or caused to be filed all returns, declarations, reports, estimates, information returns and statements required to be filed under federal, state, local or any foreign tax laws ("Tax Returns") with respect to Subject Company or any of its Subsidiaries, except where the failure to file timely such Tax Returns would not have and would not reasonably be expected to have a Material Adverse Effect on Subject Company. All Taxes shown to be due on such Tax Returns have been paid or adequate reserves have been established for the payment of such Taxes, except where the failure to pay or establish adequate reserves would not have and would not reasonably be expected to have a Material Adverse Effect on Subject Company. Except as set forth in Section 3.10(a) of the Subject Company Disclosure Schedule, no material (i) audit or examination or (ii) refund litigation with respect to any Tax Return is pending. All material Tax Returns filed by Subject Company and each of its Subsidiaries are complete and accurate in all material respects. (b) Subject Company has no reason to believe that any conditions exist that might prevent or impede the Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code. (c) For purposes of this Agreement, "Taxes" shall mean all taxes, charges, fees, levies or other assessments, including, without limitation, all net income, gross income, gross receipts, sales, use, ad valorem, goods and services, capital, transfer, franchise, profits, license, withholding, payroll, employment, employer health, excise, estimated, severance, stamp, occupation, property or other taxes, customs duties, fees, assessments or charges of any kind whatsoever, together with any interest and any penalties, additions to tax or additional amounts imposed by any taxing authority. 3.11 Employees. (a) Section 3.11(a) of the Subject Company Disclosure Schedule sets forth a true and complete list of each material employee benefit plan, arrangement or agreement that is maintained as of the date of this Agreement (the "Plans") by Subject Company or any of its Subsidiaries or by any trade or business, whether or not incorporated (an "ERISA Affiliate"), all of which together with Subject Company would be deemed a "single employer" within the meaning of Section 4001 of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). (b) As soon as practicable after the date hereof, Subject Company shall make available to Parent true and complete copies of each of the Plans and all related documents, including but not limited to (i) the actuarial report for such Plan (if applicable) for each of the last two years, and (ii) the most recent determination letter from the Internal Revenue Service (if applicable) for such Plan. (c) Except as set forth in Section 3.11(c) of the Subject Company Disclosure Schedule, (i) each of the Plans has been operated and administered in all material respects in accordance with applicable laws, including but not limited to ERISA and the Code, (ii) each of the Plans intended to be "qualified" within the meaning of Section 401(a) of the Code is so qualified, (iii) with respect to each Plan which is subject to Title IV of ERISA, the present value of accrued benefits under such Plan, based upon the actuarial assumptions used for funding purposes in the most recent actuarial report prepared by such Plan's actuary with respect to such Plan, did not, as of its latest valuation date, exceed the then current value of the assets of such Plan allocable to such accrued benefits, (iv) no Plan provides benefits, including without limitation death or medical benefits (whether or not insured), with respect to current or former employees of Subject Company, its Subsidiaries or any ERISA Affiliate beyond their retirement or other termination of service, other than (w) coverage mandated by applicable law, (x) death benefits or retirement benefits under any "employee pension plan," as that term is defined in Section 3(2) of ERISA, (y) deferred compensation benefits accrued as liabilities on the books of Subject Company, its Subsidiaries or the ERISA Affiliates or (z) benefits the full cost of which is borne by the current or former employee (or his beneficiary), (v) no liability under Title IV of ERISA has been incurred by Subject Company, its Subsidiaries or any ERISA Affiliate that has not been satisfied in full, and no condition exists that presents a material risk to Subject Company, its Subsidiaries or any ERISA Affiliate of incurring a material liability thereunder, (vi) no Plan is a "multiemployer pension plan," as such term is defined in Section 3(37) of ERISA, (vii) all contributions or other amounts payable by Subject Company or its Subsidiaries as of the Effective Time with respect to each Plan in respect of current or prior plan years have been paid or accrued in accordance with generally accepted accounting practices and Section 412 of the Code, (viii) since January 1, 1994 neither Subject Company, its Subsidiaries nor any ERISA Affiliate has engaged in a transaction in connection with which Subject Company, its Subsidiaries or any ERISA Affiliate could be subject to either a material civil penalty assessed pursuant to Section 409 or 502(i) of ERISA or a material tax imposed pursuant to Section 4975 or 4976 of the Code, and (ix) to the best knowledge of Subject Company there are no pending, threatened or anticipated claims (other than routine claims for benefits) by, on behalf of or against any of the Plans or any trusts related thereto which would, individually or in the aggregate, have or be reasonably expected to have a Material Adverse Effect on Subject Company. 3.12 SEC Reports. Subject Company has previously made available to Parent an accurate and complete copy of each final registration statement, prospectus, report, schedule and definitive proxy statement filed since January 1, 1994 and prior to the date hereof by Subject Company with the SEC pursuant to the Securities Act of 1933, as amended (the "Securities Act"), or the Exchange Act (the "Subject Company Reports"), and no such registration statement, prospectus, report, schedule or proxy statement contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances in which they were made, not misleading. Subject Company has timely filed all Subject Company Reports and other documents required to be filed by it under the Securities Act and the Exchange Act, and, as of their respective dates, all Subject Company Reports complied in all material respects with the published rules and regulations of the SEC with respect thereto. 3.13 Compliance with Applicable Law. Except as disclosed in Section 3.13 of the Subject Company Disclosure Schedule, Subject Company and each of its Subsidiaries hold, and have at all times held, all material licenses, franchises, permits and authorizations necessary for the lawful conduct of their respective businesses under and pursuant to all, and have complied with and are not in default in any material respect under any, applicable law, statute, order, rule, regulation, policy and/or guideline of any Governmental Entity relating to Subject Company or any of its Subsidiaries, except where the failure to hold such license, franchise, permit or authorization or such noncompliance or default would not, individually or in the aggregate, have or reasonably be expected to have a Material Adverse Effect on Subject Company, and neither Subject Company nor any of its Subsidiaries knows of, or has received notice of, any violations of any of the above which, individually or in the aggregate, would have or would reasonably be expected to have a Material Adverse Effect on Subject Company. 3.14 Certain Contracts. (a) Except as set forth in Section 3.14(a) of the Subject Company Disclosure Schedule, neither Subject Company nor any of its Subsidiaries is a party to or is bound by any contract, arrangement, commitment or understanding (whether written or oral) (i) which is a material contract (as defined in Item 601(b)(10) of Regulation S-K of the SEC) to be performed after the date of this Agreement that has not been filed or incorporated by reference in the Subject Company Reports, (ii) which materially restricts the conduct of any line of business by Subject Company, or (iii) with or to a labor union or guild (including any collective bargaining agreement). Subject Company has made available to Parent true and correct copies of all employment, consulting and deferred compensation agreements to which Subject Company or any of its Subsidiaries is a party. Each contract, arrangement, commitment or understanding of the type described in this Section 3.14(a), other than the Subject Company Documents, whether or not set forth in Section 3.14(a) of the Subject Company Disclosure Schedule, is referred to herein as a "Subject Company Contract," and neither Subject Company nor any of its Subsidiaries knows of, or has received notice of, any violation of the above by any of the other parties thereto which, individually or in the aggregate, would have or would reasonably be expected to have a Material Adverse Effect on Subject Company. (b) (i) Each Subject Company Contract is valid and binding and in full force and effect, (ii) Subject Company and each of its Subsidiaries has in all material respects performed all obligations required to be performed by it to date under each Subject Company Contract, and (iii) no event or condition exists which constitutes or, after notice or lapse of time or both, would constitute a material default on the part of Subject Company or any of its Subsidiaries under any such Subject Company Contract, except, in each case, where such invalidity, failure to be binding, failure to so perform or default, individually or in the aggregate, would not have or reasonably be expected to have a Material Adverse Effect on Subject Company. 3.15 Agreements with Regulatory Agencies. Except as set forth in Section 3.15 of the Subject Company Disclosure Schedule, neither Subject Company nor any of its Subsidiaries is subject to any cease-and-desist or other order issued by, or is a party to any written agreement, consent agreement or memorandum of understanding with, or is a party to any commitment letter or similar undertaking to, or is subject to any order or directive by, or has adopted any board resolutions at the request of (each, whether or not set forth in Section 3.15 of the Subject Company Disclosure Schedule, a "Regulatory Agreement"), any Regulatory Agency or other Governmental Entity that restricts the conduct of its business or that in any manner relates to its capital adequacy, its credit policies, its management or its business, nor has Subject Company or any of its Subsidiaries been advised by any Regulatory Agency or other Governmental Entity that it is considering issuing or requesting any Regulatory Agreement. 3.16 Undisclosed Liabilities. Except for those liabilities that are fully reflected or reserved against on the consolidated balance sheet of Subject Company included in the Subject Company Form 10-Q for the quarter ended June 30, 1995, and for liabilities incurred in the ordinary course of business consistent with past practice, since June 30, 1995, neither Subject Company nor any of its Subsidiaries has incurred any liability of any nature whatsoever (whether absolute, accrued, contingent or otherwise and whether due or to become due) that, either alone or when combined with all similar liabilities, has had, or would reasonably be expected to have, a Material Adverse Effect on Subject Company. 3.17 State Takeover Laws. The Board of Directors of Subject Company has approved the execution of the Subject Company Option Agreement and authorized and approved the Merger (prior to the execution by Subject Company of this Agreement and prior to the execution of the Subject Company Option Agreement) in accordance with Section 203 of the DGCL, such that Section 203 will not apply to this Agreement, the Subject Company Option Agreement, the Subject Company Fee Letter or the transactions contemplated hereby and thereby. The Board of Directors of Subject Company has taken all such action required to be taken by it to provide that this Agreement, the Subject Company Option Agreement, the Subject Company Fee Letter and the transactions contemplated hereby and thereby shall be exempt from the requirements of any "moratorium," "control share," "fair price" or other anti-takeover laws or regulations of any state. 3.18 Rights Agreement. Subject Company has taken all action (including, if required, redeeming all of the outstanding common stock purchase rights issued pursuant to the Subject Company Rights Agreement or amending or terminating the Subject Company Rights Agreement) so that the entering into of the Subject Company Documents and the consummation of the transactions contemplated hereby and thereby do not and will not result in the grant of any rights to any person under the Subject Company Rights Agreement or enable or require the Subject Company Rights to be exercised, distributed or triggered. 3.19 Pooling of Interests. As of the date of this Agreement, Subject Company has no reason to believe that the Merger will not qualify as a pooling of interests for accounting purposes. 3.20 First Interstate Name. Except as set forth in Section 3.20 of the Subject Company Disclosure Schedule, Subject Company has the right to use the First Interstate name in each state of the United States, free and clear of any Liens, and no other person has the right to use such name in any such state. 3.21 Subject Company Information. The information relating to Subject Company and its Subsidiaries to be provided by Subject Company to be contained in the Joint Proxy Statement and the S-4, or in any other document filed with any other regulatory agency in connection herewith, will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances in which they are made, not misleading. The Joint Proxy Statement (except for such portions thereof that relate only to Parent or any of its Subsidiaries) will comply in all material respects with the provisions of the Exchange Act and the rules and regulations thereunder. 3.22 Environmental Liability. Except as set forth in Section 3.22 of the Subject Company Disclosure Schedule, there are no legal, administrative, arbitral or other proceedings, claims, actions, causes of action, private environmental investigations or remediation activities or governmental investigations of any nature seeking to impose, or that reasonably could be expected to result in the imposition, on Subject Company or any of its Subsidiaries of any liability or obligation arising under common law standards relating to environmental protection, human health or safety, or 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 (collectively, the "Environmental Laws"), pending or, to the knowledge of Subject Company, threatened, against Subject Company or any of its Subsidiaries, which liability or obligation would have or would reasonably be expected to have a Material Adverse Effect on Subject Company. To the knowledge of Subject Company or any of its Subsidiaries, there is no reasonable basis for any such proceeding, claim, action or governmental investigation that would impose any liability or obligation that would have or would reasonably be expected to have a Material Adverse Effect on Subject Company. To the knowledge of Subject Company, during or prior to the period of (i) its or any of its Subsidiaries' ownership or operation of any of their respective current properties, (ii) its or any of its Subsidiaries' participation in the management of any property, or (iii) its or any of its Subsidiaries' holding of a security interest or other interest in any property, there were no releases or threatened releases of hazardous, toxic, radioactive or dangerous materials or other materials regulated under Environmental Laws in, on, under or affecting any such property. Neither Subject Company nor any of its Subsidiaries is subject to any agreement, order, judgment, decree, letter or memorandum by or with any court, governmental authority, regulatory agency or third party imposing any material liability or obligation pursuant to or under any Environmental Law that would have or would reasonably be expected to have a Material Adverse Effect on Subject Company. 3.23 Interest Rate Risk Management Instruments. All interest rate swaps, caps, floors and option agreements and other interest rate risk management arrangements, whether entered into for the account of Subject Company or for the account of a customer of Subject Company or one of its Subsidiaries, were entered into in accordance with prudent banking practices and applicable rules, regulations and policies of any regulatory authority and with counterparties believed to be financially responsible at the time and are legal, valid and binding obligations of Subject Company or one of its Subsidiaries enforceable in accordance with their terms (except as enforcement may be limited by general principles of equity whether applied in a court of law or a court of equity and by bankruptcy, insolvency and similar laws affecting creditors' rights and remedies generally), and are in full force and effect. Subject Company and each of its Subsidiaries have duly performed in all material respects all of their material obligations thereunder to the extent that such obligations to perform have accrued; and, to Subject Company's knowledge, there are no breaches, violations or defaults or allegations or assertions of such by any party thereunder which would have or would reasonably be expected to have a Material Adverse Effect on Subject Company. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT Parent hereby represents and warrants to Subject Company as follows: 4.1 Corporate Organization. (a) Parent is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. Parent has the corporate power and authority to own or lease all of its properties and assets and to carry on its business as it is now being conducted, and is duly licensed or qualified to do business in each jurisdiction in which the nature of the business conducted by it or the character or location of the properties and assets owned or leased by it makes such licensing or qualification necessary, except where the failure to be so licensed or qualified would not have or reasonably be expected to have a Material Adverse Effect on Parent. Parent is duly registered as a bank holding company under the BHC Act. The copies of the Certificate of Incorporation and Bylaws of Parent, which have previously been made available to Subject Company, are true, complete and correct copies of such documents as in effect as of the date of this Agreement. (b) Each Parent Subsidiary is (i) duly organized and validly existing as a bank, corporation or partnership under the laws of its jurisdiction of organization, (ii) is duly qualified to do business and in good standing in all jurisdictions (whether federal, state, local or foreign) where its ownership or leasing of property or the conduct of its business requires it to be so qualified and in which the failure to be so qualified would have or reasonably be expected to have a Material Adverse Effect on Parent, and (iii) has all requisite corporate power and authority to own or lease its properties and assets and to carry on its business as now conducted. (c) Merger Sub is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. 4.2 Capitalization. (a) The authorized capital stock of Parent consists of 200,000,000 shares of Parent Common Stock and 10,000,000 shares of Preferred Stock, par value $1.00 per share ("Parent Preferred Stock"). At the close of business on October 31, 1995, there were 129,798,913 shares of Parent Common Stock outstanding, 3,702,750 shares of Parent Preferred Stock designated and 2,077,800 shares issued and outstanding as Series 1991A Convertible Preferred Stock ("Parent Series 1991A Preferred Stock"), 12,750 shares of Parent Preferred Stock designated and no shares outstanding as Adjustable Rate Cumulative Preferred Stock Series 1990A ("Parent Series 1990A Preferred Stock"), 1,400,000 shares of Parent Preferred Stock designated and no shares issued and outstanding as Parent Series A Junior Participating Preferred Stock pursuant to the Rights Agreement, dated as of December 21, 1988, between Parent and Morgan Shareholder Services Trust Company, as Rights Agent, as amended (the "Parent Rights Agreement"), and 5,833,411 shares of Parent Common Stock held in Parent's treasury. On October 31, 1995, no shares of Parent Common Stock or Parent Preferred Stock were reserved for issuance, except that (i) 22,718,744 shares of Parent Common Stock were reserved for issuance pursuant to outstanding options, warrants, periodic stock purchase rights ("PSPRs"), risk event warrants, the Parent dividend reinvestment plan, the Parent employee stock purchase plan and employee benefit plans, (ii) 3,585,452 shares of Parent Common Stock were reserved for issuance upon conversion of the Parent Series 1991A Preferred Stock, (iii) 16,950,057 shares of Parent Common Stock were reserved for issuance upon consummation of the acquisition by Parent of FirsTier Financial, Inc. (the "FirsTier Acquisition"), (iv) 12,750 shares of Parent Series 1990A Preferred Stock were reserved for issuance upon exercise of PSPRs or risk event warrants, and (v) 1,400,000 shares of Parent Series A Junior Participating Preferred Stock were reserved for issuance upon exercise of the Parent Rights distributed to holders of Parent Common Stock pursuant to the Parent Rights Agreement. All of the issued and outstanding shares of the Parent Common Stock and Parent Preferred Stock have been duly authorized and validly issued and are fully paid, nonassessable and free of preemptive rights, with no personal liability attaching to the ownership thereof. As of the date of this Agreement, except (i) as set forth in Schedule 4.2(a) of the Parent Disclosure Schedule (as defined below), (ii) for the Parent Rights Agreement (a true and correct copy of which, including all amendments thereto, has been made available to Subject Company), (iii) for the Parent Option Agreement and (iv) as set forth elsewhere in this Section 4.2(a), Parent does not have and is not bound by any outstanding subscriptions, options, warrants, calls, commitments or agreements of any character calling for the purchase or issuance of any shares of Parent Common Stock or Parent Preferred Stock or any other equity securities of Parent or any securities representing the right to purchase or otherwise receive any shares of Parent Common Stock or Parent Preferred Stock. Except (i) as set forth in Section 4.2(a) of the disclosure schedule of Parent delivered to Subject Company concurrently herewith (the "Parent Disclosure Schedule") and (ii) for options permitted by this Agreement to be granted subsequent to the date of this Agreement, since October 31, 1995, Parent has not issued any shares of its capital stock or any securities convertible into or exercisable for any shares of its capital stock, other than pursuant to Parent's dividend reinvestment and stock purchase plans, the exercise of employee stock options granted prior to such date and as disclosed in Section 4.2(a) of the Parent Disclosure Schedule, warrants, PSPRs and risk event warrants granted prior to such date and disclosed in Section 4.2(a) of the Parent Disclosure Schedule, the conversion of shares of Parent Series 1991A Preferred Stock, the Parent Rights Agreement and the FirsTier Acquisition. The shares of Parent Capital Stock to be issued pursuant to the Merger will be duly authorized and validly issued and, at the Effective Time, all such shares will be fully paid, nonassessable and free of preemptive rights, with no personal liability attaching to the ownership thereof. (b) Except as set forth in Section 4.2(b) of the Parent Disclosure Schedule, Parent owns, directly or indirectly, (i) at least 99% of the issued and outstanding shares of capital stock of each of the material Parent Subsidiaries (other than Merger Sub) and (ii) all of the issued and outstanding shares of capital stock of Merger Sub, in each case, free and clear of any Liens, and all of such shares are duly authorized and validly issued and are fully paid, nonassessable and free of preemptive rights, with no personal liability attaching to the ownership thereof. No Parent Subsidiary has or is bound by any outstanding subscriptions, options, warrants, calls, commitments or agreements of any character calling for the purchase or issuance of any shares of capital stock or any other equity security of such Subsidiary or any securities representing the right to purchase or otherwise receive any shares of capital stock or any other equity security of such Subsidiary. 4.3 Authority; No Violation. (a) Parent has full corporate power and authority to execute and deliver this Agreement, the Fee Letter, of even date herewith, between Parent and Subject Company (the "Parent Fee Letter," and together with the Subject Company Fee Letter, the "Fee Letters") pursuant to which Parent will in certain circumstances pay certain amounts to Subject Company, the Parent Option Agreement and the other documents contemplated to be executed and delivered by Parent in connection with the transactions contemplated hereby (this Agreement, together with the Parent Fee Letter, the Subject Company Option Agreement and such other documents, collectively, the "Parent Documents") and to consummate the transactions contemplated hereby and thereby. The execution and delivery of each of the Parent Documents and the consummation of the transactions contemplated hereby and thereby have been duly and validly approved by the Board of Directors of Parent. The Board of Directors of Parent has directed that the issuance of Parent Common Stock pursuant hereto and an amendment (the "Charter Amendment") to Parent's Certificate of Incorporation to (i) increase the number of authorized shares of Parent Common Stock to 500,000,000 and to increase the number of authorized shares of Parent Preferred Stock to 15,000,000 and (ii) to change the name of Parent to First Interstate Bancorp (collectively, the "Parent Vote Matters") be submitted to Parent's stockholders for approval at a meeting of such stockholders and, except for the approval of the Charter Amendment by the affirmative vote of the holders of a majority of the outstanding shares of Parent Common Stock and the approval of the issuance of shares of Parent Common Stock pursuant hereto by a majority of the shares of Parent Common Stock voting at the meeting of shareholders called for such purpose at which a quorum was present, no other corporate proceedings on the part of Parent are necessary to approve the Parent Documents and to consummate the transactions contemplated hereby and thereby. Each of the Parent Documents has been duly and validly executed and delivered by Parent and (assuming due authorization, execution and delivery by Subject Company) this Agreement constitutes a valid and binding obligation of Parent, enforceable against Parent in accordance with its terms, except as enforcement may be limited by general principles of equity whether applied in a court of law or a court of equity and by bankruptcy, insolvency and similar laws affecting creditors' rights and remedies generally. (b) Merger Sub has full corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly approved by the Board of Directors of Merger Sub and by Parent as the sole stockholder of Merger Sub, and no other corporate proceedings on the part of Merger Sub are necessary to consummate the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by Merger Sub and (assuming due authorization, execution and delivery by Subject Company) constitutes a valid and binding obligation of Merger Sub, enforceable against Merger Sub in accordance with its terms, except as enforcement may be limited by general principles of equity whether applied in a court of law or a court of equity and by bankruptcy, insolvency and similar laws affecting creditors' rights and remedies generally. (c) Except as set forth in Section 4.3(c) of the Parent Disclosure Schedule, neither the execution and delivery of the Parent Documents by Parent or Merger Sub, nor the consummation by Parent or Merger Sub of the transactions contemplated hereby and thereby, nor compliance by Parent or Merger Sub with any of the terms or provisions hereof or thereof, will (i) violate any provision of the Certificate of Incorporation or Bylaws of Parent or any of the similar governing documents of any of its Subsidiaries or (ii) assuming that the consents and approvals referred to in Section 4.4 are duly obtained, (x) violate any statute, code, ordinance, rule, regulation, judgment, order, writ, decree or injunction applicable to Parent or any of its Subsidiaries or any of their respective properties or assets, or (y) violate, conflict with, result in a breach of any provision of or the loss of any benefit under, constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, result in the termination of or a right of termination or cancellation under, accelerate the performance required by, or result in the creation of any Lien upon any of the respective properties or assets of Parent or any of its Subsidiaries under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, deed of trust, license, lease, agreement or other instrument or obligation to which Parent or any of its Subsidiaries is a party, or by which they or any of their respective properties or assets may be bound or affected, except (in the case of clause (ii) above) for such violations, conflicts, breaches or defaults which either individually or in the aggregate will not have and would not reasonably be expected to have a Material Adverse Effect on Parent. 4.4 Consents and Approvals. Except for (i) the filing of applications and notices, as applicable, with the Federal Reserve Board under the BHC Act and approval of such applications and notices, (ii) the filing of any requisite applications with the OCC and the approval of such applications, (iii) the filings with respect to the State Approvals (including receipt of such State Approvals), (iv) the filing of any requisite applications with the Office of Thrift Supervision and the approval of such applications, (v) approval of the listing of the Parent Capital Stock to be issued in the Merger on the NYSE, (vi) the filing with the SEC of the Joint Proxy Statement and the filing and declaration of effectiveness of the S-4, (vii) the filing of the Certificate of Merger with the Delaware Secretary pursuant to the DGCL, (viii) such filings and approvals as are required to be made or obtained under the securities or "Blue Sky" laws of various states in connection with the issuance of the shares of Parent Capital Stock pursuant to this Agreement, (ix) the adoption of the agreement of merger (within the meaning of Section 251 of the DGCL) contained in this Agreement by the requisite vote of the stockholders of Subject Company and the approval of the Parent Vote Matters by the requisite votes of the stockholders of Parent, (x) the filing of the appropriate documents necessary to cause the Charter Amendment to become effective with the Secretary of State of the State of Delaware, (xi) the consents and approvals set forth in Section 4.4 of the Parent Disclosure Schedule, and (xii) the consents and approvals of third parties which are not Governmental Entities, the failure of which to obtain will not have and would not be reasonably expected to have a Material Adverse Effect, no consents or approvals of, or filings or registrations with, any Governmental Entity or any third party are necessary in connection with (A) the execution and delivery by Parent and Merger Sub of the Parent Documents and (B) the consummation by Parent and Merger Sub of the Merger and the other transactions contemplated hereby and thereby. 4.5 Reports. Parent and each of its Subsidiaries have timely filed all material reports, registrations and statements, together with any amendments required to be made with respect thereto, that they were required to file since January 1, 1993 with the Regulatory Agencies, and have paid all fees and assessments due and payable in connection therewith. Except for normal examinations conducted by a Regulatory Agency in the regular course of the business of Parent and its Subsidiaries, no Regulatory Agency has initiated any proceeding or, to the best knowledge of Parent, investigation into the business or operations of Parent or any of its Subsidiaries since January 1, 1993. There is no material unresolved violation, criticism, or exception by any Regulatory Agency with respect to any report or statement relating to any examinations of Parent or any of its Subsidiaries. The deposits of each Parent Subsidiary that is an insured institution are insured by the FDIC in accordance with the Federal Deposit Insurance Act up to applicable limits. 4.6 Financial Statements. Parent has previously made available to Subject Company copies of (a) the consolidated balance sheets of Parent and its Subsidiaries, as of December 31, for the fiscal years 1993 and 1994, and the related consolidated statements of income, shareholders' equity and cash flows for the fiscal years 1992 through 1994, inclusive, as reported in Parent's Restated Annual Report as filed on Form 8-K for the fiscal year ended December 31, 1994 filed with the SEC under the Exchange Act, in each case accompanied by the audit report of Ernst & Young LLP, independent public accountants with respect to Parent, (b) the unaudited consolidated balance sheet of Parent and its Subsidiaries as of June 30, 1994 and June 30, 1995 and the related unaudited consolidated statements of income, cash flows and shareholders' equity for the six month periods then ended as reported in Parent's Quarterly Report on Form 10-Q for the period ended June 30, 1995 filed with the SEC under the Exchange Act and (c) the unaudited consolidated balance sheet of Parent and its Subsidiaries as of September 30, 1995 and the related unaudited consolidated statements of income, shareholders' equity and cash flows for the period then ended. The December 31, 1994 consolidated balance sheet of Parent (including the related notes, where applicable) fairly presents the consolidated financial position of Parent and its Subsidiaries as of the date thereof, and the other financial statements referred to in this Section 4.6 (including the related notes, where applicable) fairly present, and the financial statements referred to in Section 6.13 hereof will fairly present (subject, in the case of the unaudited statements, to recurring audit adjustments normal in nature and amount), the results of the consolidated income and changes in stockholders' equity and consolidated financial position of Parent and its Subsidiaries for the respective fiscal periods or as of the respective dates therein set forth. Each of such statements (including the related notes, where applicable) complies, and the financial statements referred to in Section 6.13 hereof will comply, in all material respects with applicable accounting requirements and with the published rules and regulations of the SEC with respect thereto; and each of such statements (including the related notes, where applicable) has been, and the financial statements referred to in Section 6.13 will be, prepared in accordance with GAAP consistently applied during the periods involved, except in each case as indicated in such statements or in the notes thereto or, in the case of unaudited statements, as permitted by Form 10-Q. The books and records of Parent and its Subsidiaries have been, and are being, maintained in all material respects in accordance with GAAP and any other applicable legal and accounting requirements and reflect only actual transactions. 4.7 Broker's Fees. Except as set forth in Section 4.7 of the Parent Disclosure Schedule, neither Parent nor any Parent Subsidiary nor any of their respective officers or directors has employed any broker or finder or incurred any liability for any broker's fees, commissions or finder's fees in connection with any of the transactions contemplated by the Parent Documents. 4.8 Absence of Certain Changes or Events. (a) Except as publicly disclosed in Parent Reports (as defined below) filed prior to the date hereof, since June 30, 1995, no event (including, without limitation, any earthquake or other act of God) has occurred which has had or would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on Parent. (b) Except as set forth in Section 4.8(b) of the Parent Disclosure Schedule, since June 30, 1995, Parent and its Subsidiaries have carried on their respective businesses in all material respects in the ordinary course of business, and neither Parent nor any of its Subsidiaries has (i) except for normal increases in the ordinary course of business consistent with past practice and except as required by applicable law, increased the wages, salaries, compensation, pension or other fringe benefits or perquisites payable to any named executive officer (within the meaning of Regulation S-K of the SEC) or director, other than persons newly hired for such positions, from the amount thereof in effect as of June 30, 1995, or granted any severance or termination pay, entered into any contract to make or grant any severance or termination pay, or paid any bonus, in each case to any such named executive officer or director, other than pursuant to preexisting agreements or arrangements or (ii) suffered any strike, work stoppage, slow-down or other labor disturbance. 4.9 Legal Proceedings. (a) Neither Parent nor any of its Subsidiaries is a party to any, and there are no pending or, to the best of Parent's knowledge, threatened, legal, administrative, arbitral or other proceedings, claims, actions or governmental or regulatory investigations of any nature against Parent or any of its Subsidiaries or challenging the validity or propriety of the transactions contemplated by the Parent Documents as to which there is a reasonable probability of an adverse determination and which, if adversely determined, would, individually or in the aggregate, have or reasonably be expected to have a Material Adverse Effect on Parent. (b) There is no injunction, order, judgment, decree, or regulatory restriction imposed upon Parent, any of its Subsidiaries or the assets of Parent or any of its Subsidiaries which has had, or would reasonably be expected to have, a Material Adverse Effect on Parent or the Surviving Corporation. 4.10 Taxes and Tax Returns. (a) Parent and each of its Subsidiaries has timely filed or caused to be filed all Tax Returns with respect to Parent or any of its Subsidiaries, except where the failure to file timely such Tax Returns would not have and would not reasonably be expected to have a Material Adverse Effect on Parent. All Taxes shown to be due on such Tax Returns have been paid or adequate reserves have been established for the payment of such Taxes, except where the failure to pay or establish adequate reserves would not have and would not reasonably be expected to have a Material Adverse Effect on Parent. Except as set forth in Section 4.10(a) of the Parent Disclosure Schedule, no material (i) audit or examination or (ii) refund litigation with respect to any Tax Return is pending. All material Tax Returns filed by Parent and each of its Subsidiaries are complete and accurate in all material respects. (b) Parent has no reason to believe that any conditions exist that might prevent or impede the Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code. 4.11 Employees. (a) Section 4.11(a) of the Parent Disclosure Schedule sets forth a true and complete list of each material employee benefit plan, arrangement or agreement that is maintained as of the date of this Agreement (the "Parent Plans") by Parent or any of its Subsidiaries or by any trade or business, whether or not incorporated (a "Parent ERISA Affiliate"), all of which together with Parent would be deemed a "single employer" within the meaning of Section 4001 of ERISA. (b) As soon as practicable after the date hereof, Parent shall make available to Subject Company true and complete copies of each of the Parent Plans and all related documents, including but not limited to (i) the actuarial report for such Parent Plan (if applicable) for each of the last two years, and (ii) the most recent determination letter from the Internal Revenue Service (if applicable) for such Parent Plan. (c) Except as set forth in Section 4.11(c) of the Parent Disclosure Schedule, (i) each of the Parent Plans has been operated and administered in all material respects in accordance with applicable laws, including but not limited to ERISA and the Code, (ii) each of the Parent Plans intended to be "qualified" within the meaning of Section 401(a) of the Code is so qualified, (iii) with respect to each Parent Plan which is subject to Title IV of ERISA, the present value of accrued benefits under such Parent Plan, based upon the actuarial assumptions used for funding purposes in the most recent actuarial report prepared by such Parent Plan's actuary with respect to such Parent Plan, did not, as of its latest valuation date, exceed the then current value of the assets of such Parent Plan allocable to such accrued benefits, (iv) no Parent Plan provides benefits, including without limitation death or medical benefits (whether or not insured), with respect to current or former employees of Parent, its Subsidiaries or any Parent ERISA Affiliate beyond their retirement or other termination of service, other than (w) coverage mandated by applicable law, (x) death benefits or retirement benefits under any "employee pension plan," as that term is defined in Section 3(2) of ERISA, (y) deferred compensation benefits accrued as liabilities on the books of Parent, its Subsidiaries or the Parent ERISA Affiliates or (z) benefits the full cost of which is borne by the current or former employee (or his beneficiary), (v) no liability under Title IV of ERISA has been incurred by Parent, its Subsidiaries or any Parent ERISA Affiliate that has not been satisfied in full, and no condition exists that presents a material risk to Parent, its Subsidiaries or any Parent ERISA Affiliate of incurring a material liability thereunder, (vi) no Parent Plan is a "multiemployer pension plan," as such term is defined in Section 3(37) of ERISA, (vii) all contributions or other amounts payable by Parent or its Subsidiaries as of the Effective Time with respect to each Parent Plan in respect of current or prior plan years have been paid or accrued in accordance with generally accepted accounting practices and Section 412 of the Code, (viii) since January 1, 1994 neither Parent, its Subsidiaries nor any Parent ERISA Affiliate has engaged in a transaction in connection with which Parent, its Subsidiaries or any Parent ERISA Affiliate could be subject to either a material civil penalty assessed pursuant to Section 409 or 502(i) of ERISA or a material tax imposed pursuant to Section 4975 or 4976 of the Code, and (ix) to the best knowledge of Parent there are no pending, threatened or anticipated claims (other than routine claims for benefits) by, on behalf of or against any of the Parent Plans or any trusts related thereto which would, individually or in the aggregate, have or be reasonably expected to have a Material Adverse Effect on Parent. 4.12 SEC Reports. Parent has previously made available to Subject Company an accurate and complete copy of each final registration statement, prospectus, report, schedule and definitive proxy statement filed since January 1, 1994 and prior to the date hereof by Parent with the SEC pursuant to the Securities Act or the Exchange Act (the "Parent Reports"), and no such registration statement, prospectus, report, schedule or proxy statement contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances in which they were made, not misleading. Parent has timely filed all Parent Reports and other documents required to be filed by it under the Securities Act and the Exchange Act, and, as of their respective dates, all Parent Reports complied in all material respects with the published rules and regulations of the SEC with respect thereto. 4.13 Compliance with Applicable Law. Except as disclosed in Section 4.13 of the Parent Disclosure Schedule, Parent and each of its Subsidiaries hold, and have at all times held, all material licenses, franchises, permits and authorizations necessary for the lawful conduct of their respective businesses under and pursuant to all, and have complied with and are not in default in any material respect under any, applicable law, statute, order, rule, regulation, policy and/or guideline of any Governmental Entity relating to Parent or any of its Subsidiaries, except where the failure to hold such license, franchise, permit or authorization or such noncompliance or default would not, individually or in the aggregate, have or reasonably be expected to have a Material Adverse Effect on Parent, and neither Parent nor any of its Subsidiaries knows of, or has received notice of, any material violations of any of the above which, individually or in the aggregate, would have or reasonably be expected to have a Material Adverse Effect on Parent. 4.14 Certain Contracts. (a) Except as set forth in Section 4.14(a) of the Parent Disclosure Schedule, neither Parent nor any of its Subsidiaries is a party to or is bound by any contract, arrangement, commitment or understanding (whether written or oral) (i) which is a material contract (as defined in Item 601(b)(10) of Regulation S-K of the SEC) to be performed after the date of this Agreement that has not been filed or incorporated by reference in the Parent Reports, (ii) which materially restricts the conduct of any line of business by Parent, or (iii) with or to a labor union or guild (including any collective bargaining agreement). Parent has made available to Subject Company true and correct copies of all employment, consulting and deferred compensation agreements to which Parent or any of its Subsidiaries is a party. Each contract, arrangement, commitment or understanding of the type described in this Section 4.14(a), other than the Parent Documents, whether or not set forth in Section 4.14(a) of the Parent Disclosure Schedule, is referred to herein as a "Parent Contract," and neither Parent nor any of its Subsidiaries knows of, or has received notice of, any violation of the above by any of the other parties thereto which, individually or in the aggregate, would have or would reasonably be expected to have a Material Adverse Effect on Parent. (b) (i) Each Parent Contract is valid and binding and in full force and effect, (ii) Parent and each of its Subsidiaries has in all material respects performed all obligations required to be performed by it to date under each Parent Contract, and (iii) no event or condition exists which constitutes or, after notice or lapse of time or both, would constitute, a material default on the part of Parent or any of its Subsidiaries under any such Parent Contract, except, in each case, where any such invalidity, failure to be binding, failure to so perform or default, individually or in the aggregate, would not have or reasonably be expected to have a Material Adverse Effect on Parent. 4.15 Agreements with Regulatory Agencies. Except as set forth in Section 4.15 of the Parent Disclosure Schedule, neither Parent nor any of its Subsidiaries is subject to any cease-and-desist or other order issued by, or is a party to any written agreement, consent agreement or memorandum of understanding with, or is a party to any commitment letter or similar undertaking to, or is subject to any order or directive by, or has adopted any board resolutions at the request of (each, whether or not set forth in Section 4.15 of the Parent Disclosure Schedule, a "Parent Regulatory Agreement"), any Regulatory Agency or other Governmental Entity that restricts the conduct of its business or that in any manner relates to its capital adequacy, its credit policies, its management or its business, nor has Parent or any of its Subsidiaries been advised by any Regulatory Agency or other Governmental Entity that it is considering issuing or requesting any Regulatory Agreement. 4.16 Undisclosed Liabilities. Except for those liabilities that are fully reflected or reserved against on the consolidated balance sheet of Parent included in the Parent Form 10Q for the quarter ended June 30, 1995, and for liabilities incurred in the ordinary course of business consistent with past practice, since June 30, 1995, neither Parent nor any of its Subsidiaries has incurred any liability of any nature whatsoever (whether absolute, accrued, contingent or otherwise and whether due or to become due) that, either alone or when combined with all similar liabilities, has had, or would reasonably be expected to have, a Material Adverse Effect on Parent. 4.17 State Takeover Laws; Certificate of Incorporation. The Board of Directors of Parent has approved the execution of the Parent Option Agreement and authorized and approved the Merger (prior to the execution by Parent of this Agreement and prior to the execution of the Parent Option Agreement) in accordance with Section 203 of the DGCL and Article Eight of Parent's Certificate of Incorporation such that Section 203 and Article Eight will not apply to this Agreement, the Parent Option Agreement, the Parent Fee Letter or the transactions contemplated hereby and thereby. The Board of Directors of Parent has taken all such action required to be taken by it to provide that this Agreement, the Parent Option Agreement, the Parent Fee Letter and the transactions contemplated hereby and thereby shall be exempt from the requirements of any "moratorium," "control share," "fair price" or other anti- takeover laws or regulations of any state. 4.18 Rights Agreement. Subject to the execution of an amendment to the Parent Rights Agreement which has been approved by Parent's Board of Directors and shall be executed as promptly as practicable after the date of this Agreement, Parent has taken all action (including, if required, redeeming all of the outstanding preferred stock purchase rights issued pursuant to the Parent Rights Agreement or amending or terminating the Parent Rights Agreement) so that the entering into of the Parent Documents and the consummation of the transactions contemplated hereby and thereby do not and will not result in the grant of any rights to any person under the Parent Rights Agreement or enable or require the Parent Rights to be exercised, distributed or triggered. 4.19 Pooling of Interests. As of the date of this Agreement, Parent has no reason to believe that the Merger will not qualify as a pooling of interests for accounting purposes. 4.20 Parent Information. The information relating to Parent and its Subsidiaries to be provided by Parent to be contained in the Joint Proxy Statement and the S-4, or in any other document filed with any other regulatory agency in connection herewith, will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances in which they are made, not misleading. The Joint Proxy Statement (except for such portions thereof that relate only to Subject Company or any of its Subsidiaries) will comply in all material respects with the provisions of the Exchange Act and the rules and regulations thereunder. The S-4 will comply in all material respects with the provisions of the Securities Act and the rules and regulations thereunder. 4.21 Environmental Liability. Except as set forth in Section 4.21 of the Parent Disclosure Schedule, there are no legal, administrative, arbitral or other proceedings, claims, actions, causes of action, private environmental investigations or remediation activities or governmental investigations of any nature seeking to impose, or that reasonably would be expected to result in the imposition, on Parent or any of its Subsidiaries of any liability or obligation arising under any Environmental Law, pending or, to the knowledge of Parent, threatened, against Parent or any of its Subsidiaries, which liability or obligation would reasonably be expected to have a Material Adverse Effect on Parent. To the knowledge of Parent, there is no reasonable basis for any such proceeding, claim, action or governmental investigation that would impose any liability or obligation that would reasonably be expected to have a Material Adverse Effect on Parent. To the knowledge of Parent, during or prior to the period of (i) its or any of its Subsidiaries' ownership or operation of any of their respective current properties, (ii) its or any of its Subsidiaries' participation in the management of any property, or (iii) its or any of its Subsidiaries' holding of a security interest or other interest in any property, there were no releases or threatened releases of hazardous, toxic, radioactive or dangerous materials or other materials regulated under Environmental Laws in, on, under or affecting any such property. Neither Parent nor any of its Subsidiaries is subject to any agreement, order, judgment, decree, letter or memorandum by or with any court, governmental authority, regulatory agency or third party imposing any material liability or obligation pursuant to or under any Environmental Law that would reasonably be expected to have a Material Adverse Effect on Parent. 4.22 Interest Rate Risk Management Instruments. All interest rate swaps, caps, floors and option agreements and other interest rate risk management arrangements, whether entered into for the account of Parent or for the account of a customer of Parent or one of its Subsidiaries, were entered into in accordance with prudent banking practices and applicable rules, regulations and policies of any regulatory authority and with counterparties believed to be financially responsible at the time and are legal, valid and binding obligations of Parent or one of its Subsidiaries enforceable in accordance with their terms (except as enforcement may be limited by general principles of equity whether applied in a court of law or a court of equity and by bankruptcy, insolvency and similar laws affecting creditors' rights and remedies generally), and are in full force and effect. Parent and each of its Subsidiaries have duly performed in all material respects all of their material obligations thereunder to the extent that such obligations to perform have accrued; and, to Parent's knowledge, there are no material breaches, violations or defaults or allegations or assertions of such by any party thereunder which would have or would reasonably be expected to have a Material Adverse Effect on Parent. ARTICLE V COVENANTS RELATING TO CONDUCT OF BUSINESS 5.1 Conduct of Businesses Prior to the Effective Time. Except as set forth in the Subject Company Disclosure Schedule or the Parent Disclosure Schedule, as the case may be, during the period from the date of this Agreement to the Effective Time, except as expressly contemplated or permitted by this Agreement or the Option Agreements or as required by applicable law, each of Parent and Subject Company shall, and shall cause each of their respective Subsidiaries to, (i) conduct its business in the usual, regular and ordinary course consistent with past practice, (ii) use reasonable best efforts to maintain and preserve intact its business organization, employees and advantageous business relationships and retain the services of its officers and key employees and (iii) take no action which would reasonably be expected to adversely affect or delay the ability of either Parent or Subject Company to obtain any approvals of any Regulatory Agency or other governmental authority required to consummate the transactions contemplated hereby or by the Option Agreements or to perform its covenants and agreements under the Subject Company Documents or the Parent Documents, as the case may be. 5.2 Forbearances. Except as set forth in Section 5.2 of the Subject Company Disclosure Schedule or Section 5.2 of the Parent Disclosure Schedule, as the case may be, during the period from the date of this Agreement to the Effective Time and, except as expressly contemplated or permitted by this Agreement or the Option Agreements or as required by applicable law, rule or regulation, neither Parent nor Subject Company shall, and neither Parent nor Subject Company shall permit any of their respective Subsidiaries to, without the prior written consent of the other: (a) adjust, split, combine or reclassify any capital stock; make, declare or pay any dividend or make any other distribution on, or directly or indirectly redeem, purchase or otherwise acquire, any shares of its capital stock or any securities or obligations convertible into or exchangeable for any shares of its capital stock, or grant any stock appreciation rights or grant any individual, corporation or other entity any right to acquire any shares of its capital stock (except for regular quarterly cash dividends on Subject Company Common Stock and on Parent Common Stock at a rate equal to the rates recently paid by each of Subject Company and Parent, as the case may be, as such rates may be increased by either party in the ordinary course of business consistent with past practice and, in the case of Subject Company Preferred Stock and Parent Preferred Stock, for regular quarterly or semiannual cash dividends thereon at the rates set forth in the applicable certificate of incorporation or certificate of designation for such securities and except for dividends paid by any of the wholly owned Subsidiaries of each of Parent and Subject Company to Parent or Subject Company or any of their wholly owned Subsidiaries, respectively, and except for the issuance of employee stock options and restricted stock consistent with past practices); or issue any additional shares of capital stock except pursuant to (A) the exercise of stock options, PSPRs or risk event warrants outstanding as of the date hereof, (B) the vesting of Performance Units outstanding as of the date hereof pursuant to Subject Company Stock Option Plans, (C) the conversion of shares of Parent Series 1991A Preferred Stock, (D) the Subject Company Rights Agreement, (E) the Parent Rights Agreement, (F) the FirsTier Acquisition, (G) the Option Agreements and (H) acquisitions and investments permitted by paragraph (c) hereof; (b) sell, transfer, mortgage, encumber or otherwise dispose of any of its properties or assets to any individual, corporation or other entity other than a direct or indirect wholly owned Subsidiary, or cancel, release or assign any indebtedness to any such person or any claims held by any such person, in each case that is material to such party, except (i) in the ordinary course of business consistent with past practice, (ii) pursuant to contracts or agreements in force at the date of this Agreement or (iii) pursuant to plans disclosed in writing prior to the execution of this Agreement to the other party; (c) except for (i) transactions in the ordinary course of business consistent with past practice, or (ii) acquisitions of an entity or business having assets not exceeding 10% of the consolidated assets of Subject Company or Parent, as applicable, on a pro forma basis giving effect to such transaction, make any material acquisition or investment either by purchase of stock or securities, merger or consolidation, contributions to capital, property transfers, or purchases of any property or assets of any other individual, corporation or other entity other than a wholly owned Subsidiary thereof; (d) except for transactions in the ordinary course of business consistent with past practice, enter into or terminate any contract or agreement, or make any change in any of its leases or contracts, in each case that is material to such party, other than renewals of contracts and leases without materially adverse changes of terms thereof; (e) other than (i) in the ordinary course of business consistent with past practice, or (ii) in an aggregate amount not exceeding $10 million, increase in any material respect the compensation or fringe benefits of any of its employees or pay any pension or retirement allowance not required by any existing plan or agreement to any such employees or become a party to, amend or commit itself to any material pension, retirement, profit-sharing or welfare benefit plan or agreement or employment agreement with or for the benefit of any employee or accelerate the vesting of any stock options or other stock-based compensation; (f) authorize or permit any of its officers, directors, employees or agents to directly or indirectly solicit, initiate or encourage any inquiries relating to, or the making of any proposal which constitutes, a Takeover Proposal (as defined below), or recommend or endorse any Takeover Proposal, or participate in any discussions or negotiations, or provide third parties with any nonpublic information, relating to any such inquiry or proposal or otherwise facilitate any effort or attempt to make or implement a Takeover Proposal, provided, however, that each of Parent and Subject Company may, and may authorize and permit its officers, directors, employees or agents to, provide third parties with nonpublic information, otherwise facilitate any effort or attempt by any third party to make or implement a Takeover Proposal, recommend or endorse any Takeover Proposal with or by any third party, and participate in discussions and negotiations with any third party relating to any Takeover Proposal, if such party's Board of Directors, after having consulted with and considered the advice of outside counsel, has reasonably determined in good faith that the failure to do so would cause the members of such Board of Directors to breach their fiduciary duties under applicable law. Subject Company will immediately cease and cause to be terminated any activities, discussions or negotiations conducted prior to the date of this Agreement with any parties other than Parent with respect to any of the foregoing. Each party shall immediately advise the other following the receipt by it of any Takeover Proposal and the details thereof, and advise the other of any developments with respect to such Takeover Proposal immediately upon the occurrence thereof. As used in this Agreement, "Takeover Proposal" shall mean, with respect to any person, any tender or exchange offer, proposal for a merger, consolidation or other business combination involving Subject Company or Parent or any of their respective Subsidiaries or any proposal or offer to acquire in any manner a substantial equity interest in, or a substantial portion of the assets of, Subject Company or Parent or any of their respective Subsidiaries other than the transactions contemplated or permitted by this Agreement; (g) settle any claim, action or proceeding involving money damages which is material to Parent or Subject Company, as applicable, except in the ordinary course of business consistent with past practice; (h) take any action that would prevent or impede the Merger from qualifying (i) for pooling of interests accounting treatment or (ii) as a reorganization within the meaning of Section 368(a) of the Code; provided, however, that nothing contained herein shall limit the ability of Parent or Subject Company to exercise its rights under the Subject Company Option Agreement, the Parent Option Agreement, the Subject Company Fee Letter or the Parent Fee Letter, as the case may be; (i) amend its certificate of incorporation, bylaws or similar governing documents or the Parent Rights Agreement or Subject Company Rights Agreement, as the case may be, in any case in a manner that would materially and adversely effect either party's ability to consummate the Merger or the economic benefits of the Merger to either party; (j) except in the ordinary course or following prior consultation with the other party to this Agreement, materially change its investment securities portfolio policy, or the manner in which the portfolio is classified or reported; (k) take any action that is intended or may reasonably be expected to result in any of its representations and warranties set forth in this Agreement being or becoming untrue in any material respect at any time prior to the Effective Time, or in any of the conditions to the Merger set forth in Article VII not being satisfied or in a violation of any provision of this Agreement, except, in every case, as may be required by applicable law; or (l) agree to, or make any commitment to, take any of the actions prohibited by this Section 5.2. ARTICLE VI ADDITIONAL AGREEMENTS 6.1 Regulatory Matters. (a) Parent and Subject Company shall promptly prepare and file with the SEC a preliminary version of the Joint Proxy Statement and, following comment thereon, Parent shall promptly prepare and file with the SEC the S-4, in which the definitive Joint Proxy Statement will be included as a prospectus. Each of Parent and Subject Company shall use all reasonable efforts to have the S-4 declared effective under the Securities Act as promptly as practicable after such filing, and Parent and Subject Company shall thereafter mail the definitive Joint Proxy Statement to their respective stockholders. Parent shall also use all reasonable efforts to obtain all necessary state securities law or "Blue Sky" permits and approvals required to carry out the transactions contemplated by this Agreement, and Subject Company shall furnish all information concerning Subject Company and the holders of Subject Company Capital Stock as may be reasonably requested in connection with any such action. (b) The parties hereto shall cooperate with each other and use reasonable best efforts to promptly prepare and file all necessary documentation, to effect all applications, notices, petitions and filings, to obtain as promptly as practicable all permits, consents, approvals and authorizations of all third parties and Governmental Entities which are necessary or advisable to consummate the transactions contemplated by this Agreement (including without limitation the Merger), and to comply with the terms and conditions of all such permits, consents, approvals and authorizations of all such Governmental Entities. Parent and Subject Company shall have the right to review in advance, and to the extent practicable each will consult the other on, in each case subject to applicable laws relating to the exchange of information, all the information relating to Subject Company or Parent, as the case may be, and any of their respective Subsidiaries which appear in any filing made with, or written materials submitted to, any third party or any Governmental Entity in connection with the transactions contemplated by this Agreement. In exercising the foregoing right, each of the parties hereto shall act reasonably and as promptly as practicable. The parties hereto agree that they will consult with each other with respect to the obtaining of all permits, consents, approvals and authorizations of all third parties and Governmental Entities necessary or advisable to consummate the transactions contemplated by this Agreement and each party will keep the other apprised of the status of matters relating to completion of the transactions contemplated herein. (c) Parent and Subject Company shall, upon request, furnish each other with all information concerning themselves, their Subsidiaries, directors, officers and stockholders and such other matters as may be reasonably necessary or advisable in connection with the Joint Proxy Statement, the S-4 or any other statement, filing, notice or application made by or on behalf of Parent, Subject Company or any of their respective Subsidiaries to any Governmental Entity in connection with the Merger and the other transactions contemplated by this Agreement. (d) Parent and Subject Company shall promptly advise each other upon receiving any communication from any Governmental Entity whose consent or approval is required for consummation of the transactions contemplated by this Agreement which causes such party to believe that there is a reasonable likelihood that any Requisite Regulatory Approval (as defined below) will not be obtained or that the receipt of any such approval will be materially delayed. 6.2 Access to Information. (a) Upon reasonable notice and subject to applicable laws relating to the exchange of information, each of Parent and Subject Company shall, and shall cause each of their respective Subsidiaries to, afford to the officers, employees, accountants, counsel and other representatives of the other party access, during normal business hours during the period prior to the Effective Time, to all its properties, books, contracts, commitments and records, and to its officers, employees, accountants, counsel and other representatives and, during such period, each of Parent and Subject Company shall, and shall cause their respective Subsidiaries to, make available to the other party (i) a copy of each report, schedule, registration statement and other document filed or received by it during such period pursuant to the requirements of Federal securities laws or Federal or state banking laws (other than reports or documents which Parent or Subject Company, as the case may be, is not permitted to disclose under applicable law) and (ii) all other information concerning its business, properties and personnel as such other party may reasonably request. Neither Parent nor Subject Company nor any of their respective Subsidiaries shall be required to provide access to or to disclose information where such access or disclosure would violate or prejudice the rights of its customers, jeopardize the attorney-client privilege of the institution in possession or control of such information or contravene any law, rule, regulation, order, judgment, decree, fiduciary duty or binding agreement entered into prior to the date of this Agreement. The parties hereto will make appropriate substitute disclosure arrangements under circumstances in which the restrictions of the preceding sentence apply. (b) Each of Parent and Subject Company shall hold all information furnished by the other party or any of such party's Subsidiaries or representatives pursuant to Section 6.2(a) in confidence to the extent required by, and in accordance with, the provisions of the confidentiality agreement, dated October 21, 1995 between Parent and Subject Company (the "Confidentiality Agreement"). (c) No investigation by either of the parties or their respective representatives shall affect the representations, warranties, covenants or agreements of the other set forth herein. 6.3 Stockholders' Approvals. Each of Parent and Subject Company shall duly call, give notice of, convene and hold a meeting of its stockholders to be held as soon as practicable following the date hereof for the purpose of obtaining the requisite stockholder approvals required in connection with this Agreement and the Merger, and each shall use its best efforts to cause such meetings to occur on the same date. Subject to the provisions of the next sentence, each of Parent and Subject Company shall, through its Board of Directors, recommend to its stockholders approval of such matters. The Board of Directors of each party may fail to make such recommendation, or withdraw, modify or change any such recommendation in a manner adverse to the other party hereto, if such Board of Directors, after having consulted with and considered the advice of outside counsel, has reasonably determined in good faith that the making of such recommendation, or the failure to withdraw, modify or change its recommendation, would constitute a breach of the fiduciary duties of the members of such Board of Directors under applicable law. 6.4 Legal Conditions to Merger. (a) Subject to the terms and conditions of this Agreement, each of Parent and Subject Company shall, and shall cause its Subsidiaries to use their reasonable best efforts (i) to take, or cause to be taken, all actions necessary, proper or advisable to comply promptly with all legal requirements which may be imposed on such party or its Subsidiaries with respect to the Merger and, subject to the conditions set forth in Article VII hereof, to consummate the transactions contemplated by this Agreement and (ii) to obtain (and to cooperate with the other party to obtain) any consent, authorization, order or approval of, or any exemption by, any Governmental Entity and any other third party which is required to be obtained by Subject Company or Parent or any of their respective Subsidiaries in connection with the Merger and the other transactions contemplated by this Agreement. (b) Subject to the terms and conditions of this Agreement, each of Parent and Subject Company agrees to use reasonable best efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary, proper or advisable to consummate and make effective, as soon as practicable after the date of this Agreement, the transactions contemplated hereby, including, without limitation, using reasonable efforts to lift or rescind any injunction or restraining order or other order adversely affecting the ability of the parties to consummate the transactions contemplated hereby and using reasonable efforts to defend any litigation seeking to enjoin, prevent or delay the consummation of the transactions contemplated hereby or seeking material damages. 6.5 Affiliates; Publication of Combined Financial Results. Each of Parent and Subject Company shall use its reasonable best efforts to cause each director, executive officer and other person who is an "affiliate" (for purposes of Rule 145 under the Securities Act and for purposes of qualifying the Merger for "pooling-of-interests" accounting treatment) of such party to deliver to the other party hereto, as soon as practicable after the date of this Agreement, and in any event prior to the date of the stockholders meetings called by Parent and Subject Company pursuant to Section 6.3 hereof, a written agreement, in the form of Exhibit 6.5(a) hereto (in the case of affiliates of Subject Company) or Exhibit 6.5(b) hereto (in the case of affiliates of Parent). 6.6 Stock Exchange Listing. Parent shall use its best efforts to cause the shares of Parent Common Stock to be issued in the Merger and the New Parent Depositary Shares to be approved for listing on the NYSE, subject to official notice of issuance, prior to the Effective Time. 6.7 Employee Benefit Plans. (a) From and after the Effective Time, unless otherwise mutually determined and except as provided in Section 1.7 hereof, Parent Plans and Plans in effect as of the date of this Agreement shall remain in effect with respect to employees of Parent or Subject Company (or their Subsidiaries) covered by such plans at the Effective Time until such time as Parent shall, subject to applicable law, the terms of this Agreement and the terms of such plans, adopt new benefit plans with respect to employees of Parent and its Subsidiaries (including without limitation the Surviving Corporation and its Subsidiaries) (the "New Parent Plans"). Prior to the Closing Date, Parent and Subject Company shall cooperate in reviewing, evaluating and analyzing the Parent Plans and the Plans with a view toward developing appropriate New Parent Plans for the employees covered thereby subsequent to the Merger. Parent and Subject Company shall use their reasonable best efforts to develop New Parent Plans which, among other things, treat similarly situated employees of Parent and its Subsidiaries (including without limitation the Surviving Corporation and its Subsidiaries) on a substantially equivalent basis, taking into account all relevant factors, including, without limitation, duties, geographic location, tenure, qualifications and abilities. Parent agrees that if it establishes or continues employee benefit plans (including severance plans) under which an employee's benefit depends, in whole or in part, on length of service with Subject Company or Parent prior to the Effective Time, credit will be given, to the extent reasonably practicable, for service credited under similar plans of Subject Company or Parent or any Subsidiary of either, provided that such crediting of service does not result in duplication of benefits. (b) Notwithstanding the foregoing, Parent shall, and shall cause its Subsidiaries to, honor in accordance with their terms all benefits vested as of the date hereof under the Parent Plans or Plans or under other contracts, arrangements, commitments or understandings described in the Parent Disclosure Schedule and the Subject Company Disclosure Schedule. Parent and Subject Company hereby acknowledge that the Merger will constitute a "Change in Control" for purposes of the Parent Plans and the Plans and agree to abide by the provisions of any Plan or Parent Plan which relate to a Change in Control, including, but not limited to, the accelerated vesting and/or payment of equity- based awards under the Parent Stock Option Plans and the Subject Company Stock Option Plans. (c) Nothing in this Section 6.7 shall be interpreted as preventing Parent or its Subsidiaries from amending, modifying or terminating any Parent Plans, Plans, or other contracts, arrangements, commitments or understandings, in accordance with their terms and applicable law. (d) It is the express understanding and intention of Subject Company, Parent and Merger Sub that no Subject Company Employee or Parent Employee or other person shall be deemed to be a third party beneficiary, or have or acquire any right to enforce the provisions, of this Section 6.7, and that nothing in this Agreement shall be deemed to constitute a Plan, a Parent Plan or a New Parent Plan or an amendment to a Plan, a Parent Plan or a New Parent Plan. 6.8 Indemnification; Directors' and Officers' Insurance. (a) Each of Subject Company and Parent agrees that from and after the Effective Time, Parent will indemnify and hold harmless each present and former director and officer of Subject Company and Parent and their respective Subsidiaries, determined as of the Effective Time (the "Indemnified Parties"), against any costs or expenses (including reasonable attorneys' fees), judgments, fines, losses, claims, damages or liabilities (collectively "Costs") incurred in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, arising out of or pertaining to matters existing or occurring at or prior to the Effective Time, whether asserted or claimed prior to, at or after the Effective Time, to the fullest extent that Subject Company, Parent, or such Subsidiary would have been permitted under Delaware law and the certificate of incorporation or by-laws of Subject Company, Parent or such Subsidiary in effect on the date hereof to indemnify such person (and Parent shall also advance expenses as incurred to the fullest extent permitted under applicable law; provided, that the person to whom expenses are advanced provides an undertaking to repay such advances if it is ultimately determined that such person is not entitled to indemnification). (b) To the extent that paragraph (a) shall not serve to indemnify and hold harmless an Indemnified Party, for a period of six years after the Effective Time, each of Subject Company and Parent agrees that Parent shall, subject to the terms set forth herein, indemnify and hold harmless, to the fullest extent permitted under applicable law (and Parent shall also advance expenses as incurred to the fullest extent permitted under applicable law, provided, that the person to whom expenses are advanced provides an undertaking to repay such advances if it is ultimately determined that such person is not entitled to indemnification), each Indemnified Party against any Costs incurred in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, arising out of or pertaining to the transactions contemplated by this Agreement, the Option Agreements or the Fee Letters. In the event any claim or claims are asserted or made within such six-year period, all rights to indemnification in respect of any such claim or claims shall continue until final disposition of any and all such claims. (c) Any Indemnified Party wishing to claim indemnification under Section 6.8(a) or (b), upon learning of any such claim, action, suit, proceeding or investigation, shall promptly notify Parent thereof, but the failure to so notify shall not relieve Parent of any liability it may have to such Indemnified Party except to the extent such failure materially prejudices Parent. In the event of any such claim, action, suit, proceeding or investigation (whether arising before or after the Effective Time), Parent shall have the right to assume the defense thereof and Parent shall not be liable to such Indemnified Parties for any legal expenses of other counsel or any other expenses subsequently incurred by such Indemnified Parties in connection with the defense thereof, except that, if Parent elects not to assume such defense or counsel for the Indemnified Parties advises that there are issues which raise conflicts of interest between Parent and the Indemnified Parties, the Indemnified Parties may retain counsel satisfactory to them, and Parent shall pay all reasonable fees and expense of such counsel for the Indemnified Parties promptly as statements therefor are received. If such indemnity is not available with respect to any Indemnified Party, then Parent and the Indemnified Party shall contribute to the amount payable in such proportion as is appropriate to reflect relative faults and benefits. (d) From and after the Effective Time, the directors, officers and employees of Subject Company and its Subsidiaries who become directors, officers or employees of Parent or any of its Subsidiaries, except for the indemnification rights set forth in Section 6.8(a) or 6.8(b) or as otherwise provided by applicable law, shall have indemnification rights (with respect to their capacities as directors, officers or employees of Parent or any of its Subsidiaries at or subsequent to the Effective Time) with prospective application only. The prospective indemnification rights shall consist of such rights to which directors, officers and employees of Parent and its Subsidiaries are entitled under the provisions of the Certificate of Incorporation or similar governing documents of Parent and its Subsidiaries, as in effect from time to time after the Effective Time, as applicable, and provisions of applicable law as in effect from time to time after the Effective Time. (e) In the event Parent or any of its successors or assigns (i) consolidates with or merges into any other person and shall not be the continuing or surviving corporation or entity of such consolidation or merger, or (ii) transfers or conveys all or substantially all of its properties and assets to any person, then, and in each such case, to the extent necessary, proper provision shall be made so that the successors and assigns of Parent assume the obligations set forth in this section. (f) For a period of six years from the Effective Time, Parent shall use its best efforts to provide that portion of directors' and officers' liability insurance that serves to reimburse the present and former officers and directors of Parent, Subject Company or any of their respective Subsidiaries (determined as of the Effective Time) (as opposed to Parent or Subject Company) with respect to claims against such officers and directors arising from facts or events which occurred before the Effective Time, which insurance shall contain at least the same coverage and amounts, and contain terms and conditions no less advantageous, as that coverage currently provided by Parent; provided, however, that the annual premiums for such coverage will not exceed 200% of the annual premiums currently paid by Subject Company for such coverage; provided, further, that officers and directors of Subject Company or any Subsidiary may be required to make application and provide customary representations and warranties to Parent's insurance carrier for the purpose of obtaining such insurance; and provided, further, that such coverage will have a single aggregate for such six- year period in an amount not less than the annual aggregate of such coverage currently provided by Subject Company. (g) The provisions of this Section 6.8 are intended to be for the benefit of, and shall be enforceable by, each Indemnified Party and his or her heirs and representatives. 6.9 Additional Agreements. In case at any time after the Effective Time any further action is necessary or desirable to carry out the purposes of this Agreement (including, without limitation, any merger between a Subsidiary of Parent and a Subsidiary of Subject Company) or to vest the Surviving Corporation with full title to all properties, assets, rights, approvals, immunities and franchises of any of the parties to the merger, the proper officers and directors of each party to this Agreement and their respective Subsidiaries shall take all such necessary action as may be reasonably requested by, and at the sole expense of, Parent. 6.10 Advice of Changes. Parent and Subject Company shall promptly advise the other party of any change or event which, individually or in the aggregate with other such changes or events, has a Material Adverse Effect on it or which it believes would or would be reasonably likely to cause or constitute a material breach of any of its representations, warranties or covenants contained herein. 6.11 Dividends. After the date of this Agreement, each of Parent and Subject Company shall coordinate with the other the declaration of any dividends in respect of Parent Common Stock and Subject Company Common Stock and the record dates and payment dates relating thereto, it being the intention of the parties hereto that holders of Parent Common Stock or Subject Company Common Stock shall not receive more than one dividend, or fail to receive one dividend, for any single calendar quarter with respect to their shares of Parent Common Stock and/or Subject Company Common Stock and any shares of Parent Common Stock any such holder receives in exchange therefor in the Merger. 6.12 Merger Sub. Parent shall cause Merger Sub to take all necessary action to complete the transactions contemplated hereby, subject to the terms and conditions hereof. 6.13 Subsequent Interim and Annual Financial Statements. As soon as reasonably available, but in no event more than 45 days after the end of each fiscal quarter (other than the fourth quarter of a fiscal year) or 90 days after the end of each fiscal year ending after the date of this Agreement, each party will deliver to the other party its Quarterly Report on Form 10-Q or its Annual Report on Form 10-K, as the case may be, as filed with the SEC under the Exchange Act. ARTICLE VII CONDITIONS PRECEDENT 7.1 Conditions to Each Party's Obligation To Effect the Merger. The respective obligations of each party to effect the Merger shall be subject to the satisfaction at or prior to the Effective Time of the following conditions: (a) Stockholder Approval. This Agreement and the transactions contemplated hereby shall have been approved and adopted by the requisite affirmative votes of the holders of Subject Company Common Stock entitled to vote thereon and the Parent Vote Matters shall have been approved by the requisite affirmative vote of the holders of Parent Common Stock entitled to vote thereon. (b) NYSE Listing. The shares of Parent Common Stock which shall be issued to the stockholders of Subject Company upon consummation of the Merger and the New Parent Depositary Shares shall have been authorized for listing on the NYSE, subject to official notice of issuance. (c) Other Approvals. All regulatory approvals required to consummate the transactions contemplated hereby shall have been obtained and shall remain in full force and effect and all statutory waiting periods in respect thereof shall have expired (all such approvals and the expiration of all such waiting periods being referred to herein as the "Requisite Regulatory Approvals") and no such approval shall contain any conditions or restrictions which the Board of Directors of either Parent or Subject Company reasonably determines in good faith will have or reasonably be expected to have a Material Adverse Effect on Parent and its Subsidiaries (including the Surviving Corporation and its Subsidiaries) taken as a whole. (d) S-4. The S-4 shall have become effective under the Securities Act and no stop order suspending the effectiveness of the S-4 shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC. (e) No Injunctions or Restraints; Illegality. No order, injunction or decree issued by any court or agency of competent jurisdiction or other legal restraint or prohibition (an "Injunction") preventing the consummation of the Merger or any of the other transactions contemplated by this Agreement shall be in effect. No statute, rule, regulation, order, injunction or decree shall have been enacted, entered, promulgated or enforced by any Governmental Entity which prohibits, restricts or makes illegal the consummation of the Merger. 7.2 Conditions to Obligations of Parent. The obligation of Parent to effect the Merger is also subject to the satisfaction or waiver by Parent at or prior to the Effective Time of the following conditions: (a) Representations and Warranties. (i) The representations and warranties of Subject Company set forth in Sections 3.2, 3.3(a), 3.6, 3.8(a), 3.17 and 3.18 of this Agreement shall be true and correct in all material respects as of the date of this Agreement and (except to the extent such representations and warranties speak as of an earlier date) as of the Closing Date as though made on and as of the Closing Date and (ii) the representations and warranties of Subject Company set forth in this Agreement other than those specifically enumerated in clause (i) hereof shall be true and correct in all respects as of the date of this Agreement and (except to the extent such representations and warranties speak as of an earlier date) as of the Closing Date as though made on and as of the Closing Date; provided, however, that for purposes of determining the satisfaction of the condition contained in this clause (ii), no effect shall be given to any exception in such representations and warranties relating to materiality or a Material Adverse Effect, and provided, further, however, that, for purposes of this clause (ii), such representations and warranties shall be deemed to be true and correct in all respects unless the failure or failures of such representations and warranties to be so true and correct, individually or in the aggregate, results or would reasonably be expected to result in a Material Adverse Effect on Subject Company and its Subsidiaries taken as a whole. Parent shall have received a certificate signed on behalf of the Subject Company by the Chief Executive Officer and Chief Financial Officer of Subject Company to the foregoing effect. (b) Performance of Obligations of Subject Company. Subject Company shall have performed in all material respects all obligations required to be performed by it under this Agreement at or prior to the Closing Date, and Parent shall have received a certificate signed on behalf of Subject Company by the Chief Executive Officer and the Chief Financial Officer of Subject Company to such effect. (c) Subject Company Rights Agreement. The rights issued pursuant to the Subject Company Rights Agreement shall not have become nonredeemable, exercisable, distributed or triggered pursuant to the terms of such agreement. (d) Pooling of Interests. Parent shall have received a letter from Ernst & Young LLP, addressed to Parent, dated as of the Effective Time, to the effect that the Merger will qualify for "pooling of interests" accounting treatment. (e) Federal Tax Opinion. Parent shall have received an opinion of Dorsey & Whitney P.L.L.P., counsel to Parent, in form and substance reasonably satisfactory to Parent, dated as of the Effective Time, substantially to the effect that, on the basis of facts, representations and assumptions set forth in such opinion which are consistent with the state of facts existing at the Effective Time, the Merger will be treated for Federal income tax purposes as a reorganization within the meaning of Section 368(a) of the Code and that accordingly: (1) No gain or loss will be recognized by Parent, Subject Company or Merger Sub as a result of the Merger; (2) No gain or loss will be recognized by the stockholders of Subject Company who exchange their Subject Company Capital Stock solely for Parent Capital Stock pursuant to the Merger (except with respect to cash received in lieu of a fractional share interest in Parent Common Stock); and (3) The tax basis of the Parent Capital Stock received by stockholders who exchange all of their Subject Company Capital Stock solely for Parent Capital Stock in the Merger will be the same as the tax basis of the Subject Company Capital Stock surrendered in exchange therefor (reduced by any amount allocable to a fractional share interest for which cash is received). In rendering such opinion, Dorsey & Whitney P.L.L.P. may require and rely upon representations and covenants including those contained in certificates of officers of Parent, Subject Company and Merger Sub and others. 7.3 Conditions to Obligations of Subject Company. The obligation of Subject Company to effect the Merger is also subject to the satisfaction or waiver by Subject Company at or prior to the Effective Time of the following conditions: (a) Representations and Warranties. (i) The representations and warranties of Parent set forth in Sections 4.2, 4.3(a), 4.3(b), 4.6, 4.8(a), 4.17 and 4.18 of this Agreement shall be true and correct in all material respects as of the date of this Agreement and (except to the extent such representations and warranties speak as of an earlier date) as of the Closing Date as though made on and as of the Closing Date and (ii) the representations and warranties of Parent set forth in this Agreement other than those specifically enumerated in clause (i) hereof shall be true and correct in all respects as of the date of this Agreement and (except to the extent such representations and warranties speak as of an earlier date) as of the Closing Date as though made on and as of the Closing Date; provided, however, that for purposes of determining the satisfaction of the condition contained in this clause (ii), no effect shall be given to any exception in such representations and warranties relating to materiality or a Material Adverse Effect, and provided, further, however, that, for purposes of this clause (ii), such representations and warranties shall be deemed to be true and correct in all respects unless the failure or failures of such representations and warranties to be so true and correct, individually or in the aggregate, results or would reasonably be expected to result in a Material Adverse Effect on Parent and its Subsidiaries taken as a whole. Subject Company shall have received a certificate signed on behalf of Parent by the Chief Executive Officer and the Chief Financial Officer of Parent to the foregoing effect. (b) Performance of Obligations of Parent. Parent shall have performed in all material respects all obligations required to be performed by it under this Agreement at or prior to the Closing Date, and Subject Company shall have received a certificate signed on behalf of Parent by the Chief Executive Officer and the Chief Financial Officer of Parent to such effect. (c) Parent Rights Agreement. The rights issued pursuant to the Parent Rights Agreement shall not have become nonredeemable, exercisable, distributed or triggered pursuant to the terms of such agreement. (d) Pooling of interests. Subject Company shall have received a letter from Ernst & Young LLP, addressed to Subject Company, dated as of the Effective Time, to the effect that the Merger will qualify for "pooling of interests" accounting treatment. (e) Federal Tax Opinion. Subject Company shall have received an opinion of Skadden, Arps, Slate, Meagher & Flom, counsel to Subject Company, in form and substance reasonably satisfactory to Subject Company, dated as of the Effective Time, substantially to the effect that, on the basis of facts, representations and assumptions set forth in such opinion which are consistent with the state of facts existing at the Effective Time, the Merger will be treated for Federal income tax purposes as a reorganization within the meaning of Section 368(a) of the Code and that accordingly: (1) No gain or loss will be recognized by Parent, Subject Company or Merger Sub as a result of the Merger; (2) No gain or loss will be recognized by the stockholders of Subject Company who exchange their Subject Company Capital Stock solely for Parent Capital Stock pursuant to the Merger (except with respect to cash received in lieu of a fractional share interest in Parent Common Stock); and (3) The tax basis of the Parent Capital Stock received by stockholders who exchange all of their Subject Company Capital Stock solely for Parent Capital Stock in the Merger will be the same as the tax basis of the Subject Company Capital Stock surrendered in exchange therefor (reduced by any amount allocable to a fractional share interest for which cash is received). In rendering such opinion, Skadden, Arps, Slate, Meagher & Flom may require and rely upon representations and covenants including those contained in certificates of officers of Parent, Subject Company and Merger Sub and others. ARTICLE VIII TERMINATION AND AMENDMENT 8.1 Termination. This Agreement may be terminated at any time prior to the Effective Time: (a) by mutual consent of Parent and Subject Company in a written instrument, if the Board of Directors of each so determines; (b) by either the Board of Directors of Parent or the Board of Directors of Subject Company if (i) any Governmental Entity which must grant a Requisite Regulatory Approval has denied approval of the Merger and such denial has become final and nonappealable or (ii) any Governmental Entity of competent jurisdiction shall have issued a final nonappealable order enjoining or otherwise prohibiting the consummation of the transactions contemplated by this Agreement; (c) by either the Board of Directors of Parent or the Board of Directors of Subject Company if the Merger shall not have been consummated on or before December 31, 1996 (or, if at such date the Merger shall not have been consummated as a result of the failure of the condition set forth in Section 7.1(e) to be satisfied, and such condition shall not have failed to have been satisfied by reason of the enactment or promulgation of any statute, rule or regulation which prohibits, restricts or makes illegal consummation of the Merger, the earlier of (i) the date on which such condition is satisfied and (ii) June 30, 1997), unless the failure of the Closing to occur by such date shall be due to the failure of the party seeking to terminate this Agreement to perform or observe the covenants and agreements of such party set forth herein; (d) by either the Board of Directors of Parent or the Board of Directors of Subject Company (provided that the terminating party is not then in material breach of any representation, warranty, covenant or other agreement contained herein) if the other party shall have breached (i) any of the covenants or agreements made by such other party herein or (ii) any of the representations or warranties made by such other party herein, and in either case, such breach (x) is not cured within thirty (30) days following written notice to the party committing such breach, or which breach, by its nature, cannot be cured prior to the Closing and (y) would entitle the non-breaching party not to consummate the transactions contemplated hereby under Article VII hereof; (e) by either the Board of Directors of Parent or the Board of Directors of Subject Company if any approval of the stockholders of Parent or the Subject Company contemplated by this Agreement shall not have been obtained by reason of the failure to obtain the required vote at a duly held meeting of stockholders or at any adjournment or postponement thereof; (f) prior to the approval of (x) this Agreement by the requisite vote of Subject Company's shareholders (if Subject Company is the terminating party) or (y) the Parent Vote Matters (if Parent is the terminating party), by either the Board of Directors of Parent or the Board of Directors of Subject Company, if there exists at such time a Takeover Proposal for the party whose Board of Directors is seeking to terminate this Agreement pursuant to this paragraph (f) and such Board of Directors, after having consulted with and considered the advice of outside legal counsel, reasonably determines in good faith that such action is necessary in the exercise of its fiduciary duties under applicable laws; or (g) by either the Board of Directors of Parent or the Board of Directors of Subject Company, if the Board of Directors of the other party shall have withdrawn, modified or changed in a manner adverse to the terminating party its approval or recommendation of this Agreement and the transactions contemplated hereby (in the case of Subject Company) or the Parent Vote Matters (in the case of Parent). 8.2 Effect of Termination. In the event of termination of this Agreement by either Parent or Subject Company as provided in Section 8.1, this Agreement shall forthwith become void and have no effect, and none of Parent, Subject Company, any of their respective Subsidiaries or any of the officers or directors of any of them shall have any liability of any nature whatsoever hereunder, or in connection with the transactions contemplated hereby, except (i) Sections 6.2(b), 8.2, and 9.3 shall survive any termination of this Agreement, and (ii) notwithstanding anything to the contrary contained in this Agreement, neither Parent nor Subject Company shall be relieved or released from any liabilities or damages arising out of its willful breach of any provision of this Agreement. 8.3 Amendment. Subject to compliance with applicable law, this Agreement may be amended by the parties hereto, by action taken or authorized by their respective Boards of Directors, at any time before or after approval of the matters presented in connection with the Merger by the stockholders of Subject Company and Parent; provided, however, that after any approval of the transactions contemplated by this Agreement by Subject Company's stockholders, there may not be, without further approval of such stockholders, any amendment of this Agreement which reduces the amount or changes the form of the consideration to be delivered to the Subject Company stockholders hereunder other than as contemplated by this Agreement. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties hereto. 8.4 Extension; Waiver. At any time prior to the Effective Time, the parties hereto, by action taken or authorized by their respective Board of Directors, may, to the extent legally allowed, (a) extend the time for the performance of any of the obligations or other acts of the other parties hereto, (b) waive any inaccuracies in the representations and warranties contained herein or in any document delivered pursuant hereto and (c) waive compliance with any of the agreements or conditions contained herein. Any agreement on the part of a party hereto to any such extension or waiver shall be valid only if set forth in a written instrument signed on behalf of such party, but such extension or waiver or failure to insist on strict compliance with an obligation, covenant, agreement or condition shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure. ARTICLE IX GENERAL PROVISIONS 9.1 Closing. Subject to the terms and conditions of this Agreement, the closing of the Merger (the "Closing") will take place at 10:00 a.m. on a date to be specified by the parties, which shall be no later than two business days after the satisfaction or waiver (subject to applicable law) of the latest to occur of the conditions set forth in Article VII hereof (the "Closing Date"). 9.2 Nonsurvival of Representations, Warranties and Agreements. None of the representations, warranties, covenants and agreements in this Agreement or in any instrument delivered pursuant to this Agreement (other than the Option Agreements and the Fee Letters, for which provision has been made therein) shall survive the Effective Time, except for those covenants and agreements contained herein and therein which by their terms apply in whole or in part after the Effective Time. 9.3 Expenses. Except as provided in the Fee Letters and the Option Agreements, all costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such expense, provided, however, that (i) the costs and expenses of printing and mailing the Joint Proxy Statement, and all filing and other fees paid to the SEC in connection with the Merger, shall be borne equally by Parent and Subject Company and (ii) notwithstanding anything to the contrary contained in this Agreement, neither Parent nor Subject Company shall be relieved or released from any liabilities or damages arising out of its willful breach of any provision of this Agreement. 9.4 Notices. All notices and other communications hereunder shall be in writing and shall be deemed given if delivered personally, telecopied (with confirmation), mailed by registered or certified mail (return receipt requested) or delivered by an express courier (with confirmation) to the parties at the following addresses (or at such other address for a party as shall be specified by like notice): (a) if to Parent, to: First Bank System, Inc. First Bank Place 601 Second Avenue South Minneapolis, Minnesota 55402-4302 Fax: (612) 973-0431 Attn: Lee R. Mitau, Esq. with a copy to each of: Cleary, Gottlieb, Steen & Hamilton One Liberty Plaza New York, New York 10006 Fax: (212) 225-3999 Attn: Victor I. Lewkow, Esq. and Dorsey & Whitney P.L.L.P. 220 South 6th Street Minneapolis, Minnesota 55402 Fax: (612) 340-8738 Attn: Jay L. Swanson, Esq. (b) if to Subject Company, to: First Interstate Bancorp 633 West Fifth Street, TC 2-10 Los Angeles, California 90071 Fax: (213) 614-3741 Attn: General Counsel with a copy to: Skadden, Arps, Slate, Meagher & Flom 919 Third Avenue New York, New York 10022 Fax: (212) 735-2000 Attn: Fred B. White, III, Esq. 9.5 Interpretation. When a reference is made in this Agreement to Sections, Exhibits or Schedules, such reference shall be to a Section of or Exhibit or Schedule to this Agreement unless otherwise indicated. The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words "include," "includes" or "including" are used in this Agreement, they shall be deemed to be followed by the words "without limitation". Whenever the word "material" is used in this Agreement and the context in which it is used refers to any of the parties to this Agreement or any of their respective Subsidiaries, it shall be deemed to be followed by "to [Subject Company] [Parent] and its Subsidiaries, taken together as a whole," as applicable. No provision of this Agreement shall be construed to require Subject Company, Parent or any of their respective Subsidiaries or affiliates to take any action which would violate or conflict with any applicable law (whether statutory or common), rule or regulation. 9.6 Counterparts. This Agreement may be executed in counterparts, all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each of the parties and delivered to the other parties, it being understood that all parties need not sign the same counterpart. 9.7 Entire Agreement. This Agreement (together with the documents and the instruments referred to herein) constitutes the entire agreement and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof, other than the Confidentiality Agreement, the Subject Company Documents and the Parent Documents. 9.8 Governing Law. This Agreement shall be governed and construed in accordance with the laws of the State of Delaware, without regard to any applicable conflicts of law. 9.9 Severability. Any term or provision of this Agreement which is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Agreement or affecting the validity or enforceability of any of the terms or provisions of this Agreement in any other jurisdiction. If any provision of this Agreement is so broad as to be unenforceable, the provision shall be interpreted to be only so broad as is enforceable. 9.10 Publicity. Except as otherwise required by applicable law or the rules of the NYSE, neither Parent nor Subject Company shall, or shall permit any of its Subsidiaries to, issue or cause the publication of any press release or other public announcement with respect to, or otherwise make any public statement concerning, the transactions contemplated by this Agreement, the Option Agreements or the Fee Letters without the consent of the other party, which consent shall not be unreasonably withheld. 9.11 Assignment; Third Party Beneficiaries. Neither this Agreement nor any of the rights, interests or obligations of any party hereunder shall be assigned by any of the parties hereto (whether by operation of law or otherwise) without the prior written consent of the other party. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of and be enforceable by the parties and their respective successors and assigns. Except as otherwise specifically provided in Section 6.8 hereof, this Agreement (including the documents and instruments referred to herein) is not intended to confer upon any person other than the parties hereto any rights or remedies hereunder. 9.12 Alternative Structure. Notwithstanding anything to the contrary contained in this Agreement, prior to the Effective Time, the parties may mutually agree to revise the structure of the Merger and related transactions provided that each of the transactions comprising such revised structure shall (i) not change the amount or form of consideration to be received by the stockholders of Subject Company and the holders of Subject Company Options, (ii) be capable of consummation in as timely a manner as the structure contemplated herein and (iii) not otherwise be prejudicial to the interests of the stockholders of Subject Company. This Agreement and any related documents shall be appropriately amended in order to reflect any such revised structure. 9.13 Enforcement of the Agreement. The parties hereto agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof in any court of the United States or any state having jurisdiction, this being in addition to any other remedy to which they are entitled at law or in equity. IN WITNESS WHEREOF, Parent, Merger Sub and Subject Company have caused this Agreement to be executed by their respective officers thereunto duly authorized as of the date first above written. FIRST BANK SYSTEM, INC. By: ---------------------------- Name: Title: ELEVEN ACQUISITION CORP. By: ---------------------------- Name: Title: FIRST INTERSTATE BANCORP By: ---------------------------- Name: Title: TABLE OF CONTENTS ARTICLE I THE MERGER 1.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . . 1 1.2 Effective Time . . . . . . . . . . . . . . . . . . . . . . 2 1.3 Effects of the Merger. . . . . . . . . . . . . . . . . . . 2 1.4 Conversion of Subject Company Common Stock, Subject Company Preferred Stock 2 1.5 Parent Common Stock; Parent Preferred Stock. . . . . . . . 4 1.6 Merger Sub Stock.. . . . . . . . . . . . . . . . . . . . . 4 1.7 Options. . . . . . . . . . . . . . . . . . . . . . . . . . 4 1.8 Certificates of Incorporation. . . . . . . . . . . . . . . 5 1.9 Bylaws.. . . . . . . . . . . . . . . . . . . . . . . . . . 5 1.10 Tax Consequences. . . . . . . . . . . . . . . . . . . . . . 6 1.11 Management Succession. . . . . . . . . . . . . . . . . . . 6 1.12 Board of Directors. . . . . . . . . . . . . . . . . . . . . 6 1.13 Name. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 ARTICLE II EXCHANGE OF SHARES 2.1 Parent to Make Shares Available. . . . . . . . . . . . . . 7 2.2 Exchange of Shares . . . . . . . . . . . . . . . . . . . . 7 ARTICLE III . . . . . . . . . . . . . . 9 REPRESENTATIONS AND WARRANTIES OF SUBJECT COMPANY 3.1 Corporate Organization . . . . . . . . . . . . . . . . . . 9 3.2 Capitalization . . . . . . . . . . . . . . . . . . . . . . 10 3.3 Authority; No Violation. . . . . . . . . . . . . . . . . . 11 3.4 Consents and Approvals . . . . . . . . . . . . . . . . . . 12 3.5 Reports. . . . . . . . . . . . . . . . . . . . . . . . . . 13 3.6 Financial Statements . . . . . . . . . . . . . . . . . . . 13 3.7 Broker's Fees. . . . . . . . . . . . . . . . . . . . . . . 14 3.8 Absence of Certain Changes or Events . . . . . . . . . . . 14 3.9 Legal Proceedings. . . . . . . . . . . . . . . . . . . . . 15 3.10 Taxes and Tax Returns . . . . . . . . . . . . . . . . . . 15 3.11 Employees.. . . . . . . . . . . . . . . . . . . . . . . . 16 3.12 SEC Reports . . . . . . . . . . . . . . . . . . . . . . . 17 3.13 Compliance with Applicable Law. . . . . . . . . . . . . . 17 3.14 Certain Contracts . . . . . . . . . . . . . . . . . . . . 17 3.15 Agreements with Regulatory Agencies.. . . . . . . . . . . 18 3.16 Undisclosed Liabilities . . . . . . . . . . . . . . . . . 18 3.17 State Takeover Laws . . . . . . . . . . . . . . . . . . . 18 3.18 Rights Agreement. . . . . . . . . . . . . . . . . . . . . 19 3.19 Pooling of Interests. . . . . . . . . . . . . . . . . . . 19 3.20 First Interstate Name . . . . . . . . . . . . . . . . . . 19 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT 4.1 Corporate Organization . . . . . . . . . . . . . . . . . . 20 4.2 Capitalization . . . . . . . . . . . . . . . . . . . . . . 21 4.3 Authority; No Violation. . . . . . . . . . . . . . . . . . 22 4.4 Consents and Approvals . . . . . . . . . . . . . . . . . . 24 4.5 Reports. . . . . . . . . . . . . . . . . . . . . . . . . . 24 4.6 Financial Statements . . . . . . . . . . . . . . . . . . . 25 4.7 Broker's Fees. . . . . . . . . . . . . . . . . . . . . . . 25 4.8 Absence of Certain Changes or Events . . . . . . . . . . . 26 4.9 Legal Proceedings. . . . . . . . . . . . . . . . . . . . . 26 4.10 Taxes and Tax Returns . . . . . . . . . . . . . . . . . . 26 4.11 Employees . . . . . . . . . . . . . . . . . . . . . . . . 27 4.12 SEC Reports.. . . . . . . . . . . . . . . . . . . . . . . 28 4.13 Compliance with Applicable Law. . . . . . . . . . . . . . 28 4.14 Certain Contracts.. . . . . . . . . . . . . . . . . . . . 28 4.15 Agreements with Regulatory Agencies.. . . . . . . . . . . 29 4.16 Undisclosed Liabilities.. . . . . . . . . . . . . . . . . 29 4.17 State Takeover Laws; Certificate of Incorporation.. . . . 29 4.18 Rights Agreement. . . . . . . . . . . . . . . . . . . . . 30 4.19 Pooling of Interests. . . . . . . . . . . . . . . . . . . 30 4.20 Parent Information. . . . . . . . . . . . . . . . . . . .. 30 4.21 Environmental Liability.. . . . . . . . . . . . . . . . . 30 4.22 Interest Rate Risk Management Instruments.. . . . . . . . 31 ARTICLE V COVENANTS RELATING TO CONDUCT OF BUSINESS 5.1 Conduct of Businesses Prior to the Effective Time. . . . . 31 5.2 Forbearances . . . . . . . . . . . . . . . . . . . . . . . 31 ARTICLE VI ADDITIONAL AGREEMENTS. . . . . . . . . . . 34 6.1 Regulatory Matters . . . . . . . . . . . . . . . . . . . . 34 6.2 Access to Information. . . . . . . . . . . . . . . . . . . 35 6.3 Stockholders' Approvals. . . . . . . . . . . . . . . . . . 36 6.4 Legal Conditions to Merger . . . . . . . . . . . . . . . . 36 6.5 Affiliates; Publication of Combined Financial Results. . . 37 6.6 Stock Exchange Listing . . . . . . . . . . . . . . . . . . 37 6.7 Employee Benefit Plans.. . . . . . . . . . . . . . . . . . 38 6.8 Indemnification; Directors' and Officers' Insurance . . . 38 6.9 Additional Agreements. . . . . . . . . . . . . . . . . . . 40 6.10 Advice of Changes.. . . . . . . . . . . . . . . . . . . . 40 6.11 Dividends.. . . . . . . . . . . . . . . . . . . . . . . . 40 6.12 Merger Sub. . . . . . . . . . . . . . . . . . . . . . . . 41 6.13 Subsequent Interim and Annual Financial Statements. . . . 41 ARTICLE VII CONDITIONS PRECEDENT 7.1 Conditions to Each Party's Obligation To Effect the Merger 41 7.2 Conditions to Obligations of Parent. . . . . . . . . . . . 42 7.3 Conditions to Obligations of Subject Company . . . . . . . 43 ARTICLE VIII TERMINATION AND AMENDMENT 8.1 Termination. . . . . . . . . . . . . . . . . . . . . . . . 45 8.2 Effect of Termination. . . . . . . . . . . . . . . . . . . 46 8.3 Amendment. . . . . . . . . . . . . . . . . . . . . . . . . 46 8.4 Extension; Waiver. . . . . . . . . . . . . . . . . . . . . 47 ARTICLE IX GENERAL PROVISIONS 9.1 Closing. . . . . . . . . . . . . . . . . . . . . . . . . . 47 9.2 Nonsurvival of Representations, Warranties and Agreements. 47 9.3 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . 47 9.4 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . 47 9.5 Interpretation . . . . . . . . . . . . . . . . . . . . . . 49 9.6 Counterparts . . . . . . . . . . . . . . . . . . . . . . . 49 9.7 Entire Agreement.. . . . . . . . . . . . . . . . . . . . . 49 9.8 Governing Law. . . . . . . . . . . . . . . . . . . . . . . 49 9.9 Severability.. . . . . . . . . . . . . . . . . . . . . . . 49 9.10 Publicity.. . . . . . . . . . . . . . . . . . . . . . . . 49 9.11 Assignment; Third Party Beneficiaries. . . . . . . . . . 50 9.12 Alternative Structure . . . . . . . . . . . . . . . . . . 50 EX-99.4 5 1991 PERFORMANCE STOCK PLAN FIRST INTERSTATE BANCORP 1991 PERFORMANCE STOCK PLAN 1. PURPOSE. The purpose of the 1991 Performance Stock Plan (the "Plan") is to promote the interests of First Interstate Bancorp (the "Company") and its Subsidiaries by providing performance incentives to certain of its key employees who are responsible for the management, growth and financial success of the Company. Pursuant to the Plan, stock options, stock appreciation rights, restricted stock awards, performance units and stock awards may be granted. 2. ADMINISTRATION. The Plan shall be administered by a Committee (the "Committee") consisting of those members of the Compensation Committee of the Board of Directors of the Company who are (a) at least the minimum number of members required under Rule 16b-3 (or any successor rule) promulgated by the Securities and Exchange Commission pursuant to the Securities Exchange Act ("Rule 16b-3"), and (b) "disinterested" as defined under such rule. The Committee shall have full authority to administer the Plan, including authority to interpret and construe any provision of the Plan and to adopt such rules and regulations for administering the Plan as it may deem necessary. Decisions of the Committee shall be final and binding on all persons who have an interest in the Plan. 3. ELIGIBILITY. The persons eligible to participate in the Plan shall be those key employees of the Company and its Subsidiaries selected by the Committee; provided, however, that no person shall be granted an award under the Plan who at the time owns more than 5% of the issued and outstanding common stock of the Company. 4. SHARES SUBJECT TO THE PLAN. The shares subject to the Plan shall be shares of the Company's $2 par value Common Stock ("Common Stock"). The aggregate number of shares of Common Stock which may be delivered under the Plan shall not exceed 5,000,000, subject to adjustment pursuant to Section 9. If Restricted Stock is forfeited or an option shall terminate for any reason, except for the surrender thereof upon exercise of a related Stock Appreciation Right, without having been exercised in full, such Restricted Stock or the shares applicable to the unexercised portion of such option shall become available under the Plan for all purposes. If shares of Common Stock already owned by a Participant are tendered or exchanged under Section 5.3(b) in full or partial payment of the purchase price of an exercised option, such tendered or exchanged shares shall be added back to the number of shares available for issuance or delivery under this Plan; provided that, this sentence shall not be effective if its operation would cause this Plan to not be considered to be described under Rule 16b-3. The previous sentence notwithstanding, for purposes of determining the number of shares available for the granting of Incentive Options, the aggregate number of shares available for delivery or issuance under this Plan shall not be increased by the number of shares tendered or exchanged. Either authorized and unissued shares or treasury shares may be delivered under the Plan; provided, however, that unissued shares shall not be awarded as Restricted Stock, or pursuant to Performance Units, or as Stock Awards to any Participant unless the Committee expressly determines, after consideration of all other remuneration paid or payable to the Participant, that the services already rendered to the Company and its Subsidiaries by the Participant have a value of not less than the par value of the shares so awarded. 5. STOCK OPTIONS. Stock options granted under the Plan may be either incentive stock options qualifying under Section 422A of the Internal Revenue Code of 1986 ("Incentive Options") or non-qualified stock options ("Non-Qualified Options"). The options shall be evidenced by agreements in such form as the Committee may, from time to time, approve and shall be subject to the following terms and conditions ("Stock Option Agreement"). 5.1 Option Price. The option price of the shares of Common Stock subject to each option shall be determined by the Committee but shall be not less than 100% of the Fair Market Value of such shares on the date of granting of the option. 5.2 Terms of Exercise. Each option granted under the Plan shall be exercisable in whole or in part on such term as the Committee may determine, but in no event shall the option be exercisabe within six months of or more than 10 years after the date the option is granted. 5.3 Manner of Exercise. The option shall be exercised by giving written notice to the Company specifying the number of full shares to be purchased, accompanied by payment of the full price thereof. Payment methods may include any of the following, as determined by the Committee at the date of grant and provided for in the Stock Option Agreement: (a) In cash; (b) In shares of Common Stock already owned by the holder of the option ("Optionee") or partly in cash and partly in shares of Common Stock. If Common Stock is used to pay the purchase price (i.e., a "Stock-for-Stock Swap Transaction"), the Common Stock used must have been owned by the Participant for at least six months prior to the date of exercise and must not have been used in a Stock-for- Stock Swap Transaction within the preceding six months (i.e., the Common Stock must be "mature"). Payments made in Common Stock shall be valued at the Fair Market Value of the Common Stock on the date of exercise. Shares of Common Stock used to pay the purchase price pusrsuant to this subsection (b) need not actually be tendered by the Participant. Instead, the Participant shall be treated as constructively tendering such shares (and receiving them back from the Company) if the Participant provides satisfactory proof to the Committee of current ownership. The actual shares of Common Stock delivered pursuant to such an exercise shall be net of the number of shares constructively tendered; (c) Subject to such guidelines as may be promulgated by the Committee, an Optionee may deliver a notice instructing the Company to deliver the shares being purchased to a broker, subject to the broker's delivery of cash to the Company equal to the purchase price and any applicable tax withholding amount. 5.4 Additional Terms of Incentive Options. An Incentive Option granted pursuant to the Plan: (a) Must be designated as an Incentive Option by the Committee; (b) Shall only be an Incentive Option to the extent that the Aggregate Fair Market Value of the Common Stock (determined as of the date of grant of the option) with respect to which the option is first exercisable in any calendar year does not exceed $100,000. For the purpose of the preceding sentence all options granted after 1986 by the Company and any Parent or Subsidiary wbich are intended to be incentive stock options under Section 422A of the Internal Revenue Code of 1986 shall be taken into account. To the extent the $100,000 limit is exceeded, the $100,000 in options (measured as described above) granted earliest in time will be treated as incentive stock options; and (c) If issuable to an employee who on the date of grant is the owner of stock (determined with application of the ownership attribution rules of Section 425(d) of the Internal Revenue Code of 1986) possessing more than 10% of the total combined voting power of all classes of stock of the Company or any Parent or Subsidiary, the Incentive Option price shall not be less than 110% of the Fair Market Value of the Common Stock on the date of grant and the Incentive Option shall not have a term in excess of five years from the date of grant. 5.5 Termination of Right to Exercise Options. Each option granted under this Plan shall set forth a termination date thereof, which date shall be determined by the Committee. In any event, all options granted pursuant to the Plan shall terminate upon the first to occur of the following events: 2 (a) Tne expiration of 10 years from the date such option was granted, or any earlier termination date specified in the Stock Option Agreement; (b) The expiration of three months from the date an Optionee ceases to be employed by the Company or a Subsidiary other than by reason of death, Retirement, Disability or termination of employment for cause as determined by the Committee; (c) The expiration of one year from the date an Optionee ceases to be employed by the Company or a Subsidiary by reason of Disability or death; (d) The expiration of three years from the date an Optionce ceases to be employed by the Company or a Subsidiary by reason of Retirement; (e) The termination of the Optioncee's employment for cause, as determined by the Comniittee; or (f) The termination of the Plan pursuant to Section 10; provided, that if an Optionee's death occurs after the Optionee ceases to be employed by the Company or a Subsidiary for a reason other than Retirement but at a time when the Optionee has a right to exercise any options pursuant to the foregoing, the right to exercise such option shall not expire prior to one year from the date of death of the Optionee. Subsequent to termination of the Optionee's employment for any reason, only that portion of an option which was exercisable on the date of termination of employment shall be exercisable, and only during the period, if any, set forth above. Failure to exercise an Incentive Option within three months of the date Optionee ceases to be employed by the Company or a Subsidiary by reason of Retirement shall cause an Incentive Option to cease to be treated as an incentive stock option for purposes of Section 421 of the Internal Revenue Code of 1986. 5.6 Stock Appreciation Rights. Any option granted pursuant to the Plan may, in the discretion of the Committee, contain a stock appreciation right ("Stock Appreciation Right"). A Stock Appreciation Right will permit the holder thereof to exercise such right by the surrender of the option or portion thereof which is then exercisable and receive in exchange therefor, upon such terms, restrictions and conditions as the Committee deems advisable, an amount equal to the excess of the Fair Market Value of the shares of Common Stock covered by the option surrendered or portion thereof, determined on the date of surrender, over the aggregate option exercise price of such shares. Such payment may be made in shares of Common Stock valued at Fair Market Value, in cash, or partly in cash and partly in shares of Common Stock as the holder may elect, subject to the consent or disapproval of the Committee in its sole discretion. If a Stock Appreciation Right extends to less than all the shares of Common Stock covered by the related option and if a portion of the related option is thereafter exercised, the number of shares subject to the unexercised Stock Appreciation Right shall be reduced only if and to the extent that the remaining number of shares covered by such related option is less than the remaining number of shares subject to such Stock Appreciation Right. The Stock Appreciation Right, in addition to any other restrictions imposed by the Committee: (a) shall expire no later than the underlying stock option; (b) shall not permit the issuance of cash or shares of a value which exceeds the difference between the exercise price of the underlying stock option and the Fair Market Value of the Common Stock subject to the underlying option at the time the Stock Appreciation Right is exercised; (c) shall be transferable only when the underlying stock option is transferable, and under the same conditions; 3 (d) shall be exercisable only when the underlying stock option is eligible to be exercised and then only when the Fair Market Value of the stock subject to the underlying option exceeds the option exercise price; and (e) shall contain such conditions upon exercise (including, without limitation, conditions limiting the time of exercise to specified periods) as may be required to satisfy applicable regulatory requirements, including, without limitation, Rule 16b-3 (or any successor rule) promulgated by the Securities and Exchange Commission. In the event of the exercise of a Stock Appreciation Right, shares represented by the option or part thereof surrendered upon such exercise shall not be available for reissuance under the Plan. 5.7 Award of Accelerated Ownership Stock Option. If the Committee so provides in the Stock Option Agreement, effective as of the date of exercise by an Optionee of all or part of an Option using "mature" Common Stock as defined in Section 5.3 of the Plan as payment for the full purchase price (except that cash may be used to purchase the nearest whole share of Common Stock), an Employee shall be granted an accelerated ownership Non-Qualified Option ("AO") to purchase at the Fair Market Value as of the date of said exercise and grant, the number of shares of Common Stock equal to the sum of the number of whole shares used by the Optionee in payment of the purchase price. An AO shall only be available during the period an Optionee is an employee of the Company or a Subsidiary. The AO may be exercised between the date of its grant and the original date of expiration of the underlying option to which the AO is related. No AO shall vest sooner than six months after its date of grant. The AO shall be evidenced by any agreement containing such additional terms and conditions as the Committee shall approve, which conditions may provide that upon exercise of any AO, an additional AO may be granted with respect to the number of whole shares used to exercise the AO. 5.8 Options Non-transferable. No option rights shall be assignable or transferable except by will or by the laws of descent and distribution. During the lifetime of an Optionee, an option or Stock Appreciation Right shall be exercisable only by the Optionee or by the Optionee's guardian or legal representative. After the death of an Optionee, the option or Stock Appreciation Right may be exercised prior to its termination by the Optionce's legal representative, heir or legatee. 6. RESTRICTED STOCK AWARDS. The award of restricted stock ("Restricted Stock") to employees may be made in the discretion of the Committee pursuant to agreements in such form as the comniittee may, from time to time, approve ("Restricted Stock Agreement"), subject to the following terms and conditions. 6.1 Restricted Period. The Committee shall set a restricted period during which the Restricted Stock may not be sold, assigned, transferred, pledged or otherwise encumbered, except as permitted by this Plan and the Restricted Stock Agreement (the "Restricted Period"). If a holder of Restricted Stock ceases to be an employee of the Company or a Subsidiary during the Restricted Period for any reason other than death, Disability or Retirement, all shares of Restricted Stock which are then subject to the restrictions imposed by the Committee shall upon such termination of employment be immediately forfeited and returned to the Company. If a holder of Restricted Stock ceases to be an employee of the Company or a Subsidiary during the Restricted Period by reason of death, Disability or Retirement, shares of Restricted Stock shall become free of the restrictions imposed by the Committee only to the extent determined by the Committee, and the Company will deliver to the holder, or the holder's successor, as the case may be, within 60 days, such shares of Common Stock as are freed from restrictions, and all other shares shall be forfeited and returned to the Company. The Committee may, at any time, reduce or terminate the Restricted Period. Subject to the foregoing, at the end of the Restricted Period, the holder of Restricted Stock shall be entitled to receive the Restricted Stock free of restrictions. 4 6.2 Restrictive Legend and Deposit of Certificates. Each certificate issued in respect of shares of Restricted Stock awarded under the Plan shall be registered in the name of the Participant, shall be deposited by the Participant with the Company together with a stock power endorsed in blank and shall bear the following legend: "The transferability of this certificate and the shares of stock represented hereby are subject to the terms and conditions contained in an Agreement entered into between the registered owner and First Interstate Bancorp. A copy of such Agreement is on file in the office of the Secretary of First Interstate Bancorp, 633 West Fifth Street, Los Angeles, California 90071." 6.3 Rights as Shareholder. Subject to the terms of the Restricted Stock Agreement, the holder of Restricted Stock shall have all the rights of a shareholder with respect to the Restricted Stock, including the right to vote such shares; provided, however, that dividends paid with respect to the shares of Restricted Stock shall be deposited with the Company and shall be subject to forfeiture until the expiration of the Restricted Period, subject to the condition that the sums so deposited shall be free of restriction and not subject to forfeiture to the extent applied by Company to satisfy that employee's withholding obligations with respect to Restricted Stock pursuant to Section 13 of the Plan, or otherwise released by the Committee in its sole discretion. The holder of Restricted Stock shall not be entitled to interest with respect to the dividends so deposited. 6.4 Unless the purchase price of Restricted Stock is its par value, it shall be at lease equal to 50% of Fair Market Value, unless otherwise allowed under Rule 16b-3. 7. PERFORMANCE UNITS. The award of performance units ("Performance Units") to employees shall be made in the discretion of the Committee pursuant to agreements in such form as the Committee may, from time to time, approve ("Performance Unit Agreement"), subject to the following terms and conditions. 7.1 Payment of Shares and Dividends. Each Performance Unit shall represent one share of Common Stock and shall, at the time and to the extent it becomes vested, be payable by the delivery of one share of Common Stock, subject to the provisions of Section 9 of this Plan, or, if and to the extent provided in the Performance Unit Agreements, cash based on the Fair Market Value of the Common Stock at the time of payment. In addition, each Participant who has been awarded Performance Units shall receive additional Performance Unit credit based on the value of any dividends which would have been paid to the Participant if he or she bad owned a number of shares of Common Stock equal to the number of his or her Performance Units. The amount of such dividend credit shall be applied towards additional Performance Units for the Participant at the value of shares of Common Stock on the dividend date. 7.2 Performance Conditions. The Performance Unit Agreements shall specify any terms and conditions relating to performance or otherwise which may be established in the discretion of the Committee. 7.3 Management Incentive Plan Deferrals. Performance Units under this Plan may be attributable to a Participant's deferral election under the 1991 Management Incentive Plan. Such Performanre Units will be payable at the time selected by the Participant and permitted by the Committee in the applicable Performance Unit Agreement (which shall be entered into at the time of the Participant's deferral election) in shares of Common Stock, one share for each Performance Unit or, if permitted by the Administrator and provided in the Performance Unit Agreement in cash based on the Fair Market Value of the Common Stock at the time of payment. 8. STOCK AWARDS. The award of Common Stock ("Stock Award") to employees may be made in the discretion of the Committee. Common Stock issued to a Participant pursuant to a Stock Award shall not be subject to any restrictions under the Plan. 9. CHANGES IN CAPITALIZATION. If there are any changes in the capitalization of the Company affecting in any manner the number or kind of outstanding shares of Common Stock of the Company, whether such changes 5 have been occasioned by declaration of stock dividends, stock split-ups, reclassifications or recapitalization of such stock, or because the Company has merged or consolidated with some other corporation (and provided the option is not thereby terminated pursuant to Section 10 hereof), or for any other reason whatsoever, then the number and kind of shares then subject to this Plan and to outstanding options and the prices to be paid therefor, as well as any related Stock Appreciation Right, shall be proportionately adjusted by the Committee whenever and to the extent that the Committee determines that any such change equitably requires an adjustment. Any shares of Common Stock or other securities received by a holder of Restricted Stock with respect to such Restricted Stock by reason of any such change shall be subject to the same restrictions and shall be deposited with the Company. 10. MERGERS OR CONSOLIDATIONS. If the Company, at any time, should elect to dissolve, undergo a reorganization, merge or consolidate with any other corporation and the Company is not the surviving corporation, then (unless in the case of a reorganization, merger or consolidation, one or more of the surviving corporations assumes the options under the Plan or issues substitute options in place thereof) each Optionee holding outstanding options not yet exercised shall be notified of the Optionee's right to exercise such options and any related Stock Appreciation Right to the extent then exercisable prior to such dissolution, reorganization, merger or consolidation. The Committee may, in its discretion and on such terms and conditions as it deems appropriate, authorize the exercise of such options and any related Stock Appreciation Right with respect to all shares covered thereby. Any option and related Stock Appreciation Right not so exercised within 30 days of such notification shall thereupon be deemed terminated and simultaneously the Plan itself shall be deemed terminated. 11. ACCELERATION OF OPTIONS, STOCK APPRECIATION RIGHTS, AND RESTRICTED STOCK AWARDS. In the event of a Change in Control, (i) each option and each related Stock Appreciation Right shall become immediately exercisable to the full extent theretofore not exercisable, (ii) the Restricted Period for Restricted Stock shall immediately expire, and (iii) urless otherwise provided in Performance Unit Agreements, all Performance Units shall be immediately payable in Common Stock in the maximum amount available under the term of such Performance Unit Agreements; provided, however, that Awards other than Restricted Stock Awards shall not, in any event, be so accelerated to a date less than six months after the date of grant. Acceleration of Awards shall comply with applicable regulatory requirements, including, without limitation, Rule 16b-3. Notwithstanding the foregoing, any Participant shall be entitled to decline the acceleration of all or any of his or her options, Stock Appreciation Rights or Restricted Stock if he or she determines that such acceleration may result in adverse tax consequences to him or her. 12. EFFECT ON EMPLOYMENT. Nothing herein shall be construed to limit or restrict the right of the Company or any of its Subsidiaries to terminate the employment of any Participant in the Plan, at any time, with or without cause, or to increase or decrease the compensation of such Participant from the rate of compensation in existence at the time the employee became a Participant. 13. WITHHOLDING. The Company shall have the right to withhold from amounts due Participants, or to collect from Participants directly, the amount which the Company deems necessary to satisfy any taxes required by law to be withheld by reason of Participation in the Plan but, in the alternative, the Participant may, prior to the payment of any Award, pay such amounts to the Company in cash or in shares of Common Stock (which shall be valued at their Fair Market Value on the date of payment). There is no obligation under this Plan that any Participant be advised of the existence of the tax or the amount required to be withheld. Without limiting the generality of the foregoing, in any case where it determines that a tax is or will be required to be withheld in connection with the issuance or transfer of shares of Common Stock under this Plan, the Company may, pursuant to such rules as the Committee may establish, reduce the number of such shares so issued or transferred by such number of shares as the Company may deem appropriate in its sole discretion to accomplish such withholding or make such other arrangements as it deems satisfactory. Notwithstanding any other provision of this Plan, the Committee may impose such conditions on the payment of any withholding obligation as may be required to satisfy applicable regulatory requirements, including, without limitation, Rule 16b-3 (or any successor rule) promulgated by the Securities and Exchange Commission. 6 14. ADDITIONAL DEFINITIONS. "Award" shall mean an Incentive Option, a Non-Qualified Option, a Stock Appreciation Right, a Restricted Stock Award, a Performance Unit or a Stock Award. "Change in Control" of the Company means and shall be deemed to have occurred if and when (a) any "person" (as such term is used Section 13(d) of the Exchange Act) becomes a beneficial owner, directly or indirectly, of securities of the Company representing 25% or more of the combined voting power of the Company's then outstanding securities; (b) individuals who were members of the Board of Directors of the Company immediately prior to a meeting of the stockholders of the Company involving a contest for the election of Directors do not constitute a majority of the Board of Directors following such election; (c) the stockholders of the Company approve the dissolution or liquidation of the Company; (d) the stockholders of the Company approve an agreement to merge or consolidate, or otherwise reorganize, with or into one or more entities which are not Subsidiaries, as a result of which less than 50% of the outstanding voting securities of the surviving or resulting entity are, or are to be, owned by former stockholders of the Company (excluding from the term "former stockholders" a stockholder who is, or as a result of the transaction in question becomes, an "affiliate," as that term is used in the Exchange Act and the Rules promulgated thereunder, of any party to such merger, consolidation or reorganization); or (e) the stockholders of the Company approve the sale of substantially all of the Company's business and/or assets to a person or entity which is not a Subsidiary. Notwithstanding an acquisition of voting stock that otherwise meets the definition of a Change in Control, such transaction shall not constitute a Change in Control under this Plan if two criteria are met: (1) subsequent to the transaction and at all times thereafter at least 65% of the voting power of the Company's then outstanding voting securities remain widely held by the members of the general public, and (2) the Committee of the Company, or any successor committee, resolves within 30 days after the acquisition which would otherwise be treated as a Change in Control that such event shall not be so treated. For purposes of this Section, securities held by a company registered under the Investment Company Act of 1940 or by a trust qualified under Section 401 of the Internal Revenue Code shall be considered widely held by members of the general public. The resolution of the Committee shall specify the extent to which future actions by the acquiring person shall, or shall not, be treated as a Change in Control. Notwithstanding anything to the contrary contained herein, a Change in Control shall subsequently be deemed to occur at any time that the first criterion listed above ceases to be met. "Disability" shall mean such physical or mental condition affecting the employee as shall be determined by the Committee in its sole discretion, to constitute a disability causing a termination of employment. "Fair Market Value" on a specified day means the closing price on that day of the Common Stock as reported on New York Stock Exchange-Composite Tape, or if no sale of the Common Stock was so reported on that date, on the next preceding day on which there was such a sale. "Parent" means any corporation owning directly or indirectly 50% or more of the total combined voting power of all classes of stock of the Company. "Participant" means an eligible employee selected by the Comniittee to participate in the Plan. "Retirement" means normal or early retirement in accordance with the provisions of the First Interstate Retirement Plan. "Subsidiary" means any corporation of which the Company owns, directly or indirectly, 50% or more of the total combined voting power of all classes of stock. If an entity ceases to be a Subsidiary, each employee of that entity shall no longer be deemed employed by the Company or a Subsidiary under the Plan (unless the employee continues to be employed by the Company or another entity which is a Subsidiary). 15. AMENDMENT OF PLAN. The Board of Directors of the Company may make such amendments to this Plan and to any agreements thereunder as it shall deem advisable, including, but not limited to, accelerating 7 the time at which an option may be exercised or the time when restrictions on Restricted Stock shall expire. Such amendments shall be subject to shareholder approval to the extent such approval is required by Rule 16b-3 or the federal tax rules applicable to Incentive Options. Without the consent of the Participant, no amendment shall impair rights of any Participant with respect to Awards to such Participant under the Plan, except as permitted by the Plan. 16. EFFECTIVE DATE AND TERMINATION OF PLAN. The Plan shall be effective upon filing with the Securities and Exchange Commission, subject to receipt of shareholder approval of the Plan at the 1991 Annual Shareholder Meeting. All Awards pursuant to the Plan prior to the receipt of shareholder approval shall be subject to receipt of such approval. If such approval is not received, the Awards shall be forfeited. The Plan shall terminate 10 years from the effective date; provided, however, that the Board of Directors of the Company may terminate the PIan at any prior time within its absolute discretion. No such termination, other than as provided for in Section 10 hereof, shall in any way affect any Award then outstanding. FIRST INTERSTATE BANCORP By ____________________________ 8 FIRST AMENDMENT TO FIRST INTERSTATE 1991 PERFORMANCE STOCK PLAN First Interstate Bancorp adopted the First Interstate Bancorp 1991 Performance Stock Plan (the "Plan") effective February 7, 1991 as approved by shareholders on April 19, 1991. In order to have consistent treatment under First Interstate Bancorp's various plans in the event that employees become employees of another company, this amendment is being adopted. This amendment is effective August 17, 1992. 1. New sentences have been added to Section 6.1 of the Plan to read as follows: In the event that employees of the Company or its Subsidiaries become employees of another company pursuant to a stock or asset sale, merger, or similar transaction or in the event of a corporate reorganization, reduction in force or similar event, the Committee shall have the authority, which shall be exercised in its sole discretion, to continue to credit service for purposes of satisfying the restricted period requirements set forth in the Restricted Stock Agreement. Such Committee authority shall only apply to restricted stock granted to individuals who are not subject to Section 16 of the Securities Exchange Act. 2. The following paragraph has been added as a new Section 17: 17. EXPIRATION OF OPTIONS. In the event that employees of the Company or its Subsidiaries become employees of another company pursuant to a stock or asset sale, merger or similar transaction or in the event of a corporate reorganization, reduction in force or similar event, the Committee shall have the authority, which shall be exercised in its sole discretion, to modify the dates upon which options previously granted shall expire. Such Committee authority, shall only apply to options granted to individuals who are not subject to Section 16 of the Securities Exchange Act. Any modification to the terms under which the option would otherwise expire shall not cause the option to expire later than the date the option was originally scheduled to expire pursuant to the terms or the original Stock Option Agreement. Executed at Los Angeles, California this 22nd day of August, 1995. FIRST INTERSTATE BANCORP By /SIGNED/ ----------------------------- Executive Vice President By /SIGNED/ ----------------------------- Secretary SECOND AMENDMENT TO FIRST INTERSTATE BANCORP 1991 PERFORMANCE STOCK PLAN First Interstate Bancorp adopted the First Interstate Bancorp 1991 Performance Stock Plan (the "Plan"), effective February 7, 1991 as approved by shareholders on April 1, 1991 at the Annual Shareholder's meeting. In order to have a consistent definition of Change in Control among First Interstate Bancorp's various plans, this Amendment is being adopted. This Amendment is effective June 20, 1994. 1.The definition of Change in Control in Section 14, Additional Definitions is amended by revising it to read as follows: "Change in Control" of the Company means and shall be deemed to have occurred if and when any one of the following five events occurs: (a) any "person" (as such term is used in Section 13(d) of the Securities Exchange Act of 1934 (the "Exchange Act"')) becomes a beneficial owner, directly or indirectly, of securities of the Company representing 20% or more of the combined voting power of the Company's then outstanding securities; (b) individuals who were members of the Board of Directors of the Company immediately prior to a meeting of the stockholders of the Company involving a contest for the election of Directors do not constitute a majority of the Board of Directors following such election; (c) the stockholders of the Company approve the dissolution or liquidation of the Company; (d) the stockholders of the Company approve an agreement to merge or consolidate, or otherwise reorganize, with or into one or more entities which are not Subsidiaries, as a result of which less than 50% of the outstanding voting securities of the surviving or resulting entity are, or are to be, owned by former stockholders of the Company (excluding from the term "former stockholders" a stockholder who is, or as a result of the transaction in question becomes, an "affiliate", as that term is used in the Exchange Act and the Rules promulgated thereunder, of any party to such merger, consolidation or reorganization); or (e) the stockholders of the Company approve the sale of substantially all of the Company's business and/or assets to a person or entity which is not a Subsidiary. Executed at Los Angeles, California this 20th day of July, 1994 . FIRST INTERSTATE BANCORP By /SIGNED/ ------------------------------- Executive Vice President By /SIGNED/ ------------------------------- Secretary FIRST INTERSTATE BANCORP 1991 PERFORMANCE STOCK PLAN Grant Date 02-22-94 NON-QUALIFIED STOCK OPTION AGREEMENT THIS AGREEMENT is between FIRST INTERSTATE BANCORP, a Delaware corporation (hereinafter called the "Company"), and ..................................... (hereinafter called the "Employee"). RECITALS: The Company has established the 1991 Performance Stock Plan (the "Plan"); and The Committee of the Board of Directors of the Company designated in the Plan (the "Committee") has approved the execution of this Non-Qualified Stock Option Agreement containing the grant of the option herein set forth to the Employee to purchase shares of the Common Stock, $2.00 par value, of the Company upon the terms and conditions hereinafter set forth. AGREEMENT: In consideration of the mutual obligations contained herein, it is hereby agreed: 1. GRANT OF OPTION. The Company hereby grants to the Employee a Non-Qualified Option to purchase from the Company all or any part of ...............(.................) shares of its authorized Common Stock at the price of $....... per share. 2. TERM OF OPTION. This option may be exercised (unless terminated prior to such exercise as hereinafter provided) during the periods commencing after the anniversary and for the number of shares granted as provided below: Anniversary Following Vesting The Date Hereof Schedule ------------------ --------------------- First Anniversary................... 25% of Shares Granted Second Anniversary.................. 25% of Shares Granted Third Anniversary................... 25% of Shares Granted Fourth Anniversary.................. 25% of Shares Granted provided, however, that this option shall be exercised for full shares only and shall not be exercised for less than 50 shares at any one time unless the remaining shares covered hereby is less than 50. In the event that the Employee shall not in any year purchase all or any part of the shares which the Employee is entitled to purchase in such year, the Employee's right to purchase any shares not purchased in such year shall continue until the expiration or termination of this option, which in no event shall be more than ten (10) years from the date of grant. 3. EXPIRATION OF OPTION. This option shall expire and all rights to purchase shares hereunder shall cease at 5:00 o'clock p.m., California time, on ..............., or prior thereto upon the happening of the first to occur of the following events: (a) the expiration of ten (10) years from the date such option was granted, or any earlier termination date specified in the option agreements; (b) the expiration of three (3) months from the date the Employee ceases to be employed by the Company or a Subsidiary other than by reason of death, Retirement, Disability or termination of employment for cause as determined by the Committee; (c) the expiration of one (1) year from the date the Employee ceases to be employed by the Company or a Subsidiary by reason of Disability or death; (d) the expiration of three (3) years from the date the Employee ceases to be employed by the Company or a Subsidiary by reason of Retirement; (e) the termination of the Employee's employment for cause, as determined bv the Committee; (f) the termination of the Plan pursuant to Section 10, provided, that if the Employee's death occurs after the Employee ceases to be employed by the Company or a Subsidiary for a reason other than Retirement but at a time when the Employee has a right to exercise any options pursuant to the foregoing, the right to exercise such option shall be extended for one year from the date of death of the Employee. Subsequent to termination of the Employee's employment for any reason, only that portion of an option which was exercisable on the date of termination of employment shall be exercisable, and only during the period, if any, set forth above. 4. NONTRANSFERABILITY OF OPTION. This option shall be nonassignable and nontransferable by the Employee other than by will or the laws of descent and distribution, and shall be exercisable during the lifetime of the Employee only by the Employee or by the Employee's guardian or legal representative. After the death of the Employee, this option may be exercised prior to its termination by the Employee's legal representative, heir or legatee, to the extent permitted in the Plan. Upon any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of this option, or of any right or privilege conferred hereby, contrary to the provision hereof, or upon any attempted sale under any execution, attachment or similar process upon the rights and privileges conferred hereby, this option and the rights and privileges conferred hereby shall immediately become null and void. Until written notice of any permitted passage of rights under this option shall have been given to and received by the Secretary of the Company, the Company may, for all purposes, regard the Employee as the holder of this option. 5. EXERCISE OF OPTION. The rights granted under this Agreement may be exercised by the Employee, or by the person or persons to whom the Employee's rights under this Agreement shall have passed (a) under the provisions of Section 4 hereof, by delivering to the Company in care of its Secretary, at 633 West Fifth Street, Los Angeles, California, 90071, written notice of the number of shares with respect to which the rights are being exercised, accompanied by this Agreement for appropriate endorsement by the Company, such investment letter as may be required by Section 10 hereof, and the consideration provided in the plan if any, provided that if the Employee intends to exercise this option by delivery of consideration consisting in whole or in part of shares of Common Stock already owned by the Employee, the Employee shall secure the prior consent of the Committee to such delivery. 6. REGULATORY COMPLIANCE. The issue and sale of Shares of stock pursuant to this Agreement shall be subject to full compliance with all then applicable requirements of law and the requirements of any stock exchange upon which Common Stock of the Company may be listed. 7. MODIFICATION AND TERMINATION. The rights of the Employee are subject to modification, acceleration and termination in certain events as provided in Sections 9, 10 and 11 of the Plan. 8. WITHHOLDING TAX. The Employee agrees that, in the event the exercise of any rights granted in this Agreement results in the Employee's realization of income which for Federal, state or local income tax purposes is, in the opinion of counsel for the Company, subject to withholding of tax at source by the Employee's employer, the Employee will pay to the Employee's employer an amount equal to such withholding, tax (or such employer on behalf of the Company may withhold such amount from the Employee's salary) prior to delivery to the Employee of certificates representing the shares purchased or transferred. The Company may reduce the number of shares issued as the Company may deem necessary in its sole discretion to cover its withholding obligation. 9. HOLDER OF SHARES. Neither the Employee nor the Employee's legal representative, legatee or distributee shall be, or be deemed to be, a holder of any shares of the Company's Common Stock subject to this option unless and until such person has received a certificate or certificates therefore. No adjustment will be made for dividends or other rights for which the record date is prior to the date such stock certificates are so issued. 2 10.INVESTMENT COVENANT. The Employee represents and agrees that if the Employee exercises this option in whole or in part at a time when there is not in effect under the Securities Act of 1933 a registration statement relating to the shares issued upon exercise hereof and there is not available for delivery a prospectus meeting the requirements of Section 10(a)(3) of said Act, (i) the Employee will acquire the shares upon such exercise for the purpose of investment and not with a view to the distribution thereof, (ii) that upon each such exercise of this option, the Employee will furnish to the Company an investment letter in form and substance satisfactory to the Company, (iii) prior to selling or offering for sale any such shares, the Employee will furnish the Company with an opinion of counsel satisfactory to it to the effect that such sale ma,y lawfully be made and will furnish it with such certificates as to factual matters as it may reasonably request, and (iv) that certificates representing such shares may be marked with an appropriate legend describing such conditions precedent to sale or transfer. Any person or persons entitled to exercise such option under the provision of Section 4 hereof shall furnish to the Company letters, opinions and certificates to the same effect as would otherwise be required of the Employee. 11. GOVERNING LAW. This Agreement shall be governed by and interpreted in accordance with the laws of the State of California. 12.SUCCESSORS. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their legal representatives, and permitted successors and assigns. 13.PLAN. This Agreement is subject to all of the terms and provisions of the Plan, receipt of a copy of which is hereby acknowledged by the Employee. IN WITNESS WHEREOF, this Agreement has been executed and delivered by the parties hereto on ............... FIRST INTERSTATE BANCORP By:_____________________________________ ________________________________ Chairman of the Board Employee ________________________________ (Address) ________________________________ ________________________________ Social Security No. ____________ Affiliate ______________________ 3 FIRST INTERSTATE BANCORP 1991 PERFORMANCE STOCK PLAN RESTRICTED STOCK AGREEMENT THIS AGREEMENT is between FIRST INTERSTATE BANCORP, a Delaware corporation (hereinafter called the "Company"), and _______________ (hereinafter called the "Employee"); RECITALS: The Company has established the 1991 Performance Stock Plan (the "Plan"); and The Committee of the Board of Directors of the Company designated in the Plan (the "Committee") has approved the execution of this Restricted Stock Agreement containing the Restricted Stock award herein set forth to the Employee upon the terms and conditions set forth; AGREEMENT: In consideration of the mutual obligations contained herein, it is hereby agreed: 1. AWARD AND PURCHASE OF RESTRICTED STOCK. The Company hereby awards to Employee the right to purchase from the Company and Employee hereby agrees to purchase ____________________, ____________________ (_______________) shares of the Company's Common Stock, $2.00 par value, receipt of which is hereby acknowledged. 2. RESTRICTIONS ON TRANSFER. The shares of Common Stock so purchased and any additional shares attributable thereto received by Employee as a result of any stock dividend, recapitalization, merger, reorganization or similar event (collectively the "Restricted Stock") shall be subject to the restrictions set forth herein and may not be sold, assigned, transferred, pledged or otherwise encumbered during the "Restricted Period" as hereinafter defined, except as permitted hereby. The Restricted Period shall commence as of the date of this Agreement and shall terminate as follows: PERCENTAGE DATE SHARES OF SHARES BECOME FREE FREE FROM FROM RESTRICTIONS RESTRICTIONS ----------------- ------------ The Committee may, at the time of the granting to Employee of the Restricted Stock or at any time thereafter, reduce or terminate the Restricted Period otherwise applicable to all or any portion of the Restricted Stock. References to the Company in this Section include the Company's Subsidiaries. A transfer of the Employee's employment between Subsidiaries of the Company, or between any Subsidiary and the Company shall not be considered a termination of employment for purposes of this Agreement. Employee hereby agrees that within ten (10) days after the termination of the Employee's employment with the Company for any reason whatsoever, Employee shall deliver to the Secretary of the Company written notice of the termination of the Employee's employment with the Company. If the Employee ceases to be employed for any reason other than death, Disability or Retirement, all shares of Restricted Stock which are then subject to restrictions imposed by the Committee shall upon such termination of employment be forfeited and returned to the Company. If the Employee terminates by reason of death, Disability or Retirement, such shares shall be forfeited except to the extent such shares shall be made free from restrictions by the Committee. 3. STOCK CERTIFICATE. Upon the purchase of the Restricted Stock by Employee, a stock certificate issued in respect of such shares of Restricted Stock shall be registered in the name of Employee and shall be deposited by Employee with the Company together with a stock power endorsed in blank. All stock certificates for shares of Restricted Stock during the Restricted Period shall bear the following legend: "The transferability of this certificate and the shares of stock represented hereby are subject to the terms and conditions contained in an Agreement entered into between the registered owner and First Interstate Bancorp. A copy of such Agreement is on file in the Office of the Secretary of First Interstate Bancorp, 633 W. Fifth Street, Los Angeles, California 90071." With regard to any shares of Restricted Stock which cease to be subject to restrictions pursuant to Section 2, the Company shall, within sixty (60) days of the date such shares cease to be subject to restrictions, transfer such shares free of all restrictions set forth in the Plan and this Agreement to Employee or, in the event of such Employee's death, to Employee's legal representative, heir or legatee. 4. SHAREHOLDER'S RIGHTS. Subject to the terms of this Agreement, during the Restricted Period, Employee shall have, with respect to the Restricted Stock, all rights of a shareholder of the Company, including the right to vote such shares; provided, however, that all dividends paid with respect to the shares of Restricted Stock while subject to the restrictions of Section 2 shall be deposited with the Company, subject to the condition that the sums so deposited shall be free of restriction and not subject to forfeiture to the extent applied by the Company to satisfy Employee's Federal, State or local withholding tax obligations pursuant to Section 6 of this Agreement and Section 13 of the Plan, or otherwise released by the Committee in its sole discretion. The Employee shall not be entitled to interest with respect to the dividends so deposited. 5. REGULATORY COMPLIANCE. The issue and sale of shares of Restricted Stock shall be subject to full compliance with all then applicable requirements of law and the requirements of any stock exchange upon which the Common Stock of the Company may be listed. 6. WITHHOLDING TAX. The Employee agrees that in the event to purchase of the Restricted Stock or the expiration of restrictions thereon results in Employee's realization of income which for Federal, State or local income tax purposes is, in the opinion of counsel for the Company, subject to withholding of tax at source by Employee's employer, Employee will pay to such Employee's employer an amount equal to such withholding tax (or such employer on behalf of the Company may withhold such amount from Employee's salary or from dividends deposited with the Company with respect to the Restricted Stock), 7. INVESTMENT REPRESENTATION. Employee represents and agrees that if Employee purchases the Restricted Stock at a time when there is not in effect under the Securities Act of 1933 a registration statement relating to the shares and there is not available for delivery a prospectus meeting the requirements of Section 10(a)(3) of said Act, (i) Employee will acquire the shares upon such purchase for the purpose of investment and not with a view to their resale or distribution, (ii) that upon such purchase, Employee will fumish to the Company an investment letter in form and substance satisfactory to the Company, (iii) prior to selling or offering for sale any such shares, Employee will furnish the Company with an opinion of counsel satisfactory to it to the effect that such sale may lawfully be made and will furnish it with such certificates as to factual matters as it may reasonably request, and (iv) 2 that certificates representing such shares may be marked with an appropriate legend describing such conditions precedent to sale or transfer. 8. FEDERAL INCOME TAX ELECTION. Employee hereby acknowledges receipt of advice that pursuant to current Federal income tax laws, (i) Employee has 30 days in which to elect to be taxed in the current taxable year on the difference between the amount paid, if any, for the Restricted Stock and the Fair Market Value thereof in accordance with the provisions of Intemal Revenue Code Section 83(b) and, (ii) if no such election is made, the taxable event will occur when the shares of Restricted Stock cease to be subject to the Company's right of repurchase, and the tax will be measured by the difference between the amount paid, if any, for the Restricted Stock and the Fair Market Value of the Restricted Stock on the date of the taxable event. 9. GOVERNING LAW. This Agreement shall be governed by and interpreted in accordance with the laws of the State of California. 10. SUCCESSORS. The rights under this Agreement are personal to Employee and are not transferable except in the event of Employee's death to the Employee's legal representatives, heirs or legatees. This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. 11. PLAN. This Agreement is subject to all of the terms and provisions of the Plan, receipt of a copy of which is hereby acknowledged by Employee. All terms defined in the Plan shall have the same meanings in this Agreement. IN WITNESS WHEREOF, this Agreement has been executed and delivered by the parties hereto on ____________________. FIRST INTERSTATE BANCORP By:___________________________________ Chairman of the Board ______________________________________ Employee ______________________________________ (Address) ______________________________________ ______________________________________ Social Security No. ______________________________________ Affiliate 3 FIRST INTERSTATE BANCORP 1991 PERFORMANCE STOCK PLAN STOCK UNIT AGREEMENT FOR USE WITH 1994 MIP (STOCK AWARD DEFERRAL) IMPORTANT: The First Interstate Bancorp ("Bancorp") Compensation Committee ("Committee") as administrator of the First Interstate Bancorp 1991 Performance Stock Plan ("1991 PSP") has approved your request to defer into Performance Units as defined in the 1991 PSP ("Stock Units") all or a portion of the stock awarded to you under the 1991 PSP ("Stock Award") in connection with your participation in the First Interstate Bancorp 1994 Management Incentive Plan ("1994 MIP"). This Stock Unit Agreement ("Agreement") contains the terms and conditions of the grant of Stock Units under the 1991 PSP for the 1994 Performance Year pursuant to your 1994 MIP Stock Deferral Election Form ("Election Form"). Please sign, date and return the extra copy of this Agreement within ten (10) days of receipt to Judy SutterEhrenreich at First Interstate Bancorp, CA T9-34, 633 West Fifth Street, Los Angeles, California 90071. I, the undersigned, have made a request for Stock Units under the terms of Section I of my Election Form. I understand that the Stock Units I am awarded shall be subject to the following terms and conditions of this Agreement: 1. Award Date. The "Award Date" of the Stock Units is the date I would have been entitled to receive payment of my Stock Award under the 1991 PSP but for my deferral election under Section I of the Election Form. 2. Award of Stock Units. The number of Stock Units awarded pursuant to my Election Form is which is equal in value to the number of shares of First Interstate Bancorp Common Stock, $2.00 par value ("Common Stock") included in my Stock Award, multiplied by the percent I have designated under Section I of the Election Form as the percent to be deferred into Stock Units. 3. Stock Unit Agreement. The number of Stock Units determined in Paragraph 2 above will be credited to an account in my name under the 1991 PSP as of the Award Date. Thereafter, any dividends paid on Common Stock will be credited to my account and converted into additional Stock Units in accordance with Section 7.1 of the 1991 PSP. 4. Terms of Payment. At the time specified in Section II of the Election Form for payment of my Stock Units, Bancorp will issue shares of Common Stock equal to the number of whole Stock Units credited to my account, subject to Section 9 of the 1991 PSP. Any fractional Stock Unit will be payable in cash. 5. Death. (a) If I die before the payment date I have specified in Section II of the Election Form, any payment of Stock Units due hereunder shall be paid to my beneficiary in a lump sum as soon as administratively practical. (b) If I have failed to designate a beneficiary or if my beneficiary does not survive me, any payment shall be made in accordance with Section 8(d) of the 1994 MIP. 6. No Assignment. The rights under this Agreement are personal to me and are not transferable except, in the event of my death, to my legal representatives, heirs or legatees. 7. Change in Control. In the event of a Change in Control as defined in Section 14 of the 1991 PSP, as amended, payment of my entire Stock Unit award under Paragraph 4 hereunder shall be accelerated. However, there shall be no acceleration to a date less than six months after the Award Date. 8. Withholding. Any required withholding shall be made in accordance with Section 13 of the 1991 PSP. 9. Regulatory Compliance. Any issuance of shares of Common Stock pursuant to this Agreement shall be subject to full compliance with all the applicable requirements of law and the requirements of any stock exchange upon which the Common Stock may be listed. I represent and agree that such shares, if they are received at a time when there is not in effect under the Securities Act of 1933 a registration statement relating to such shares and is not available for delivery a prospectus meeting the requirements of Section 10(a) (3) of said Act, shall be acquired for the purpose of investment and not with a view to the distribution thereof. In such event, I, or my beneficiaries, if applicable, consent: (a) upon receipt of the shares, to furnish Bancorp with an investment letter in form and substance satisfactory to Bancorp; (b) prior to selling or offering for sale any such shares, to furnish Bancorp with an opinion of counsel satisfactory to Bancorp to the effect that such sale may be lawfully made and to furnish Bancorp with such certificates regarding factual matters as Bancorp may reasonably request; and (c) to receive certificates for such shares marked with an appropriate legend describing such conditions precedent to sale or transfer. 10. Amendment of Agreement. This Agreement shall be subject to amendment by Bancorp only with my consent; provided, no amendment may have the effect of causing a change in the time of payout established in the Election Form. 11. Governing Law. This Agreement shall be governed by and interpreted in accordance with the laws of the State of California. 12. Interpretation of Agreement. This Agreement shall be subject to all of the relevant terms of the 1991 PSP, 1994 MIP and the Election Form as interpreted by the Committee. Except as otherwise provided in this Agreement, all terms used herein shall have the same meaning as set forth in these documents. By executing this Agreement, I acknowledge receipt of a copy of each of these documents and agree to be bound by their terms. IN WITNESS WHEREOF, this Agreement has been executed and delivered by the parties hereto on FIRST INTERSTATE BANCORP By:____________________________________ ____________________________ [Chairman of the Board] Employee 2 EX-99.5 6 PERFORMANCE STOCK PLAN FIRST INTERSTATE BANCORP 1988 PERFORMANCE STOCK PLAN 1. Purpose. The purpose of the 1988 Performance Stock Plan (the "Plan") is to promote the interests of First Interstate Bancorp (the "Company") and its Subsidiaries by providing performance incentives to certain of its key employees who are responsible for the management, growth and financial success of the Company. Pursuant to the Plan, incentive stock options, non-qualified stock options and restricted stock awards may be granted. 2. Administration. The Plan shall be administered by a Committee (the "Committee") consisting of those members of the Compensation Committee of the Board of Directors of the Company who as of the date of any action by the Committee are not then, and have not been during the preceding twelve months, eligible to participate in the Plan. The Committee shall have full authority to administer the Plan, including authority to interpret and construe any provision of the Plan and to adopt such rules and regulations for administering the Plan as it may deem necessary. Decisions of the Committee shall be final and binding on all persons who have an interest in the Plan. 3. Eligibility. The persons eligible to participate in the Plan shall be those key employees of the Company and its Subsidiaries selected by the Committee; provided, however, that no person shall be granted an award under the Plan who at the time owns more than 5% of the issued and outstanding common stock of the Company. 4. Shares Subject to the Plan. The shares subject to the Plan shall be shares of the Company's $2 par value Common Stock ("Common Stock"). The aggregate number of shares of Common Stock which may be delivered under the Plan shall not exceed 1,500,000, of which not more than 500,000 shares may be delivered pursuant to Restricted Stock awards, in each case subject to adjustment pursuant to Section 7. If an option shall terminate for any reason, except for the surrender thereof upon exercise of a related stock appreciation right, without having been exercised in full, the shares applicable to the unexercised portion of such option shall become available under the Plan. If any shares of Restricted Stock are forfeited in accordance with the provisions of Section 6, such shares shall again be available under the Plan for all purposes. Either authorized and unissued shares or treasury shares may be delivered under the Plan; provided, however, that unissued shares shall not be awarded as Restricted Stock to any Participant unless the Committee expressly determines, after consideration of all other remuneration paid or payable to the Participant, that the services already rendered to the Company and its Subsidiaries by the Participant have a value of not less than the par value of the shares so awarded. 5. Stock Options. Stock options granted under the Plan may be either incentive stock options qualifying under Section 422A of the Internal Revenue Code of 1986 ("Incentive Options"), or non-qualified stock options ("Non-Qualified Options"). The options shall be evidenced by agreements in such form as the Committee may, from time to time, approve and shall be subject to the following terms and conditions. 5.1. Option Price. The option price of the shares of Common Stock subject to each option shall be determined by the Committee but shall be not less than 100% of the Fair Market Value of such shares on the date of granting of the option. 5.2. Terms of Exercise. Each option granted under the Plan shall be exercisable in whole or in part on such terms as the Committee may determine, but in no event shall the option be exercisable within six months of or more than 10 years after the date the option is granted. 5.3. Manner of Exercise. The option shall be exercised by giving written notice to the Company specifying the number of full shares to be purchased, accompanied by payment of the full price thereof. Payment for the shares purchased shall be made in cash or, if permitted by the Committee, in shares of Common Stock already owned by the holder of the option ("Optionee") or partly in cash and partly in shares of Common Stock. Payments made in Common Stock shall be valued at the Market Value of the Common Stock on the date of exercise. 5.4. Additional Terms of Incentive Options. An Incentive Option granted pursuant to the Plan: (a) Must be designated as an Incentive Option by the Committee; (b) Shall only be an Incentive Stock Option to the extent that the aggregate Market Value of the Common Stock (determined as of the date of grant of the option) with respect to which the option is first exercisable in any calendar year does not exceed $100,000. For the purpose of the preceding sentence all options granted after 1986 by the Company and any Parent or Subsidiary which are intended to be incentive stock options under Section 422A of the Internal Revenue Code of 1986 shall be taken into account. To the extent the $100,000 limit is exceeded, the $100,000 in options (measured as described above) granted earliest in time will be treated as incentive stock options; and (c) If issuable to an employee who on the date of grant is the owner of stock (determined with application of the ownership attribution rules of Section 425(d) of the Internal Revenue Code of 1986) possessing more than 10% of the total combined voting power of all classes of stock of the Company or any Parent or Subsidiary, the Incentive Option price shall not be less than 110% of the Fair Market Value of the Common Stock on the date of grant and the Incentive Option shall not have a term in excess of five (5) years from the date of grant. 5.5. Termination of Right To Exercise Options. Each option granted under this Plan shall set forth a termination date thereof, which date shall be determined by the Committee. In any event, all options granted pursuant to the Plan shall terminate upon the first to occur of the following events: (a) The expiration of ten (10) years from the date such option was granted, or any earlier termination date specified in the option agreement; (b) The expiration of three (3) months from the date an Optionee ceases to be employed by the Company or a Subsidiary other than by reason of death, Retirement, Disability or termination of employment for cause as determined by the Committee; (c) The expiration of one (1) year from the date an Optionee ceases to be employed by the Company or a Subsidiary by reason of Disability or death; (d) The expiration of three (3) years from the date an Optionee ceases to be employed by the Company or a Subsidiary by reason of Retirement; (e) The termination of the Optionee's employment for cause, as determined by the Committee; (f) The termination of the Plan pursuant to Section 8; provided, that if an Optionee's death occurs after the Optionee ceases to be employed by the Company or a Subsidiary but at a time when the Optionee has a right to exercise any options pursuant to the foregoing, the right to exercise such option shall be extended for one year from the date of death of the Optionee. Subsequent to termination of the Optionee's employment for any reason, only that portion of an option which was exercisable on the date of termination of employment shall be exercisable, and only during the period, if any, set forth above. Failure to exercise an Incentive Option within three months of the date Optionee ceases to be employed by the Company or a Subsidiary by reason of Retirement shall cause an Incentive Option to cease to be treated as an incentive stock option for purposes of Section 421 of the Internal Revenue Code of 1986. 5.6. Stock Appreciation Rights. Any option granted pursuant to the Plan may, in the discretion of the Committee, contain a stock appreciation right ("Stock Appreciation Right"). A Stock Appreciation Right will permit the holder thereof to exercise such right by the surrender of the option or portion thereof which is then exercisable and receive in exchange therefor, upon such terms, restrictions and conditions as the Committee deems advisable, an amount equal to the excess of the Fair Market Value of the shares of Common Stock covered by the option surrendered, or portion thereof, determined on the date of surrender, over the aggregate option exercise price of such shares. Such payment may be made in shares of Common Stock valued at Fair Market Value, in cash, or partly in cash and partly in shares of Common Stock as the holder may elect, subject to the consent or disapproval of the Committee in its sole discretion. If a Stock Appreciation Right extends to less than all the shares of Common Stock covered by the related option and if a portion of the related option is thereafter exercised, the number of shares subject to the unexercised Stock Appreciation Right shall be reduced only if and to the extent that the remaining number of shares covered by such related Option is less than the remaining number of shares subject to such Stock Appreciation Right. The Stock Appreciation Right, in addition to any other restrictions imposed by the Committee: (a) shall expire no later than the underlying stock option; (b) shall not permit the issuance of cash or shares of a value which exceeds the difference between the exercise price of the underlying stock option and the Market Value of the Common Stock subject to the underlying option at the time the Stock Appreciation Right is exercised; (c) shall be transferable only when the underlying stock option is transferable, and under the same conditions; (d) shall be exercisable only when the underlying stock option is eligible to be exercised and then only when the Fair Market Value of the stock subject to the underlying option exceeds the option exercise price; and (e) shall contain such conditions upon exercise (including, without limitation, conditions limiting the time of exercise to specified periods) as may be required to satisfy applicable regulatory requirements, including, without limitation, Rule 16b-3 (or any successor rule) promulgated by the Securities and Exchange Commission. In the event of the exercise of a Stock Appreciation Right, shares represented by the option or part thereof surrendered upon such exercise shall not be available for reissuance under the Plan. 5.7. Options Non-transferable. No option rights shall be assignable or transferable except by will or by the laws of descent and distribution. During the lifetime of an Optionee, the option or Stock Appreciation Right shall be exercisable only by the Optionee or by the Optionee's guardian or legal representative. After the death of an Optionee, the option or Stock Appreciation Right may be exercised prior to its termination by the Optionee's legal representative, heir or legatee. 6. Restricted Stock Awards. The award of restricted stock ("Restricted Stock") to employees shall be made in the discretion of the Committee pursuant to agreements in such form as the Committee may, from time to time, approve ("Restricted Stock Agreement"), subject to the following terms and conditions. 6.1. Restricted Period. The Committee shall set a restricted period during which the Restricted Stock may not be sold, assigned, transferred, pledged or otherwise encumbered, except as permitted by this Plan and the Restricted Stock Agreement (the "Restricted Period"). If a holder of Restricted Stock ceases to be an employee of the Company or a Subsidiary during the Restricted Period for any reason other than death, Disability or Retirement, all shares of Restricted Stock which are then subject to the restrictions imposed by the Committee shall upon such termination of employment be forfeited and returned to the Company. If a holder of Restricted Stock ceases to be an employee of the Company or a Subsidiary during the Restricted Period by reason of death, Disability or Retirement, shares of Restricted Stock shall become free of the restrictions imposed by the Committee to the extent determined by the Committee, and the Company will deliver to the holder, or the holder's successor, as the case may be, within 60 days, such shares of Common Stock. Shares of Common Stock which do not become free of restrictions shall be forfeited and returned to the Company. The Committee may, at any time, reduce or terminate the Restricted Period. In the event of a Change in Control of the Company, the Restricted Period shall terminate automatically. Subject to the foregoing, at the end of the Restricted Period, the holder of Restricted Stock shall be entitled to receive the Restricted Stock free of restrictions. 6.2. Restrictive Legend and Deposit of Certificates. Each certificate issued in respect of shares of Restricted Stock awarded under the Plan shall be registered in the name of the Participant, shall be deposited by the Participant with the Company together with a stock power endorsed in blank and shall bear the following legend: "The transferability of this certificate and the shares of stock represented hereby are subject to the terms and conditions contained in an Agreement entered into between the registered owner and First Interstate Bancorp. A copy of such Agreement is on file in the office of the Secretary of First Interstate Bancorp, 707 Wilshire Boulevard, Los Angeles, California 90017." 6.3. Rights as Shareholder. Subject to the terms of the Restricted Stock Agreement, the holder of Restricted Stock shall have all the rights of a shareholder with respect to the Restricted Stock, including the right to vote such shares; provided, however, that dividends paid with respect to the shares of Restricted Stock shall be deposited with the Company and shall be subject to forfeiture until the expiration of the Restricted Period, subject to the condition that the sums so deposited shall be free of restriction and not subject to forfeiture to the extent applied by the Company to satisfy the employee's obligations with respect to Restricted Stock pursuant to Section 10 of the Plan, or otherwise released by the Committee in its sole discretion. The holder of Restricted Stock shall not be entitled to interest with respect to the dividends so deposited. 7. Changes in Capitalization. If there are any changes in the capitalization of the Company affecting in any manner the number or kind of outstanding shares of Common Stock of the Company, whether such changes have been occasioned by declaration of stock dividends, stock split-ups, reclassifications or recapitalization of such stock, or because the Company has merged or consolidated with some other corporation (and provided the option is not thereby termination pursuant to section 8 hereof), or for any other reason whatsoever, then the number and kind of shares then subject to this Plan and to outstanding options and the prices to be paid therefor, as well as any related Stock Appreciation Right, shall be proportionately adjusted by the Committee whenever and to the extent that the Committee determines that any such change equitably requires an adjustment. Any shares of Common Stock or other securities received by a holder of Restricted Stock with respect to such Restricted Stock by reason of any such change shall be subject to the same restrictions and shall be deposited with the Company. 8. Mergers or Consolidations. If the Company, at any time, should elect to dissolve, undergo a reorganization, merge or consolidate with any other corporation and the Company is not the surviving corporation, then (unless in the case of a reorganization, merger or consolidation, one or more of the surviving corporations assumes the options under the Plan or issues substitute options in place thereof) each Optionee holding outstanding options not yet exercised shall be notified of the Optionee's right to exercise such options and any related Stock Appreciation Right to the extent then exercisable prior to such dissolution, reorganization, merger or consolidation. The Committee may, in its discretion and on such terms and conditions as it deems appropriate, authorize the exercise of such options and any related Stock Appreciation Right with respect to all shares covered thereby. Any option and related Stock Appreciation Right not so exercised within thirty (30) days of such notification shall thereupon be deemed terminated and simultaneously the Plan itself shall be deemed terminated. 9. Acceleration of Options, Stock Appreciation Rights, and Restricted Stock Awards. Unless, prior to a Change in Control, the Committee determines that, upon its occurrence, there shall be no acceleration of Awards or determines those Awards which shall be accelerated and the extent to which they shall be accelerated, (i) each option and each related Stock Appreciation Right shall become immediately exercisable to the full extent theretofore not exercisable and (ii) the Restricted Period for Restricted Stock shall immediately expire; provided, however, that Awards other than Restricted Stock Awards shall not, in any event, be so accelerated to a date less than six months after the date of grant. Acceleration of Awards shall comply with applicable regulatory requirements, including, without limitation, Rule 16b-3 promulgated by the Securities and Exchange Commission. For purposes of this Section 9 only, Committee shall mean the Committee of the Company as constituted immediately prior to the Change in Control. 10. Effect on Employment. Nothing herein shall be construed to limit or restrict the right of the Company or any of its Subsidiaries to terminate the employment of any Participant in the Plan, at any time, with or without cause, or to increase or decrease the compensation of such Participant from the rate of compensation in existence at the time the employee became a Participant. 11. Withholding. The Company shall have the right to withhold from amounts due Participants, or to collect from Participants directly, the amount which the Company deems necessary to satisfy any taxes required by law to be withheld by reason of participation in the Plan but, in the alternative, the Participant may, prior to the payment of any Award, pay such amounts to the Company in cash or in shares of Common Stock (which shall be valued at their Fair Market Value on the date of payment). There is no obligation under this Plan that any Participant be advised of the existence of the tax or the amount required to be withheld. Without limiting the generality of the foregoing, in any case where it determines that a tax is or will be required to be withheld in connection with the issuance or transfer of shares of Common Stock under this Plan, the Company may, pursuant to such rules as the Committee may establish, reduce the number of such shares so issued or transferred by such number of shares as the Company may deem appropriate in its sole discretion to accomplish such withholding or make such other arrangements as it deems satisfactory. Notwithstanding any other provision of this Plan, the Committee may impose such conditions on the payment of any withholding obligation as may be required to satisfy applicable regulatory requirements, including, without limitation, Rule 16b-3 promulgated by the Securities and Exchange Commission. 12. Additional Definitions. "Award" shall mean an Incentive Stock Option, a Non-Qualified Stock Option, a Stock Appreciation Right, or a Restricted Stock Award. "Change in Control" of the Company means and shall be deemed to have occurred if and when (i) any "person" (as such term is used in Section 13(d) of the Securities Exchange Act of 1934) becomes a beneficial owner, directly or indirectly, of securities of the Company representing 25% or more of the combined voting power of the Company's then outstanding securities; (ii) individuals who were members of the Board of Directors of the Company immediately prior to a meeting of the stockholders of the Company involving a contest for the election of Directors do not constitute a majority of the Board of Directors following such election; (iii) the stockholders of the Company approve the dissolution or liquidation of the Company; (iv) the stockholders of the Company approve an agreement to merge or consolidate, or otherwise reorganize, with or into one or more entities which are not Subsidiaries, as a result of which less than 50% of the outstanding voting securities of the surviving or resulting entity are, or are to be, owned by former stockholders of the Company (excluding from the term "former stockholders" a stockholder who is, or as a result of the transaction in question becomes, an "affiliate", as that term is used in the Securities Exchange Act of 1934 and the Rules promulgated thereunder, of any party to such merger, consolidation or reorganization); or (v) the stockholders of the Company approve the sale of substantially all of the Company's business and/or assets to a person or entity which is not a Subsidiary. "Disability" shall mean such physical or mental condition affecting the employee as shall be determined by the Committee, in its sole discretion, to constitute a disability causing a termination of employment. "Fair Market Value" or "Market Value" on a specified day means the closing price on that day of the Common Stock as reported on the New York Stock Exchange-Composite Tape, or if no sale of the Common Stock was so reported on that date, on the next preceding day on which there was such a sale. "Parent" means any corporation owning directly or indirectly 50% or more of the total combined voting power of all classes of stock of the Company. "Participant" means an eligible employee selected by the Committee to participate in the Plan. "Subsidiary" means any corporation of which the Company owns, directly or indirectly, 50% or more of the total combined voting power of all classes of stock. If an entity ceases to be a Subsidiary, each employee of that entity shall no longer be deemed employed by the Company or a Subsidiary under the Plan (unless the employee continues to be employed by the Company or another entity which is a Subsidiary). "Retirement" means normal or early retirement in accordance with the provisions of the First Interstate Retirement Plan. 13. Amendment of Plan. The Board of Directors of the Company may make such amendments to this Plan and to any agreements thereunder as it shall deem advisable, including, but not limited to, accelerating the time at which an option may be exercised or the time when restrictions on Restricted Stock shall expire, but may not, without shareholder approval: (a) increase the maximum number of shares subject to the Plan, except pursuant to section 7; (b) decrease the option price provided for in section 5; (c) extend the term during which or for which options may be granted; or (d) change the designation of the class of employees eligible to participate in the Plan. Without the consent of the Participant, no amendment shall impair the rights of any Participant in any rights awarded to such Participant under the Plan, except as permitted by the Plan. 14. Effective Date and Termination of Plan. The Plan shall be effective February 16, 1988, subject to receipt of shareholder approval of the Plan within one year of that date. All awards pursuant to the Plan prior to the receipt of shareholder approval shall be subject to receipt of such approval. If such approval is not received, the award shall be forfeited. The Plan shall terminate ten years from the effective date; provided, however, that the Board of Directors of the Company may terminate the Plan at any prior time within its absolute discretion. No such termination, other than as provided for in section 8 hereof, shall in any way affect any option, Stock Appreciation Right or Restricted Stock then outstanding. FIRST AMENDMENT TO FIRST INTERSTATE 1988 PERFORMANCE STOCK PLAN First Interstate Bancorp adopted the First Interstate Bancorp 1988 Performance Stock Plan (the "Plan") effective February 16, 1988 as approved by shareholders on April 29, 1988. In order to have consistent treatment under First Interstate Bancorp's various plans in the event that employees become employees of another company, this amendment is being adopted. This amendment is effective August 17, 1992. 1. New sentences have been added to Section 6.1 of the Plan to read as follows: In the event that employees of the Company or its Subsidiaries become employees of another company pursuant to a stock or asset sale, merger, or similar transaction or in the event of a corporate reorganization, reduction in force or similar event, the Committee shall have the authority, which shall be exercised in its sole discretion, to continue to credit service for purposes of satisfying the restricted period requirements set forth in the Restricted Stock Agreement. Such Committee authority shall only apply to restricted stock granted to individuals who are not subject to Section 16 of the Securities Exchange Act. 2. The following paragraph has been added as a new Section 15: 15. Expiration of Options. In the event that employees of the Company or its Subsidiaries become employees of another company pursuant to a stock or asset sale, merger or similar transaction or in the event of a corporate reorganization, reduction in force or similar event, the Committee shall have the authority, which shall be exercised in its sole discretion, to modify the dates upon which options previously granted shall expire. Such Committee authority shall only apply to options granted to individuals who are not subject to Section 16 of the Securities Exchange Act. Any modification to the terms under which the option would otherwise expire shall not cause the option to expire later than the date the option was originally scheduled to expire pursuant to the terms or the original Stock Option Agreement. Executed at Los Angeles this 22 day of August, 1995. FIRST INTERSTATE BANCORP By: /SIGNED/ -------------------------- Executive Vice President By: /SIGNED/ -------------------------- Secretary SECOND AMENDMENT TO FIRST INTERSTATE BANCORP 1988 PERFORMANCE STOCK PLAN First Interstate Bancorp adopted the First Interstate Bancorp 1988 Performance Stock Plan (the "Plan") effective February 16, 1988 as approved by shareholders on April 29, 1988 at the Annual Shareholder's meeting. In order to have a consistent definition of Change in Control among First Interstate Bancorp's various plans, this Amendment is being adopted. This Amendment is effective June 20, 1994. 1. The definition of Change in Control in Section 12 Additional Definitions is amended by revising it to read as follows: "Change in Control" of the Company means and shall be deemed to have occurred if and when any one of the following five events occurs: (i) any "Person" (as such term is used in Section 13(d) of the Securities Exchange Act of 1934 (the "Exchange Act")) becomes a beneficial owner, directly or indirectly, of securities of the Company representing 20% or more of the combined voting power of the Company's then outstanding securities; (ii) individuals who were members of the Board of Directors of the Company immediately prior to a meeting of the stockholders of the Company involving a contest for the election of Directors do not constitute a majority of the Board of Directors following such election; (iii) the stockholders of the Company approve the dissolution or liquidation of the Company; (iv) the stockholders of the Company approve an agreement to merge or consolidate, or otherwise reorganize, with or into one or more entities which are not Subsidiaries, as a result of which less than 50% of the outstanding voting securities of the surviving or resulting entity are, or are to be, owned by former stockholders of the Company (excluding from the term "former stockholders" a stockholder who is, or as a result of the transaction in question becomes, an "affiliate", as that term is used in the Exchange Act and the Rules promulgated thereunder, of any party to such merger, consolidation or reorganization); or (v) the stockholders of the Company approve the sale of substantially all of the Company's business and/or assets to a person or entity which is not a Subsidiary. Executed at Los Angeles, California this 20th day of July, 1994. FIRST INTERSTATE BANCORP By: /SIGNED/ ---------------------------- Executive Vice President By: /SIGNED/ ---------------------------- Secretary FIRST INTERSTATE BANCORP 1988 PERFORMANCE STOCK PLAN NON-QUALIFIED STOCK OPTION AGREEMENT THIS AGREEMENT is between FIRST INTERSTATE BANCORP, a Delaware corporation (hereinafter called the "Company"), and (hereinafter called the "Employee"). RECITALS: The Company has established the 1988 Performance Stock Plan (the "Plan"); and The Committee of the Board of Directors of the Company designated in the Plan (the "Committee") has approved the execution of this Non-Qualified Stock Option Agreement containing the grant of the option herein set forth to the Employee to purchase shares of the Common Stock, $2.00 par value, of the Company upon the terms and conditions hereinafter set forth; AGREEMENT: In consideration of the mutual obligations contained herein, it is hereby agreed: 1. Grant of Option. The Company hereby grants to the Employee a Non-Qualified Option to purchase from the Company all or any part of ( ) shares of its authorized Common Stock at the price of $ per share. It is understood that such option is not intended to be an "Incentive Stock Option" within the meaning of Section 422A of the Internal Revenue Code of 1954, as amended (the "Code"). 2. Term of Option. This option may be exercised (unless terminated prior to such exercise as hereinafter provided) during the periods commencing after the anniversary and for the percentage of shares granted as provided below: Anniversary Following Vesting The Date Hereof Schedule First Anniversary . . . . 25% of Shares Granted Second Anniversary . . . . 25% of Shares Granted Third Anniversary . . . . 25% of Shares Granted Fourth Anniversary . . . . 25% of Shares Granted provided, however, that this option shall be exercised for full shares only and shall not be exercised for less than 50 shares at any one time unless the remaining shares covered hereby is less than 50. In the event that the Employee shall not in any year purchase all or any part of the shares which the Employee is entitled to purchase in such year, the Employee's right to purchase any shares not purchased in such year shall continue until the expiration or termination of this option, which in no event shall be more than ten (10) years from the date of grant. 3. Expiration of Option. This option shall expire and all rights to purchase shares hereunder shall cease at 5:00 o'clock p.m., California time, on or prior thereto upon the happening of the first to occur of the following events: (a) the expiration of ten (10) years from the date such option was granted, or any earlier termination date specified in the option agreement; (b) the expiration of three (3) months from the date the Employee ceases to be employed by the Company or a Subsidiary other than by reason of death, Retirement, Disability or termination of employment for cause as determined by the Committee; (c) the expiration of one (1) year from the date the Employee ceases to be employed by the Company or a Subsidiary by reason of Disability or death; (d) the expiration of three (3) years from the date the Employee ceases to be employed by the Company or a Subsidiary by reason of Retirement; (e) the termination of the Employee's employment for cause, as determined by the Committee; (f) the termination of the Plan pursuant to Section 8; provided, that if the Employee's death occurs after the Employee ceases to be employed by the Company or a Subsidiary but at a time when the Employee has a right to exercise any options pursuant to the foregoing, the right to exercise such option shall be extended for one year from the date of death of the Employee. Subsequent to termination of the Employee's employment for any reason, only that portion of an option which was exercisable on the date of termination of employment shall be exercisable, and only during the period, if any, set forth above. 4. Nontransferability of Option. This option shall be nonassignable and nontransferable by the Employee other than by will or the laws of descent and distribution, and shall be exercisable during the lifetime of the Employee only by the Employee or by the Employee's guardian or legal representative. After the death of the Employee, this option may be exercised prior to its termination by the Employee's legal representative, heir or legatee, to the extent permitted in the Plan. Upon any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of this option, or of any right or privilege conferred hereby, contrary to the provisions hereof, or upon any attempted sale under any execution, attachment or similar process upon the rights and privileges conferred hereby, this option and the rights and privileges conferred hereby shall immediately become null and void. Until written notice of any permitted passage of rights under this option shall have been given to and received by the Secretary of the Company, the Company may, for all purposes, regard the Employee as the holder of this option. 5. Exercise of Option. The rights granted under this Agreement may be exercised by the Employee, or by the person or persons to whom the Employee's rights under this Agreement shall have passed under the provisions of Section 4 hereof, by delivering to the Company in care of its Secretary, at 707 Wilshire Boulevard, Los Angeles, California 90017, written notice of the number of shares with respect to which the rights are being exercised, accompanied by this Agreement for appropriate endorsement by the Company, such investment letter as may be required by Section 10 hereof, and the consideration provided in the Plan, if any, provided that if the Employee intends to exercise this option by delivery of consideration consisting in whole or in part of shares of Common Stock already owned by the Employee, shall secure the prior consent of the Committee to such delivery. 6. Regulatory Compliance. The issue and sale of shares of stock pursuant to this Agreement shall be subject to full compliance with all then applicable requirements of law and the requirements of any stock exchange upon which Common Stock of the Company may be listed. 7. Modification and Termination. The rights of the Employee are subject to modification, acceleration and termination in certain events as provided in Sections 7, 8 and 9 of the Plan. 8. Withholding Tax. The Employee agrees that, in the event the exercise of any rights granted in this Agreement results in the Employee's realization of income which for Federal, state or local income tax purposes is, in the opinion of counsel for the Company, subject to withholding of tax at source by the Employee's employer, the Employee will pay to the Employee's employer an amount equal to such withholding tax (or such employer on behalf of the Company may withhold such amount from the Employee's salary) prior to delivery to the Employee of certificates representing the shares purchased or transferred. 9. Holder of Shares. Neither the Employee nor the Employee's legal representative, legatee or distributee shall be, or be deemed to be, a holder of any shares of the Company's Common Stock subject to this option unless and until such person has received a certificate or certificates therefor. No adjustment will be made for dividends or other rights for which the record date is prior to the date such stock certificate or certificates are so issued. 10. Investment Covenant. The Employee represents and agrees that if the Employee exercises this option in whole or in part at a time when there is not in effect under the Securities Act of 1933 a registration statement relating to the shares issuable upon exercise hereof and there is not available for delivery a prospectus meeting the requirements of Section 10(a)(3) of said Act, (i) the Employee will acquire the shares upon such exercise for the purpose of investment and not with a view to the distribution thereof, (ii) that upon each such exercise of this option, the Employee will furnish to the Company an investment letter in form and substance satisfactory to the Company, (iii) prior to selling or offering for sale any such shares, the Employee will furnish the Company with an opinion of counsel satisfactory to it to the effect that such sale may lawfully be made and will furnish it with such certificates as to factual matters as it may reasonably request, and (iv) that certificates representing such shares may be marked with an appropriate legend describing such conditions precedent to sale or transfer. Any person or persons entitled to exercise such option under the provision of Paragraph 4 hereof shall furnish to the Company letters, opinions and certificates to the same effect as would otherwise be required of the Employee. 11. Governing Law. This Agreement shall be governed by and interpreted in accordance with the laws of the State of California. 12. Successors. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their legal representatives, and permitted successors and assigns. 13. Plan. This Agreement is subject to all of the terms and provisions of the Plan, receipt of a copy of which is hereby acknowledged by the Employee. IN WITNESS WHEREOF, this Agreement has been executed and delivered by the parties hereto on. FIRST INTERSTATE BANCORP By:______________________________ Chairman of the Board _________________________________ EMPLOYEE _________________________________ (Address) _________________________________ _________________________________ Social Security No.______________ Affiliate _______________________ OPTION EXERCISE ENDORSEMENTS DATE OF NUMBER OF NOTED FOR FIRST EXERCISE SHARES INTERSTATE BANCORP EX-99.6 7 PERFORMANCE STOCK PLAN FIRST INTERSTATE BANCORP 1983 PERFORMANCE STOCK PLAN 1. Purpose. The purpose of the 1983 Performance Stock Plan (the "Plan") is to promote the interests of First Interstate Bancorp (the "Company") and its Subsidiaries by providing performance incentives to certain of its key employees who are responsible for the management, growth and financial success of the Company. Pursuant to the Plan incentive stock options, non-qualified stock options and restricted stock awards may be granted. 2. Administration. The Plan shall be administered by a Committee (the "Committee") consisting of those members of the Compensation Committee of the Board of Directors of the Company who as of the date of any action by the Committee are not then, and have not been during the preceding twelve months, eligible to participate in the Plan. The Committee shall have full authority to administer the Plan, including authority to interpret and construe any provision of the Plan and to adopt such rules and regulations for administering the Plan as it may deem necessary. Decisions of the Committee shall be final and binding on all persons who have an interest in the Plan. 3. Eligibility. The persons eligible to participate in the Plan shall be those key employees of the Company and its Subsidiaries selected by the Committee; provided, however, that no person shall be granted an award under the Plan who at the time owns more than 5% of the issued and outstanding common stock of the Company. 4. Shares Subject to the Plan. The shares subject to the Plan shall be shares of the Company's $2 par value Common Stock ("Common Stock"). The aggregate number of shares of Common Stock which may be delivered under the Plan shall not exceed 1,000,000, of which not more than 300,000 shares may be delivered pursuant to Restricted Stock awards, in each case subject to adjustment pursuant to Section 7. If an option shall terminate for any reason, except for the surrender thereof upon exercise of a related stock appreciation right, without having been exercised in full, the shares applicable to the unexercised portion of such option shall become available under the Plan. If any shares of Restricted Stock are forfeited in accordance with the provisions of Section 6, such shares shall again be available under the Plan for all purposes. Either authorized and unissued shares or treasury shares may be delivered under the Plan; provided, however, that unissued shares shall not be awarded as Restricted Stock to any Participant unless the Committee expressly determines, after consideration of all other remuneration paid or payable to the Participant, that the services already rendered to the Company and its Subsidiaries by the Participant have a value of not less than the par value of the shares so awarded. 5. Stock Options. Stock options granted under the Plan may be either incentive stock options qualifying under Section 422A of the Internal Revenue Code of 1954, as amended ("Incentive Options"), or non-qualified stock options ("Non-Qualified Options"). The options shall be evidenced by agreements in such form as the Committee may, from time to time, approve and shall be subject to the following terms and conditions. 5.1. Option Price. The option price of the shares of Common Stock subject to each option shall be determined by the Committee but shall be not less than 100% of the Fair Market Value of such shares on the date of granting of the option. 5.2. Terms of Exercise. Each option granted under the Plan shall be exercisable in whole or in part on such terms as the Committee may determine, but in no event shall the option be exercisable within one year of, or more than 10 years after, the date the option is granted. 5.3. Manner of Exercise. The option shall be exercised by giving written notice to the Company specifying the number of full shares to be purchased, accompanied by payment of the full price thereof. Payment for the shares purchased shall be made in cash or, if permitted by the Committee, in shares of Common Stock already owned by the holder of the option ("Optionee") or partly in cash and partly in shares of Common Stock. Payments made in Common Stock shall be made bv delivery of the certificates property endorsed for transfer in negotiable form and shall be valued at the Market Value of the Common Stock on the date of exercise. 5.4. Additional Terms of Incentive Options. An Incentive Option granted pursuant to the Plan: (a) Must be designated as an Incentive Option by the Committee; (b) Shall not be exercisable while there is outstanding any incentive stock option which was granted to the same employee before the granting of such option with respect to a right to purchase shares of the Company or a Parent or Subsidiary of the Company or any predecessor of any of the foregoing. An incentive stock option shall be deemed outstanding for purposes of the foregoing sentence until such option is exercised in full or expires by reason of lapse of time; (c) Shall not be issued for a number of shares which would cause the aggregate Fair Market Value (determined as of the date the option is granted) of the shares subject to incentive stock options granted to an employee in any calendar year by the Company or any Parent or Subsidiary of the Company to exceed $100,000 plus any unused limit carry-over to such year permitted by Section 422A(c)(4) of the Internal Revenue Code; and (d) If issuable to an employee who on the date of grant is the owner of stock (determined with application of the ownership attribution rules of Section 425(d) of the Internal Revenue Code) possessing more than 10% of the total combined voting power of all classes of stock of the Company or any Parent or Subsidiary, the Incentive Option price shall not be less than 110% of the Fair Market Value of the Common Stock on the date of grant and the Incentive Option shall not have a term in excess of five (5) years from the date of grant. 5.5. Termination of Right To Exercise Options. Each option granted under this Plan shall set forth a termination date thereof, which date shall be determined by the Committee. In any event, all options granted pursuant to the Plan shall terminate upon the first to occur of the following events: (a) The expiration of ten (10) years from the date such option was granted, or any earlier termination date specified in the option agreement; (b) The expiration of three (3) months from the date an Optionee ceases to be employed by the Company or a Subsidiary other than by reason of death, Retirement, Disability or termination of employment for cause as determined by the Committee; (c) The expiration of one (1) year from the date an Optionee ceases to be employed by the Company or a Subsidiary by reason of Retirement, Disability or death; (d) The termination of the Optionee's employment for cause, as determined by the Committee; (e) The termination of the Plan pursuant to Section 8; provided, that if an Optionee's death occurs after the Optionee ceases to be employed by the Company or a Subsidiary but at a time when the Optionee has a right to exercise any options pursuant to the foregoing, the right to exercise such option shall be extended for one year from the date of death of the Optionee. Subsequent to termination of the Optionee's employment for any reason, only that portion of an option which was exercisable on the date of termination of employment shall be exercisable, and only during the period, if any, set forth above. Failure to exercise an Incentive Option within three months of the date Optionee ceases to be employed by the Company or a Subsidiary by reason of Retirement shall cause an Incentive Option to cease to be treated as an incentive stock option for purposes of Section 421 of the Internal Revenue Code. 5.6. Stock Appreciation Rights. Any option granted pursuant to the Plan may, in the discretion of the Committee, contain a stock appreciation right ("Stock Appreciation Right"). A Stock Appreciation Right will permit the holder thereof to exercise such right by the surrender of the option or portion thereof which is then exercisable and receive in exchange therefor, upon such terms, restrictions and conditions as the Committee deems advisable, an amount equal to the excess of the fair market value of the shares of Common Stock covered by the option surrendered, or portion thereof, determined on the date of surrender, over the aggregate option exercise price of such shares. Such payment may be made in shares of Common Stock valued at fair market value, in cash, or parity in cash and partly in shares of Common Stock as the holder may elect, subject to the consent or disapproval of the Committee in its sole discretion. The Stock Appreciation Right, in addition to any other restrictions imposed by the Committee: (a) shall expire no later than the underlying stock option; (b) shall not permit the issuance of cash or shares of a value which exceeds the difference between the exercise price of the underlying stock option and the Market Value of the Common Stock subject to the underlying option at the time the Stock Appreciation Right is exercised; (c) shall be transferable only when the underlying stock option is transferable, and under the same conditions; and (d) shall be exercisable only when the underlying stock option is eligible to be exercised and then only when the Fair Market Value of the stock subject to the underlying option exceeds the option exercise price. In the event of the exercise of a Stock Appreciation Right, shares represented by the option or part thereof surrendered upon such exercise shall not be available for reissuance under the Plan. 5.7. Options Non-transferable. No option rights shall be assignable or transferable except by will or by the laws of descent and distribution. During the lifetime of an Optionee, the option or Stock Appreciation Right shall be exercisable only by the Optionee or by the Optionee's guardian or legal representative. After the death of an Optionee, the option or Stock Appreciation Right may be exercised prior to its termination by the Optionee's legal representative, heir or legatee. 6. Restricted Stock Awards. The award of restricted stock ("Restricted Stock") to employees shall be made in the discretion of the Committee pursuant to agreements in such form as the Committee may, from time to time, approve ("Restricted Stock Agreement"), subject to the following terms and conditions. 6.1. Restricted Period. The Committee shall set a restricted period during which the Restricted Stock may not be sold, assigned, transferred, pledged or otherwise encumbered, except as permitted by this Plan and the Restricted Stock Agreement (the "Restricted Period"). If a holder of Restricted Stock ceases to be an employee of the Company or a Subsidiary during the Restricted Period for any reason other than death, Disability or Retirement, all shares of Restricted Stock which are then subject to the restrictions imposed by the Committee shall upon such termination of employment be forfeited and returned to the Company. If a holder of Restricted Stock ceases to be an employee of the Company or a Subsidiary during the Restricted Period by reason of death, Disability or Retirement, shares of Restricted Stock shall become free of the restrictions imposed by the Committee to the extent determined by the Committee, and the Company will deliver to the holder, or the holder's successor, as the case may be, within 60 days, such shares of Common Stock. Shares of Common Stock which do not become free of restrictions shall be forfeited and returned to the Company. The Committee may, at any time, reduce or terminate the Restricted Period. In the event of a Change in Control of the Company, the Restricted Period shall terminate automatically. Subject to the foregoing, at the end of the Restricted Period, the holder of Restricted Stock shall be entitled to receive the Restricted Stock free of restrictions. 6.2. Restrictive Legend and Deposit of Certificates. Each certificate issued in respect of shares of Restricted Stock awarded under the Plan shall be registered in the name of the Participant, shall be deposited by the Participant with the Company together with a stock power endorsed in blank and shall bear the following legend: "The transferability of this certificate and the shares of stock represented hereby are subject to the terms and conditions contained in an Agreement entered into between the registered owner and First Interstate Bancorp. A copy of such Agreement is on file in the office of the Secretary of First Interstate Bancorp, 707 Wilshire Boulevard, Los Angeles, California 90017." 6.3. Rights as Shareholder. Subject to the terms of the Restricted Stock Agreement, the holder of Restricted Stock shall have all the rights of a shareholder with respect to the Restricted Stock, including the right to vote such shares; provided, however, that dividends paid with respect to the shares of Restricted Stock shall be deposited with the Company and shall be subject to forfeiture until the expiration of the Restricted Period, subject to the condition that the sums so deposited shall be free of restriction and not subject to forfeiture to the extent applied by the Company to satisfy the employee's obligations with respect to Restricted Stock pursuant to Section 10 of the Plan, or otherwise released by the Committee in its sole discretion. The holder of Restricted Stock shall not be entitled to interest with respect to the dividends so deposited. 7. Changes in Capitalization. If there are any changes in the capitalization of the Company affecting in any manner the number or kind of outstanding shares of Common Stock of the Company, whether such changes have been occasioned by declaration of stock dividends, stock split-ups, reclassifications or recapitalization of such stock, or because the Company has merged or consolidated with some other corporation (and provided the option is not thereby terminated pursuant to section 8 hereof), or for any other reason whatsoever, then the number and kind of shares then subject to this Plan and to outstanding options and the prices to be paid therefor, as well as any related Stock Appreciation Right, shall be proportionately adjusted by the Committee whenever and to the extent that the Committee determines that any such change equitably requires an adjustment. Any shares of Common Stock or other securities received by a holder of Restricted Stock with respect to such Restricted Stock by reason of any such change shall be subject to the same restrictions and shall be deposited with the Company. 8. Mergers or Consolidations. If the Company, at any time, should elect to dissolve, undergo a reorganization, merge or consolidate with any other corporation and the Company is not the surviving corporation, then (unless in the case of a reorganization, merger or consolidation, one or more of the surviving corporations assumes the options under the Plan or issues substitute options in place thereof) each Optionee holding outstanding options not yet exercised shall be notified of the Optionee's right to exercise such options and any related Stock Appreciation Right to the extent then exercisable prior to such dissolution, reorganization, merger or consolidation. The Committee may, in its discretion and on such terms and conditions as it deems appropriate, authorize the exercise of such options and any related Stock Appreciation Right with respect to all shares covered thereby. Any option and related Stock Appreciation Right not so exercised within thirty (30) days of such notification shall thereupon be deemed terminated and simultaneously the Plan itself shall be deemed terminated. 9. Effect on Employment. Nothing herein shall be construed to limit or restrict the right of the Company or any of its Subsidiaries to terminate the employment of any Participant in the Plan, at any time, with or without cause, or to increase or decrease the compensation of such Participant from the rate of compensation in existence at the time the employee became a Participant. 10. Withholding. The Company shall have the right to withhold from amounts due Participants, or to collect from Participants directly, the amount which the Company deems necessary to satisfy any taxes required by law to be withheld by reason of participation in the Plan. 11. Additional Definitions. "Change in Control" of the Company means and shall be deemed to have occurred if and when (i) any "person" (as such term is used in Section 13(d) of the Securities Exchange Act of 1934) becomes a beneficial owner, directly or indirectly, of securities of the Company representing 25% or more of the combined voting power of the Company's then outstanding securities or (ii) individuals who were members of the Board of Directors of the Company immediately prior to a meeting of the stockholders of the Company involving a contest for the election of Directors shall not constitute a majority of the Board of Directors following such election. "Disability" shall mean such physical or mental condition affecting the employee as shall be determined by the Committee, in its sole discretion, to constitute a disability causing a termination of employment. "Fair Market Value" or "Market Value" on a specified day means the closing price on that day of the Common Stock as reported on the New York Stock Exchange-Composite Tape, or if no sale of the Common Stock was so reported on that date, on the next preceding day on which there was such a sale. "Parent" means any corporation owning directly or indirectly 50% or more of the total combined voting power of all classes of stock of the Company. "Participant" means an eligible employee selected by the Committee to participate in the Plan. "Subsidiary" means any corporation of which the Company owns, directly or indirectly, 50% or more of the total combined voting power of all classes of stock. "Retirement" means normal or early retirement in accordance with the provisions of the First Interstate Retirement Plan. 12. Amendment of Plan. The Board of Directors of the Company may make such amendments to this Plan and to any agreements thereunder as it shall deem advisable, including, but not limited to, accelerating the time at which an option may be exercised or the time when restrictions on Restricted Stock shall expire, but may not, without shareholder approval: (a) increase the maximum number of shares subject to the Plan, except pursuant to section 7; (b) decrease the option price provided for in section 5; (c) extend the term during which or for which options may be granted; or (d) change the designation of the class of employees eligible to participate in the Plan. Without the consent of the Participant, no amendment shall impair the rights of any Participant in any rights awarded to such Participant under the Plan, except as permitted by the Plan. 13. Effective Date and Termination of Plan. The Plan shall be effective January 1, 1983, subject to receipt of shareholder approval of the Plan within one year of that date. All awards pursuant to the Plan prior to the receipt of shareholder approval shall be subject to receipt of such approval. If such approval is not received, the award shall be forfeited. The Plan shall terminate ten years from the effective date; provided, however, that the Board of Directors of the Company may terminate the Plan at any prior time within its absolute discretion. No such termination, other than as provided for in section 8 hereof, shall in any way affect any option, Stock Appreciation Right or Restricted Stock then outstanding. FIRST AMENDMENT BOARD OF DIRECTORS AMENDMENT TO 1983 PERFORMANCE STOCK PLAN RESOLVED, that the Board of Directors of this Corporation, pursuant to the authority contained in Section 12 of the First Interstate Bancorp 1983 Performance Stock Plan (the "Plan") hereby adopts an amendment to the Plan in the form as set forth below: 10A. Withholding on Restricted Stock. In addition, with respect to an Award of Restricted Stock, and in addition to the Company's rights under Section 6.3 of the Plan, the Company shall have the right to withhold that portion of Shares of Common Stock otherwise vested as are necessary to satisfy applicable withholding taxes, provided the Participant complies with the following requirements: (a) The Participant shall elect, on a date prior to the date the applicable tax is determined, to have shares apply to the withholding obligation; (b) the election shall be irrevocable; (c) the election shall be subject to the disapproval of the Compensation Committee; (d) the election shall be made at least six months after the Award of Restricted Stock; and (e) the election shall be made (i) either six months prior to the date the applicable tax is determined or (ii) within the ten day "window period" beginning on the third day following the release of quarterly or annual financial statements. RESOLVED FURTHER, that the appropriate officers of this Corporation be, and they hereby are, authorized to take such actions as are reasonable and appropriate to implement this amendment. SECOND AMENDMENT TO FIRST INTERSTATE 1983 PERFORMANCE STOCK PLAN First Interstate Bancorp adopted the First Interstate Bancorp 1983 Performance Stock Plan (the "Plan") effective November 15, 1982 as approved by shareholders on April 22, 1983. In order to have consistent treatment under First Interstate Bancorp's various plans in the event that employees become employees of another company, this amendment is being adopted. This amendment is effective August 17, 1992. 1. New sentences have been added to Section 6.1 of the Plan to read as follows: In the event that employees of the Company or its Subsidiaries become employees of another company pursuant to a stock or asset sale, merger, or similar transaction or in the event of a corporate reorganization, reduction in force or similar event, the Committee shall have the authority, which shall be exercised in its sole discretion, to continue to credit service for purposes of satisfying the restricted period requirements set forth in the Restricted Stock Agreement. Such Committee authority shall only apply to restricted stock granted to individuals who are not subject to Section 16 of the Securities Exchange Act. 2. The following paragraph has been added as a new Section 14: 14. Expiration of Options. In the event that employees of the Company or its Subsidiaries become employees of another company pursuant to a stock or asset sale, merger or similar transaction or in the event of a corporate reorganization, reduction in force or similar event, the Committee shall have the authority, which shall be exercised in its sole discretion, to modify the dates upon which options previously granted shall expire. Such Committee authority shall only apply to options granted to individuals who are not subject to Section 16 of the Securities Exchange Act. Any modification to the terms under which the option would otherwise expire shall not cause the option to expire later than the date the option was originally scheduled to expire pursuant to the terms or the original Stock Option Agreement. Executed at Los Angeles this 22 day of August, 1995. FIRST INTERSTATE BANCORP By: /SIGNED/ -------------------------- Executive Vice President By: /SIGNED/ --------------------------- Secretary THIRD AMENDMENT TO FIRST INTERSTATE BANCORP 1983 PERFORMANCE STOCK PLAN First Interstate Bancorp adopted the First Interstate Bancorp 1983 Performance Stock Plan (the "Plan") effective November 15, 1982 as approved by shareholders on April 29, 1988 at the Annual Shareholder's meeting. In order to have a consistent definition of Change in Control among First Interstate Bancorp's various plans, this Amendment is being adopted. This Amendment is effective June 20, 1994. 1. The definition of Change in Control in Section 11 Additional Definitions is amended by revising it to read as follows: "Change in Control" of the Company means and shall be deemed to have occurred if and when any one of the following five events occurs: (i) any "person" (as such term is used in Section 13(d) of the Securities Exchange Act of 1934 (the "Exchange Act")) becomes a beneficial owner,directly or indirectly, of securities of the Company representing 20% or more of the combined voting power of the Company's then outstanding securities; (ii) individuals who were members of the Board of Directors of the Company immediately prior to a meeting of the stockholders of the Company involving a contest for the election of Directors do not constitute a majority of the Board of Directors following such election; (iii) the stockholders of the Company approve the dissolution or liquidation of the Company; (iv) the stockholders of the Company approve an agreement to merge or consolidate, or otherwise reorganize, with or into one or more entities which are not Subsidiaries, as a result of which less than 50% of the outstanding voting securities of the surviving or resulting entity are, or are to be, owned by former stockholders of the Company (excluding from the term "former stockholders" a stockholder who is, or as a result of the transaction in question becomes, an "affiliate", as that term is used in the Exchange Act and the Rules promulgated thereunder, of any party to such merger, consolidation or reorganization); or (v) the stockholders of the Company approve the sale of substantially all of the Company's business and/or assets to a person or entity which is not a Subsidiary. Executed at Los Angeles, California this 20th day of July 1994. FIRST INTERSTATE BANCORP By: /SIGNED/ -------------------------- Executive Vice President By: /SIGNED/ -------------------------- Secretary FIRST INTERSTATE BANCORP 1983 PERFORMANCE STOCK PLAN NON-QUALIFIED STOCK OPTION AGREEMENT THIS AGREEMENT is between FIRST INTERSTATE BANCORP, a Delaware corporation (hereinafter called the "Company"), and (hereinafter called the "Employee"). RECITALS: The Company has established the 1983 Performance Stock Plan (the "Plan"); and The Committee of the Board of Directors of the Company designated in the Plan (the "Committee") has approved the execution of this Non-Qualified Stock Option Agreement containing the grant of the option herein set forth to the Employee to purchase shares of the Common Stock, $2.00 par value, of the Company upon the terms and conditions hereinafter set forth; AGREEMENT: In consideration of the mutual obligations contained herein, it is hereby agreed: 1. Grant of Option. The Company hereby grants to the Employee a Non-Qualified Option to purchase from the Company all or any part of ( ) shares of its authorized Common Stock at the price of $ per share. It is understood that such option is not intended to be an "Incentive Stock Option" within the meaning of Section 422A of the Internal Revenue Code of 1954, as amended (the "Code"). 2. Term of Option. This option may be exercised (unless terminated prior to such exercise as hereinafter provided) during the periods and for the number of shares indicated below: Year Following Number The Date Hereof Of Shares --------------- --------- 2nd. . . . . . . . 250 Shares 3rd. . . . . . . . 250 Additional Shares 4th. . . . . . . . 250 Additional Shares 5th. . . . . . . . 250 Additional Shares provided, however, that this option shall be exercised for full shares only and shall not be exercised for less than 50 shares at any one time unless the remaining shares covered hereby is less than 50. In the event that the Employee shall not in any year purchase all or any part of the shares which the Employee is entitled to purchase in such year, the Employee's right to purchase any shares not purchased in such year shall continue until the expiration or termination of this option, which in no event shall be more than ten (10) years from the date of grant. 3. Expiration of Option. This option shall expire and all rights to purchase shares hereunder shall cease at 5:00 o'clock p.m., California time, on or prior thereto upon the happening of the first to occur of the following events: (a) The expiration of ten (10) years from the date such option was granted, or any earlier termination date specified in the option agreement; (b) The expiration of three (3) months from the date on which Optionee ceases to be employed by the Company or a Subsidiary other than by reason of death, Retirement, Disability or termination of employment for cause as determined by the Committee. During such period of three months, this option shall be exercisable only to the extent that the Optionee was entitled to exercise this option on the date of the happening of such event; (c) The expiration of one (1) year from the date an Optionee ceases to be employed by the Company or a Subsidiary by reason of Retirement, Disability or death. During such period of one year, this option shall be exercisable only to the extent that the Optionee was entitled to exercise this option on the date of the happening of such event; (d) The termination of the Optionee's employment for cause, as determined by the Committee; (e) The termination of the Plan pursuant to Section 8. 4. Nontransferability of Option. This option shall be nontransferable by the Employee other than by will or the laws of descent and distribution, and shall be exercisable during the lifetime of the Employee only by the Employee or by the Employee's guardian or legal representative. After the death of the Employee, this option may be exercised prior to its termination by the Employee's legal representative, heir or legatee, to the extent permitted in the Plan. Upon any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of this option, or of any right or privilege conferred hereby, contrary to the provisions hereof, or upon any attempted sale under any execution, attachment or similar process upon the rights and privileges conferred hereby, this option and the rights and privileges conferred hereby shall immediately become null and void. Until written notice of any permitted passage of rights under this option shall have been given to and received by the Secretary of the Company, the Company may, for all purposes, regard the Employee as the holder of this option. 5. Exercise of Option. The rights granted under this Agreement may be exercised by the Employee, or by the person or persons to whom the Employee's rights under this Agreement shall have passed under the provisions of Section 4 hereof, by delivering to the Company in care of its Secretary, at 707 Wilshire Boulevard, Los Angeles, California 90017, written notice of the number of shares with respect to which the rights are being exercised, accompanied by this Agreement for appropriate endorsement by the Company, such investment letter as may be required by Section 10 hereof, and the consideration provided in the Plan, if any, provided that if the Employee intends to exercise this option by delivery of consideration consisting in whole or in part of shares of Common Stock already owned by the Employee, shall secure the prior consent of the Committee to such delivery. 6. Regulatory Compliance. The issue and sale of shares of stock pursuant to this Agreement shall be subject to full compliance with all then applicable requirements of law and the requirements of any stock exchange upon which Common Stock of the Company may be listed. 7. Modification and Termination. The rights of the Employee are subject to modification and termination in certain events as provided in Sections 7 and 8 of the Plan. 8. Withholding Tax. The Employee agrees that, in the event the exercise of any rights granted in this Agreement results in the Employee's realization of income which for Federal, state or local income tax purposes is, in the opinion of counsel for the Company, subject to withholding of tax at source by the Employee's employer, the Employee shall pay to the Employee's employer an amount equal to such withholding tax (or such employer on behalf of the Company may withhold such amount from the Employee's salary) prior to delivery to the Employee of certificates representing the shares purchased or transferred. 9. Holder of Shares. Neither the Employee nor the Employee's legal representative, legatee or distributee shall be, or be deemed to be, a holder of any shares of the Company's Common Stock subject to this option unless and until such person has received a certificate or certificates therefor. No adjustment will be made for dividends or other rights for which the record date is prior to the date such stock certificate or certificates are so issued. 10. Investment Covenant. The Employee represents and agrees that if the Employee exercises this option in whole or in part at a time when there is not in effect under the Securities Act of 1933 a registration statement relating to the shares issuable upon exercise hereof and there is not available for delivery a prospectus meeting the requirements of Section 10(a)(3) of said Act, (i) the Employee will acquire the shares upon such exercise for the purpose of investment and not with a view to the distribution thereof, (ii) that upon each such exercise of this option, the Employee will furnish to the Company an investment letter in form and substance satisfactory to the Company, (iii) prior to selling or offering for sale any such shares, the Employee will furnish the Company with an opinion of counsel satisfactory to it to the effect that such sale may lawfully be made and will furnish it with such certificates as to factual matters as it may reasonably request, and (iv) that certificates representing such shares may be marked with an appropriate legend describing such conditions precedent to sale or transfer. Any person or persons entitled to exercise such option under the provision of Paragraph 4 hereof shall furnish to the Company letters, opinions and certificates to the same effect as would otherwise be required of the Employee. 11. Governing Law. This Agreement shall be governed by and interpreted in accordance with the laws of the State of California. 12. Successors. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their legal representatives, and permitted successors and assigns. 13. Plan. This Agreement is subject to all of the terms and provisions of the Plan, receipt of a copy of which is hereby acknowledged by the Employee. IN WITNESS WHEREOF, this Agreement has been executed and delivered by the parties hereto on. FIRST INTERSTATE BANCORP By:______________________________ Chairman of the Board ______________________________ EMPLOYEE ______________________________ (Address) ______________________________ ______________________________ Social Security No.____________________ Affiliate _____________________________ OPTION EXERCISE ENDORSEMENTS DATE OF NUMBER OF NOTED FOR FIRST EXERCISE SHARES INTERSTATE BANCORP EX-99.7 8 1995 MANAGEMENT INCENTIVE PLAN FIRST INTERSTATE 1995 MANAGEMENT INCENTIVE PLAN EFFECTIVE JANUARY 1, 1995 1. OBJECTIVES. The 1995 Management Incentive Plan is designed to focus the efforts of certain key employees of First Interstate on the continued improvement in the performance of First Interstate and to aid in attracting, motivating and retaining superior executives by providing an incentive and reward for those key employees who contribute most to the operating progress and performance of First Interstate. 2. DEFINITIONS. The following definitions shall be applica- ble to the terms used in the Plan: (a) "Administrator" means the Chief Executive Officer of Bancorp. (b) "Award" means a cash distribution to be made to a Participant for a Performance Year as determined in accordance with the provisions of the Plan. (c) "Award Fund" means the total of the Target Awards for each Participant as determined and approved in accordance with Section 5 hereof. (d) "Bancorp" means First Interstate Bancorp, a Delaware corporation. (e) "Change in Control" shall have the meaning set forth in Section 17. (f) "Committee" means the Compensation Committee of the Board of Directors of Bancorp. (g) "First Interstate" means the consolidated group of companies comprising First Interstate Bancorp. (h) "Fiscal Year" means the customary fiscal year of Bancorp. (i) "Offset Value" shall have the meaning set forth in Section 18(b) and (c). (j) "Participant" means a person who, pursuant to Section 4 hereof, is designated as a Participant in the Plan for a Fiscal Year. (k) "Performance Year" means the Fiscal Year. (l) "Plan" means this First Interstate 1995 Management Incentive Plan, as set forth herein. (m) "Policies" shall have the meaning set forth in Section 18(a). (n) "PSP" shall have the meaning set forth in Section 7(c). (o) "Split-Dollar Life Insurance Agreement" shall have the meaning set forth in Section 18(a). (p) "Subsidiary" means a bank, corporation, association or similar organization of which the majority of the outstanding shares of voting stock is owned directly or indirectly by Bancorp, directly or indirectly. (q) "Target Award" is determined for each Participant by multiplying the Participant's base pay rate in effect at the end of the Performance Year by the Target Award Percentage applicable to the Participant set forth under Item I of the Target Award Guidelines attached as Table A. 3. ADOPTION AND ADMINISTRATION OF THE PLAN. The Plan shall become effective as of January 1, 1995 upon adoption by the Committee. Subject to the provisions of this Plan and in the absence of specific action by the Committee, this Plan shall be administered by the Administrator. The Plan shall not be modified except with the consent of the Committee. All decisions of the Administrator or the Committee shall be final and binding. 4. PARTICIPATION AND TARGET AWARDS. (a) Determination of Participants and Target Awards. Prior to the beginning of each Performance Year, or as soon as practicable thereafter, the Administrator shall prepare a list of proposed Participants in the Plan for such Performance Year and shall, for each such Participant, establish a preliminary Target Award Percentage. Each Subsidiary shall be given an opportunity to make suggestions with respect to both proposed Participants and their preliminary Target Award Percentages. Any such suggestions shall, however, not be binding on the Administrator. Additional Participants may be included during the Performance Year and, as provided in the Plan, participation for an individual may be terminated. Except as provided in Section 8(b) and 10, to be considered eligible for an Award, a Participant must participate in the Plan for at least six months during the Performance Year. (b) Notification. Each Participant shall be notified of his or her participation in the Plan for such Performance Year or shall be notified of his or her termination, as applicable, by a letter from the Administrator or his or her designee. A summary of 2 this Plan shall be provided to each Participant. A Participant shall have no right to or interest in an Award unless and until the Participant's Award has been determined and allocated to the Participant. 5. DETERMINATION OF AWARD FUND. (a) Performance Review. As soon as practicable after the close of each Performance Year, a determination of the Corporation's performance and the performance of each Region participating in this Plan shall be made by the Administrator. The Administrator's determination shall be subject to approval by the Committee. (b) Award Fund. The Committee shall determine the total amount of the Award Fund authorized for First Interstate for the Performance Year. The Award Fund shall contain a separate pool of funds for Bancorp and each participating Subsidiary. The Award Fund amount for Bancorp and each participating Subsidiary may be determined in any manner the Committee deems appropriate from time to time. Without limiting the Committee's discretion to choose other methods to calculate the size of the Award Fund, it is anticipated that the Award Fund amount for the Participants employed by Bancorp or a participating Subsidiary will equal the sum of the Target Awards for each Participant of Bancorp or the participating Subsidiary, as applicable, multiplied by the following percentage calculated for such a Participant: (AxC) + (BxD), where A is the percentage, if any, of the Participant's Award to be based on First Interstate's performance, B is the percentage, if any, of the Participant's Award to be based on a Region's performance, as such percentages are set forth under Item II of the Target Award Guidelines attached as Table A, C is a percentage representing the performance of First Interstate determined by the Administrator, and D is a percentage representing the performance of the Region determined by the Administrator. 6. ALLOCATION OF AWARD FUND TO PARTICIPANTS. The Award Fund shall be available for allocation to Participants on a totally discretionary basis in a manner designed to give the Administrator the flexibility to take into account the individual performance of each Participant. Based on its evaluation of a Participant's performance, the Administrator may determine an Award equal to any percentage of the Participant's Target Award up to the maximum percentage set forth under Item III of the Target Award Guidelines attached as Table A. The total Awards determined by the Administrator for Bancorp or a participating Subsidiary for a Performance Year shall not exceed the amount of the Award Fund for the particular employer for such Performance Year. In the event the amount of the Award Fund exceeds the total Awards for a Performance 3 Year, such excess shall not be carried forward for purposes of Awards in future Performance Years. Award payments will be charged against Bancorp or the Subsidiary for which the Participant is an employee, as appropriate. 7. TIME OF PAYMENT OF AWARDS, DEFERRALS, HARDSHIPS. (a) Payment Date. Except as provided in (b) below, as soon as practicable after the allocation of Awards in respect of Participants, any Award, less any legally required withholding, shall be paid to the Participant or, in the event of a Participant's death, in accordance with Section 8 hereof. (b) Deferrals. In the year prior to the year which the Award is earned, a Participant may elect, on a form specified by Bancorp, to defer the receipt of any Award to which he or she may be entitled for such Performance Year until the earlier of (1) termination of employment (the first to occur of retirement, death, disability, or termination of employment) or (2) January 1 of a specified calendar year. In such event: (i) The amount the Participant elects, net of any legally required withholding, shall become the deferred Award; (ii) Interest on such deferred Award will be the Moody's Investment Grade Corporate Bond Yield as shown in Moody's Yield Average for the last full month of each previous calendar year and will be credited quarterly; and (iii) Such deferred Award, plus accumulated interest, shall be paid upon the earlier of (1) or (2) above, in the form of a lump sum, equal annual installments over not more than 10 years, or such other method as may be selected by the Participant and agreed to by the Administrator. (c) Deferrals into Performance Units. As an alternative to a deferral payable in cash, as described in subsection (b), the deferred Award may, if the Participant elects and the Committee permits, be invested in Performance Units under Section 7.3 of the First Interstate Bancorp 1991 Performance Stock Plan (the "PSP") . The amount deferred shall be deemed to be converted into Performance Units under Section 7.3 of the PSP as of the date the Award would have been payable if no deferral had occurred, based on the fair market value, determined in accordance with the terms of the PSP, of the common stock of Bancorp on that date. The timing and manner of payment of deferrals shall be governed by a Performance Unit Agreement entered into by the Participant under the PSP. (d) Hardship Withdrawal. A Participant may request in writing, citing the reasons for the request, that the Committee permit the early payment of all or part of a deferred Award. Within 90 days after receipt, the Committee shall rule on the request. The 4 Committee shall grant the request only if, in its sole discretion, the Committee makes a specific finding of financial hardship that is an unanticipated emergency caused by an event beyond the control of the Participant. The amount payable hereunder shall not exceed the amount necessary to avoid such hardship. (e) Acceleration of Deferrals. Anything in this Plan to the contrary notwithstanding, the Committee may accelerate the payment of all deferred Awards with respect to Bancorp or any Subsidiary at any time in its sole discretion. In addition, the Committee reserves the right to pay any deferred Awards in the form of a lump sum if the amount is less than $10,000.00. 8. DEATH OF A PARTICIPANT. (a) Beneficiary Designation. A Participant may file a designation of a beneficiary or beneficiaries on a form to be provided which designation may be changed or revoked by the Participant's sole action, provided that such change or revocation is filed in written form. (b) Death during Performance Year. In case of the death of a Participant during a Performance Year, Bancorp or the Subsidiary, as appropriate, may pay a pro rata portion of the Award to which the Participant would have been entitled for such Performance Year. Such pro rata portion shall be equal to (1) the ratio which the Participant's completed calendar months of participation during the Performance Year bears to 12 multiplied by (2) the amount the Committee determines the Participant would have been entitled to had he or she lived. (c) Death after Performance Year. In case of the death of a Participant after the end of a Performance Year, but before the delivery of an Award to which he or she may be entitled, such Award shall be delivered to the Participant's designated beneficiary. (d) Failure to Designate Beneficiary. If a Participant dies having failed to designate any beneficiary, or if no beneficiary survives the Participant or survives to the date of any payment in question, the amount otherwise payable to such beneficiary shall be paid to the Participant's surviving spouse, if any, and otherwise to the Participant's heirs at law, as determined under the law governing succession to personal property for the state in which the Participant resided on the day the Participant died. 9. TRANSFER OF A PARTICIPANT. In the event a Participant for any Performance Year is transferred during such Performance Year from Bancorp or a Subsidiary to another Subsidiary or Bancorp, such Participant's Award, consistent with Subsection 4(a), shall normally be calculated as the sum of the following: 5 (a) the Award the Participant would have received under the Plan, had he or she not been transferred, multiplied by the ratio which his or her completed months of participation during such Performance Year prior to the transfer bears to 12, plus (b) the Award, if any, the Participant is entitled to receive under the Plan based on service after the transfer determined on a Performance Year basis and then multiplied by the ratio which his or her completed months of participation during such Performance Year subsequent to such transfer bears to 12. 10. RETIREMENT OR DISABILITY OF PARTICIPANT. In case a Participant becomes totally and permanently disabled during a Performance Year, or retires from active employment after attaining age 55 during a Performance Year, the Committee may but need not grant the Participant an Award. Generally, if an Award is granted, it will be based on a pro rata portion of the Award. 11. TERMINATION OF EMPLOYMENT. If the employment of a Participant with First Interstate is terminated prior to the approval of the Committee as specified in Section 5(a) for reasons other than those specified in Sections 8, 9 or 10 hereof, the right to and the amount of an Award shall be forfeited. 12. TERMINATION AND MODIFICATION. No Award shall be granted under the Plan after any date as of which the Plan shall have been terminated. The Board of Directors of Bancorp or the Committee may at any time modify, terminate or from time to time suspend and, if suspended, may reinstate the provisions of this Plan, including Table A. The Committee may consider but shall not be bound by suggestions of participating Subsidiaries in connection with its periodic amendment of relative weights set forth under Item II of Table A. 13. EFFECT OF OTHER PLANS. Eligibility in or the receipt of any Award under the Plan shall not be affected by or affect any other compensation or benefit plans in effect for First Interstate; provided, however that the receipt of an Award under the Corporate Executive Incentive Plan in a Performance year shall preclude participation in any Award under this Plan for such year. 14. NO EMPLOYMENT RIGHTS. Nothing contained in nor any action under the Plan will confer upon any individual any right to continue in the employment of First Interstate and does not constitute any contract or agreement of employment or interfere in any way with the right of First Interstate to terminate any individual's employment. 15. WITHHOLDING TAX. As required by law, federal, state or local taxes that are subject to the withholding of tax at the source shall be withheld by First Interstate as necessary to satisfy such requirements. 6 16. EFFECTIVE DATE. This Plan shall be effective as of January 1, 1995. The Plan, including Table A, shall remain in effect as amended from time to time. 17. PROVISIONS APPLICABLE IN THE EVENT OF A CHANGE IN CONTROL. (a) In the event of a "Change in Control" (as defined below) , notwithstanding any provisions to the contrary in this Plan, the operation of this Plan shall be modified as set forth below in this Section 17. These modifications shall only apply with respect to Target Awards for the Performance Year in which a Change in Control occurs. (b) Notwithstanding any provision to the contrary in this Plan, within ten (10) days after the Change in Control of Bancorp each Participant shall be paid 100% of his or her Target Award for the year in which the Change in Control occurs, based on the base pay rate then in effect. (c) A "Change in Control" of Bancorp means and shall be deemed to have occurred if and when any one of the following five events occurs: (i) within the meaning of Section 13(d) of the Securities Exchange Act of 1934, any person or group becomes a beneficial owner, directly or indirectly, of securities of First Interstate Bancorp representing 20% or more of the combined voting power of First Interstate Bancorp's then outstanding securities; (ii) individuals who were members of the Board of Directors of First Interstate Bancorp immediately prior to a meeting of the stockholders of First Interstate Bancorp involving a contest for the election of Directors shall not constitute a majority of the Board of Directors following such election; (iii) the stockholders of First Interstate Bancorp approve the dissolution or liquidation of First Interstate Bancorp; (iv) the stockholders of First Interstate Bancorp approve an agreement to merge or consolidate, or otherwise organize, with or into one or more entities which are not subsidiaries, as a result of which less than 50% of the outstanding voting securities of the surviving or resulting entity are, or are to be, owned by former stockholders of First Interstate Bancorp (excluding from the term "former stockholders" a stockholder who is, or as a result of the transaction in question becomes, an "affiliate," as that term is used in the Securities Exchange Act of 1934 and the Rules promulgated thereunder, of any party to such merger, consolidation or reorganization); or (v) the stockholders of First Interstate Bancorp approve the sale of substantially all of First Interstate Bancorp's business and/or assets to a person or entity which is not a Subsidiary. (d) Any Participant shall be entitled to refuse all or any portion of any Target Award under this Plan if he or she determines that receipt of such payment may result in adverse tax consequences to him or her. First Interstate Bancorp shall be totally and 7 permanently relieved of any obligation to pay any Award which a Participant explicitly so refuses in writing. 18. PROVISIONS APPLICABLE TO OFFSETS FOR SPLIT-DOLLAR LIFE INSUR- ANCE AGREEMENTS. (a) Notwithstanding anything contained herein to the contrary, any benefits payable under this Plan shall be offset by the value of benefits received by the Participant under certain life insurance policies as set forth in this Section. Participants in this Plan may own life insurance policies (the "Policies") purchased on their behalf by Bancorp ("the Company"). The ownership of these Policies by each Participant is, however, subject to certain conditions (set forth in a "Split-Dollar Life Insurance Agreement" between each Participant and Bancorp) and, if the Participant fails to meet the conditions set forth in the Split-Dollar Life Insurance Agreement, the Participant may lose certain rights under the Policy. (b) In the event that a Participant satisfies the conditions specified in Section 4 or 5 of the Split-Dollar Life Insurance Agreement, so that the Participant or his or her beneficiary becomes entitled to benefits under one of those sections, the value of those benefits shall constitute an offset to any benefits otherwise payable under this Plan. As the case may be, this offset (the "Offset Value") shall be equal to the value of benefits payable under the Split-Dollar Life Insurance Agreement and shall be determined as of the date that the Participant satisfies the conditions specified in Section 4 or 5 of the Split-Dollar Life Insurance Agreement, that is, the cash value of the Policy or, in the case of the Participant's death, the death benefit payable to the beneficiary under the Policy reduced by one times the Participant's annual base salary (maximum $500,000) at the time of death. The Offset Value shall then be compared to the Participant's deferred award (including interest accumulated on such award) under this Plan, and such amounts shall be reduced, but not to less than zero, by the Offset Value. (c) If the Policy in subsection (a) is not on the life of the Participant and the insured dies prior to distribution of benefits under this Plan, then the value of the benefits received by the Participant under the Policy will offset the Participant's deferred award (including interest accumulated on such award) under this Plan. This offset ("Offset Value") shall be equal to the amount of death benefit payable to the Participant and shall be determined as of the date of death of the insured. This Offset Value shall then be compared to the Participant's deferred award (including interest accumulated on such award) under this Plan, and such amounts shall be reduced, but not to be less than zero, by the Offset Value. (d) Notwithstanding anything contained herein to the contrary, if, in addition to the benefits otherwise payable under this Plan, the Participant or his or her beneficiary is entitled to benefits under 8 (i) the First Interstate Bancorp Annual Incentive Compensation Plans, (ii) the First Interstate Bancorp Profit Improvement Plans, (iii) the First Interstate Bancorp Management Incentive Plans, (iv) the Supplemental Employee Savings Plan of First Interstate Bancorp, (v) the First Interstate Bancorp Excess Benefit Retirement Plan, (vi) the First Interstate Bancorp Supplemental Executive Retirement Plan; (vii) the First Interstate Supplemental Retirement Program or (viii) the First Interstate Executive Incentive Plans, the "Offset Value" shall be applied to offset the benefits payable under this Plan and such plans in the following order: 1. The First Interstate Bancorp Excess Benefit Retirement Plan; 2. The First Interstate Bancorp Supplemental Executive Retirement Plan; 3. The Supplemental Employee Savings Plan of First Inter- state Bancorp; 4. The First Interstate Bancorp Management Incentive Plans; 5. The First Interstate Bancorp Annual Incentive Compen- sation Plans; 6. The First Interstate Bancorp Profit Improvement Plans. 7. The First Interstate Bancorp Corporate Executive Incen- tive Plan. 8. The First Interstate Bancorp Regional Executive Incen- tive Plan. 9. The First Interstate Bancorp Supplemental Retirement Program. 19.DISPUTE RESOLUTION. (a) If a Participant who has applied for retirement under the Retirement Plan for Employees of First Interstate Bancorp and Its Affiliates, or, in the case of the Participant's death, his or her beneficiary, disagrees with the Compensation Committee of the Board of Directors of First Interstate Bancorp (the "Administrator") regarding the interpretation of this Plan, and if the Participant or his or her beneficiary has exhausted the claims review and appeal procedure under Section 503 of the Employee Retirement Income Security Act of 1974 with respect to his or her claim for benefits under this Plan, then the Participant or his or her beneficiary may, if he or she desires, submit any claim for benefits under this Plan or dispute regarding the interpretation of 9 this Plan to arbitration; provided that, the request for arbitration must be brought within the time limit for bringing a judicial proceeding with respect to such claim for benefits, or if less, within one year after the Administrator's final denial of such claim for benefits. This right to select arbitration shall be solely that of Participant or his or her beneficiary and Participant or his or her beneficiary may decide whether or not to arbitrate in his or her discretion. The "right to select arbitration" is not mandatory on Participant or his or her beneficiary and Participant or his or her beneficiary may choose in lieu thereof to bring an action in an appropriate civil court. Once an arbitration is commenced, however, it may not be discontinued without the mutual consent of both parties to the arbitration. During the lifetime of the Participant only he or she can use the arbitration procedure set forth in this section. (b) Any claim for arbitration may be filed in writing with an arbitrator of Participant's or beneficiary's choice who is selected by the method described in the next four sentences. The first step of the selection shall consist of Participant or his or her beneficiary submitting a list of five potential arbitrators to the Administrator. Each of the five arbitrators must be either (1) a member of the National Academy of Arbitrators located in the State of California or (2) a retired California Superior Court or Appellate Court judge. Within one week after receipt of the list, the Administrator shall select one of the five arbitrators as the arbitrator for the dispute in question. If the Administrator fails to select an arbitrator in a timely manner, Participant or his or her beneficiary shall then designate one of the five arbitrators as the arbitrator for the dispute in question. (c) The arbitration hearing shall be held within seven days (or as soon thereafter as possible) after the picking of the arbitrator. No continuance of said hearing shall be allowed without the mutual consent of Participant or his or her beneficiary and the Administrator. Absence from or nonparticipation at the hearing by either party shall not prevent the issuance of an award. Hearing procedures which will expedite the hearing may be ordered at the arbitrator's discretion, and the arbitrator may close the hearing in his or her sole discretion when he or she decides he or she has heard sufficient evidence to satisfy issuance of an award. (d) The arbitrator's award shall be rendered as expeditiously as possible and in no event later than one week after the close of the hearing. In the event the arbitrator finds that Bancorp has violated the terms of this Plan, he or she shall order Bancorp immediately to take the necessary steps to remedy such violation. The award of the arbitrator shall be final and binding upon the parties. The award may be enforced in any appropriate court as soon as possible after its rendition. If an action is brought to confirm the award, both Bancorp and Participant agree that no 10 appeal shall be taken by either party from any decision rendered in such action. (e) Solely for purposes of determining the allocation of the costs described in this Section 19(e), the Administrator will be considered the prevailing party in a dispute if the arbitrator determines (1) that Bancorp has not violated the terms of this Plan, and (2) the claim by Participant or his or her beneficiary was not made in good faith. otherwise, Participant or his or her beneficiary will be considered the prevailing party. In the event that Bancorp is the prevailing party, the fee of the arbitrator and all necessary expenses of the hearing (excluding any attorneys, fees incurred by Bancorp) including stenographic reporter, if employed, shall be paid by the other party. In the event that Participant or his or her beneficiary is the prevailing party, the fee of the arbitrator and all necessary expenses of the hearing (including all attorneys' fees incurred by Participant or his or her beneficiary in pursuing his or her claim) , including the fees of a stenographic reporter if employed, shall be paid by Bancorp. IN WITNESS WHEREOF, Bancorp hereby adopts this Restatement as of January 1, 1995. FIRST INTERSTATE BANCORP By ____________________________ 11 EX-99.8 9 1995 REGIONAL EXECUTIVE INCENTIVE PLAN FIRST INTERSTATE 1995 REGIONAL EXECUTIVE INCENTIVE PLAN EFFECTIVE JANUARY 1, 1995 1. OBJECTIVES. The 1994 Regional Executive Incentive Plan is designed to focus the efforts of certain executive employees of selected Subsidiaries on the continued improvement in the performance of such Subsidiaries, and to aid in attracting, motivating and retaining superior executives by providing an incentive and reward for those executive employees who contribute most to the operating progress and performance of the Corporation's Subsidiaries. 2. DEFINITIONS. The following definitions shall be applica- ble to the terms used in the Plan: (a) "Administrator" means the Chief Executive Officer of Bancorp. (b) "Award" means a cash distribution to be made to a Participant for a Performance Year as determined in accordance with the provisions of the Plan. (c) "Award Fund" means the total of the Target Awards for each Participant as determined and approved in accordance with Section 5 hereof. (d) "Bancorp" means First Interstate Bancorp, a Delaware Corporation. (e) "Change in Control" shall have the meaning set forth in Section 17. (f) "Committee" means the Compensation Committee of the Board of Directors of Bancorp. (g) "First Interstate" means the consolidated group of companies comprising First Interstate Bancorp. (h) "Fiscal Year" means the customary fiscal year of Bancorp. (i) "Management Incentive Plan" means the First Interstate Bancorp 1995 Management Incentive Plan. (j) "Offset Value" shall have the meaning set forth in Section 18 (b) and (c) . (k) "Participant" means an eligible executive who, pursuant to Section 4 hereof, automatically becomes a Participant in the Plan for a Fiscal Year. (l) "Performance Year" means the Fiscal Year. (m) "Plan" means this First Interstate Bancorp 1995 Regional Executive Incentive Plan, as set forth herein. (n) "Policies" shall have the meaning set forth in Section 18(a) . (o) "PSP" shall have the meaning set forth in Section 7(c). (p) "Region" means any of the California, Northwest, Southwest or Texas regions consisting of First Interstate banks and as defined by First Interstate Bancorp. (q) "Split-Dollar Life Insurance Agreement" shall have the meaning set forth in Section 18(a). (r) "Subsidiary" means a bank, corporation, association or similar organization of which the majority of the outstanding shares of voting stock is owned by Bancorp, directly or indirectly. (s) "Target Award" is determined for each Participant by multiplying the Participant's base pay rate in effect at the end of the Performance Year by the Target Award Percentage applicable to the Participant set forth under Item I of the Target Award Guidelines attached as Table A. 3. ADOPTION AND ADMINISTRATION OF THE PLAN. The Plan shall become effective as of January 1, 1995 upon adoption by the Committee. Subject to the provisions of this Plan and in the absence of specific action by the Committee, this Plan shall be administered by the Administrator. The Plan shall not be modified except with the consent of the Committee. All decisions of the Administrator or the Committee shall be final and binding. 4. PARTICIPATION AND TARGET AWARDS. (a) Determination of Participants and Target Awards. The Chief Executive Officer of each Region shall be Participants in the Plan. As provided in the Plan, participation for an individual may be terminated. Except as provided in Sections 8(b) and 10, to be considered eligible for an Award, a Participant must be participating in the Plan or the Management Incentive Plan for at least six months during the Performance Year. (b) Notification. Each Participant shall be notified of his or her eligibility for participation in the Plan for such 2 Performance Year or shall be notified of his or her termination, as applicable, by a letter from the Administrator or his or her designee. A copy of this Plan shall be provided to each Participant. A Participant shall have no right to or interest in an Award unless and until the Participant's Award has been determined and certified by the Committee. 5. DETERMINATION OF AWARD. (a) Performance Review. As soon as practicable after the close of each Performance Year, a determination of each Region's performance shall be made by the Administrator. The Administrator's determination shall be subject to the approval by the Committee. (b) Award Fund. The Committee shall determine the total amount of the Award Fund authorized under this Plan for the Performance Year. The Award Fund amount for a Region may be determined in any manner the Committee deems appropriate from time to time. Without limiting the Committee's discretion to choose other methods to calculate the size of the Award Fund, it is anticipated that the Award Fund amount for the Participants will equal the sum of the Target Awards for each Participant multiplied by a percentage representing the performance of the Region determined by the Administrator. The maximum Award Fund amount may not exceed 1.5 times the sum of Target Awards. (c) Limitations. The Committee shall have the right to reduce an Award to an actual award percentage of no less than 0%. Award payments will be charged against Bancorp or the Subsidiary for which the Participant is an employee, as appropriate. 6. ALLOCATION OF AWARD FUND TO PARTICIPANTS. The Award Fund shall be available for allocation to Participants on a totally discretionary basis in a manner designed to give the Administrator the flexibility to take into account the individual performance of each Participant. Based on its evaluation of a Participant's performance, the Administrator may determine an Award equal to any percentage of the Participant's Target Award up to 150%. In the event the amount of the Award Fund exceeds the total Awards for a Performance Year, such excess shall not be carried forward for purposes of Awards in future Performance Years. Award payments will be charged against the Subsidiary for which the Participant is an employee, as appropriate. 7. TIME OF PAYMENT OF AWARDS, DEFERRALS, HARDSHIPS. (a) Payment Date. Except as provided in (b) below, as soon as practicable after the determination of Awards and approval by the Committee, any Award, less any legally required withholding, shall be paid to the Participant or, in the event of a Participant's death, in accordance with Section 8 hereof. 3 (b) Deferrals. In the year prior to the year in which an Award is earned, a Participant may elect, on a form specified by Bancorp, to defer the receipt of any Award to which he or she may be entitled for such Performance Year until the earlier of (1) termination of employment (the first to occur of retirement, death, disability, or termination of employment) or (2) January 1 of a specified calendar year. In such event: (i) The amount the Participant elects, net of any legally required withholding, shall become the deferred Award; (ii) Interest on such deferred Award will be the Moody's Investment Grade Corporate Bond Yield as shown in Moody's Yield Average for the last full month of each previous calendar year and will be credited quarterly; and (iii) Such deferred Award, plus accumulated interest, shall be paid upon the earlier of (1) or (2) above, in the form of a lump sum, equal annual installments over not more than 10 years, or such other method as may be selected by the Participant and agreed to by the Administrator or, in the case of any payment to the Administrator, by the Committee. (c) Deferrals into Performance Units. As an alternative to a deferral payable in cash, as described in subsection (b), the deferred Award may, if the Participant elects and the Committee permits, be invested in Performance Units under Section 7.3 of the First Interstate Bancorp 1991 Performance Stock Plan or the 1995 Performance Stock Plan (each, a "PSP"). The amount deferred shall be deemed to be converted into Performance Units under Section 7.3 of the PSP as of the date the Award would have been payable if no deferral had occurred, based on the fair market value, determined in accordance with the terms of said plan, of the common stock of Bancorp on that date. The timing and manner of payment of deferrals shall be governed by a Performance Unit Agreement entered into by the Participant under the PSP. (d) Hardship Withdrawal. A Participant may request in writing, citing the reasons for the request, that the Committee permit the early payment of all or part of a deferred Award. Within 90 days after receipt, the Committee shall rule on the request. The Committee shall grant the request only if, in its sole discretion, the Committee makes a specific finding of financial hardship that is an unanticipated emergency caused by an event beyond the control of the Participant. The amount payable hereunder shall not exceed the amount necessary to avoid such hardship. (e) Acceleration of Deferrals. Anything in this Plan to the contrary notwithstanding, the Committee may accelerate the payment of all deferred Awards hereunder at any time in its sole discretion. In addition, the Committee reserves the right to pay 4 any deferred Awards in the form of a lump sum if the amount is less than $10,000.00. 8. DEATH OF A PARTICIPANT. (a) Beneficiary Designation. A Participant may file a designation of a beneficiary or beneficiaries on a form to be provided which designation may be changed or revoked by the Participant's sole action, provided that such change or revocation is filed in written form. (b) Death during Performance Year. In case of the death of a Participant during a Performance Year, Bancorp or the Subsidiary, as appropriate, may pay a pro rata portion of the Award to which the Participant would have been entitled for such Performance Year. Such pro rata portion shall be equal to (1) the ratio which the Participant's completed calendar months of participation during the Performance Year bears to 12 multiplied by (2) the amount the Committee determines the Participant would have been entitled to had he or she lived. (c) Death after Performance Year. In case of the death of a Participant after the end of a Performance Year, but before the delivery of an Award to which he or she may be' entitled, such Award shall be delivered to the Participant's designated beneficiary. (d) Failure to Designate Beneficiary. If a Participant dies having failed to designate any beneficiary, or if no beneficiary survives the Participant or survives to the date of any payment in question, the amount otherwise payable to such beneficiary shall be paid to the Participant's surviving spouse, if any, and otherwise to the Participant's heirs at law, as determined under the law governing succession to personal property for the state in which the Participant resided on the day the Participant died. 9. TRANSFER OF A PARTICIPANT. In the event a Participant for any Performance Year is transferred during such Performance Year so that they are no longer eligible to participate in this Plan, such Participant's Award, consistent with Subsection 4(a), shall normally be calculated as the sum of the following: (a) the Award the Participant would have received, had he or she not been transferred, multiplied by the ratio which his or her completed months of participation during such Performance Year prior to the transfer bears to 12, plus (b) the Award, if any, the Participant is entitled to receive based on service after the transfer determined on a Performance Year basis and then multiplied by the ratio which his 5 or her completed months of participation during such Performance Year subsequent to such transfer bears to 12. 10. RETIREMENT OR DISABILITY OF PARTICIPANT. In case a Participant becomes totally and permanently disabled during a Performance Year, or retires from active employment after attaining age 55 during a Performance Year, the Committee may but need not grant the Participant an Award. Generally, if an Award is granted, it will be based on a pro rata portion of the Award. 11. TERMINATION OF EMPLOYMENT. If the employment of a Participant with a Subsidiary is terminated prior to the approval of an Award by the Committee as specified in Section 5(a), for reasons other than those specified in Sections 8, 9 or 10 hereof, the right to and the amount of an Award shall be forfeited. 12. TERMINATION AND MODIFICATION. No Award shall be granted under the Plan after any date as of which the Plan shall have been terminated. The Board of Directors of Bancorp or the Committee may at any time modify, terminate or from time to time suspend and, if suspended, may reinstate the provisions of this Plan, including Table A. The Committee may consider but shall not be bound by suggestions of Participants in connection with its periodic amendment of relative weights of the goals set forth by the Committee. 13. EFFECT OF OTHER PLANS. Eligibility in or the receipt of any Award under the Plan shall not be affected by or affect any other compensation or benefit plans in effect for Bancorp or a Subsidiary. 14. NO EMPLOYMENT RIGHTS. Nothing contained in nor any action under the Plan will confer upon any individual any right to continue in the employment of Bancorp or a Subsidiary and does not constitute any contract or agreement of employment or interfere in any way with the right of Bancorp or a Subsidiary to terminate any individual's employment. 15. WITHHOLDING TAX. As required by law, federal, state or local taxes that are subject to the withholding of tax at the source shall be withheld by Bancorp or a Subsidiary as necessary to satisfy such requirements. 16. EFFECTIVE DATE. This Plan shall be effective as of January 1, 1995. The Plan, including Table A, shall remain in effect as amended from time to time. 17. PROVISIONS APPLICABLE IN THE EVENT OF A CHANGE IN CONTROL. (a) In the event of a "Change in Control" (as defined below), notwithstanding any provisions to the contrary in this 6 Plan, the operation of this Plan shall be modified as set forth below in this Section 17. These modifications shall only apply with respect to Target Awards for the Performance Year in which a Change in Control takes place. (b) Notwithstanding any provision to the contrary in this Plan, within ten (10) days after the Change in Control of Bancorp each Participant shall be paid loot of his or her Target Award for the year in which the Change in Control occurs, based on the base pay rate then in effect. (c) A "Change in Control" of Bancorp means and shall be deemed to have occurred if and when any one of the following five events occurs: (i) within the meaning of Section 13(d) of the Securities Exchange Act of 1934, any person or group becomes a beneficial owner, directly or indirectly, of securities of Bancorp representing 20% or more of the combined voting power of Bancorp's then outstanding securities; (ii) individuals who were members of the Board of Directors of Bancorp immediately prior to a meeting of the stockholders of Bancorp involving a contest for the election of Directors shall not constitute a majority of the Board of Directors following such election; (iii) the stockholders of Bancorp approve the dissolution or liquidation of Bancorp; (iv) the stockholders of Bancorp approve an agreement to merge or consolidate, or otherwise organize, with or into one or more entities which are not subsidiaries, as a result of which less than 50% of the outstanding voting securities of the surviving or resulting entity are, or are to be, owned by former stockholders of Bancorp (excluding from the term "former stockholders" a stockholder who is, or as a result of the transaction in question becomes, an "affiliate," as that term is used in the Securities Exchange Act of 1934 and the Rules promulgated thereunder, of any party to such merger, consolidation or reorganization); or (v) the stockholders of Bancorp approve the sale of substantially all of Bancorp's business and/or assets to a person or entity which is not a Subsidiary. (d) Any Participant shall be entitled to refuse all or any portion of any Target Award under this Plan if he or she determines that receipt of such payment may result in adverse tax consequences to him or her. Bancorp shall be totally and permanently relieved of any obligation to pay any Award which a Participant explicitly so refuses in writing. 18. PROVISIONS APPLICABLE TO OFFSETS FOR SPLIT-DOLLAR LIFE INSURANCE AGREEMENTS. (a) Notwithstanding anything contained herein to the contrary, any benefits payable under this Plan shall be offset by the value of benefits received by the Participant under certain life insurance policies as set forth in this Section. Participants in this Plan may own life insurance policies (the "Policies") purchased on their behalf by Bancorp. The ownership of these 7 Policies by each Participant is, however, subject to certain conditions (set forth in a "Split-Dollar Life Insurance Agreement" between each Participant and Bancorp) and, if the Participant fails to meet the conditions set forth in the Split-Dollar Life Insurance Agreement, the Participant may lose certain rights under the Policy. (b) In the event that a Participant satisfies the conditions specified in Section 4 or 5 of the Split-Dollar Life Insurance Agreement, so that the Participant or his or her beneficiary becomes entitled to benefits under one of those sections, the value of those benefits shall constitute an offset to any benefits otherwise payable under this Plan. As the case may be, this offset (the "Offset Value") shall be equal to the value of benefits payable under the Split-Dollar Life Insurance Agreement and shall be determined as of the date that the Participant satisfies the conditions specified in Section 4 or 5 of the Split- Dollar Life Insurance Agreement, that is, the cash value of the Policy or, in the case of the Participant's death, the death benefit payable to the beneficiary under the Policy reduced by one times the Participant's annual base salary (maximum $500,000) at the time of death. The Offset Value shall then be compared to the Participant's deferred award (including interest accumulated on such award) under this Plan, and such amounts shall be reduced, but not to less than zero, by the Offset Value. (c) If the Policy in subsection (a) is not on the life of the Participant and the insured dies prior to distribution of benefits under this Plan, then the value of the benefits received by the Participant under the Policy will offset the Participant's deferred award (including interest accumulated on such award) under this Plan. This offset ("Offset Value") shall be equal to the amount of death benefit payable to the Participant and shall be determined as of the date of death of the insured. This Offset Value shall then be compared to the Participant's deferred award (including interest accumulated on such award) under this Plan, and such amounts shall be reduced, but not to be less than zero, by the Offset Value. (d) Notwithstanding anything contained herein to the contrary, if, in addition to the benefits otherwise payable under this Plan, the Participant or his or her beneficiary is entitled to benefits under the plans set forth in Table B. The "Offset Value" shall be applied to offset the benefits payable under this Plan and such plans in the order set forth in Table B: 19. DISPUTE RESOLUTION. (a) If a Participant who has applied for retirement under the Retirement Plan for Employees of First Interstate Bancorp and its Affiliates, or, in the case of the Participant's death, his or her beneficiary, disagrees with the Compensation Committee of 8 the Board of Directors of First Interstate Bancorp (the "Administrator") regarding the interpretation of this Plan, and if the Participant or his or her beneficiary has exhausted the claims review and appeal procedure under Section 503 of the Employee Retirement Income Security Act of 1974 with respect to his or her claim for benefits under this Plan, then the Participant or his or her beneficiary may, if he or she desires, submit any claim for benefits under this Plan, then the Participant or his or her beneficiary may, if he or she desires, submit any claim for benefits under this Plan or dispute regarding the interpretation of this Plan to arbitration; provided that, the request for arbitration must be brought within the time limit for bringing a judicial proceeding with respect to such claim for benefits, or if less, within one year after the Administrator's final denial of such claim for benefits. This right to select arbitration shall be solely that of Participant or his or her beneficiary and Participant or his or her beneficiary may decide whether or not to arbitrate in his or her discretion. The "right to select arbitration" is not mandatory on Participant or his or her beneficiary and Participant or his or her beneficiary may choose in lieu thereof to bring an action in an appropriate civil court. Once an arbitration is commenced, however, it may not be discontinued without the mutual consent of both parties to the arbitration. During the lifetime of the Participant only he or she can use the arbitration procedure set forth in this section. (b) Any claim for arbitration may be filed in writing with an arbitrator of Participant's or beneficiary's choice who is selected by the method described in the next four sentences. The first step of the selection shall consist of Participant or his or her beneficiary submitting a list of five potential arbitrators to the Administrator. Each of the five arbitrators must be either (1) a member of the National Academy of Arbitrators located in the State of California or (2) a retired California Superior Court or Appellate Court judge. Within one week after receipt of the list, the Administrator shall select one of the five arbitrators as the arbitrator for the dispute in question. If the Administrator fails to select an arbitrator in a timely manner, Participant or his or her beneficiary shall then designate one of the five arbitrators as the arbitrator for the dispute in question. (c) The arbitration hearing shall be held within seven days (or as soon thereafter as possible) after the picking of the arbitrator. No continuance of said hearing shall be allowed without the mutual consent of Participant or his or her beneficiary and the Administrator. Absence from or nonparticipation at the hearing by either party shall not prevent the issuance of an award. Hearing procedures which will expedite the hearing may be ordered at the arbitrator's discretion, and the arbitrator may close the hearing in his or her sole discretion when he or she decides he or she has heard sufficient evidence to satisfy issuance of an award. 9 (d) The arbitrator's award shall be rendered as expeditiously as possible and in no event later than one week after the close of the hearing. In the event the arbitrator finds that Bancorp has violated the terms of this Plan, he or she shall order Bancorp immediately to take the necessary steps to remedy such violation. The award of the arbitrator shall be final and binding upon the parties. The award may be enforced in any appropriate court as soon as possible after its rendition. If an action is brought to confirm the award, both Bancorp and Participant agree that no appeal shall be taken by either party from any decision rendered in such action. (e) Solely for purposes of determining the allocation of the costs described in this Section 19(e), the Administrator will be considered the prevailing party in a dispute if the arbitrator determines (1) that Bancorp has not violated the terms of this Plan, and (2) the claim by Participant or his or her beneficiary was not made in good faith. Otherwise, Participant or his or her beneficiary will be considered the prevailing party. In the event that Bancorp is the prevailing party, the fee of the arbitrator and all necessary expenses of the hearing (excluding any attorneys' fees incurred by Bancorp) including stenographic reporter, if employed, shall be paid by the other party. In the event that Participant or his or her beneficiary is the prevailing party, the fee of the arbitrator and all necessary expenses of the hearing (including all attorneys' fees incurred by Participant or his or her beneficiary in pursuing his or her claim), including the fees of a stenographic reporter if employed, shall be paid by Bancorp. IN WITNESS WHEREOF, First Interstate Bancorp hereby adopts this 1995 Regional Executive Incentive Plan as of January 1, 1995. FIRST INTERSTATE BANCORP By _________________________________ 10 EX-99.9 10 TIER II EMPLOYMENT AGREEMENT TIER II CALIFORNIA EMPLOYMENT AGREEMENT ------------------------------------------------ AMENDED AND RESTATED EMPLOYMENT AGREEMENT This Amended and Restated Employment Agreement ("Agreement") is dated as of ____________, 1995, and is entered into by and between ("Employee") and First Interstate Bank of California, a California corporation ("Employer") , and a wholly-owned subsidiary (except for any directors' qualifying shares) of First Interstate Bancorp, a Delaware corporation ("First Interstate"). This Agreement terminates and supersedes the Employment Agreement dated ____________, ____ between Employer and Employee and sets forth the terms and conditions of Employee's continued employment with Employer. Employee and Employer hereby agree that Employee will render services to Employer on the following terms and conditions: 1. Employment. Upon the terms and subject to the conditions contained herein, during the term of this Agreement, Employer hereby agrees to employ Employee to provide full-time services for Employer. During the term hereof, Employee agrees to devote his or her best efforts to the business of Employer, and shall perform his or her duties in a diligent, trustworthy, business-like manner, all for the purpose of advancing the business of Employer. 2. Duties. The duties of Employee shall be those duties which can reasonably be expected to be performed by a person with the title of ________ _____________________________________________________________________________ ___________________________________________________________________. Except as provided in paragraph 10 of this Agreement, Employee's duties may, from time to time, be changed or modified at the discretion of the Chief Executive Officer or the Compensation Committee of Employer. 3. Salary and Benefits. Employer shall, during the term of this Agreement, pay Employee a base salary, which shall initially be the salary in effect on the date of this Agreement. Such salary shall be paid in semimonthly installments less applicable withholding and salary reductions. Employer may, in its discretion, periodically increase the base salary and/or grant a bonus or other compensation or benefits to Employee, during the term of this Agreement. Employer may not, however, reduce Employee's base salary during the term of this Agreement. Employee shall be entitled to participate in the employee 1 benefit programs generally available to employees of Employer. 4. Term of Agreement. This Agreement shall be effective beginning on the date of this Agreement and shall continue until either party, in its sole discretion and for any reason, provides written notice of termination to the other party. Such termination will be effective no earlier than the first day of the 14th month following the notice so that, for example, a notice delivered on September 1, 1994 could terminate this Agreement no earlier than November 1, 1995. Notwithstanding the preceding sentences, and except as otherwise provided in paragraph 9, this Agreement shall terminate on the Employee's last day of employment if the Employee voluntarily terminates for any reason or is terminated by Employer for a reason described in paragraph 5. 5. Termination. During the term of this Agreement, and except as otherwise provided in paragraph 10 of this Agreement, the parties agree that Employer may terminate the employment of the Employee only for "Cause" or for breach of the provisions of paragraph 8 or as set forth in paragraph 9. Cause for termination shall be limited to the following: (1) Employee engages in an act of dishonesty or moral turpitude (including but not limited to conviction of a felony) which materially injures or damages Employer, (2) Employee willfully fails to substantially perform his or her duties hereunder and such willful failure results in demonstrable material injury and damage to Employer, (3) it is determined that Employee has misrepresented or concealed a material fact for the purpose of securing employment or this Employment Agreement, or (4) Employee's performance is substantially below the standard of performance which can reasonably be expected from an individual occupying Employee's position or Employee substantially fails to meet performance objectives which have been previously agreed to between Employee and Employer, such as performance objectives relating to profit. 6. Remedy for Breach. In the event that Employer breaches this Agreement by terminating the employment of Employee other than pursuant to paragraph 5, and provided that Employee executes a release agreement in the form attached hereto as Exhibit A, Employer agrees to pay to Employee, as damages and not as a penalty for such breach, a sum of money equal to Employee's monthly base salary multiplied by 18. Unless Employer determines in its complete discretion to pay such amount more quickly, 2 damages owed to Employee shall be paid at the same time and in the same manner as if employment under this Agreement had continued for 18 months past the date of breach. By signing the Agreement Employee agrees that the payments to which Employee may become entitled under this paragraph are in lieu of any other payments to which Employee might be entitled and that Employer's discharge of its obligations under this paragraph shall constitute full satisfaction of any and all claims of any nature whatsoever that Employee might otherwise possess against Employer and its subsidiaries, except (1) such claims as are specifically provided for in the terms of any generally applicable employee benefit or executive compensation plans evidenced by written agreements or (2) any claims for personal injuries (other than claims that are based on or relate to a contention that Employer has wrongfully discharged Employee). 7. Successors. The rights and obligations of Employer under this Agreement shall inure to the benefit of and shall be binding upon the successors and assigns of Employer. 8. Non-Disclosure of Confidential Information. Employee agrees that during the term of this Agreement and thereafter Employee will not disclose any information or data concerning the business or customers of First Interstate or Employer that is disclosed to Employee or acquired by Employee in confidence at any time during the period of his or her employment. Employee further agrees that he or she will neither publicly disclose the terms of this Agreement nor publicly discuss First Interstate or Employer in a manner that tends to portray First Interstate or Employer in an unfavorable light. Violation of these provisions subsequent to the termination of this Agreement will cause Employee to immediately forfeit his or her right to any payments under paragraph 6 that have not yet been paid. Notwithstanding anything contained in paragraph 14, Employer shall have the right to file a suit to enjoin any action of Employee which would constitute a breach of this paragraph 8. 9. Illness, Incapacity, or Death. In the event of illness or incapacity of Employee, Employer shall continue Employee's salary for six months and may, at its sole option, continue payment of Employee's salary until he or she is able to return to work. If Employee is unable to work due to illness or incapacity for a period greater than six months, Employer may elect, in its discretion, to terminate this Agreement. If Employee should die during 3 the term of this Agreement, Employee's employment shall be treated as terminated and Employer's obligations hereunder shall terminate as of the end of the month in which Employee's death occurs. Employee's death during a payout period under paragraph 6 of this Agreement shall, however, not be treated the same as a death during employment, i.e., the obligation to make payments under paragraph 6 shall not terminate as of the end of the month in which death occurs. 10. Change in Control. Upon a Change in Control of First Interstate, as defined herein, Employee and Employer agree that, notwithstanding any provisions to the contrary in this Agreement, the terms and conditions of this Agreement will be modified as follows: (a) The term of this Agreement will automatically be extended to the date two years following the date of the Change in Control of First Interstate. (b) Employee's duties shall remain defined as set forth in paragraph 2 of this Agreement, or as otherwise modified pursuant to paragraph 2 prior to the date of the Change in Control. Following the Change in Control, Employee's duties may not be changed and the Chief Executive Officer and the Compensation Committee shall no longer have the power to change, modify, add to, or take away from the scope of Employee's duties. In addition, Employee shall be entitled to benefits under Employer's employee benefits programs which are at least as favorable, in the aggregate, as the most favorable of those benefits provided to Employee under such programs prior to the Change in Control or, if more favorable to Employee, those provided generally at any time after the Change in Control to other peer executives of Employer. Any breach of this subparagraph (b) (which shall be deemed to include the transfer of Employee's job location to a site more than 50 miles away from his or her place of employment prior to the Change in Control), as determined by Employee in good faith, may be deemed a material breach of this Agreement, and will entitle Employee, at his or her election, to terminate this Agreement and receive damages pursuant to paragraph 6 of this Agreement (as modified by subparagraphs 10(c) and 10(d) below and without regard to the requirement that Employee execute a release). (c) Upon a Change in Control, paragraphs 5 and 8 of this Agreement shall have no further force or 4 effect, and the employment of Employee may be terminated by Employer without causing a breach of the Agreement only if (1) Employee engages in an act of dishonesty or moral turpitude (including but not limited to conviction of a felony) which materially injures or damages Employer or (2) Employee willfully fails to substantially perform his or her duties hereunder and such willful failure results in demonstrable material injury and damage to Employer. The terms of paragraph 9 shall remain in full force and effect following a Change in Control. If Employee is terminated for a reason other than one listed in the second preceding sentence, Employer shall be treated as having breached this Agreement and Employee shall be entitled to the payment described in subparagraph (d) below (as damages and not as a penalty for such breach). Such payment shall be paid in a lump sum no later than 10 days following the date of breach and there shall be no excuse for a delay in payment. (d) The amount Employer agrees to pay Employee under this paragraph 10 shall equal an amount determined by adding (1) and (2) and, if Employee's employment is terminated in the same calendar year in which the Change in Control occurs, by reducing the result by (3), where (1) is equal to $20,000 plus two times the sum of (A) the amount of Employee's annual base salary in effect immediately prior to Employee's termination of employment and (B) the aggregate of the amounts of Employee's target bonus awards for the year in which Employee's employment terminates under all of Employer's or First Interstate's incentive plans or programs in which Employee was then participating, (2) is equal to the sum of (A) the aggregate of the increases in the single sum actuarial equivalents of Employee's vested accrued benefits under the Retirement Plan for the Employees of First Interstate Bancorp and its Affiliates or any successor plan (hereinafter referred to as the "Pension Plan") and each nonqualified defined benefit pension plan sponsored by Employer or First Interstate other than the First Interstate Bancorp Supplemental Executive Retirement Plan (the "SERP") that would result if Employee were credited with two additional years of Service and Benefit Service 5 (as such terms are defined in the Pension Plan) and two additional years of age, provided that the additional years of Service shall in no event alter the determination of Employee's Basic Monthly Salary (as defined in the Pension Plan), and (B) the aggregate of the single sum actuarial equivalents of Employee's vested accrued benefits under all nonqualified employee deferred compensation plans sponsored by Employer or First Interstate (including the SERP) deter-mined without regard to the provisions of the preceding clause (A), and (3) is an amount equal to the aggregate of the amounts of any bonus awards paid to Employee under Employer's or First Interstate's incentive plans or programs that were accelerated because of the Change in Control, multiplied by a fraction, the numerator of which is the number of full months between the date of Employee's termination of employment and January 1 of the year following the year in which the Change in Control occurred, and the denominator of which is 12. The single sum actuarial equivalents described above shall be determined using the interest rate and mortality table set forth in the Pension Plan for purposes of converting benefits to lump sum payments. Nothing contained herein shall affect the application of any provisions regarding offsets or non-duplication of benefits applicable to any of the nonqualified deferred compensation plan benefits referred to herein. Upon payment of the amount described in clause (2)(B) above, no further benefits shall be payable to Employee under the plans described therein. (e) Following a Change in Control, Employee's base annual salary for the remaining term of this Agreement shall be no less than his or her base salary immediately prior to the date of the Change in Control. (f) A "Change in Control" of First Interstate means and shall be deemed to have occurred if and when any one of the following events occurs: (1) within the meaning of Section 13(d) of the Securities Exchange Act of 1934, any person or group becomes a beneficial owner, directly or indirectly, of securities of First Interstate representing 20% or more of the combined 6 voting power of First Interstate's then outstanding securities; (2) individuals who were members of the Board of Directors of First Interstate immediately prior to a meeting of the stockholders of First Interstate involving a contest for the election of Directors shall not constitute a majority of the Board of Directors following such election; (3) the stockholders of First Interstate approve the dissolution or liquidation of First Interstate; (4) the stockholders of First Interstate approve an agreement to merge or consolidate, or otherwise reorganize, with or into one or more entities which are not subsidiaries, as a result of which less than 50% of the outstanding voting securities of the surviving or resulting entity are, or are to be, owned by former stockholders of First Interstate (excluding from the term "former stockholders" a stockholder who is, or as a result of the transaction in question becomes, an "affiliate", as that term is used in the Securities Exchange Act of 1934 and the Rules promulgated thereunder, of any party to such merger, consolidation or reorganization); or (5) the stockholders of First Interstate approve the sale of substantially all of First Interstate's business and/or assets to a person or entity which is not a subsidiary. (g) Paragraph 14 shall no longer apply and the following arbitration provisions shall apply: (1) Because it is agreed that time will be of the essence in determining whether any payments are due to Employee under this Agreement following a Change in Control, Employee may, if he or she desires, submit any claim for payment under this Agreement or dispute regarding the interpretation of this Agreement to arbitration. This right to select arbitration shall be solely that of Employee and Employee may decide whether or not to arbitrate in his or her discretion. The "right to select arbitration" is not mandatory on Employee and Employee may choose in lieu thereof to bring an action in an appropriate civil court. Once an arbitration is commenced, however, it may not be discontinued without the mutual consent of both parties to the arbitration. (2) Any claim for arbitration may be filed in writing with an arbitrator of Employee's choice who is selected by the method described 7 in the next four sentences. The first step of the selection shall consist of Employee submitting a list of five potential arbitrators to Employer. Each of the five arbitrators must be either (A) a member of the National Academy of Arbitrators located in the State of California or (B) a retired California Superior Court or Appellate Court judge. Within one week after receipt of the list, Employer shall select one of the five arbitrators as the arbitrator for the dispute in question. If Employer fails to select an arbitrator in a timely manner, Employee shall then designate one of the five arbitrators as the arbitrator for the dispute in question. (3) The arbitration hearing shall be held within seven days (or as soon thereafter as possible) after the picking of the arbitrator. No continuance of said hearing shall be allowed without the mutual consent of Employee and Employer. Absence from or nonparticipation at the hearing by either party shall not prevent the issuance of an award. Hearing procedures which will expedite the hearing may be ordered at the arbitrator's discretion, and the arbitrator may close the hearing in his or her sole discretion when he or she decides he or she has heard sufficient evidence to satisfy issuance of an award. (4) The arbitrator's award shall be rendered as expeditiously as possible and in no event later than one week after the close of the hearing. In the event the arbitrator finds that Employer has breached this Agreement, he or she shall order Employer to immediately take the necessary steps to remedy the breach. The award of the arbitrator shall be final and binding upon the parties. The award may be enforced in any appropriate court as soon as possible after its rendition. If an action is brought to confirm the award, both Employer and Employee agree that no appeal shall be taken by either party from any decision rendered in such action. (5) Solely for purposes of determining the allocation of the costs described in this subsection, Employer will be considered the prevailing party in a dispute if the arbitrator 8 determines (A) that Employer has not breached this Agreement and (B) the claim by Employee was not made in good faith. Otherwise, Employee will be considered the prevailing party. In the event that Employer is the prevailing party, the fee of the arbitrator and all necessary expenses of the hearing (excluding any attorneys' fees incurred by Employer) including stenographic reporter, if employed, shall be paid by Employee. In the event that Employee is the prevailing party, the fee of the arbitrator and all necessary expenses of the hearing (including all attorneys' fees incurred by Employee in pursuing his or her claim), including the fees of a stenographic reporter if employed, shall be paid by Employer. (h) Paragraph 15 shall be deleted. (i) Employer agrees that, if Employee is terminated under circumstances that constitute a breach of this Agreement, Employer will make no statements with regard to Employee which might be interpreted to reflect adversely upon his or her job competency. (j) Employee shall be entitled to refuse all or any portion of any payment under this Agreement if he or she determines that receipt of such payment may result in adverse tax consequences to him or her. Employer shall be totally and permanently relieved of any obligation to pay any amount which Employee explicitly so refuses in writing. 11. Consultation with Legal Counsel. Employee acknowledges that he or she has been encouraged to consult with legal counsel before signing this Agreement. 12. Governing Law. This Agreement is made and entered into in the State of California, and the laws of California shall govern its validity and interpretation in the performance by the parties hereto of their respective duties and obligations hereunder. 13. Entire Agreement. This Agreement constitutes the entire agreement between the parties respecting the employment of Employee, and there are no representations, warranties or commitments, other than those set forth herein. This Agreement may be amended or 9 modified only by an instrument in writing executed by all of the parties hereto. This is an integrated agreement. 14. Arbitration. Except as otherwise provided in paragraph 8, any dispute, controversy, or claim arising out of or relating to this Agreement or breach thereof, or arising out of or relating in any way to the employment of the Employee or the termination thereof, shall be submitted to arbitration in accordance with the Voluntary Labor Arbitration Rules of the American Arbitration Association. Judgment upon the award rendered by the arbitrator may be entered in any court in the State of California, or in any other court of competent jurisdiction. In reaching his or her decision, the arbitrator shall have no authority to ignore, change, modify, add to or delete from any provision of this Agreement, but instead is limited to interpreting this Agreement. In the case of any arbitration or subsequent judicial proceeding arising after a Change in Control, Employee shall be awarded his or her costs, including attorneys' fees. 15. Assistance in Litigation. Employee shall make himself or herself available, upon the request of First Interstate or Employer, to testify or otherwise assist in litigation, arbitration, or other disputes involving First Interstate or Employer, or any of the directors, officers, employees, subsidiaries, or parent corporations of either, (1) during the term of this Agreement at no additional cost and (2) at any time following the termination of this Agreement so long as Employee receives a reasonable fee for his or her services plus reimbursement of out-of-pocket expenses. 16. Notices. Any notice or communications required or permitted to be given to the parties hereto shall be delivered personally or be sent by United States registered or certified mail, postage prepaid and return receipt requested, and addressed or delivered as follows, or to such other address as the party addressed may have substituted by notice pursuant to this section: (a) If to Employer: First Interstate Bank of California 633 West 5th Street Los Angeles, California 90071 Attention: Corporate Secretary 10 (b) If to Employee: ___________________________ ___________________________ ___________________________ 17. Captions. The captions of this Agreement are inserted for convenience and do not constitute a part hereof. 18. Severability. In case any one or more of the provisions contained in this Agreement shall for any reason be held to be invalid, illegal or unenforceable in any other respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Agreement, but this Agreement shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein and there shall be deemed substituted therefor such other provision as will most nearly accomplish the intent of the parties to the extent permitted by the applicable law. In case this Agreement, or any one or more of the provisions hereof, shall be held to be invalid, illegal or unenforceable within any governmental jurisdiction or subdivision thereof, this Agreement or any such provision thereof shall not as a consequence thereof be deemed to be invalid, illegal or unenforceable in any other governmental jurisdiction or subdivision thereof. 19. Counterparts. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original, but all of which shall together constitute one and the same Agreement. 11 IN WITNESS HEREOF, the parties hereto have caused this Agreement to be duly executed and delivered as of the day and year first written above in Los Angeles, California. EXECUTED: ____________, 19__. First Interstate Bank of California By _____________________________________________ EXECUTED: ____________, 19__. ______________________________ (Name of Employee) 12 EXHIBIT A RESIGNATION AND GENERAL RELEASE AGREEMENT In consideration of the covenants undertaken and releases contained in this Resignation and General Release Agreement (the "Agreement"), (" ") and First Interstate Bank of California ("First Interstate"), agree as follows: _________________ hereby resigns, effective _____________________ ,199_, from his or her position as ________________ of First Interstate, and as an officer, director, employee, or in any other capacity with First Interstate or any of First Interstate's divisions, subsidiaries, parent or affiliates. First Interstate shall as severance continue to and including _______________, 199_, to pay to his or her monthly base salary of $ , less standard withholding and authorized deductions. Such severance payment is for and in lieu of all accrued but unpaid wages including vacation pay and any bonus, and any other payments or benefits and none shall accrue beyond _________________, 199_, provided, however, that First Interstate shall pay to ____________________ on or before ______________, 199_, his or her accrued but unused vacation to that date. shall have the option to convert and continue his or her health insurance after ________________, 199_, as may be required or authorized by law under the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA"). Except for those obligations created by or arising out of this Agreement and any benefits specifically provided for in the terms of any employee pension benefit plans (as defined in Section 3(2) of the Employee Retirement Income Security Act of 1974) evidenced by written agreements, hereby acknowledges full and complete satisfaction of and releases and discharges and covenants not to sue First Interstate, its divisions, subsidiaries, parent, affiliated corporations, past and present, and each of them, as well as their directors, officers, shareholders, representatives, assignees, successors, agents and employees, past and present, and each of them (individually and collectively, "Releasees") from and with respect to any and all claims, wages, agreements, obligations, demands and causes of action, known or unknown, suspected or unsuspected, arising out of or in 13 any way connected with his or her employment relationship with, or his or her separation or resignation from, First Interstate, including, without limiting the generality of the foregoing, any claim for severance pay, bonus or similar benefit, sick leave, vacation pay, life insurance, health or medical insurance or any other fringe benefit, workers' compensation or disability, or any other occurrences, acts or omissions whatever, known or unknown, suspected or unsuspected, resulting from any act or omission by or on the part of Releasees committed or omitted prior to the date of this Agreement, including, without limiting the generality of the foregoing, any claim under Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act, the Americans with Disabilities Act, the Family and Medical Leave Act, the California Fair Employment and Housing Act, the California Family Rights Act, or any other federal, state or local law, regulation or ordinance. This Agreement is intended to be effective as a bar to every claim, demand and cause of action stated above. Accordingly, _______________ hereby expressly waives any rights and benefits conferred by Section 1542 of the California Civil Code, which provides that, "A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR." If any provision of this Agreement or its application is held invalid, the invalidity shall not affect other provisions or applications of the Agreement which can be given effect without the invalid provisions or application and, therefore, the provisions of this Agreement are declared to be severable. ____________ agrees to keep the terms of this Agreement confidential. _______________ acknowledges that he or she has been encouraged to consult with legal counsel before signing this Agreement. [FOR EMPLOYEES 40 OR OLDER] ________ will be provided ample time and opportunity to consider the terms of this Agreement and to consult with an attorney if he or she chooses to do so. If ______ agrees to all the provisions of this Agreement, he or she shall return the executed original of this Agreement to ____________________. ______ shall have twenty-one (21) days from the date he or she receives this Agreement in which to sign this 14 Agreement. He or she shall have seven (7) days from the date he or she signs the Agreement within which to revoke it. The undersigned have read and understand the consequences of this Agreement and voluntarily sign it. The undersigned declare under penalty of perjury that the foregoing is true and correct. EXECUTED this day of _______ 199 , at __________ County, California. FIRST INTERSTATE BANK ______________________ OF CALIFORNIA [Name] By _________________________________ ______________________ [Signature] Title ______________________________ 15 EX-99.10 11 LETTER REGARDING INITIAL WELLS PROPOASL October 17, 1995 Mr. William E. B. Siart Chairman and CEO First Interstate Bancorp 633 West Fifth Street Los Angeles, California 90071 Dear Bill: I appreciate your setting a date for us to continue discussions while you and your board review your strategic alternatives over the course of the next year. As I stated during our last meeting, I believe that every day we delay results in a substantial loss in value for both our shareholders. Since our last meeting, we have decided to act on this belief. Therefore, we are submitting for your consideration a tax-free merger proposal in which each First Interstate Bancorp shareholder would receive 0.625 shares of Wells Fargo & Co. common stock for each share of First Interstate Bancorp common stock. This exchange ratio would represent a price of $133.50 for each First Interstate Bancorp share based on Wells Fargo & Co.'s current market price, for a total of about $10 billion for your shareholders. (Before the close of this transaction, Wells Fargo would expect to raise its dividend to maintain the present dollar level of dividend income per share to your shareholders.) As we have discussed, the economic benefit of the proposed merger is enormous, with between $4 and $5 billion of present value to be shared by our respective shareholders. Not only will your shareholders gain a substantial market premium, representing a large share of the present value generated, but they will also have the opportunity to share in the stock appreciation of the Mr. William E. B. Siart October 17, 1995 Page 2 resulting company which will be the most efficient and dynamic major banking company in the U.S. I strongly believe there is no other way to generate this level of shareholder value. Although we intend to make this proposal public before the markets open tomorrow, we are not attempting to pre-empt or preclude negotiations between us. To the contrary, we would welcome the opportunity to begin a negotiation process immediately. Based on the outcome of these negotiations, we might be able to increase our offer if you can demonstrate greater value than is indicated by publicly available data. The synergies which would result from the combination of First Interstate and Wells Fargo are substantial. Not only are there significant cost savings to be derived from a merger, there are also opportunities for revenue growth through the combination of our mutual reputations for excellent customer service, technological strengths and innovations in the delivery of banking services and your broad geographical base. We recognize all that you and your management team have accomplished, and that the market has rewarded your performance. However, it is time now to consider the sources of future value creation for your shareholders (as we are doing for ours). We believe that far greater rewards would be available if we combined the strengths and values of our two companies. The combination of two large banking institutions will, inevitably, lead to some job losses and elimination of redundant branches or facilities in both our organizations, as has been the case in all bank consolidations. In this instance, we believe such measures would be justified by the creation of a more competitive California-based institution that can best serve the needs of its customers and communities. We are committed to the fair treatment of employees whose jobs may be lost as a result of this transition. As each of us has done in past mergers, we would expect to freeze hiring at the combined organization, and to fill from Mr. William E. B. Siart October 17, 1995 Page 3 within whatever vacancies are created by normal attri- tion. Each of our organizations has a strong record of commitment to our respective communities. The combined organization will be even better positioned to continue that performance. In particular, we are convinced that the State of California, our headquarter cities and other California communities will benefit from retaining in California the headquarters of what will be one of the country's ten largest banks. If our banks instead merge with or are acquired by large out-of-state banks, the State's economic and social fabric will be diminished. We have the highest regard for your board, and we trust that this respect is reciprocal. In order to take full advantage of the significant resource represented by the members of your boards, as well as to provide added assurances to your employees, customers and communities, we propose that the board of the combined company be comprised of existing directors of both companies, many of whom are already well-acquainted. We also propose maintaining headquarters locations in both the north and the south. Our merger proposal is subject to the execution and approval of a mutually acceptable definitive agreement by our respective boards, and we anticipate no difficulty in quickly reaching full agreement. I have received approval from our board for this proposal, and they are unanimous in their enthusiasm for the merger. We anticipate no difficulty in obtaining all regulatory approvals on a timely basis. In fact, we expect that the regulators will be totally supportive, as we have an outstanding CRA rating and are very well capitalized. Our review of competitive considerations demonstrates that the relevant issues can be readily resolved. In closing, I want to assure you that my enthusiasm for the proposal is shared by my entire board, and Mr. William E. B. Siart October 17, 1995 Page 4 they join me in emphasizing how much we want to work together with your team to forge what would truly be the premier banking organization in the country. We have an extraordinary opportunity to create value for shareholders and benefits for our other constituencies, and we should not let it pass. I hope that we can begin negotiations to address any issues that may concern you and your board. Sincerely, /s/ Paul Hazen ------------------ Paul Hazen Chairman and CEO EX-99.11 12 LETTER TO SHAREHOLDERS [First Interstate Bancorp letterhead] Dear First Interstate Shareholder: On November 6, 1995, First Interstate announced that it had entered into a merger agreement with First Bank System, Inc. ("FBS") pursuant to which First Interstate would merge with a subsidiary of FBS and each of your shares of First Interstate common stock would be converted into 2.6 shares of FBS common stock. On November 13, 1995, Wells Fargo & Co. announced that it intended to commence an unsolicited exchange offer in which holders of First Interstate common stock would have the right to exchange each of their shares for two-thirds of a share of Wells common stock. (The Wells exchange offer has not yet commenced and it may be several weeks or longer before you receive any materials with respect to it.) This announcement followed the First Interstate Board's rejection of Wells' earlier unsolicited proposal to merge with First Interstate in a transaction in which First Interstate's shareholders would receive .625 (or possibly .65) shares of Wells common stock for each First Interstate share. Your Board of Directors believes that the merger with FBS is in the best interests of First Interstate and its shareholders. ACCORDINGLY, THE BOARD RECOMMENDS THAT YOU REJECT THE WELLS FARGO & CO. EXCHANGE OFFER AND, WHEN AND IF SUCH OFFER IS COMMENCED, NOT TENDER ANY OF YOUR SHARES TO WELLS FARGO. Your Board's consideration of Wells Fargo's revised proposal and the FBS Merger follows an extensive process of evaluating the company's strategic alternatives for enhancing shareholder value. This process began several months prior to Wells' initial unsolicited bid and included discussions and evaluations of several potential merger possibilities, including one with Wells Fargo. The record is clear. After Wells made its initial takeover proposal public on October 18, on behalf of your Board I engaged in extensive discussions with Wells Fargo, as well as with other potential merger candidates. A full account of that process is contained in the Schedule 14D-9 filed today by First Interstate with the Securities and Exchange Commission and enclosed with this letter. The First Interstate Board believes that the strategic combination of First Interstate and FBS creates a dynamic, lower risk, multi-state banking alliance that will provide substantial near-term and long-range value to you. Your Board and management believe that this combination offers better value to First Interstate's shareholders than the Wells offer. In reaching its determination to reaffirm the FBS Merger and recommend rejection of the Wells Offer, the First Interstate Board relied upon a number of factors, including: o the greater earnings per share and cash flow per share of an FBS combination compared to a Wells Fargo combination; o the higher dividends per share to be received by First Interstate shareholders as a result of the FBS merger than with a Wells Fargo combination; o the reduced credit risk resulting from operations in 21 states under the FBS merger as contrasted with the substantially greater exposure to the California market that would result from a merger with Wells; o the superior market position created by an FBS merger--a top three ranking, in terms of deposit market share, in ten states--as opposed to increasing First Interstate's top three ranking in only one state in a Wells merger; o the substantial loss of revenue, as compared to Wells' public statements, that would result from Wells' proposed branch closings, other cost saving measures and antitrust divestitures (revenue losses not present in the FBS merger); o the dependence of the value of the Wells offer on Wells' sustaining its high price-to-earnings ratio relative to other high quality bank stocks, including FBS; o Wells' use of purchase accounting for the transaction, which creates additional goodwill in excess of $7 billion, which would substantially reduce future earnings and returns on equity; and o the opinions of First Interstate's independent financial advisors, Goldman, Sachs & Co. and Morgan Stanley & Co. Incorporated, that the exchange ratio of the FBS Merger is fair to First Interstate shareholders. We understand very well why our highly successful multi-state franchise, with its operating scope and strengths, is attractive to Wells Fargo. Our concern is not with Wells' interests, but the strategic alternative that is best for you. We expect the First Interstate/FBS combined company to achieve 1997 EPS accretion of 23% and a return on equity of 27.5%, with virtually no tangible book value dilution. Because cost reductions would be achieved through back office and staff cuts and systems integration, they can be accomplished quickly and with minimal impact to our customers and revenue. Under pooling accounting, the combined company will avoid the creation of goodwill and still be able to continue returning excess capital to shareholders through share repurchases. The company will have a reduced risk profile and an expanded foundation for future business growth across our 21-state service territory. It will have an exceptional, low-cost deposit base and be a leader in pioneering alternative delivery systems. And the combined company will be the number one ranked bank in the country in corporate cards, purchasing cards, corporate trust and ATM/POS, in addition to being among the top five banks in merchant card processing and asset management. Your Board and management are convinced that the FBS merger is a winning combination for the long-term benefit of our shareholders. It is unfortunate that a respected institution like Wells Fargo would jeopardize its reputation by ignoring your Board of Directors' carefully considered decision and choosing instead to recklessly pursue its hostile takeover proposal. We will not be deterred or distracted from completing our pending merger with First Bank on your behalf. A more detailed description of the factors considered by your Board of Directors is contained in the Schedule 14D-9. We urge you to read it carefully and in its entirety so that you will be fully informed as to the Board's recommendation. The date of the special meeting of First Interstate's shareholders which will be called to consider the proposed merger with FBS has not yet been set. First Interstate is not soliciting proxies from shareholders with respect to the FBS merger at this time. A Joint Proxy Statement/Prospectus of First Interstate and FBS will be mailed to the Company's shareholders in connection with the special meeting of each company's shareholders which will be called to vote upon the merger. On behalf of the Board of Directors, /s/ William E. B. Siart William E. B. Siart Chairman and Chief Executive Officer EX-99.12 13 PRESS RELEASE FIRST INTERSTATE BOARD REJECTS WELLS FARGO'S REVISED TAKEOVER PROPOSAL -- SAYS FIRST BANK MERGER OFFERS BEST ALTERNATIVE FOR CREATING NEAR- AND LONG-TERM SHAREHOLDER VALUE -- LOS ANGELES, NOVEMBER 20, 1995 -- First Interstate Bancorp (NYSE:I) said today its Board of Directors, by unanimous vote, rejected Wells Fargo & Company's revised acquisition proposal as not in the best interests of First Interstate and its shareholders and recommended that shareholders reject the Wells offer and not tender their shares of First Interstate Common Stock pursuant to the Wells offer. The Board also reaffirmed its determination that the terms of its announced merger with First Bank System (FBS) are fair to, and in the best interests of, First Interstate and its shareholders. The Board's consideration of Wells Fargo's revised proposal and the FBS merger follows an extensive process of evaluating the company's strategic alternatives for enhancing shareholder value. After Wells made its initial takeover proposal public on October 18, First Interstate chairman and CEO, William E. B. Siart, engaged in extensive discussions with Wells Fargo, as well as with other potential merger candidates. A full account of that process is contained in the Schedule 14D-9 filed today by First Interstate with the Securities and Exchange Commission. Mr. Siart said: "First Interstate believes that the strategic combination of First Interstate and FBS will create a dynamic, lower risk, multi-state banking alliance that will provide substantial near-term and long-range value. "We are convinced that this merger is a winning combination for the long-term benefit of our shareholders and the communities we serve. We believe it is unfortunate that a respected institution like Wells Fargo would jeopardize its reputation by ignoring our Board of Directors' carefully considered decision and choosing instead to recklessly pursue its hostile takeover proposal. We will not be deterred or distracted from completing our pending merger with First Bank on your behalf," concluded Mr. Siart. The First Interstate Banks in 13 western states provide financial products and services to customers through 1,148 offices. These banks serve individuals, small businesses, middle market companies and selected large corporations and financial institutions primarily in the West. Working together with Standard Chartered Bank of London, First Interstate provides a variety of international banking services and extends its reach to companies around the world. First Interstate provides quality financial products and services marketed at the local level to nearly five million households in over 500 western communities. # # # (The full text of a letter to First Interstate shareholders from William E. B. Siart, on behalf of the Board of Directors, is attached.) Dear First Interstate Shareholder: On November 6, 1995, First Interstate announced that it had entered into a merger agreement with First Bank System, Inc. ("FBS") pursuant to which First Interstate would merger with a subsidiary of FBS and each of your shares of First Interstate common stock would be converted into 2.6 shares of FBS common stock. On November 13, 1995, Wells Fargo & Company announced that it intended to commence an unsolicited exchange offer in which holders of First Interstate common stock would have the right to exchange each of their shares for two-thirds of a share of Wells common stock. (The Wells exchange offer has not yet commenced and it may be several weeks or longer before you receive any materials with respect to it.) This announcement followed the First Interstate Board's rejection of Wells' earlier unsolicited proposal to merge with First Interstate in a transaction in which First Interstate's shareholders would receive .625 (or possibly .65) shares of Wells common stock for each First Interstate share. Your Board of Directors believes that the merger with FBS is in the best interests of First Interstate and its shareholders. ACCORDINGLY, THE BOARD RECOMMENDS THAT YOU REJECT THE WELLS FARGO & COMPANY EXCHANGE OFFER AND, WHEN AND IF SUCH OFFER IS COMMENCED, NOT TENDER ANY OF YOUR SHARES TO WELLS FARGO. Your Board's consideration of Wells Fargo's revised proposal and the FBS merger follows an extensive process of evaluating the company's strategic alternatives for enhancing shareholder value. This process began several months prior to Wells' initial unsolicited bid and included discussions and evaluations of several potential merger possibilities, including one with Wells Fargo. The record is clear. After Wells made its initial takeover proposal public on October 18, on behalf of your Board I engaged in extensive discussions with Wells Fargo, as well as with other potential merger candidates. A full account of that process is contained in the Schedule 14D-9 filed today by First Interstate with the Securities and Exchange Commission and enclosed with this letter. The First Interstate Board believes that the strategic combination of First Interstate and FBS creates a dynamic, lower risk, multi-state banking alliance that will provide substantial near-term and long-range value to you. Your Board and management believe that this combination offers better value to First Interstate's shareholders than the Wells offer. In reaching its determination to reaffirm the FBS merger and recommend rejection of the Wells offer, the First Interstate Board relied upon a number of factors, including: o the greater earnings per share and cash flow per share of an FBS combination compared to a Wells Fargo combination; o the higher dividends per share to be received by First Interstate shareholders as a result of the FBS merger than with a Wells Fargo combination; o the reduced credit risk resulting from operations in 21 states under the FBS merger as contrasted with the substantially greater exposure to the California market that would result from a merger with Wells; o the superior market position created by an FBS merger -- a top three ranking, in terms of deposit market share, in ten states -- as opposed to increasing First Interstate's top three ranking in only one state in a Wells merger; o the substantial loss of revenue, as compared to Wells' public statements, that would result from Wells' proposed branch closings, other cost saving measures and antitrust divestitures (revenue losses not present in the FBS merger); o the dependence of the value of the Wells offer on Wells' sustaining its high price-to- earnings ratio relative to other high quality bank stocks, including FBS; o Wells' use of purchase accounting for the transaction, which creates additional goodwill in excess of $7 billion, which would substantially reduce future earnings and returns on equity; and o the opinions of First Interstate's independent financial advisors, Goldman, Sachs & Co. and Morgan Stanley & Co. Incorporated, that the exchange ratio of the FBS Merger is fair to First Interstate shareholders. We understand very well why our highly successful multi-state franchise, with its operating scope and strengths, is attractive to Wells Fargo. Our concern is not with Wells' interests, but the strategic alternative that is best for you. We expect the First Interstate/FBS combined company to achieve 1997 EPS accretion of 23% and a return on equity of 27.5%, with virtually no tangible book value dilution. Because cost reductions would be achieved through back office and staff cuts and systems integration, they can be accomplished quickly and with minimal impact to our customers and revenue. Under pooling accounting, the combined company will avoid the creation of goodwill and still be able to continue returning excess capital to shareholders through share repurchases. The company will have a reduced risk profile and an expanded foundation for future business growth across our 21-state service territory. It will have an exceptional, low-cost deposit base and be a leader in pioneering alternative delivery systems. And the combined company will be the number one ranked bank in the country in corporate cards, purchasing cards, corporate trust and ATM/POS, in addition to being among the top five banks in merchant card processing and asset management. Your Board and management are convinced that the FBS merger is a winning combination for the long-term benefit of our shareholders. It is unfortunate that a respected institution like Wells Fargo would jeopardize its reputation by ignoring your Board of Directors' carefully considered decision and choosing instead to recklessly pursue its hostile takeover proposal. We will not be deterred or distracted from completing our pending merger with First Bank on your behalf. A more detailed description of the factors considered by your Board of Directors is contained in the Schedule 14D-9. We urge you to read it carefully and in its entirety so that you will be fully informed as to the Board's recommendation. The date of the special meeting of First Interstate's shareholders which will be called to consider the proposed merger with FBS has not yet been set. First Interstate is not soliciting proxies from shareholders with respect to the FBS merger at this time. A joint Proxy Statement/Prospectus of First Interstate and FBS will be mailed to the Company's 2 shareholders in connection with the special meeting of each company's shareholders which will be called to vote upon the merger. On behalf of the Board of Directors, William E. B. Siart Chairman and Chief Executive Officer 3 EX-99.13 14 OPINION OF GOLDMAN, SACHS & CO. PRIVILEGED AND CONFIDENTIAL November 6, 1995 Board of Directors First Interstate Bancorp 633 West Fifth Street Los Angeles, California 90071 Gentlemen and Madame: You have requested that we confirm our oral opinion as of November 5, 1995 as to the fairness to the holders of the outstanding shares of Common Stock, par value $2.00 per share (the "Shares"), of First Interstate Bancorp (the "Company") of the exchange ratio of 2.6 shares of Common Stock, par value $1.25 per share, of First Bank System, Inc. ("FBS") to be received for each Share (the "Exchange Ratio") pursuant to the merger (the "Merger") contemplated by the Agreement and Plan of Merger dated as of Novem- ber 5, 1995 among FBS, Eleven Acquisition Corp., a whol- ly-owned subsidiary of FBS, and the Company (the "Agreement"). Goldman, Sachs & Co. ("Goldman Sachs"), as part of its investment banking business, is continually engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, negotiated underwritings, competitive biddings, secondary distributions of listed and unlisted securities, private placements and valuations for estate, corporate and other purposes. We are familiar with the Company having performed investment banking services for the Company from time to time and having acted as its financial advisor in connection with the Agreement. We also have provided certain investment banking services to FBS from time to time and may provide investment banking services to the combined company in the future. In addition, Goldman Sachs is a full service securities firm and in the course of its trading activities it may from time to time effect transactions, for its own account or the account of Board of Directors November 6, 1995 Page 2 customers, and hold positions in securities or options on securities of the Company and FBS. In connection with this opinion, we have reviewed, among other things, the Agreement; Annual Reports to Stockholders and Annual Reports on Form 10-K of the Company and FBS for the five years ended December 31, 1994; certain interim reports to stockholders and Quarterly Reports on Form 10-Q of the Company and FBS; certain other communications from the Company and FBS to their respective stockholders; and certain internal financial analyses and forecasts for the Company and FBS prepared by their respective managements, including analyses and forecasts of certain cost savings, operating efficiencies, revenue effects and financial synergies (collectively, the "Syn- ergies") expected by the Company and FBS to be achieved as a result of the Merger. We have also reviewed, and considered in our analysis, information prepared by senior managements of the Company and FBS relating to the relative contributions of the Company and FBS to the combined company and the estimated pro forma impact of the Merger on earnings per share, consolidated capitalization and certain other financial ratios for the combined company as compared to the Company and FBS. We also have held discussions with members of the senior management of the Company and FBS regarding the past and current business operations, regulatory relationships, financial condition and future prospects of their respective companies, each senior managements' assessment of the strategic fit and implications of the Merger, and the Synergies. We also have reviewed with members of the senior management of the Company the results of the Company's due diligence examination of FBS. In addition, we have reviewed the reported price and trading activity for the Shares and FBS Common Stock, compared certain financial and stock market information for the Company and FBS with similar information for certain other companies the securities of which are publicly traded, reviewed the financial terms of certain recent business combinations in the commercial banking industry specifically and in other industries generally and performed such other studies and analyses as we considered appropriate. We have relied without independent verification upon the accuracy and completeness of all of the financial and other information reviewed by us or conveyed to us in discussions with senior managements of the Company and FBS for purposes of this opinion. In that regard, we have assumed, with your consent, that the financial Board of Directors November 6, 1995 Page 3 forecasts, including, without limitation, the Synergies and projections regarding under-performing and non-per- forming assets and net charge-offs have been reasonably prepared on a basis reflecting the best currently available judgments and estimates of the Company and FBS and that such forecasts will be realized in the amounts and at the times contemplated thereby. We are not experts in the evaluation of loan and lease portfolios for purposes of assessing the adequacy of the allowances for losses with respect thereto and have assumed, with your consent, that such allowances for each of the Company and FBS are in the aggregate adequate to cover all such losses. Similarly, we have assumed, with your consent and without independent analysis, that the obligations of the Company and FBS pursuant to derivatives, swaps, foreign exchange, financial instruments and off-balance sheet lending- related financial instruments will not have an adverse effect which would be relevant to our analysis. In addition, we have not reviewed individual credit files nor have we made an independent evaluation or appraisal of the assets and liabilities of the Company or FBS or any of their respective subsidiaries and we have not been furnished with any such evaluation or appraisal. You have informed us, and we have assumed, that the Merger is of long-term strategic importance to the Company. We also have assumed, with your consent, that obtaining any necessary regulatory approvals and third-party consents for the Merger or otherwise will not have a materially adverse effect on the Company, FBS or the combined company. Our opinion as to the fairness of the Exchange Ratio addresses the ownership position in the combined company to be received by the holders of Shares pursuant to the Exchange Ratio on the terms set forth in the Agreement and does not address the future trading or acquisition value for the stock of the combined company. In addition, our opinion does not address the relative merits of the Merger and alternative potential transactions. We also have assumed with your consent that the Merger will be accounted for as a pooling of interests under generally accepted accounting principles. Our opinion is directed to the Board of Directors of the Company and does not constitute a recommendation to any Board of Directors November 6, 1995 Page 4 stockholder of the Company as to how such stockholder should vote at the stockholders' meeting to be held in connection with the Merger. Based upon and subject to the foregoing and based upon such other matters as we consider relevant, we hereby confirm our oral opinion as of November 5, 1995 that the Exchange Ratio pursuant to the Agreement is fair to the holders of Shares. Very truly yours, GOLDMAN, SACHS & CO. EX-99.14 15 OPINION OF GOLDMAN, SACHS & CO. November 19, 1995 Board of Directors First Interstate Bancorp 633 West Fifth Street Los Angeles, California 90071 Gentlemen and Madame: On November 5, 1995, First Interstate Bancorp (the "Company") and First Bank System, Inc. ("FBS") entered into an Agreement and Plan of Merger (the "Merger Agreement"), which provides, among other things, for the merger of the Company with Eleven Acquisition Corp., a wholly owned subsidiary of FBS (the "Merger"). Pursuant to the Merger, each outstanding share of Common Stock, par value $2.00 per share (the "Shares"), of the Company will be converted into 2.6 shares (the "Exchange Ratio") of Common Stock, par value $1.25 per share, of FBS. We have delivered to you, on November 5, 1995, our oral opinion as to the fairness of the Exchange Ratio to the holders of Shares. We also have confirmed our oral opinion in our written opinion dated November 6, 1995. The information, analyses, assumptions and limitations contained or referred to in our November 6, 1995 written option are made a part of this letter and are incorporated herein by reference. It is understood that this letter is for the information of the Board of Director of the Company only and does not constitute a recommendation to stockholders of the Company as to the voting of their shares on the proposed Merger or any other transaction. This is to advise you that, as of the date hereof, nothing has come to our attention that would cause us to withdraw or amend either our oral opinion delivered to you on November 5, 1995, or the confirmation thereof delivered to you in our written opinion dated November 6, 1995. Very truly yours, GOLDMAN, SACHS & CO. EX-99.15 16 OPINION OF MORGAN & STANLEY November 5, 1995 Board of Directors First Interstate Bancorp 633 West Fifth Street Los Angeles, CA 90071 Members of the Board: We understand that First Interstate Bancorp ("First Interstate" or "Company") and First Bank System, Inc. ("First Bank") are proposing to enter into an Agreement and Plan of Merger (the "Proposed Merger Agreement"), which will provide, among other things, for the merger of First Interstate with First Bank (the "Merger"). Pursuant to the Merger, each outstanding share of common stock of First Interstate (the "First Interstate Common Stock"), other than shares held in treasury or held by First Bank or any affiliate of First Bank or as to which dissenters' rights have been perfected, will be converted into 2.60 shares (the "First Bank Exchange Ratio") of common stock of First Bank (the "First Bank Common Stock"). Based on the closing price of First Bank Common Stock on November 3, 1995, the indicated value of the First Bank Exchange Ratio wold be $132.28 per share of First Interstate Common Stock. You have asked for our opinion as to whether the First Bank Exchange Ratio pursuant to the Proposed Merger Agreement is fair from a financial point of view to holders of First Interstate Common Stock (other than First Bank and its affiliates). For purposes of the opinion set forth herein, we have: (i) analyzed certain publicly available financial statements and other information of First Interstate and First Bank, respectively; (ii) analyzed internal financial statements and other financial and operating data concerning First Interstate and First Bank prepared by the management of First Interstate and First Bank, respectively; (iii) analyzed financial projections prepared by the managements of First Interstate and First Bank, respectively; (iv) discussed the past and current operations and financial condition and the prospects of First Interstate and First Bank with senior executives of First Interstate and First Bank, respectively; (v) reviewed and reported prices and trading activity for the First Interstate Common Stock and the First Bank Common Stock; (vi) compared the financial performance of First Interstate and First Bank and the prices, trading activity and trading multiples of the First Interstate Common Stock and the First Bank Common Stock with that of certain other comparable bank holding companies and their securities; (vii) discussed the strategic objectives of the merger and the plan for the combined company with senior executives of First Interstate and First Bank; (viii) analyzed certain pro forma financial projections for the combined company prepared by First Interstate and First Bank; (ix) reviewed and discussed with the senior managements of First Interstate and First Bank certain estimates of the potential cost savings, and anticipated revenue enhancements expected to result from the Merger; (x) reviewed the financial terms, to the extent publicly available, of certain comparable bank holding company merger transactions; (xi) participated in discussions among representatives of First Interstate and First Bank and their financial and legal advisors; (xii) reviewed the Proposed Merger Agreement and certain related agreements; and (xiii) performed such other analyses as we have deemed appropriate. We are aware of the proposal by Wells Fargo & Company ("Wells Fargo") to combine with First Interstate at an exchange ratio of .625 of a share of Wells Fargo Common Stock for each share of First Interstate Common Stock ( the ".625 Wells Fargo Ratio"). We also have been advised by senior management of First Interstate that senior management of Wells Fargo has orally indicated that under certain conditions it might be willing to consider raising the proposed exchange ratio to no higher than .650 of a share of Wells Fargo Common Stock for each share of First Interstate Common Stock (the ".650 Wells Fargo Ratio"). Based on the closing price of Wells Fargo Common Stock on November 3, 1995, the indicated value of the .625 Wells Fargo Ratio and the .650 Wells Fargo Ratio would be $132.66 and $137.96, respectively, per share of First Interstate Common Stock. We note that based on closing prices on November 3, 1995, the indicated values of both the Wells Fargo Ratios were higher than the indicated value of the First Bank Exchange Ratio. We have assumed and relied upon without independent verification the accuracy and completeness of the information reviewed by us for the purposes of this opinion. With respect to the financial projections, including estimates of cost savings and revenue 2 enhancements expected to result from the Merger, we have assumed that they have been reasonably prepared on bases reflecting the best currently available estimates and judgments of the future financial performance of First Interstate and First Bank, respectively. We have also assumed that off-balance sheet activities of First Interstate and First Bank, including derivatives and other similar financial instruments, will not adversely affect the future financial position and results of operations of the combined enterprise. We have not made any independent valuation or appraisal of the assets or liabilities of First Interstate or First Bank, nor have we been furnished with any such appraisals and we have not examined any individual loan credit files of First Interstate and First Bank. We have also assumed with your consent that the Merger will be accounted for as a pooling of interests under generally accepted accounting principals. Our opinion is necessarily based on economic, market and other conditions as in effect on, and the information made available to us as of, the date hereof. We have acted as financial advisor to the Board of Directors of First Interstate in connection with this transaction and will receive a fee for our services. In the past, Morgan Stanley & Co. Incorporated and its affiliates have provided financial advisory and financing services for First Interstate and First Bank and have received fees for the rendering of these services. We have also provided financial advisory and financing services for Wells Fargo in the past, and have received fees for the rendering of these services. It is understood that this letter is for the information of the Board of Directors of First Interstate only and does not constitute a recommendation to stockholders of First Interstate as to the voting of their shares on the proposed Merger or any other transaction. Based on the foregoing, we are of the opinion on the date hereof that the First Bank Exchange Ratio is fair from a financial point of view to holders of First Interstate Common Stock (other than First Bank and its affiliates). We note that it is also our view on the date hereof, based upon publicly available information in the case of Wells Fargo, that each of the .625 and .650 Wells Fargo Ratios would be fair from a financial point of view to the holders of First Interstate Common Stock (other than Wells Fargo and its affiliates). Very truly yours, MORGAN STANLEY & CO. INCORPORATED By: /s/ Donald A. Moore, Jr. ----------------------------------- Donald A. Moore, Jr. Managing Director 3 EX-99.16 17 OPINION OF MORGAN STANLEY & CO. November 19, 1995 Board of Directors First Interstate Bancorp 633 West Fifth Street Los Angeles, CA 90071 Members of the Board: On November 5, 1995, First Interstate Bancorp ("First Interstate") and First Bank System, Inc. ("First Bank") entered into an Agreement and Plan of Merger (the "Merger Agreement") which provides, among other things, for the merger of First Interstate with First Bank (the "Merger"). Pursuant to the Merger, each outstanding share of First Interstate Common Stock, other than shares held in treasury or held by First Bank or any affiliate of First Bank or as to which dissenters' rights have been perfected, will be converted into 2.60 shares (the "First Bank Exchange Ratio") of First Bank Common Stock. Based on the closing price of First Bank Common Stock on November 17, 1995, the indicated value of the First Bank Exchange Ratio would be $137.80 per share of First Interstate Common Stock. We have been informed of the revised offer by Wells Fargo & Company ("Wells Fargo") on November 13, 1995 to combine with First Interstate at an exchange ratio of two-thirds of a share of Wells Fargo Common Stock for each share of First Interstate Common Stock (the "Two-Thirds Wells Fargo Ratio"). Based on the closing price of Wells Fargo Common Stock on November 17, 1995 the indicated value of the Two-Thirds Wells Fargo Ratio would be $141.17 per share of First Interstate Common Stock. You have asked us to reaffirm our opinion dated November 5, 1995 as to the fairness from a financial point of view of the First Bank Exchange Ratio. For purposes of the opinion set forth herein, we have: (i) reviewed the reported prices and trading activity for the First Interstate Common Stock and the First Bank Common Stock from November 3, 1995 to the date hereof; (ii) confirmed with senior managements of First Interstate and First Bank that there have been no material changes or developments in the information previously provided to us by the respective managements in connection with our November 5, 1995 opinion, except for information relating to the revised offer by Wells Fargo; and (iii) performed such other analyses as we have deemed appropriate. The information, analyses, assumptions and limitations contained or referred to in our November 5, 1995 opinion letter are made a part of this letter and are incorporated herein by reference. It is understood that this letter is for the information of the Board of Directors of First Interstate only and does not constitute a recommendation to stockholders of First Interstate as to the voting of their shares on the proposed Merger or any other transaction. Based on the foregoing, this is to advise you that on the date hereof we reaffirm our opinion of November 5, 1995 that the First Bank Exchange Ratio is fair from a financial point of view to holders of First Interstate Common Stock. Very truly yours, MORGAN STANLEY & CO. INCORPORATED By:/s/ Donald A. Moore, Jr. --------------------------- Donald A. Moore, Jr. Managing Director EX-99.17 18 STOCK OPTION AGREEMENT STOCK OPTION AGREEMENT STOCK OPTION AGREEMENT, dated November 5, 1995, between FIRST BANK SYSTEM, INC., a Delaware corporation ("Grantee"), and FIRST INTERSTATE BANCORP, a Delaware corporation ("Issuer"). W I T N E S S E T H: WHEREAS, Grantee and Issuer have entered into an Agreement and Plan of Merger immediately prior to the execution and delivery hereof (the "Merger Agreement"); and WHEREAS, as a condition and inducement to Grantee's pursuit of the transactions contemplated by the Merger Agreement and in consideration therefor and in consideration of the grant of the Reciprocal Option (as hereinafter defined), Issuer has agreed to grant Grantee the Option (as hereinafter defined): NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements set forth herein and in the Merger Agreement, the parties hereto agree as follows: 1. (a) Issuer hereby grants to Grantee an unconditional, irrevocable option (the "Option") to purchase, subject to the terms hereof, up to 15,073,106 fully paid and nonassessable shares of the common stock, $2.00 par value, of Issuer ("Common Stock") at a price per share equal to the last reported sale price per share of Common Stock as reported on the consolidated tape for New York Stock Exchange issues on November 3, 1995; provided, however, that in the event Issuer issues or agrees to issue any shares of Common Stock at a price less than such last reported sale price per share (as adjusted pursuant to subsection (b) of Section 5) other than as permitted by the Merger Agreement, such price shall be equal to such lesser price (such price, as adjusted if applicable, the "Option Price"); provided further that in no event shall the number of shares for which this Option is exercisable exceed 19.9% of the issued and outstanding shares of Common Stock. The number of shares of Common Stock that may be received upon the exercise of the Option and the Option Price are subject to adjustment as herein set forth. (b) In the event that any additional shares of Common Stock are issued or otherwise become outstanding after the date of this Agreement (other than pursuant to this Agreement and other than pursuant to an event described in Section 5(a) hereof), the number of shares of Common Stock subject to the Option shall be increased so that, after such issuance, such number together with any shares of Common Stock previously issued pursuant hereto, equals 19.9% of the number of shares of Common Stock then issued and outstanding without giving effect to any shares subject or issued pursuant to the Option. Nothing contained in this Section 1(b) or elsewhere in this Agreement shall be deemed to authorize Issuer or Grantee to breach any provision of the Merger Agreement. 2. (a) The Holder (as hereinafter defined) may exercise the Option, in whole or part, if, but only if, both an Initial Triggering Event (as hereinafter defined) and a Subsequent Triggering Event (as hereinafter defined) shall have occurred prior to the occurrence of an Exercise Termination Event (as hereinafter defined), provided that the Holder shall have sent the written notice of such exercise (as provided in subsection (e) of this Section 2) within 6 months following such Subsequent Triggering Event (or such later period as provided in Section 10). Each of the following shall be an Exercise Termination Event: (i) the Effective Time of the Merger; (ii) termination of the Merger Agreement in accordance with the provisions thereof if such termination occurs prior to the occurrence of an Initial Triggering Event; (iii) the passage of 18 months (or such longer period as provided in Section 10) after termination of the Merger Agreement if such termination is concurrent with or follows the occurrence of an Initial Triggering Event; (iv) the date on which the shareholders of the Grantee shall have voted and failed to approve the Parent Vote Matters (as defined in the Merger Agreement) (unless (A) Issuer shall then be in material breach of its covenants or agreements contained in the Merger Agreement or (B) on or prior to such date, the shareholders of the Issuer shall have also voted and failed to approve and adopt the Merger Agreement and the Merger); or (v) the date on which the Reciprocal Option shall have 2 become exercisable in accordance with its terms. The term "Holder" shall mean the holder or holders of the Option. Notwithstanding anything to the contrary contained herein, (i) the Option may not be exercised at any time when Grantee shall be in breach of any of its covenants or agreements contained in the Merger Agreement such that Issuer shall be entitled (without regard to any grace period provided therein) to terminate the Merger Agreement pursuant to Section 8.1(d) thereof and (ii) this Agreement shall automatically terminate upon the termination of the Merger Agreement by Issuer pursuant to Section 8.1(d) thereof as a result of the breach by Grantee of its covenants or agreements contained in the Merger Agreement. (b) The term "Initial Triggering Event" shall mean any of the following events or transactions occurring on or after the date hereof: (i) Issuer or any of its Subsidiaries (as hereinafter defined) (each an "Issuer Subsidiary"), without having received Grantee's prior written consent, shall have entered into an agreement to engage in an Acquisition Transaction (as hereinafter defined) with any person (the term "person" for purposes of this Agreement having the meaning assigned thereto in Sections 3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934 (the "1934 Act"), and the rules and regulations thereunder) other than Grantee or any of its Subsidiaries (each a "Grantee Subsidiary") or the Board of Directors of Issuer shall have recommended that the shareholders of Issuer approve or accept any Acquisition Transaction other than as contemplated by the Merger Agreement or this Agreement. For purposes of this Agreement, (a) "Acquisition Transaction" shall mean (x) a merger or consolidation, or any similar transaction, involving Issuer or any Significant Subsidiary (as defined in Rule 1-02 of Regulation S-X promulgated by the Securities and Exchange Commission (the "SEC")) of Issuer (other than mergers, consolidations or similar transactions involving solely Issuer and/or one or more wholly-owned Issuer Subsidiaries and other than a merger or consolidation as to which the common shareholders of the Issuer immediately prior thereto in the aggregate own at least 70% of the common stock of the publicly held 3 surviving or successor corporation immediately following consummation thereof), (y) a purchase, lease or other acquisition of all or substantially all of the assets or deposits of Issuer or any Significant Subsidiary of Issuer, or (z) a purchase or other acquisition (including by way of merger, consolidation, share exchange or otherwise) of securities representing 10% or more of the voting power of Issuer or any Significant Subsidiary of Issuer, and (b) "Subsidiary" shall have the meaning set forth in Rule 12b-2 under the 1934 Act; (ii) Any person other than Grantee or any Grantee Subsidiary shall have acquired beneficial ownership or the right to acquire beneficial ownership of 10% or more of the outstanding shares of Common Stock (the term "beneficial ownership" for purposes of this Agreement having the meaning assigned thereto in Section 13(d) of the 1934 Act, and the rules and regulations thereunder); (iii) The shareholders of the Issuer shall have voted and failed to approve the transactions contemplated by the Merger Agreement at a meeting which has been held for that purpose or any adjournment or postponement thereof, or such meeting shall not have been held in violation of the Merger Agreement or shall have been cancelled prior to termination of the Merger Agreement if, prior to (x) such meeting or (y) if such meeting shall not have been held or shall have been cancelled, such termination, it shall have been publicly announced that any person (other than Parent or any of its Subsidiaries) shall have made, or disclosed an intention to make, a proposal to engage in an Acquisition Transaction; (iv) Issuer's Board of Directors shall have withdrawn or modified (or publicly announced its intention to withdraw or modify) its recommendation that the shareholders of Issuer approve the transactions contemplated by the Merger Agreement, or Issuer or any Issuer Subsidiary, without having received Grantee's prior written consent, shall have authorized, recommended, proposed (or publicly announced its intention to authorize, recommend or propose) an agreement to engage in an Acquisition 4 Transaction with any person other than Grantee or a Grantee Subsidiary; (v) Any person other than Grantee or any Grantee Subsidiary shall have made a proposal to Issuer or its shareholders to engage in an Acquisition Transaction and such proposal shall have been publicly announced; (vi) Any such person shall have filed with the SEC a registration statement with respect to a potential exchange offer that would constitute an Acquisition Transaction (or filed a preliminary proxy statement with the SEC with respect to a potential vote by its shareholders to approve the issuance of shares to be offered in such an exchange offer); (vii) Issuer shall have willfully breached any covenant or obligation contained in the Merger Agreement in anticipation of engaging in an Acquisition Transaction, and following such breach Grantee would be entitled to terminate the Merger Agreement (whether immediately or after the giving of notice or passage of time or both); or (viii) Any person other than Grantee or any Grantee Subsidiary, other than in connection with a transaction to which Grantee has given its prior written consent, shall have filed an application or notice with the Federal Reserve Board or other federal or state bank regulatory authority, which application or notice has been accepted for processing, for approval to engage in an Acquisition Transaction. Notwithstanding the foregoing, the proposal made prior to the date hereof by Wells Fargo & Company ("Wells") to enter into a business combination with Issuer shall be deemed, for purposes of this Agreement, to constitute a proposal to engage in an Acquisition Transaction that has been publicly announced; provided, however, that solely for purposes of the foregoing clause (v), such proposal shall not constitute a publicly announced proposal to engage in an Acquisition Transaction if Wells shall have publicly announced the withdrawal of such proposal prior to the time Issuer mails to its stockholders a proxy 5 statement in connection with its stockholder meeting called to approve and adopt the Merger Agreement. Nothing contained in the proviso to the immediately preceding sentence shall imply that any proposal made by Wells after the date hereof does not constitute a proposal to engage in an Acquisition Transaction for purposes of the foregoing clause (v). (c) The term "Subsequent Triggering Event" shall mean any of the following events or transactions occurring after the date hereof: (i) The acquisition by any person (other than Grantee or any Grantee Subsidiary) of beneficial ownership of 20% or more of the then outstanding Common Stock; or (ii) The occurrence of the Initial Triggering Event described in clause (i) of subsection (b) of this Section 2, except that the percentage referred to in clause (z) shall be 20%. (d) The term "Reciprocal Option" shall mean the option granted pursuant to the option agreement dated the date hereof between the Grantee, as issuer of such option, and the Issuer, as grantee of such option. (e) Issuer shall notify Grantee promptly in writing of the occurrence of any Initial Triggering Event or Subsequent Triggering Event (together, a "Triggering Event"), it being understood that the giving of such notice by Issuer shall not be a condition to the right of the Holder to exercise the Option. (f) In the event the Holder is entitled to and wishes to exercise the Option, it shall send to Issuer a written notice (the date of which being herein referred to as the "Notice Date") specifying (i) the total number of shares it will purchase pursuant to such exercise and (ii) a place and date not earlier than three business days nor later than 60 business days from the Notice Date for the closing of such purchase (the "Closing Date"); provided that if prior notification to or approval of the Federal Reserve Board or any other regulatory agency is required in connection with such purchase, the Holder shall promptly file the required notice or application for approval, shall promptly notify the Issuer of such 6 filing, and shall expeditiously process the same and the period of time that otherwise would run pursuant to this sentence shall run instead from the date on which any required notification periods have expired or been terminated or such approvals have been obtained and any requisite waiting period or periods shall have passed. Any exercise of the Option shall be deemed to occur on the Notice Date relating thereto. (g) At the closing referred to in subsection (f) of this Section 2, the Holder shall (i) pay to Issuer the aggregate purchase price for the shares of Common Stock purchased pursuant to the exercise of the Option in immediately available funds by wire transfer to a bank account designated by Issuer, provided that failure or refusal of Issuer to designate such a bank account shall not preclude the Holder from exercising the Option and (ii) present and surrender this Agreement to the Issuer at its principal executive offices. (h) At such closing, simultaneously with the delivery of immediately available funds as provided in subsection (g) of this Section 2, Issuer shall deliver to the Holder a certificate or certificates representing the number of shares of Common Stock purchased by the Holder and, if the Option should be exercised in part only, a new Option evidencing the rights of the Holder thereof to purchase the balance of the shares purchasable hereunder. (i) Certificates for Common Stock delivered at a closing hereunder may be endorsed with a restrictive legend that shall read substantially as follows: "The transfer of the shares represented by this certificate is subject to certain provisions of an agreement between the registered holder hereof and Issuer and to resale restrictions arising under the Securities Act of 1933, as amended. A copy of such agreement is on file at the principal office of Issuer and will be provided to the holder hereof without charge upon receipt by Issuer of a written request therefor." It is understood and agreed that: (i) the reference to the resale restrictions of the Securities Act of 1933 (the "1933 Act") in the above legend shall be removed by 7 delivery of substitute certificate(s) without such reference if the Holder shall have delivered to Issuer a copy of a letter from the staff of the SEC, or an opinion of counsel, in form and substance reasonably satisfactory to Issuer, to the effect that such legend is not required for purposes of the 1933 Act; (ii) the reference to the provisions of this Agreement in the above legend shall be removed by delivery of substitute certificate(s) without such reference if the shares have been sold or transferred in compliance with the provisions of this Agreement and under circumstances that do not require the retention of such reference; and (iii) the legend shall be removed in its entirety if the conditions in the preceding clauses (i) and (ii) are both satisfied. In addition, such certificates shall bear any other legend as may be required by law. (j) Upon the giving by the Holder to Issuer of the written notice of exercise of the Option provided for under subsection (f) of this Section 2 and the tender of the applicable purchase price in immediately available funds, the Holder shall be deemed to be the holder of record of the shares of Common Stock issuable upon such exercise, notwithstanding that the stock transfer books of Issuer shall then be closed or that certificates representing such shares of Common Stock shall not then be actually delivered to the Holder. Issuer shall pay all expenses, and any and all United States federal, state and local taxes and other charges that may be payable in connection with the preparation, issue and delivery of stock certificates under this Section 2 in the name of the Holder or its assignee, transferee or designee. 3. Issuer agrees: (i) that it shall at all times maintain, free from preemptive rights, sufficient authorized but unissued or treasury shares of Common Stock so that the Option may be exercised without additional authorization of Common Stock after giving effect to all other options, warrants, convertible securities and other rights to purchase Common Stock; (ii) that it will not, by charter amendment or through reorganization, consolidation, merger, dissolution or sale of assets, or by any other voluntary act, avoid or seek to avoid the observance or performance of any of the covenants, stipulations or conditions to be observed or performed hereunder by Issuer; (iii) promptly to take all action as may 8 from time to time be required (including (x) complying with all premerger notification, reporting and waiting period requirements specified in 15 U.S.C. (S)18a and regulations promulgated thereunder and (y) in the event, under the Bank Holding Company Act of 1956, as amended, or any state or other federal banking law, prior approval of or notice to the Federal Reserve Board or to any state or other federal regulatory authority is necessary before the Option may be exercised, cooperating fully with the Holder in preparing such applications or notices and providing such information to the Federal Reserve Board or such state or other federal regulatory authority as they may require) in order to permit the Holder to exercise the Option and Issuer duly and effectively to issue shares of Common Stock pursuant hereto; and (iv) promptly to take all action provided herein to protect the rights of the Holder against dilution. 4. This Agreement (and the Option granted hereby) are exchangeable, without expense, at the option of the Holder, upon presentation and surrender of this Agreement at the principal office of the Issuer, for other Agreements providing for Options of different denominations entitling the holder thereof to purchase, on the same terms and subject to the same conditions as are set forth herein, in the aggregate the same number of shares of Common Stock purchasable hereunder. The terms "Agreement" and "Option" as used herein include any Agreements and related Options for which this Agreement (and the Option granted hereby) may be exchanged. Upon receipt by Issuer of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Agreement, and (in the case of loss, theft or destruction) of reasonably satisfactory indemnification, and upon surrender and cancellation of this Agreement, if mutilated, Issuer will execute and deliver a new Agreement of like tenor and date. Any such new Agreement executed and delivered shall constitute an additional contractual obligation on the part of Issuer, whether or not the Agreement so lost, stolen, destroyed or mutilated shall at any time be enforceable by anyone. 5. In addition to the adjustment in the number of shares of Common Stock that are purchasable upon exercise of the Option pursuant to Section 1 of this Agreement, the number of shares of Common Stock purchas- able upon the exercise of the Option shall be subject to 9 adjustment from time to time as provided in this Section 5. (a) In the event of any change in Common Stock by reason of stock dividends, split-ups, mergers, recapitalizations, combinations, subdivisions, conversions, exchanges of shares or the like, the type and number of shares of Common Stock purchasable upon exercise hereof shall be appropriately adjusted and proper provision shall be made so that, in the event that any additional shares of Common Stock are to be issued or otherwise become outstanding as a result of any such change (other than pursuant to an exercise of the Option), the number of shares of Common Stock that remain subject to the Option shall be increased so that, after such issuance and together with shares of Common Stock previously issued pursuant to the exercise of the Option (as adjusted on account of any of the foregoing changes in the Common Stock), it equals 19.9% of the number of shares of Common Stock then issued and outstanding. (b) Whenever the number of shares of Common Stock purchasable upon exercise hereof is adjusted as provided in this Section 5, the Option Price shall be adjusted by multiplying the Option Price by a fraction, the numerator of which shall be equal to the number of shares of Common Stock purchasable prior to the adjustment and the denominator of which shall be equal to the number of shares of Common Stock purchasable after the adjustment. 6. Upon the occurrence of a Subsequent Triggering Event that occurs prior to an Exercise Termination Event, Issuer shall, at the request of Grantee delivered within 12 months (or such later period as provided in Section 10) of such Subsequent Triggering Event (whether on its own behalf or on behalf of any subsequent holder of this Option (or part thereof) or any of the shares of Common Stock issued pursuant hereto), promptly prepare, file and keep current a registration statement under the 1933 Act covering any shares issued and issuable pursuant to this Option and shall use its reasonable best efforts to cause such registration statement to become effective and remain current in order to permit the sale or other disposition of any shares of Common Stock issued upon total or partial exercise of this Option ("Option Shares") in accordance with any plan of disposition 10 requested by Grantee. Issuer will use its reasonable best efforts to cause such registration statement first to become effective and then to remain effective for such period not in excess of 180 days from the day such registration statement first becomes effective or such shorter time as may be reasonably necessary to effect such sales or other dispositions. Grantee shall have the right to demand two such registrations. The Issuer shall bear the costs of such registrations (including, but not limited to, Issuer's attorneys' fees, printing costs and filing fees, except for underwriting discounts or commissions, brokers' fees and the fees and disbursements of Grantee's counsel related thereto). The foregoing notwithstanding, if, at the time of any request by Grantee for registration of Option Shares as provided above, Issuer is in registration with respect to an underwritten public offering of shares of Common Stock, and if in the good faith judgment of the managing underwriter or managing underwriters, or, if none, the sole underwriter or underwriters, of such offering the inclusion of the Option Shares would interfere with the successful marketing of the shares of Common Stock offered by Issuer, the number of Option Shares otherwise to be covered in the registration statement contemplated hereby may be reduced; provided, however, that after any such required reduction the number of Option Shares to be included in such offering for the account of the Holder shall constitute at least 25% of the total number of shares to be sold by the Holder and Issuer in the aggregate; and provided further, however, that if such reduction occurs, then the Issuer shall file a registration statement for the balance as promptly as practicable thereafter as to which no reduction pursuant to this Section 6 shall be permitted or occur and the Holder shall thereafter be entitled to one additional registration. Each such Holder shall provide all information reasonably requested by Issuer for inclusion in any registration statement to be filed hereunder. If requested by any such Holder in connection with such registration, Issuer shall become a party to any underwriting agreement relating to the sale of such shares, but only to the extent of obligating itself in respect of representations, warranties, indemnities and other agreements customarily included in such underwriting agreements for Issuer. Upon receiving any request under this Section 6 from any Holder, Issuer agrees to send a copy thereof to any other person known to Issuer to be entitled to registration rights under this Section 6, in each 11 case by promptly mailing the same, postage prepaid, to the address of record of the persons entitled to receive such copies. Notwithstanding anything to the contrary contained herein, in no event shall Issuer be obligated to effect more than two registrations pursuant to this Section 8 by reason of the fact that there shall be more than one Holder as a result of any assignment or division of this Agreement. 7. (a) At any time after the occurrence of a Repurchase Event (as defined below) (i) at the request of the Holder, delivered prior to an Exercise Termination Event (or such later period as provided in Section 10), Issuer shall repurchase the Option from the Holder at a price (the "Option Repurchase Price") equal to (x) the amount by which (A) the market/offer price (as defined below) exceeds (B) the Option Price, multiplied by the number of shares for which this Option may then be exercised and (ii) at the request of the owner of Option Shares from time to time (the "Owner"), delivered prior to an Exercise Termination Event (or such later period as provided in Section 10), Issuer shall repurchase such number of the Option Shares from the Owner as the Owner shall designate at a price (the "Option Share Repurchase Price") equal to (x) the market/offer price multiplied by the number of Option Shares so designated. The term "market/offer price" shall mean the highest of (i) the price per share of Common Stock at which a tender or exchange offer therefor has been made, (ii) the price per share of Common Stock to be paid by any third party pursuant to an agreement with Issuer, (iii) the highest closing price for shares of Common Stock within the six-month period immediately preceding the date the Holder gives notice of the required repurchase of this Option or the Owner gives notice of the required repurchase of Option Shares, as the case may be, or (iv) in the event of a sale of all or substantially all of Issuer's assets or deposits, the sum of the net price paid in such sale for such assets or deposits and the current market value of the remaining net assets of Issuer as determined by a nationally recognized investment banking firm selected by the Holder or the Owner, as the case may be, and reasonably acceptable to Issuer, divided by the number of shares of Common Stock of Issuer outstanding at the time of such sale. In determining the market/offer price, the value of consideration other than cash shall be determined by a nationally recognized investment banking firm 12 selected by the Holder or Owner, as the case may be, and reasonably acceptable to Issuer. (b) The Holder and the Owner, as the case may be, may exercise its right to require Issuer to repurchase the Option and any Option Shares pursuant o this Section 7 by surrendering for such purpose to Issuer, at its principal office, a copy of this Agreement or certificates for Option Shares, as applicable, accompanied by a written notice or notices stating that the Holder or the Owner, as the case may be, elects to require Issuer to repurchase this Option and/or the Option Shares in accordance with the provisions of this Section 7. As promptly as practicable, and in any event within five business days after the surrender of the Option and/or certificates representing Option Shares and the receipt of such notice or notices relating thereto, Issuer shall deliver or cause to be delivered to the Holder the Option Repurchase Price and/or to the Owner the Option Share Repurchase Price therefor or the portion thereof that Issuer is not then prohibited under applicable law and regulation from so delivering. (c) To the extent that Issuer is prohibited under applicable law or regulation, or as a consequence of administrative policy, from repurchasing the Option and/or the Option Shares in full, Issuer shall immediately so notify the Holder and/or the Owner and thereafter deliver or cause to be delivered, from time to time, to the Holder and/or the Owner, as appropriate, the portion of the Option Repurchase Price and the Option Share Repurchase Price, respectively, that it is no longer prohibited from delivering, within five business days after the date on which Issuer is no longer so prohibited; provided, however, that if Issuer at any time after delivery of a notice of repurchase pursuant to paragraph (b) of this Section 7 is prohibited under applicable law or regulation, or as a consequence of administrative policy, from delivering to the Holder and/or the Owner, as appropriate, the Option Repurchase Price and the Option Share Repurchase Price, respectively, in full (and Issuer hereby undertakes to use its reasonable best efforts to obtain all required regulatory and legal approvals and to file any required notices as promptly as practicable in order to accomplish such repurchase), the Holder or Owner may revoke its notice of repurchase of the Option or the Option Shares whether in whole or to 13 the extent of the prohibition, whereupon, in the latter case, Issuer shall promptly (i) deliver to the Holder and/or the Owner, as appropriate, that portion of the Option Purchase Price or the Option Share Repurchase Price that Issuer is not prohibited from delivering; and (ii) deliver, as appropriate, either (A) to the Holder, a new Agreement evidencing the right of the Holder to purchase that number of shares of Common Stock obtained by multiplying the number of shares of Common Stock for which the surrendered Agreement was exercisable at the time of delivery of the notice of repurchase by a fraction, the numerator of which is the Option Repurchase Price less the portion thereof theretofore delivered to the Holder and the denominator of which is the Option Repurchase Price, or (B) to the Owner, a certificate for the Option Shares it is then so prohibited from repurchasing. If an Exercise Termination Event shall have occurred prior to the date of the notice by Issuer described in the first sentence of this subsection (c), or shall be scheduled to occur at any time before the expiration of a period ending on the thirtieth day after such date, the Holder shall nonetheless have the right to exercise the Option until the expiration of such 30-day period. (d) For purposes of this Section 7, a Repurchase Event shall be deemed to have occurred upon the occurrence of any of the following events or transactions after the date hereof: (i) the acquisition by any person (other than Grantee or any Grantee Subsidiary) of beneficial ownership of 50% or more of the then outstanding Common Stock; or (ii) the consummation of any Acquisition Transaction described in Section 2(b)(i) hereof, except that the percentage referred to in clause (z) shall be 50%. 8. (a) In the event that prior to an Exercise Termination Event, Issuer shall enter into an agreement (i) to consolidate with or merge into any person, other than Grantee or a Grantee Subsidiary, and shall not be the continuing or surviving corporation of such consolidation or merger, (ii) to permit any person, other than Grantee or a Grantee Subsidiary, to merge into 14 Issuer and Issuer shall be the continuing or surviving corporation, but, in connection with such merger, the then outstanding shares of Common Stock shall be changed into or exchanged for stock or other securities of any other person or cash or any other property or the then outstanding shares of Common Stock shall after such merger represent less than 50% of the outstanding shares and share equivalents of the merged company, or (iii) to sell or otherwise transfer all or substantially all of its or any Significant Subsidiary's assets or deposits to any person, other than Grantee or a Grantee Subsidiary, then, and in each such case, the agreement governing such transaction shall make proper provision so that the Option shall, upon the consummation of any such transaction and upon the terms and conditions set forth herein, be converted into, or exchanged for, an option (the "Substitute Option"), at the election of the Holder, of either (x) the Acquiring Corporation (as hereinafter defined) or (y) any person that controls the Acquiring Corporation. (b) The following terms have the meanings indicated: (i) "Acquiring Corporation" shall mean (i) the continuing or surviving corporation of a consolidation or merger with Issuer (if other than Issuer), (ii) Issuer in a merger in which Issuer is the continuing or surviving person, and (iii) the transferee of all or substantially all of Issuer's assets or deposits (or the assets or deposits of a Significant Subsidiary of Issuer). (ii) "Substitute Common Stock" shall mean the common stock issued by the issuer of the Substitute Option upon exercise of the Substitute Option. (iii) "Assigned Value" shall mean the market/offer price, as defined in Section 7. (iv) "Average Price" shall mean the average closing price of a share of the Substitute Common Stock for one year immediately preceding the consolidation, merger or sale in question, but in no event higher than the closing price of the shares of Substitute Common Stock on the day preceding such consolidation, merger or sale; provided that if 15 Issuer is the issuer of the Substitute Option, the Average Price shall be computed with respect to a share of common stock issued by the person merging into Issuer or by any company which controls or is controlled by such person, as the Holder may elect. (c) The Substitute Option shall have the same terms as the Option, provided, that if the terms of the Substitute Option cannot, for legal reasons, be the same as the Option, such terms shall be as similar as possible and in no event less advantageous to the Holder. The issuer of the Substitute Option shall also enter into an agreement with the then Holder or Holders of the Substitute Option in substantially the same form as this Agreement (after giving effect for such purpose to the provisions of Section 9), which agreement shall be applicable to the Substitute Option. (d) The Substitute Option shall be exercisable for such number of shares of Substitute Common Stock as is equal to the Assigned Value multiplied by the number of shares of Common Stock for which the Option is then exercisable, divided by the Average Price. The exercise price of the Substitute Option per share of Substitute Common Stock shall then be equal to the Option Price multiplied by a fraction, the numerator of which shall be the number of shares of Common Stock for which the Option is then exercisable and the denominator of which shall be the number of shares of Substitute Common Stock for which the Substitute Option is exercisable. (e) In no event, pursuant to any of the foregoing paragraphs, shall the Substitute Option be exercis- able for more than 19.9% of the shares of Substitute Common Stock outstanding prior to exercise of the Substitute Option. In the event that the Substitute Option would be exercisable for more than 19.9% of the shares of Substitute Common Stock outstanding prior to exercise but for this clause (e), the issuer of the Substitute Option (the "Substitute Option Issuer") shall make a cash payment to Holder equal to the excess of (i) the value of the Substitute Option without giving effect to the limitation in this clause (e) over (ii) the value of the Substitute Option after giving effect to the limitation in this clause (e). This difference in value shall be determined by a nationally recognized investment banking firm selected by the Holder. 16 (f) Issuer shall not enter into any transaction described in subsection (a) of this Section 8 unless the Acquiring Corporation and any person that controls the Acquiring Corporation assume in writing all the obligations of Issuer hereunder. 9. (a) At the request of the holder of the Substitute Option (the "Substitute Option Holder"), the issuer of the Substitute Option (the "Substitute Option Issuer") shall repurchase the Substitute Option from the Substitute Option Holder at a price (the "Substitute Option Repurchase Price") equal to (x) the amount by which (i) the Highest Closing Price (as hereinafter defined) exceeds (ii) the exercise price of the Substitute Option, multiplied by the number of shares of Substitute Common Stock for which the Substitute Option may then be exercised plus (y) Grantee's Out-of-Pocket Expenses (to the extent not previously reimbursed), and at the request of the owner (the "Substitute Share Owner") of shares of Substitute Common Stock (the "Substitute Shares"), the Substitute Option Issuer shall repurchase the Substitute Shares at a price (the "Substitute Share Repurchase Price") equal to (x) the Highest Closing Price multiplied by the number of Substitute Shares so designated plus (y) Grantee's Out-of-Pocket Expenses (to the extent not previously reimbursed). The term "Highest Closing Price" shall mean the highest closing price for shares of Substitute Common Stock within the six-month period immediately preceding the date the Substitute Option Holder gives notice of the required repurchase of the Substitute Option or the Substitute Share Owner gives notice of the required repurchase of the Substitute Shares, as applicable. (b) The Substitute Option Holder and the Substitute Share Owner, as the case may be, may exercise its respective right to require the Substitute Option Issuer to repurchase the Substitute Option and the Substitute Shares pursuant to this Section 9 by surrendering for such purpose to the Substitute Option Issuer, at its principal office, the agreement for such Substitute Option (or, in the absence of such an agreement, a copy of this Agreement) and certificates for Substitute Shares accompanied by a written notice or notices stating that the Substitute Option Holder or the Substitute Share Owner, as the case may be, elects to require the Substitute Option Issuer to repurchase the Substitute Option 17 and/or the Substitute Shares in accordance with the provisions of this Section 9. As promptly as practicable and in any event within five business days after the surrender of the Substitute Option and/or certificates representing Substitute Shares and the receipt of such notice or notices relating thereto, the Substitute Option Issuer shall deliver or cause to be delivered to the Substitute Option Holder the Substitute Option Repurchase Price and/or to the Substitute Share Owner the Substitute Share Repurchase Price therefor or the portion thereof which the Substitute Option Issuer is not then prohibited under applicable law and regulation from so delivering. (c) To the extent that the Substitute Option Issuer is prohibited under applicable law or regulation, or as a consequence of administrative policy, from repurchasing the Substitute Option and/or the Substitute Shares in part or in full, the Substitute Option Issuer shall immediately so notify the Substitute Option Holder and/or the Substitute Share Owner and thereafter deliver or cause to be delivered, from time to time, to the Substitute Option Holder and/or the Substitute Share Owner, as appropriate, the portion of the Substitute Share Repurchase Price, respectively, which it is no longer prohibited from delivering, within five business days after the date on which the Substitute Option Issuer is no longer so prohibited; provided, however, that if the Substitute Option Issuer is at any time after delivery of a notice of repurchase pursuant to subsection (b) of this Section 9 prohibited under applicable law or regulation, or as a consequence of administrative policy, from delivering to the Substitute Option Holder and/or the Substitute Share Owner, as appropriate, the Substitute Option Repurchase Price and the Substitute Share Repurchase Price, respectively, in full (and the Substitute Option Issuer shall use its best efforts to receive all required regulatory and legal approvals as promptly as practicable in order to accomplish such repurchase), the Substitute Option Holder or Substitute Share Owner may revoke its notice of repurchase of the Substitute Option or the Substitute Shares either in whole or to the extent of prohibition, whereupon, in the latter case, the Substitute Option Issuer shall promptly (i) deliver to the Substitute Option Holder or Substitute Share Owner, as appropriate, that portion of the Substitute Option Repurchase Price or the Substitute Share Repurchase Price that the Substitute Option Issuer is not prohibited from 18 delivering; and (ii) deliver, as appropriate, either (A) to the Substitute Option Holder, a new Substitute Option evidencing the right of the Substitute Option Holder to purchase that number of shares of the Substitute Common Stock obtained by multiplying the number of shares of the Substitute Common Stock for which the surrendered Substitute Option was exercisable at the time of delivery of the notice of repurchase by a fraction, the numerator of which is the Substitute Option Repurchase Price less the portion thereof theretofore delivered to the Substitute Option Holder and the denominator of which is the Substitute Option Repurchase Price, or (B) to the Substitute Share Owner, a certificate for the Substitute Option Shares it is then so prohibited from repurchasing. If an Exercise Termination Event shall have occurred prior to the date of the notice by the Substitute Option Issuer described in the first sentence of this subsection (c), or shall be scheduled to occur at any time before the expiration of a period ending on the thirtieth day after such date, the Substitute Option Holder shall nevertheless have the right to exercise the Substitute Option until the expiration of such 30-day period. 10. The 30-day, 6-month, 12-month or 18-month periods for exercise of certain rights under Sections 2, 6, 7, 9 and 12 shall be extended: (i) to the extent necessary to obtain all regulatory approvals for the exercise of such rights (for so long as the Holder is using commercially reasonable efforts to obtain such regulatory approvals), and for the expiration of all statutory waiting periods; and (ii) to the extent necessary to avoid liability under Section 16(b) of the 1934 Act by reason of such exercise. 11. Issuer hereby represents and warrants to Grantee as follows: (a) Issuer has full corporate power and au- thority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consum- mation of the transactions contemplated hereby have been duly and validly authorized by the Board of Directors of Issuer and no other corporate proceedings on the part of Issuer are necessary to authorize this Agreement or to consummate the transactions so contemplated. This Agree- 19 ment has been duly and validly executed and delivered by Issuer. (b) Issuer has taken all necessary corporate action to authorize and reserve and to permit it to issue, and at all times from the date hereof through the termination of this Agreement in accordance with its terms will have reserved for issuance upon the exercise of the Option, that number of shares of Common Stock equal to the maximum number of shares of Common Stock at any time and from time to time issuable hereunder, and all such shares, upon issuance pursuant thereto, will be duly authorized, validly issued, fully paid, nonassess- able, and will be delivered free and clear of all claims, liens, encumbrance and security interests and not subject to any preemptive rights. 12. Neither of the parties hereto may assign any of its rights or obligations under this Agreement or the Option created hereunder to any other person, without the express written consent of the other party, except that in the event a Subsequent Triggering Event shall have occurred prior to an Exercise Termination Event, Grantee, subject to the express provisions hereof, may assign in whole or in part its rights and obligations hereunder within 12 months following such Subsequent Triggering Event (or such later period as provided in Section 10); provided, however, that until the date 30 days following the date on which the Federal Reserve Board has approved applications by Grantee to acquire the shares of Common Stock subject to the Option, Grantee may not assign its rights under the Option except in (i) a widely dispersed public distribution, (ii) a private placement in which no one party acquires the right to purchase in excess of 2% of the voting shares of Issuer, (iii) an assignment to a single party (e.g., a broker or investment banker) for the purpose of conducting a widely dispersed public distribution on Grantee's behalf, or (iv) any other manner approved by the Federal Reserve Board. 13. Each of Grantee and Issuer will use its best efforts to make all filings with, and to obtain consents of, all third parties and governmental authorities necessary to the consummation of the transactions contemplated by this Agreement, including without limitation applying to the Federal Reserve Board under the Bank 20 Holding Company Act for approval to acquire the shares issuable hereunder, but Grantee shall not be obligated to apply to state banking authorities for approval to acquire the shares of Common Stock issuable hereunder until such time, if ever, as it deems appropriate to do so. 14. (a) Notwithstanding any other provision of this Agreement, in no event shall the Grantee's Total Profit (as hereinafter defined) exceed $100 million and, if it otherwise would exceed such amount, the Grantee, at its sole election, shall either (a) reduce the number of shares of Common Stock subject to this Option, (b) deliver to the Issuer for cancellation Option Shares previously purchased by Grantee, (c) pay cash to the Issuer, or (d) any combination thereof, so that Grantee's actually realized Total Profit shall not exceed $100 million after taking into account the foregoing actions. (b) Notwithstanding any other provision of this Agreement, this Option may not be exercised for a number of shares as would, as of the date of exercise, result in a Notional Total Profit (as defined below) of more than $100 million; provided, that nothing in this sentence shall restrict any exercise of the Option permitted hereby on any subsequent date. (c) As used herein, the term "Total Profit" shall mean the aggregate amount (before taxes) of the following: (i) the amount received by Grantee pursuant to Issuer's repurchase of the Option (or any portion thereof) pursuant to Section 7, (ii) (x) the amount received by Grantee pursuant to Issuer's repurchase of Option Shares pursuant to Section 7, less (y) the Grantee's purchase price for such Option Shares, (iii) (x) the net cash amounts received by Grantee pursuant to the sale of Option Shares (or any other securities into which such Option Shares are converted or exchanged) to any unaffiliated party, less (y) the Grantee's purchase price of such Option Shares, (iv) any amounts received by Grantee on the transfer of the Option (or any portion thereof) to any unaffiliated party, and (v) any equivalent amount with respect to the Substitute Option. (d) As used herein, the term "Notional Total Profit" with respect to any number of shares as to which Grantee may propose to exercise this Option shall be the Total Profit determined as of the date of such proposed 21 exercise assuming that this Option were exercised on such date for such number of shares and assuming that such shares, together with all other Option Shares held by Grantee and its affiliates as of such date, were sold for cash at the closing market price for the Common Stock as of the close of business on the preceding trading day (less customary brokerage commissions). (e) The Grantee agrees, promptly following any exercise of all or any portion of the Option, and subject to its rights under Section 7 hereof, to use commercially reasonable efforts promptly to maximize the value of Option Shares purchased taking into account market conditions, the number of Option Shares, the potential negative impact of substantial sales on the market price for Issuer Common Stock, and the availability of an effective registration statement to permit public sale of Option Shares. 15. The parties hereto acknowledge that damages would be an inadequate remedy for a breach of this Agreement by either party hereto and that the obligations of the parties hereto shall be enforceable by either party hereto through injunctive or other equitable relief. 16. If any term, provision, covenant or restriction contained in this Agreement is held by a court or a federal or state regulatory agency of competent jurisdiction to be invalid, void or unenforceable, the remainder of the terms, provisions and covenants and restrictions contained in this Agreement shall remain in full force and effect, and shall in no way be affected, impaired or invalidated. If for any reason such court or regulatory agency determines that the Holder is not permitted to acquire, or Issuer is not permitted to repurchase pursuant to Section 7, the full number of shares of Common Stock provided in Section 1(a) hereof (as adjusted pursuant to Section 1(b) or 5 hereof), it is the express intention of Issuer to allow the Holder to acquire or to require Issuer to repurchase such lesser number of shares as may be permissible, without any amendment or modification hereof. 17. All notices, requests, claims, demands and other communications hereunder shall be deemed to have been duly given when delivered in person, by fax, 22 telecopy, or by registered or certified mail (postage prepaid, return receipt requested) at the respective addresses of the parties set forth in the Merger Agreement. 18. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof. 19. This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original, but all of which shall constitute one and the same agreement. 20. Except as otherwise expressly provided herein, each of the parties hereto shall bear and pay all costs and expenses incurred by it or on its behalf in connection with the transactions contemplated hereunder, including fees and expenses of its own financial consultants, investment bankers, accountants and counsel. 21. Except as otherwise expressly provided herein or in the Merger Agreement, this Agreement contain the entire agreement between the parties with respect to the transactions contemplated hereunder and supersedes all prior arrangements or understandings with respect thereof, written or oral. The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors and permitted assignees. Nothing in this Agreement, expressed or implied, is intended to confer upon any party, other than the parties hereto, and their respective successors except as assignees, any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as expressly provided herein. 22. Capitalized terms used in this Agreement and not defined herein shall have the meanings assigned thereto in the Merger Agreement. 23 IN WITNESS WHEREOF, each of the parties has caused this Agreement to be executed on its behalf by its officers thereunto duly authorized, all of the date first above written. FIRST BANK SYSTEM, INC. By /s/ John F. Grundhofer -------------------------------- Its Chairman, President and Chief Executive Officer FIRST INTERSTATE BANCORP By /s/ William E. B. Siart --------------------------------- Its Chairman and Chief Executive Officer 24 EX-99.18 19 STOCK OPTION AGREEMENT STOCK OPTION AGREEMENT STOCK OPTION AGREEMENT, dated November 5, 1995, between FIRST INTERSTATE BANCORP, a Delaware corporation ("Grantee"), and FIRST BANK SYSTEM, INC., a Delaware corporation ("Issuer"). W I T N E S S E T H: WHEREAS, Grantee and Issuer have entered into an Agreement and Plan of Merger immediately prior to the execution and delivery hereof (the "Merger Agreement"); and WHEREAS, as a condition and inducement to Grantee's pursuit of the transactions contemplated by the Merger Agreement and in consideration therefor and in consideration of the grant of the Reciprocal Option (as hereinafter defined), Issuer has agreed to grant Grantee the Option (as hereinafter defined): NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements set forth herein and in the Merger Agreement, the parties hereto agree as follows: 1. (a) Issuer hereby grants to Grantee an unconditional, irrevocable option (the "Option") to purchase, subject to the terms hereof, up to 25,829,983 fully paid and nonassessable shares of the common stock, $1.25 par value, of Issuer ("Common Stock") at a price per share equal to the last reported sale price per share of Common Stock as reported on the consolidated tape for New York Stock Exchange issues on November 3, 1995; provided, however, that in the event Issuer issues or agrees to issue any shares of Common Stock at a price less than such last reported sale price per share (as adjusted pursuant to subsection (b) of Section 5) other than as permitted by the Merger Agreement, such price shall be equal to such lesser price (such price, as adjusted if applicable, the "Option Price"); provided further that in no event shall the number of shares for which this Option is exercisable exceed 19.9% of the issued and outstanding shares of Common Stock. The number of shares of Common Stock that may be received upon the exercise of the Option and the Option Price are subject to adjustment as herein set forth. (b) In the event that any additional shares of Common Stock are issued or otherwise become outstanding after the date of this Agreement (other than pursuant to this Agreement and other than pursuant to an event described in Section 5(a) hereof), the number of shares of Common Stock subject to the Option shall be increased so that, after such issuance, such number together with any shares of Common Stock previously issued pursuant hereto, equals 19.9% of the number of shares of Common Stock then issued and outstanding without giving effect to any shares subject or issued pursuant to the Option. Nothing contained in this Section 1(b) or elsewhere in this Agreement shall be deemed to authorize Issuer or Grantee to breach any provision of the Merger Agreement. (c) Notwithstanding anything else to the contrary contained in the Agreement, in no event shall (i) the number of shares of Common Stock for which this Option is then exercisable, plus (ii) the number of Option Shares (as hereinafter defined) theretofore purchased hereunder, plus (iii) the number of other shares of Common Stock of which the Grantee is the Beneficial Owner (as such term is defined in the Rights Agreement dated as of December 21, 1988 (as amended to date, the "Rights Agreement"), between the Issuer and the Rights Agent (as such term is defined in the Rights Agreement)) exceed 19.9% of the issued and outstanding shares of Common Stock (computed in accordance with the procedures set forth in the Rights Agreement) until after such time as the Rights Agreement is amended to provide that neither the execution of this Agreement or the Merger Agreement nor the exercise of the Option shall result in the Grantee becoming an Acquiring Person (as such term is defined in the Rights Agreement). Issuer's Board has duly authorized such an amendment and Issuer agrees promptly to take all steps necessary to enter into such an amendment with the Rights Agent. 2. (a) The Holder (as hereinafter defined) may exercise the Option, in whole or part, if, but only if, both an Initial Triggering Event (as hereinafter defined) and a Subsequent Triggering Event (as hereinaf- 2 ter defined) shall have occurred prior to the occurrence of an Exercise Termination Event (as hereinafter defined), provided that the Holder shall have sent the written notice of such exercise (as provided in subsection (e) of this Section 2) within 6 months following such Subsequent Triggering Event (or such later period as provided in Section 10). Each of the following shall be an Exercise Termination Event: (i) the Effective Time of the Merger; (ii) termination of the Merger Agreement in accordance with the provisions thereof if such termination occurs prior to the occurrence of an Initial Triggering Event; (iii) the passage of 18 months (or such longer period as provided in Section 10) after termination of the Merger Agreement if such termination is concurrent with or follows the occurrence of an Initial Triggering Event; (iv) the date on which the shareholders of the Grantee shall have voted and failed to adopt and approve the Merger Agreement and the Merger (unless (A) Issuer shall then be in material breach of its covenants or agreements contained in the Merger Agreement or (B) on or prior to such date, the shareholders of the Issuer shall have also voted and failed to approve the Parent Vote Matters (as defined in the Merger Agreement); or (v) the date on which the Reciprocal Option shall have become exercisable in accordance with its terms. The term "Holder" shall mean the holder or holders of the Option. Notwithstanding anything to the contrary contained herein, (i) the Option may not be exercised at any time when Grantee shall be in breach of any of its covenants or agreements contained in the Merger Agreement such that Issuer shall be entitled (without regard to any grace period provided therein) to terminate the Merger Agreement pursuant to Section 8.1(d) thereof and (ii) this Agreement shall automatically terminate upon the termination of the Merger Agreement by Issuer pursuant to Section 8.1(d) thereof as a result of the breach by Grantee of its covenants or agreements contained in the Merger Agreement. (b) The term "Initial Triggering Event" shall mean any of the following events or transactions occurring on or after the date hereof: (i) Issuer or any of its Subsidiaries (as hereinafter defined) (each an "Issuer Subsidiary"), without having received Grantee's prior 3 written consent, shall have entered into an agreement to engage in an Acquisition Transaction (as hereinafter defined) with any person (the term "person" for purposes of this Agreement having the meaning assigned thereto in Sections 3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934 (the "1934 Act"), and the rules and regulations thereunder) other than Grantee or any of its Subsidiaries (each a "Grantee Subsidiary") or the Board of Directors of Issuer shall have recommended that the shareholders of Issuer approve or accept any Acquisition Transaction other than as contemplated by the Merger Agreement or this Agreement. For purposes of this Agreement, (a) "Acquisition Transaction" shall mean (x) a merger or consolidation, or any similar transaction, involving Issuer or any Significant Subsidiary (as defined in Rule 1-02 of Regulation S-X promulgated by the Securities and Exchange Commission (the "SEC")) of Issuer (other than mergers, consolidations or similar transactions involving solely Issuer and/or one or more wholly-owned Issuer Subsidiaries and other than a merger or consolidation as to which the common shareholders of the Issuer immediately prior thereto in the aggregate own at least 70% of the common stock of the publicly held surviving or successor corporation immediately following consummation thereof), (y) a purchase, lease or other acquisition of all or substantially all of the assets or deposits of Issuer or any Significant Subsidiary of Issuer, or (z) a purchase or other acquisition (including by way of merger, consolidation, share exchange or otherwise) of securities representing 10% or more of the voting power of Issuer or any Significant Subsidiary of Issuer, and (b) "Subsidiary" shall have the meaning set forth in Rule 12b-2 under the 1934 Act; (ii) Any person other than Grantee or any Grantee Subsidiary shall have acquired beneficial ownership or the right to acquire beneficial ownership of 10% or more of the outstanding shares of Common Stock (the term "beneficial ownership" for purposes of this Agreement having the meaning assigned thereto in Section 13(d) of the 1934 Act, and the rules and regulations thereunder); (iii) The shareholders of the Issuer shall have voted and failed to approve the Parent Vote Matters at a meeting which has been held for that purpose or any adjournment or postponement 4 thereof, or such meeting shall not have been held in violation of the Merger Agreement or shall have been cancelled prior to termination of the Merger Agreement if, prior to (x) such meeting or (y) if such meeting shall not have been held or shall have been cancelled, such termination, it shall have been publicly announced that any person (other than Parent or any of its Subsidiaries) shall have made, or disclosed an intention to make, a proposal to engage in an Acquisition Transaction; (iv) Issuer's Board of Directors shall have withdrawn or modified (or publicly announced its intention to withdraw or modify) its recommendation that the shareholders of Issuer approve the Parent Vote Matters, or Issuer or any Issuer Subsidiary, without having received Grantee's prior written consent, shall have authorized, recommended, proposed (or publicly announced its intention to authorize, recommend or propose) an agreement to engage in an Acquisition Transaction with any person other than Grantee or a Grantee Subsidiary; (v) Any person other than Grantee or any Grantee Subsidiary shall have made a proposal to Issuer or its shareholders to engage in an Acquisition Transaction and such proposal shall have been publicly announced; (vi) Any such person shall have filed with the SEC a registration statement with respect to a potential exchange offer that would constitute an Acquisition Transaction (or filed a preliminary proxy statement with the SEC with respect to a potential vote by its shareholders to approve the issuance of shares to be offered in such an exchange offer); (vii) Issuer shall have willfully breached any covenant or obligation contained in the Merger Agreement in anticipation of engaging in an Acquisition Transaction, and following such breach Grantee would be entitled to terminate the Merger Agreement (whether immediately or after the giving of notice or passage of time or both); or 5 (viii) Any person other than Grantee or any Grantee Subsidiary, other than in connection with a transaction to which Grantee has given its prior written consent, shall have filed an application or notice with the Federal Reserve Board or other federal or state bank regulatory authority, which application or notice has been accepted for processing, for approval to engage in an Acquisition Transaction. (c) The term "Subsequent Triggering Event" shall mean any of the following events or transactions occurring after the date hereof: (i) The acquisition by any person (other than Grantee or any Grantee Subsidiary) of beneficial ownership of 20% or more of the then outstanding Common Stock; or (ii) The occurrence of the Initial Triggering Event described in clause (i) of subsection (b) of this Section 2, except that the percentage referred to in clause (z) shall be 20%. (d) The term "Reciprocal Option" shall mean the option granted pursuant to the option agreement dated the date hereof between the Grantee, as issuer of such option, and the Issuer, as grantee of such option. (e) Issuer shall notify Grantee promptly in writing of the occurrence of any Initial Triggering Event or Subsequent Triggering Event (together, a "Triggering Event"), it being understood that the giving of such notice by Issuer shall not be a condition to the right of the Holder to exercise the Option. (f) In the event the Holder is entitled to and wishes to exercise the Option, it shall send to Issuer a written notice (the date of which being herein referred to as the "Notice Date") specifying (i) the total number of shares it will purchase pursuant to such exercise and (ii) a place and date not earlier than three business days nor later than 60 business days from the Notice Date for the closing of such purchase (the "Closing Date"); provided that if prior notification to or approval of the Federal Reserve Board or any other regulatory agency is required in connection with such purchase, the Holder 6 shall promptly file the required notice or application for approval, shall promptly notify the Issuer of such filing, and shall expeditiously process the same and the period of time that otherwise would run pursuant to this sentence shall run instead from the date on which any required notification periods have expired or been terminated or such approvals have been obtained and any requisite waiting period or periods shall have passed. Any exercise of the Option shall be deemed to occur on the Notice Date relating thereto. (g) At the closing referred to in subsection (f) of this Section 2, the Holder shall (i) pay to Issuer the aggregate purchase price for the shares of Common Stock purchased pursuant to the exercise of the Option in immediately available funds by wire transfer to a bank account designated by Issuer, provided that failure or refusal of Issuer to designate such a bank account shall not preclude the Holder from exercising the Option and (ii) present and surrender this Agreement to the Issuer at its principal executive offices. (h) At such closing, simultaneously with the delivery of immediately available funds as provided in subsection (g) of this Section 2, Issuer shall deliver to the Holder a certificate or certificates representing the number of shares of Common Stock purchased by the Holder and, if the Option should be exercised in part only, a new Option evidencing the rights of the Holder thereof to purchase the balance of the shares purchasable hereunder. (i) Certificates for Common Stock delivered at a closing hereunder may be endorsed with a restrictive legend that shall read substantially as follows: "The transfer of the shares represented by this certificate is subject to certain provisions of an agreement between the registered holder hereof and Issuer and to resale restrictions arising under the Securities Act of 1933, as amended. A copy of such agreement is on file at the principal office of Issuer and will be provided to the holder hereof without charge upon receipt by Issuer of a written request therefor." 7 It is understood and agreed that: (i) the reference to the resale restrictions of the Securities Act of 1933 (the "1933 Act") in the above legend shall be removed by delivery of substitute certificate(s) without such reference if the Holder shall have delivered to Issuer a copy of a letter from the staff of the SEC, or an opinion of counsel, in form and substance reasonably satisfactory to Issuer, to the effect that such legend is not required for purposes of the 1933 Act; (ii) the reference to the provisions of this Agreement in the above legend shall be removed by delivery of substitute certificate(s) without such reference if the shares have been sold or transferred in compliance with the provisions of this Agreement and under circumstances that do not require the retention of such reference; and (iii) the legend shall be removed in its entirety if the conditions in the preceding clauses (i) and (ii) are both satisfied. In addition, such certificates shall bear any other legend as may be required by law. (j) Upon the giving by the Holder to Issuer of the written notice of exercise of the Option provided for under subsection (f) of this Section 2 and the tender of the applicable purchase price in immediately available funds, the Holder shall be deemed to be the holder of record of the shares of Common Stock issuable upon such exercise, notwithstanding that the stock transfer books of Issuer shall then be closed or that certificates representing such shares of Common Stock shall not then be actually delivered to the Holder. Issuer shall pay all expenses, and any and all United States federal, state and local taxes and other charges that may be payable in connection with the preparation, issue and delivery of stock certificates under this Section 2 in the name of the Holder or its assignee, transferee or designee. 3. Issuer agrees: (i) that it shall at all times maintain, free from preemptive rights, sufficient authorized but unissued or treasury shares of Common Stock so that the Option may be exercised without additional authorization of Common Stock after giving effect to all other options, warrants, convertible securities and other rights to purchase Common Stock; (ii) that it will not, by charter amendment or through reorganization, consolidation, merger, dissolution or sale of assets, or by any other voluntary act, avoid or seek to avoid the 8 observance or performance of any of the covenants, stipulations or conditions to be observed or performed hereunder by Issuer; (iii) promptly to take all action as may from time to time be required (including (x) complying with all premerger notification, reporting and waiting period requirements specified in 15 U.S.C. (S)18a and regulations promulgated thereunder and (y) in the event, under the Bank Holding Company Act of 1956, as amended, or any state or other federal banking law, prior approval of or notice to the Federal Reserve Board or to any state or other federal regulatory authority is necessary before the Option may be exercised, cooperating fully with the Holder in preparing such applications or notices and providing such information to the Federal Reserve Board or such state or other federal regulatory authority as they may require) in order to permit the Holder to exercise the Option and Issuer duly and effectively to issue shares of Common Stock pursuant hereto; and (iv) promptly to take all action provided herein to protect the rights of the Holder against dilution. 4. This Agreement (and the Option granted hereby) are exchangeable, without expense, at the option of the Holder, upon presentation and surrender of this Agreement at the principal office of the Issuer, for other Agreements providing for Options of different denominations entitling the holder thereof to purchase, on the same terms and subject to the same conditions as are set forth herein, in the aggregate the same number of shares of Common Stock purchasable hereunder. The terms "Agreement" and "Option" as used herein include any Agreements and related Options for which this Agreement (and the Option granted hereby) may be exchanged. Upon receipt by Issuer of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Agreement, and (in the case of loss, theft or destruction) of reasonably satisfactory indemnification, and upon surrender and cancellation of this Agreement, if mutilated, Issuer will execute and deliver a new Agreement of like tenor and date. Any such new Agreement executed and delivered shall constitute an additional contractual obligation on the part of Issuer, whether or not the Agreement so lost, stolen, destroyed or mutilated shall at any time be enforceable by anyone. 5. In addition to the adjustment in the number of shares of Common Stock that are purchasable 9 upon exercise of the Option pursuant to Section 1 of this Agreement, the number of shares of Common Stock purchas- able upon the exercise of the Option shall be subject to adjustment from time to time as provided in this Section 5. (a) In the event of any change in Common Stock by reason of stock dividends, split-ups, mergers, recapitalizations, combinations, subdivisions, conversions, exchanges of shares or the like, the type and number of shares of Common Stock purchas- able upon exercise hereof shall be appropriately adjusted and proper provision shall be made so that, in the event that any additional shares of Common Stock are to be issued or otherwise become outstanding as a result of any such change (other than pursuant to an exercise of the Option), the number of shares of Common Stock that remain subject to the Option shall be increased so that, after such issuance and together with shares of Common Stock previously issued pursuant to the exercise of the Option (as adjusted on account of any of the foregoing changes in the Common Stock), it equals 19.9% of the number of shares of Common Stock then issued and outstanding. (b) Whenever the number of shares of Common Stock purchasable upon exercise hereof is adjusted as provided in this Section 5, the Option Price shall be adjusted by multiplying the Option Price by a fraction, the numerator of which shall be equal to the number of shares of Common Stock pur- chasable prior to the adjustment and the denominator of which shall be equal to the number of shares of Common Stock purchasable after the adjustment. 6. Upon the occurrence of a Subsequent Triggering Event that occurs prior to an Exercise Termination Event, Issuer shall, at the request of Grantee delivered within 12 months (or such later period as provided in Section 10) of such Subsequent Triggering Event (whether on its own behalf or on behalf of any subsequent holder of this Option (or part thereof) or any of the shares of Common Stock issued pursuant hereto), promptly prepare, file and keep current a registration statement under the 1933 Act covering any shares issued and issuable pursuant to this Option and shall use its reasonable best efforts 10 to cause such registration statement to become effective and remain current in order to permit the sale or other disposition of any shares of Common Stock issued upon total or partial exercise of this Option ("Option Shares") in accordance with any plan of disposition requested by Grantee. Issuer will use its reasonable best efforts to cause such registration statement first to become effective and then to remain effective for such period not in excess of 180 days from the day such registration statement first becomes effective or such shorter time as may be reasonably necessary to effect such sales or other dispositions. Grantee shall have the right to demand two such registrations. The Issuer shall bear the costs of such registrations (including, but not limited to, Issuer's attorneys' fees, printing costs and filing fees, except for underwriting discounts or commissions, brokers' fees and the fees and disbursements of Grantee's counsel related thereto). The foregoing notwithstanding, if, at the time of any request by Grantee for registration of Option Shares as provided above, Issuer is in registration with respect to an underwritten public offering of shares of Common Stock, and if in the good faith judgment of the managing underwriter or managing underwriters, or, if none, the sole underwriter or underwriters, of such offering the inclusion of the Option Shares would interfere with the successful marketing of the shares of Common Stock offered by Issuer, the number of Option Shares otherwise to be covered in the registration statement contemplated hereby may be reduced; provided, however, that after any such required reduction the number of Option Shares to be included in such offering for the account of the Holder shall constitute at least 25% of the total number of shares to be sold by the Holder and Issuer in the aggregate; and provided further, however, that if such reduction occurs, then the Issuer shall file a registration statement for the balance as promptly as practicable thereafter as to which no reduction pursuant to this Section 6 shall be permitted or occur and the Holder shall thereafter be entitled to one additional registration. Each such Holder shall provide all information reasonably requested by Issuer for inclusion in any registration statement to be filed hereunder. If requested by any such Holder in connection with such registration, Issuer shall become a party to any underwriting agreement relating to the sale of such shares, but only to the extent of obligating itself in respect of representations, warranties, indemnities and other agree- 11 ments customarily included in such underwriting agreements for Issuer. Upon receiving any request under this Section 6 from any Holder, Issuer agrees to send a copy thereof to any other person known to Issuer to be entitled to registration rights under this Section 6, in each case by promptly mailing the same, postage prepaid, to the address of record of the persons entitled to receive such copies. Notwithstanding anything to the contrary contained herein, in no event shall Issuer be obligated to effect more than two registrations pursuant to this Section 8 by reason of the fact that there shall be more than one Holder as a result of any assignment or division of this Agreement. 7. (a) At any time after the occurrence of a Repurchase Event (as defined below) (i) at the request of the Holder, delivered prior to an Exercise Termination Event (or such later period as provided in Section 10), Issuer shall repurchase the Option from the Holder at a price (the "Option Repurchase Price") equal to (x) the amount by which (A) the market/offer price (as defined below) exceeds (B) the Option Price, multiplied by the number of shares for which this Option may then be exercised and (ii) at the request of the owner of Option Shares from time to time (the "Owner"), delivered prior to an Exercise Termination Event (or such later period as provided in Section 10), Issuer shall repurchase such number of the Option Shares from the Owner as the Owner shall designate at a price (the "Option Share Repurchase Price") equal to (x) the market/offer price multiplied by the number of Option Shares so designated. The term "market/offer price" shall mean the highest of (i) the price per share of Common Stock at which a tender or exchange offer therefor has been made, (ii) the price per share of Common Stock to be paid by any third party pursuant to an agreement with Issuer, (iii) the highest closing price for shares of Common Stock within the six-month period immediately preceding the date the Holder gives notice of the required repurchase of this Option or the Owner gives notice of the required repurchase of Option Shares, as the case may be, or (iv) in the event of a sale of all or substantially all of Issuer's assets or deposits, the sum of the net price paid in such sale for such assets or deposits and the current market value of the remaining net assets of Issuer as determined by a nationally recognized investment banking firm selected by the Holder or the Owner, as the case may be, and reason- 12 ably acceptable to Issuer, divided by the number of shares of Common Stock of Issuer outstanding at the time of such sale. In determining the market/offer price, the value of consideration other than cash shall be determined by a nationally recognized investment banking firm selected by the Holder or Owner, as the case may be, and reasonably acceptable to Issuer. (b) The Holder and the Owner, as the case may be, may exercise its right to require Issuer to repurchase the Option and any Option Shares pursuant to this Section 7 by surrendering for such purpose to Issuer, at its principal office, a copy of this Agreement or certificates for Option Shares, as applicable, accompanied by a written notice or notices stating that the Holder or the Owner, as the case may be, elects to require Issuer to repurchase this Option and/or the Option Shares in accordance with the provisions of this Section 7. As promptly as practicable, and in any event within five business days after the surrender of the Option and/or certificates representing Option Shares and the receipt of such notice or notices relating thereto, Issuer shall deliver or cause to be delivered to the Holder the Option Repurchase Price and/or to the Owner the Option Share Repurchase Price therefor or the portion thereof that Issuer is not then prohibited under applicable law and regulation from so delivering. (c) To the extent that Issuer is prohibited under applicable law or regulation, or as a consequence of administrative policy, from repurchasing the Option and/or the Option Shares in full, Issuer shall immediately so notify the Holder and/or the Owner and thereafter deliver or cause to be delivered, from time to time, to the Holder and/or the Owner, as appropriate, the portion of the Option Repurchase Price and the Option Share Repurchase Price, respectively, that it is no longer prohibited from delivering, within five business days after the date on which Issuer is no longer so prohibited; provided, however, that if Issuer at any time after delivery of a notice of repurchase pursuant to paragraph (b) of this Section 7 is prohibited under applicable law or regulation, or as a consequence of administrative policy, from delivering to the Holder and/or the Owner, as appropriate, the Option Repurchase Price and the Option Share Repurchase Price, respectively, in full (and Issuer hereby undertakes to use its reasonable best 13 efforts to obtain all required regulatory and legal approvals and to file any required notices as promptly as practicable in order to accomplish such repurchase), the Holder or Owner may revoke its notice of repurchase of the Option or the Option Shares whether in whole or to the extent of the prohibition, whereupon, in the latter case, Issuer shall promptly (i) deliver to the Holder and/or the Owner, as appropriate, that portion of the Option Purchase Price or the Option Share Repurchase Price that Issuer is not prohibited from delivering; and (ii) deliver, as appropriate, either (A) to the Holder, a new Agreement evidencing the right of the Holder to purchase that number of shares of Common Stock obtained by multiplying the number of shares of Common Stock for which the surrendered Agreement was exercisable at the time of delivery of the notice of repurchase by a fraction, the numerator of which is the Option Repurchase Price less the portion thereof theretofore delivered to the Holder and the denominator of which is the Option Repurchase Price, or (B) to the Owner, a certificate for the Option Shares it is then so prohibited from repurchasing. If an Exercise Termination Event shall have occurred prior to the date of the notice by Issuer described in the first sentence of this subsection (c), or shall be scheduled to occur at any time before the expiration of a period ending on the thirtieth day after such date, the Holder shall nonetheless have the right to exercise the Option until the expiration of such 30-day period. (d) For purposes of this Section 7, a Repurchase Event shall be deemed to have occurred upon the occurrence of any of the following events or transactions after the date hereof: (i) the acquisition by any person (other than Grantee or any Grantee Subsidiary) of beneficial ownership of 50% or more of the then outstanding Common Stock; or (ii) the consummation of any Acquisition Transaction described in Section 2(b)(i) hereof, except that the percentage referred to in clause (z) shall be 50%. 8. (a) In the event that prior to an Exer- cise Termination Event, Issuer shall enter into an agree- 14 ment (i) to consolidate with or merge into any person, other than Grantee or a Grantee Subsidiary, and shall not be the continuing or surviving corporation of such consolidation or merger, (ii) to permit any person, other than Grantee or a Grantee Subsidiary, to merge into Issuer and Issuer shall be the continuing or surviving corporation, but, in connection with such merger, the then outstanding shares of Common Stock shall be changed into or exchanged for stock or other securities of any other person or cash or any other property or the then outstanding shares of Common Stock shall after such merger represent less than 50% of the outstanding shares and share equivalents of the merged company, or (iii) to sell or otherwise transfer all or substantially all of its or any Significant Subsidiary's assets or deposits to any person, other than Grantee or a Grantee Subsidiary, then, and in each such case, the agreement governing such transaction shall make proper provision so that the Option shall, upon the consummation of any such transaction and upon the terms and conditions set forth herein, be converted into, or exchanged for, an option (the "Substitute Option"), at the election of the Holder, of either (x) the Acquiring Corporation (as hereinafter defined) or (y) any person that controls the Acquiring Corporation. (b) The following terms have the meanings indicated: (i) "Acquiring Corporation" shall mean (i) the continuing or surviving corporation of a consolidation or merger with Issuer (if other than Issuer), (ii) Issuer in a merger in which Issuer is the continuing or surviving person, and (iii) the transferee of all or substantially all of Issuer's assets or deposits (or the assets or deposits of a Significant Subsidiary of Issuer). (ii) "Substitute Common Stock" shall mean the common stock issued by the issuer of the Substitute Option upon exercise of the Substitute Option. (iii) "Assigned Value" shall mean the market/offer price, as defined in Section 7. (iv) "Average Price" shall mean the average closing price of a share of the Substitute 15 Common Stock for one year immediately preceding the consolidation, merger or sale in question, but in no event higher than the closing price of the shares of Substitute Common Stock on the day preceding such consolidation, merger or sale; provided that if Issuer is the issuer of the Substitute Option, the Average Price shall be computed with respect to a share of common stock issued by the person merging into Issuer or by any company which controls or is controlled by such person, as the Holder may elect. (c) The Substitute Option shall have the same terms as the Option, provided, that if the terms of the Substitute Option cannot, for legal reasons, be the same as the Option, such terms shall be as similar as possible and in no event less advantageous to the Holder. The issuer of the Substitute Option shall also enter into an agreement with the then Holder or Holders of the Substitute Option in substantially the same form as this Agreement (after giving effect for such purpose to the provisions of Section 9), which agreement shall be applicable to the Substitute Option. (d) The Substitute Option shall be exercisable for such number of shares of Substitute Common Stock as is equal to the Assigned Value multiplied by the number of shares of Common Stock for which the Option is then exercisable, divided by the Average Price. The exercise price of the Substitute Option per share of Substitute Common Stock shall then be equal to the Option Price multiplied by a fraction, the numerator of which shall be the number of shares of Common Stock for which the Option is then exercisable and the denominator of which shall be the number of shares of Substitute Common Stock for which the Substitute Option is exercisable. (e) In no event, pursuant to any of the foregoing paragraphs, shall the Substitute Option be exercis- able for more than 19.9% of the shares of Substitute Common Stock outstanding prior to exercise of the Substitute Option. In the event that the Substitute Option would be exercisable for more than 19.9% of the shares of Substitute Common Stock outstanding prior to exercise but for this clause (e), the issuer of the Substitute Option (the "Substitute Option Issuer") shall make a cash payment to Holder equal to the excess of (i) the value of the Substitute Option without giving effect to the limi- 16 tation in this clause (e) over (ii) the value of the Substitute Option after giving effect to the limitation in this clause (e). This difference in value shall be determined by a nationally recognized investment banking firm selected by the Holder. (f) Issuer shall not enter into any transaction described in subsection (a) of this Section 8 unless the Acquiring Corporation and any person that controls the Acquiring Corporation assume in writing all the obligations of Issuer hereunder. 9. (a) At the request of the holder of the Substitute Option (the "Substitute Option Holder"), the issuer of the Substitute Option (the "Substitute Option Issuer") shall repurchase the Substitute Option from the Substitute Option Holder at a price (the "Substitute Option Repurchase Price") equal to (x) the amount by which (i) the Highest Closing Price (as hereinafter defined) exceeds (ii) the exercise price of the Substitute Option, multiplied by the number of shares of Substitute Common Stock for which the Substitute Option may then be exercised plus (y) Grantee's Out-of-Pocket Expenses (to the extent not previously reimbursed), and at the request of the owner (the "Substitute Share Owner") of shares of Substitute Common Stock (the "Substitute Shares"), the Substitute Option Issuer shall repurchase the Substitute Shares at a price (the "Substitute Share Repurchase Price") equal to (x) the Highest Closing Price multiplied by the number of Substitute Shares so designated plus (y) Grantee's Out-of-Pocket Expenses (to the extent not previously reimbursed). The term "Highest Closing Price" shall mean the highest closing price for shares of Substitute Common Stock within the six-month period immediately preceding the date the Substitute Option Holder gives notice of the required repurchase of the Substitute Option or the Substitute Share Owner gives notice of the required repurchase of the Substitute Shares, as applicable. (b) The Substitute Option Holder and the Substitute Share Owner, as the case may be, may exercise its respective right to require the Substitute Option Issuer to repurchase the Substitute Option and the Substitute Shares pursuant to this Section 9 by surrendering for such purpose to the Substitute Option Issuer, at its principal office, the agreement for such Substitute 17 Option (or, in the absence of such an agreement, a copy of this Agreement) and certificates for Substitute Shares accompanied by a written notice or notices stating that the Substitute Option Holder or the Substitute Share Owner, as the case may be, elects to require the Substitute Option Issuer to repurchase the Substitute Option and/or the Substitute Shares in accordance with the provisions of this Section 9. As promptly as practicable and in any event within five business days after the surrender of the Substitute Option and/or certificates representing Substitute Shares and the receipt of such notice or notices relating thereto, the Substitute Option Issuer shall deliver or cause to be delivered to the Substitute Option Holder the Substitute Option Repurchase Price and/or to the Substitute Share Owner the Substitute Share Repurchase Price therefor or the portion thereof which the Substitute Option Issuer is not then prohibited under applicable law and regulation from so delivering. (c) To the extent that the Substitute Option Issuer is prohibited under applicable law or regulation, or as a consequence of administrative policy, from repurchasing the Substitute Option and/or the Substitute Shares in part or in full, the Substitute Option Issuer shall immediately so notify the Substitute Option Holder and/or the Substitute Share Owner and thereafter deliver or cause to be delivered, from time to time, to the Substitute Option Holder and/or the Substitute Share Owner, as appropriate, the portion of the Substitute Share Repurchase Price, respectively, which it is no longer prohibited from delivering, within five business days after the date on which the Substitute Option Issuer is no longer so prohibited; provided, however, that if the Substitute Option Issuer is at any time after delivery of a notice of repurchase pursuant to subsection (b) of this Section 9 prohibited under applicable law or regulation, or as a consequence of administrative policy, from delivering to the Substitute Option Holder and/or the Substitute Share Owner, as appropriate, the Substitute Option Repurchase Price and the Substitute Share Repurchase Price, respectively, in full (and the Substitute Option Issuer shall use its best efforts to receive all required regulatory and legal approvals as promptly as practicable in order to accomplish such repurchase), the Substitute Option Holder or Substitute Share Owner may revoke its notice of repurchase of the Substitute Option or the Substitute Shares either in whole or to the 18 extent of prohibition, whereupon, in the latter case, the Substitute Option Issuer shall promptly (i) deliver to the Substitute Option Holder or Substitute Share Owner, as appropriate, that portion of the Substitute Option Repurchase Price or the Substitute Share Repurchase Price that the Substitute Option Issuer is not prohibited from delivering; and (ii) deliver, as appropriate, either (A) to the Substitute Option Holder, a new Substitute Option evidencing the right of the Substitute Option Holder to purchase that number of shares of the Substitute Common Stock obtained by multiplying the number of shares of the Substitute Common Stock for which the surrendered Substitute Option was exercisable at the time of delivery of the notice of repurchase by a fraction, the numerator of which is the Substitute Option Repurchase Price less the portion thereof theretofore delivered to the Substitute Option Holder and the denominator of which is the Substitute Option Repurchase Price, or (B) to the Substitute Share Owner, a certificate for the Substitute Option Shares it is then so prohibited from repurchasing. If an Exercise Termination Event shall have occurred prior to the date of the notice by the Substitute Option Issuer described in the first sentence of this subsection (c), or shall be scheduled to occur at any time before the expiration of a period ending on the thirtieth day after such date, the Substitute Option Holder shall nevertheless have the right to exercise the Substitute Option until the expiration of such 30-day period. 10. The 30-day, 6-month, 12-month or 18-month periods for exercise of certain rights under Sections 2, 6, 7, 9 and 12 shall be extended: (i) to the extent necessary to obtain all regulatory approvals for the exercise of such rights (for so long as the Holder is using commercially reasonable efforts to obtain such regulatory approvals), and for the expiration of all statutory waiting periods; and (ii) to the extent necessary to avoid liability under Section 16(b) of the 1934 Act by reason of such exercise. 11. Issuer hereby represents and warrants to Grantee as follows: (a) Issuer has full corporate power and au- thority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consum- 19 mation of the transactions contemplated hereby have been duly and validly authorized by the Board of Directors of Issuer and no other corporate proceedings on the part of Issuer are necessary to authorize this Agreement or to consummate the transactions so contemplated. This Agreement has been duly and validly executed and delivered by Issuer. (b) Issuer has taken all necessary corporate action to authorize and reserve and to permit it to issue, and at all times from the date hereof through the termination of this Agreement in accordance with its terms will have reserved for issuance upon the exercise of the Option, that number of shares of Common Stock equal to the maximum number of shares of Common Stock at any time and from time to time issuable hereunder, and all such shares, upon issuance pursuant thereto, will be duly authorized, validly issued, fully paid, nonassess- able, and will be delivered free and clear of all claims, liens, encumbrance and security interests and not subject to any preemptive rights. 12. Neither of the parties hereto may assign any of its rights or obligations under this Agreement or the Option created hereunder to any other person, without the express written consent of the other party, except that in the event a Subsequent Triggering Event shall have occurred prior to an Exercise Termination Event, Grantee, subject to the express provisions hereof, may assign in whole or in part its rights and obligations hereunder within 12 months following such Subsequent Triggering Event (or such later period as provided in Section 10); provided, however, that until the date 30 days following the date on which the Federal Reserve Board has approved applications by Grantee to acquire the shares of Common Stock subject to the Option, Grantee may not assign its rights under the Option except in (i) a widely dispersed public distribution, (ii) a private placement in which no one party acquires the right to purchase in excess of 2% of the voting shares of Issuer, (iii) an assignment to a single party (e.g., a broker or investment banker) for the purpose of conducting a widely dispersed public distribution on Grantee's behalf, or (iv) any other manner approved by the Federal Reserve Board. 20 13. Each of Grantee and Issuer will use its best efforts to make all filings with, and to obtain consents of, all third parties and governmental authorities necessary to the consummation of the transactions contemplated by this Agreement, including without limitation applying to the Federal Reserve Board under the Bank Holding Company Act for approval to acquire the shares issuable hereunder, but Grantee shall not be obligated to apply to state banking authorities for approval to acquire the shares of Common Stock issuable hereunder until such time, if ever, as it deems appropriate to do so. 14. (a) Notwithstanding any other provision of this Agreement, in no event shall the Grantee's Total Profit (as hereinafter defined) exceed $100 million and, if it otherwise would exceed such amount, the Grantee, at its sole election, shall either (a) reduce the number of shares of Common Stock subject to this Option, (b) deliver to the Issuer for cancellation Option Shares previously purchased by Grantee, (c) pay cash to the Issuer, or (d) any combination thereof, so that Grantee's actually realized Total Profit shall not exceed $100 million after taking into account the foregoing actions. (b) Notwithstanding any other provision of this Agreement, this Option may not be exercised for a number of shares as would, as of the date of exercise, result in a Notional Total Profit (as defined below) of more than $100 million; provided, that nothing in this sentence shall restrict any exercise of the Option permitted hereby on any subsequent date. (c) As used herein, the term "Total Profit" shall mean the aggregate amount (before taxes) of the following: (i) the amount received by Grantee pursuant to Issuer's repurchase of the Option (or any portion thereof) pursuant to Section 7, (ii) (x) the amount received by Grantee pursuant to Issuer's repurchase of Option Shares pursuant to Section 7, less (y) the Grantee's purchase price for such Option Shares, (iii) (x) the net cash amounts received by Grantee pursuant to the sale of Option Shares (or any other securities into which such Option Shares are converted or exchanged) to any unaffiliated party, less (y) the Grantee's purchase price of such Option Shares, (iv) any amounts received by Grantee on the transfer of the Option (or any portion 21 thereof) to any unaffiliated party, and (v) any equivalent amount with respect to the Substitute Option. (d) As used herein, the term "Notional Total Profit" with respect to any number of shares as to which Grantee may propose to exercise this Option shall be the Total Profit determined as of the date of such proposed exercise assuming that this Option were exercised on such date for such number of shares and assuming that such shares, together with all other Option Shares held by Grantee and its affiliates as of such date, were sold for cash at the closing market price for the Common Stock as of the close of business on the preceding trading day (less customary brokerage commissions). (e) The Grantee agrees, promptly following any exercise of all or any portion of the Option, and subject to its rights under Section 7 hereof, to use commercially reasonable efforts promptly to maximize the value of Option Shares purchased taking into account market conditions, the number of Option Shares, the potential negative impact of substantial sales on the market price for Issuer Common Stock, and the availability of an effective registration statement to permit public sale of Option Shares. 15. The parties hereto acknowledge that damages would be an inadequate remedy for a breach of this Agreement by either party hereto and that the obligations of the parties hereto shall be enforceable by either party hereto through injunctive or other equitable relief. 16. If any term, provision, covenant or restriction contained in this Agreement is held by a court or a federal or state regulatory agency of competent jurisdiction to be invalid, void or unenforceable, the remainder of the terms, provisions and covenants and restrictions contained in this Agreement shall remain in full force and effect, and shall in no way be affected, impaired or invalidated. If for any reason such court or regulatory agency determines that the Holder is not permitted to acquire, or Issuer is not permitted to repurchase pursuant to Section 7, the full number of shares of Common Stock provided in Section 1(a) hereof (as adjusted pursuant to Section 1(b) or 5 hereof), it is the express intention of Issuer to allow the Holder to 22 acquire or to require Issuer to repurchase such lesser number of shares as may be permissible, without any amendment or modification hereof. 17. All notices, requests, claims, demands and other communications hereunder shall be deemed to have been duly given when delivered in person, by fax, telecopy, or by registered or certified mail (postage prepaid, return receipt requested) at the respective addresses of the parties set forth in the Merger Agreement. 18. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof. 19. This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original, but all of which shall constitute one and the same agreement. 20. Except as otherwise expressly provided herein, each of the parties hereto shall bear and pay all costs and expenses incurred by it or on its behalf in connection with the transactions contemplated hereunder, including fees and expenses of its own financial consultants, investment bankers, accountants and counsel. 21. Except as otherwise expressly provided herein or in the Merger Agreement, this Agreement contain the entire agreement between the parties with respect to the transactions contemplated hereunder and supersedes all prior arrangements or understandings with respect thereof, written or oral. The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors and permitted assignees. Nothing in this Agreement, expressed or implied, is intended to confer upon any party, other than the parties hereto, and their respective successors except as assignees, any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as expressly provided herein. 23 22. Capitalized terms used in this Agreement and not defined herein shall have the meanings assigned thereto in the Merger Agreement. 24 IN WITNESS WHEREOF, each of the parties has caused this Agreement to be executed on its behalf by its officers thereunto duly authorized, all of the date first above written. FIRST INTERSTATE BANCORP By /s/ William E. B. Siart -------------------------------- Its Chairman and Chief Executive Officer FIRST BANK SYSTEM, INC. By /s/ John F. Grundhofer -------------------------------- Its Chairman, President and Chief Executive Officer 25 EX-99.19 20 LETTER AGREEMENT First Interstate Bancorp 633 West Fifth Street Los Angeles, California 90071 November 5, 1995 First Bank System, Inc. First Bank Place 601 Second Avenue South Minneapolis, Minnesota 55402-4302 Attention: John F. Grundhofer Chairman, President and Chief Executive Officer Ladies and Gentlemen: We refer to the Agreement and Plan of Merger (the "Merger Agreement") of even date herewith among First Interstate Bancorp ("Subject Company"), First Bank System, Inc. ("Parent") and Eleven Acquisition Corp. ("Merger Sub"). Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Merger Agreement. In order to induce Parent and Merger Sub to enter into the Merger Agreement, and in consideration of Parent's undertaking of efforts in furtherance of the transactions contemplated thereby, Subject Company agrees as follows: 1. Representations and Warranties. Subject Company hereby represents and warrants to Parent that Subject Company has all requisite corporate power and authority to enter into this letter agreement (this "Agreement") and to perform its obligations set forth herein. The execution, delivery and performance of this Agreement have been duly and validly authorized by all necessary corporate action on the part of Subject Company. This Agreement has been duly executed and delivered by Subject Company. 2. Termination Fee. (a) Unless a Nullifying Event (as such term is defined below) shall have occurred and be continuing at the time the Merger Agreement is terminated, in the event that the Merger Agreement is terminated pursuant to Article VIII thereof (regardless of whether such termination is by Parent or Subject Company) and prior to or concurrently with such termination a First Trigger Event (as such term is defined below) shall have occurred, Subject Company shall pay to Parent a cash fee of $25 million. Such fee shall be payable in immediately available funds on or before the second business day following such termination of the Merger Agreement. (b) In addition, unless a Nullifying Event shall have occurred and be continuing at the time the Merger Agreement is terminated, in the event that (i) the Merger Agreement shall have been terminated pursuant to Article VIII thereof, (ii) prior to or concurrently with such termination a First Trigger Event shall have occurred, and (iii) prior to, concurrently with or within 18 months after such termination an Acquisition Event (as such term is defined below) shall have occurred, Subject Company shall pay to Parent an additional cash fee of (i) $100 million, less (ii) any amount paid by Subject Company pursuant to Paragraph 2(a) hereof. Such fee shall be payable in immediately available funds on or before the second business day following the occurrence of such Acquisition Event. (c) As used herein, a "First Trigger Event" shall mean the occurrence of any of the following events: (i) Subject Company's Board of Directors shall have failed to approve or recommend the Merger Agreement or the Merger, or shall have withdrawn or modified in a manner adverse to Parent its approval or recommendation of the Merger Agreement or the Merger, or shall have resolved or publicly announced an intention to do either of the foregoing; (ii) Subject Company or any Significant Subsidiary (as such term is defined below), or the Board of Directors of Subject Company or a Significant Subsidiary, shall have 2 recommended that the stockholders of Subject Company approve any Acquisition Proposal (as such term is defined below) or shall have entered into an agreement with respect to, authorized, approved, proposed or publicly announced its intention to enter into, any Acquisition Proposal; (iii) the Merger Agreement shall not have been approved at a meeting of Subject Company stockholders which has been held for that purpose prior to termination of the Merger Agreement in accordance with its terms, if prior thereto it shall have been publicly announced that any person (other than Parent or any of its Subsidiaries) shall have made, or disclosed an intention to make, an Acquisition Proposal; (iv) any person (together with its affiliates and associates) or group (as such terms are used for purposes of Section 13(d) of the Exchange Act) (other than Parent and its Subsidiaries) shall have acquired beneficial ownership (as such term is used for purposes of Section 13(d) of the Exchange Act) or the right to acquire beneficial ownership of 50% or more of the then outstanding shares of the stock then entitled to vote generally in the election of directors of Subject Company or a Significant Subsidiary; or (v) following the making of an Acquisition Proposal, Subject Company shall have breached any covenant or agreement contained in the Merger Agreement such that Parent would be entitled to terminate the Merger Agreement under Section 8.1(d) thereof (without regard to any grace period provided for therein) unless such breach is promptly cured without jeopardizing consummation of the Merger pursuant to the terms of the Merger Agreement. (d) As used herein, "Acquisition Event" shall mean the consummation of any event described in the definition of "Acquisition Proposal," except that the 3 percentage reference contained in clause (C) of such definition shall be 50% instead of 20%. (e) As used herein, "Acquisition Proposal" shall mean any (i) publicly announced proposal, (ii) regulatory application or notice (whether in draft or final form), (iii) agreement or understanding, (iv) disclosure of an intention to make a proposal, or (v) amendment to any of the foregoing, made or filed on or after the date hereof, in each case with respect to any of the following transactions with a counterparty other than Parent or any of its Subsidiaries: (A) a merger or consolidation, or any similar transaction, involving Subject Company or any Significant Subsidiary (other than mergers, consolidations or similar transactions involving solely Subject Company and/or one or more wholly owned Subsidiaries of Subject Company and other than a merger or consolidation as to which the common shareholders of Subject Company immediately prior thereto in the aggregate own at least 70% of the common stock of the publicly held surviving or successor corporation (or any publicly held ultimate parent company thereof) immediately following consummation thereof); (B) a purchase, lease or other acquisition of all or substantially all of the assets or deposits of Subject Company or any Significant Subsidiary; or (C) a purchase or other acquisition (including by way of merger, consolidation, share exchange or otherwise) of securities representing 20% or more of the voting power of Subject Company or any Significant Subsidiary. Notwithstanding the foregoing, Subject Company confirms that the proposal made by Wells Fargo & Company ("Wells") prior to the date hereof to enter into a business combination with Subject Company shall also constitute an Acquisition Proposal which has been publicly announced; provided, however, that solely for purposes of Paragraph 2(c)(iii) hereof, such proposal shall not constitute a publicly announced Acquisition Proposal if Wells shall have publicly announced the withdrawal of such proposal prior to the time Subject Company mails to its stockholders a proxy statement in connection with the stockholder meeting called to approve and adopt the Merger Agreement. Nothing contained in the proviso to the immediately preceding sentence shall imply that any proposal made by Wells after the date hereof does not constitute an Acquisition Proposal for purposes of Paragraph 2(c)(iii) hereof. 4 (f) As used herein, "Nullifying Event" shall mean any of the following events occurring and continuing at a time when Subject Company is not in material breach of any of its covenants or agreements contained in the Merger Agreement: (i) Parent shall be in breach of any of its covenants or agreements contained in the Merger Agreement such that Subject Company shall be entitled to terminate the Merger Agreement pursuant to Section 8.1(d) thereof (without regard to any grace period provided for therein), (ii) the stockholders of Parent shall have voted and failed to approve the Parent Vote Matters at a meeting of such stockholders which has been held for that purpose or at any adjournment or postponement thereof (unless the Merger Agreement shall not have been approved at a meeting of Subject Company stockholders which was held on or prior to such date for the purpose of voting with respect to the Merger Agreement) or (iii) the Board of Directors of Parent shall have failed to approve or recommend the Parent Vote Matters or shall have withdrawn, modified or changed in any manner adverse to Subject Company its approval or recommendation of the Parent Vote Matters or shall have resolved or publicly announced its intention to do any of the foregoing. (g) As used herein, "Significant Subsidiary" shall mean a "significant subsidiary," as defined in Rule 1-02 of Regulation S-X promulgated by the Securities and Exchange Commission, of Subject Company. 3. To the extent that Subject Company is prohibited by applicable law or regulation, or by administrative actions or policy of a Federal or state financial institution supervisory agency having jurisdiction over it, from making the payments required to be paid by Subject Company herein in full, it shall immediately so notify Parent and thereafter deliver or cause to be delivered, from time to time, to Parent, the portion of the payments required to be paid by it herein that it is no longer prohibited from paying, within five business days after the date on which the Subject Company is no longer so prohibited; provided, however, that if Subject Company at any time is prohibited by applicable law or regulation, or by administrative actions or policy of a Federal or state financial institution supervisory agency having jurisdiction over it, from making the payments required hereunder in full, it shall (i) use its reason- 5 able best efforts to obtain all required regulatory and legal approvals and to file any required notices as promptly as practicable in order to make such payments, (ii) within five days of the submission or receipt of any documents relating to any such regulatory and legal approvals, provide Parent with copies of the same, and (iii) keep Parent advised of both the status of any such request for regulatory and legal approvals, as well as any discussions with any relevant regulatory or other third party reasonably related to the same. 4. Except where federal law specifically applies, this Agreement shall be construed and interpreted according to the laws of the State of Delaware without regard to conflicts of laws principles thereof. 5. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 6. Nothing contained herein shall be deemed to authorize Subject Company or Parent to breach any provision of the Merger Agreement. 6 Please confirm your agreement with the understandings set forth herein by signing and returning to us the enclosed copy of this Agreement. Very truly yours, FIRST INTERSTATE BANCORP By /s/ William E.B. Siart ---------------------- Name: William E.B. Siart Title: Chairman and Chief Executive Officer Accepted and agreed to as of the date first above written: FIRST BANK SYSTEM, INC. By /s/ John F. Grundhofer ---------------------- Name: John F. Grundhofer Title: Chairman, President and Chief Executive Officer 7 EX-99.20 21 LETTER AGREEMENT First Bank System, Inc. First Bank Place 601 Second Avenue South Minneapolis, Minnesota 55402-4302 November 5, 1995 First Interstate Bancorp 633 West Fifth Street Los Angeles, California 90071 Attention: William E.B. Siart Chairman, President and Chief Executive Officer Ladies and Gentlemen: We refer to the Agreement and Plan of Merger (the "Merger Agreement") of even date herewith among First Interstate Bancorp ("Subect Company"), First Bank System, Inc. ("Parent") and Eleven Acquisition Corp. ("Merer Sub"). Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Merger Agreement. In order to induce Subject Company to enter into the Merger Agreement, and in consideration of Subject Company's undertaking of efforts in furtherance of the transactions contemplated thereby, Parent agrees as follows: 1. Representations and Warranties. Parent hereby represents and warrants to Subject Company that Parent has all requisite corporate power and authority to enter into this letter agreement (this "Agreement") and to perform its obligations set forth herein. The execution, delivery and performance of this Agreement have been duly and validly authorized by all necessary corporate action on the part of Parent. This Agreement has been duly executed and delivered by Parent. 2. Termination Fee. (a) Unless a Nullifying Event (as such term is defined below) shall have occurred and be continuing at the time the Merger Agreement is terminated, in the event that the Merger Agreement is terminated pursuant to Article VIII thereof (regardless of whether such termination is by Parent or Subject Company) and prior to or concurrently with such termination a First Trigger Event (as such term is defined below) shall have occurred, Parent shall pay to Subject Company a cash fee of $25 million. Such fee shall be payable in immediately available funds on or before the second business day following such termination of the Merger Agreement. (b) In addition, unless a Nullifying Event shall have occurred and be continuing at the time the Merger Agreement is terminated, in the event that (i) the Merger Agreement shall have been terminated pursuant to Article VIII thereof, (ii) prior to or concurrently with such termination a First Trigger Event shall have occurred, and (iii) prior to, concurrently with or within 18 months after such termination an Acquisition Event (as such term is defined below) shall have occurred, Parent shall pay to Subject Company an additional cash fee of (i) $100 million, less (ii) any amount paid by Parent pursuant to Paragraph 2(a) hereof. Such fee shall be payable in immediately available funds on or before the second business day following the occurrence of such Acquisition Event. (c) As used herein, a "First Triger Event" shall mean the occurrence of any of the following events: (i) Parent's Board of Directors shall have failed to approve or recommend the Parent Vote Matters, or shall have withdrawn or modified in a manner adverse to Subject Company its approval or recommendation of the Parent Vote Matters, or shall have resolved or publicly announced an intention to do either of the foregoing; (ii) Parent or any Significant Subsidiary (as such term is defined below), or the Board of Directors of Parent or a Significant Subsidiary, shall have recommended that the stockholders of Parent approve any Acquisition Proposal (as such term is defined below) or shall have entered into an agreement with respect to, authorized, approved, proposed or publicly announced its intention to enter into, any Acquisition Proposal; (iii) the Parent Vote Matters shall not have been approved at a meeting of Parent stockholders which has been held for that purpose prior to termination of the Merger Agreement in accordance with its terms, if prior thereto it shall have been publicly announced that any person (other than Subject Company or any of its Subsidiaries) shall have made, or disclosed an intention to make, an Acquisition Proposal; (iv) any person (together with its affiliates and associates) or group (as such terms are used for purposes of Section 13(d) of the Exchange Act) (other than Subject Company and its Subsidiaries) shall have acquired beneficial ownership (as such term is used for purposes of Section 13(d) of the Exchange Act) or the right to acquire beneficial ownership of 50% or more of the then outstanding shares of the stock then entitled to vote generally in the election of directors of Parent or a Significant Subsidiary; or (v) following the making of an Acquisition Proposal, Parent shall have breached any covenant or agreement contained in the Merger Agreement such that Subject Company would be entitled to terminate the Merger Agreement under Section 8.1(d) thereof (without regard to any grace period provided for therein) unless such breach is promptly cured without jeopardizing consummation of the Merger pursuant to the terms of the Merger Agreement. (d) As used herein, "Acquisition Event" shall mean the consummation of any event described in the definition of "Acquisition Proposal," except that the percentage reference contained in clause (C) of such definition shall be 50% instead of 20%. (e) As used herein, "Acquisition Proosal" shall mean any (i) publicly announced proposal, (ii) regulatory application or notice (whether in draft or final form), (iii) agreement or understanding, (iv) disclosure of an intention to make a proposal, or (v) amendment to any of the foregoing, made or filed on or after the date hereof, in each case with respect to any of the following transactions with a counterparty other than Subject Company or any of its Subsidiaries: (A) a merger or consolidation, or any similar transaction, involving Parent or any Significant Subsidiary (other than mergers, consolidations or similar transactions involving solely Parent and/or one or more wholly owned Subsidiaries of Parent and other than a merger or consolidation as to which the common shareholders of Parent immediately prior thereto in the aggregate own at least 70% of the common stock of the publicly held surviving or successor corporation (or any publicly held ultimate parent company thereof) immediately following consummation thereof); (B) a purchase, lease or other acquisition of all or substantially all of the assets or deposits of Parent or any Significant Subsidiary; or (C) a purchase or other acquisition (including by way of merger, consolidation, share exchange or otherwise) of securities representing 20% or more of the voting power of Parent or any Significant Subsidiary. (f) As used herein, "Nullifying Event" shall mean any of the following events occurring and continuing at a time when Parent is not in material breach of any of its covenants or agreements contained in the Merger Agreement: (i) Subject Company shall be in breach of any of its covenants or agreements contained in the Merger Agreement such that Parent shall be entitled to terminate the Merger Agreement pursuant to Section 8.1(d) thereof (without regard to any grace period provided for therein), (ii) the stockholders of Subject Company shall have voted and failed to approve the adoption of the agreement of merger (within the meaning of section 251 of the DGCL) contained in the Merger Agreement at a meeting of such stockholders which has been held for that purpose or at any adjournment or postponement thereof (unless the Parent Vote Matters shall not have been approved at a meeting of Parent stockholders which was held on or prior to such date for the purpose of voting with respect to the Parent Vote Matters) or (iii) the Board of Directors of Subject Company shall have failed to approve or recommend that the stockholders of Subject Company approve the adoption of the agreement of merger (within the meaning of section 251 of the DGCL) contained in the Merger Agreement or shall have withdrawn, modified or changed in any manner adverse to Parent its approval or recommendation that the stockholders of Subject Company approve the adoption of the agreement of merger (within the meaning of section 251 of the DGCL) contained in the Merger Agreement or shall have resolved or publicly announced its intention to do any of the foregoing. (g) As used herein, "Significant Subsidiary" shall mean a "significant subsidiary," as defined in Rule 1-02 of Regulation S-x promulgated by the Securities and Exchange Commission, of Parent. 3. To the extent that Parent is prohibited by applicable law or regulation, or by administrative actions or policy of a Federal or state financial institution supervisory agency having jurisdiction over it, from making the payments required to be paid by Parent herein in full, it shall immediately so notify Subject Company and thereafter deliver or cause to be delivered, from time to time, to Subject Company, the portion of the payments required to be paid by it herein that it is no longer prohibited from paying, within five business days after the date on which Parent is no longer so prohibited; provided, however, that if Parent at any time is prohibited by applicable law or regulation, or by administrative actions or policy of a Federal or state financial institution supervisory agency having jurisdiction over it, from making the payments required hereunder in full, it shall (i) use its reasonable best efforts to obtain all required regulatory and legal approvals and to file any required notices as promptly as practicable in order to make such payments, (ii) within five days of the submission or receipt of any documents relating to any such regulatory and legal approvals, provide Subject Company with copies of the same, and (iii) keep Subject Company advised of both the status of any such request for regulatory and legal approvals, as well as any discussions with any relevant regulatory or other third party reasonably related to the same. 4. Except where federal law specifically applies, this Agreement shall be construed and interpreted according to the laws of the State of Delaware without regard to conflicts of laws principles thereof. 5. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 6. Nothing contained herein shall be deemed to authorize Subject Company or Parent to breach any provision of the Merger Agreement. 7. Please confirm your agreement with the understandings set forth herein by signing and returning to us the enclosed copy of this Agreement. Very truly yours, FIRST BANK SYSTEM, INC. By /s/ John F. Grundhofer ---------------------- Name: John F. Grundhofer Title: Chairman, President and Chief Executive Officer Accepted and agreed to as of the date first above written: FIRST INTERSTATE BANCORP By /s/ William E. B. Siart ----------------------- Name: William E. B. Siart Title:Chairman and Chief Executive Officer EX-99.21 22 COMPLAINT IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE IN AND FOR NEW CASTLE COUNTY - - ------------------------------------------------x : JAMES T. WILLIAMSON, : : Civil Action No. 14623 Plaintiff, : : v. : : JOHN E. BRYSON, EDWARD M. CARSON, : JEWEL PLUMMER COBB, RALPH P. DAVIDSON, : MYRON DU BAIN, DON C. FRISBEE, GEORGE : M. KELLER, THOMAS L. LEE, WILLIAM F. : MILLER, WILLIAM F. RANDALL, STEVEN B. : SAMPLE, FORREST N. SHUMWAY, WILLIAM : E.B. SIART, RICHARD J. STEGEMEIER, : DANIEL M. TELLEP and FIRST INTERSTATE : BANCORP, : : Defendants. : : - - ------------------------------------------------x Plaintiff, by his attorneys, alleges upon information and belief, excepts with respect to his ownership of First Interstate Bancorp ("FIB" or the "Company") common stock as follows: PARTIES 1. Plaintiff is the owner of common stock of FIB. 2. Defendant FIB is a Delaware corporation with executive offices at 633 West Fifth Street, Los Angeles, California 90071. FIB is a bank holding company with subsidiaries which perform commercial banking operations, investment advisory services, mortgage banking services, international banking services and other related financial activities. As of July 31, 1995, FIB had approximately 75,985,361 shares of common stock outstanding held by approximately 24,976 shareholders of record. 3. Defendant Edward B. Carson is Chairman of the Board of Directors of FIB. 4. Defendant William E.B. Siart is President, Chief Executive Officer, and a director of FIB. 5. Defendant William S. Randall is Chief Operating officer and a director of FIB. 6. Defendants John E. Bryson, Jewel Plummer Cobb, Ralph P. Davidson, Myron Du Bain, Don C. Frisbee, George M. Keller, Thomas L. Lee, William F. Miller, Steven B. Sample, Forrest N. Shumway, Richard J. Stegemeier, and Daniel M. Tellep are directors of FIB. 7. The foregoing individual directors of FIB (collectively the "Director Defendants"), owe fiduciary duties to FIB and its shareholders. 8. Wells Fargo & Co. ("Wells Fargo") is a Delaware corporation with executive offices at 420 Montgomery Street, San Francisco, California 94163-0001. Wells Fargo is a bank holding company with subsidiaries that perform commercial banking operations, investment advisory services, international and mortgage banking services, credit card services and other related financial activities. As of July 31, 1995, Wells Fargo had approximately 48,259,136 shares of common stock outstanding. 2 CLASS ACTION ALLEGATIONS 9. Plaintiff bring this action on their own behalf and as a class action on behalf of all shareholders of defendant FIB (except defendants herein and any person, firm, trust, corporation or other entity related to or affiliated with any of the defendants) or their successors in interest, who have been or will be adversely affected by the conduct of defendants alleged herein. 10. This action is properly maintainable as a class action for the following reasons: (a) The class of shareholders for whose benefit this action is brought is so numerous that joinder of all class members is impracticable. As of July 31, 1995, there were over 75 million shares of defendant FIB's common stock outstanding owned by over 24,000 shareholders of record scattered throughout the United States. (b) There are questions of law and fact which are common to members of the Class and which predominate over any questions affecting any individual members. The common questions include, inter alia, the following: i. Whether the Defendant Directors have breached their fiduciary duties owed by them to plaintiff and members of the Class, and/or have aided and abetted in such breach, by virtue of their participation and/or acquiescence and by their other conduct complained of herein; 3 ii. Whether the Defendant Directors have wrongfully failed to act in the best interests of FIB and its shareholders; iii. Whether plaintiff and the other members of the Class will be irreparably damaged by the transactions complained of herein; and iv. Whether defendants have breached or aided and abetted the breaches of the fiduciary and other common law duties owed by them to plaintiff and the other members of the Class. 11. Plaintiff are committed to prosecuting this action and has retained competent counsel experienced in litigation of this nature. The claims of plaintiff are typical of the claims of the other members of the Class and plaintiff have the same interest as the other members of the Class. Accordingly, plaintiff are adequate representatives of the Class and will fairly and adequately protect the interests of the Class. 12. Defendants have acted or refused to act on grounds generally applicable to the Class, thereby making appropriate injunc- tive relief with respect to the Class as a whole. 13. The prosecution of separate actions by individual members of the Class could create a risk of inconsistent or varying adjudications with respect to individual members of the Class which would establish incompatible standards of conduct for defendants or adjudications with respect to individual members of the Class which 4 would as a practical matter be dispositive of the interests of the other members not parties to the adjudications. 14. Plaintiff anticipate that there will not be any diffi- culty in the management of this litigation. 15. For the reasons stated herein, a class action is superior to other available methods for the fair and efficient adjudication of this action. SUBSTANTIVE ALLEGATIONS 16. On October 18, 1995 Wells Fargo announced that it had submitted a merger proposal to the FIB Board, pursuant to which Wells Fargo would exchange .625 of a Wells Fargo common share for each FIB share. On October 17, 1995, FIB stock closed at $106 per share, and Wells Fargo stock closed at $213-5/8 per share. Thus, the proposal has an implied value of $133.52 per FIB share based upon the October 17, 1995 closing prices. It was also reported that Wells Fargo sees raising its dividend 5% to satisfy FIB stockholders. 17. In response to the Wells Fargo proposal, the FIB Board stated in a press release that Wells Fargo's proposal was unsolicited and that FIB is "deeply disappointed that Wells Fargo would take this uninvited action." The Board also stated that it would consider Wells Fargo's proposal and respond to it "when appropriate". However, Carl E. Reichardt, Wells Fargo's Chief Executive Officer, reportedly stated that FIB wants six months to mull the Wells Fargo offer. Further, Wells Fargo reportedly publicized the offer due to FIB's stance. 5 18. The Director Defendants, acting in concert, have violated and are violating fiduciary duties owed to the public shareholders of FIB. The Director Defendants were and are obligated to act in the best interests of FIB and its shareholders, including the consideration of whether all bona fide offers or proposals to acquire the Company or its assets are in the best interests of the shareholders. 19. The conduct of the Director Defendants in connection with the Wells Fargo proposal is, and unless corrected, will continue to be, wrongful, unfair and harmful to FIB's public shareholders. 20. In contemplating, planning and/or effecting the foregoing actions and inactions, the Director Defendants are not acting in good faith and with due care and loyalty toward plaintiff and the Class, and have breached, and are breaching, fiduciary duties to plaintiff and the Class. 21. Because the Defendant Directors (and those acting in concert with them) dominate and control the business and corporate affairs of FIB and because they are in possession of private corporate information concerning FIB's businesses and future prospects, there exists an imbalance and disparity of knowledge and economic power between the Director Defendants. 22. As a result of the wrongful actions and inactions of the Director Defendants, plaintiff and the Class have been and will be damaged. 6 23. Unless enjoined by this Court, the Director Defendants will continue to breach their fiduciary duties owed to plaintiff and the Class, all to the irreparable harm of the Class. 24. Plaintiff has no adequate remedy at law. WHEREFORE, plaintiff demands judgment as follows: (a) Declaring that this action may be maintained as a class action; (b) Enjoining preliminarily and permanently the Director Defendants to consider and negotiate with respect to all bona fide offers or proposals for the Company or its assets, in the best interests of FIB shareholders; (d) Requiring defendants to compensate plaintiff and the members of the Class for all losses and damages suffered and to be suffered by them as a result of the wrongful conduct complained of herein, together with prejudgment and post-judgment interest; (e) Awarding plaintiff the costs and disbursements of this action, including reasonable attorneys', accountants', and experts' fees; and 7 (f) Granting such other and further relief as may be just and proper. Dated: October 18, 1995 CHIMICLES, JACOBSEN & TIKELLIS ------------------------------ Pamela S. Tikellis James C. Strum Robert J. Kriner, Jr. One Rodney Square P.O. Box 1035 Wilmington, DE 19899 (302) 656-2500 OF COUNSEL: Charles J. Piven, Esquire The Legg Mason Tower Suite 2700 Baltimore, Maryland 21202 8 EX-99.22 23 COMPLAINT IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE IN AND FOR NEW CASTLE COUNTY - - - - - - - - - - - - - - - - - - - - -X VICTORIA SHAEV, individually and on behalf of all others similarly : Civil Action No. 14629 situated, : CLASS ACTION Plaintiff, COMPLAINT : - against - : FIRST INTERSTATE BANCORP, JOHN E. BRYSON, EDWARD M. CARSON, DR. : JEWEL PLUMMER COBB, RALPH P. DAVIDSON, MYRON DuBAIN, DON C. : FRISBEE, GEORGE M. KELLER, THOMAS L. LEE, DR. WILLIAM F. MILLER, : WILLIAM S. RANDALL, DR. STEVEN B. SAMPLE, FORREST N. SHUMWAY, WIL- : LIAM E.B. SIART, RICHARD J. STEGEMEIER, and DANIEL M. TELLEP, : Defendants. : - - - - - - - - - - - - - - - - - - - - -X Plaintiff alleges upon information and belief except as to paragraph 1, which is alleged on knowledge, as follows: THE PARTIES 1. Plaintiff Victoria Shaev is and was at all times relevant hereto the owner of shares of the common stock of First Interstate Bancorp ("FIB" or the "Company"). 2. FIB is a bank holding company organized and existing under the laws of the State of Delaware with offices in Los Angeles, California. FIB operates approximately 1,000 offices in 13 states. FIB has approximately 77 million shares of common stock issued and outstanding which trade on the NASDAQ over-the-counter quotation system. 3. (a) Defendant Edward M. Carson ("Carson") is and was at all relevant times Chairman of the Board. (b) Defendant William S. Randall ("Randall") is and was at all relevant times Executive Vice President and Chief Operating Officer of FIB. (c) Defendant William E.B. Siart ("Siart") is and was at all relevant times President and Chief Executive Officer of FIB. (d) Defendants John E. Bryson ("Bryson"), Dr. Jewel Plummer Cobb ("Cobb"), Ralph P. Davidson ("Davidson"), Myron DuBain ("DuBain"), Don C. Frisbee ("Frisbee"), George M. Keller ("Keller"), Nomas L. Lee ("Lee"), Dr. William F. Miller ("Miller"), Dr. Steven S. Sample ("Sample"), Forrest N. Shumway ("Shumway"), Richard J. Stegemeier ("Stegemeier") and Daniel M. Tellep ("Tellep"). 4. The Individual Defendants set forth in paragraph 3 above are officers and/or directors of FIB and as such, are in a fiduciary relationship with plaintiff and the other public stockholders of FIB and owe to plaintiff and other members of the Class the highest obligations of good faith, fair dealing and full disclosure. 2 CLASS ACTION ALLEGATIONS 5. Plaintiff brings this case on her own behalf and as a class action, pursuant to Rule 23 of the Rules of the Court of Chancery, on behalf of all public stockholders of FIB, and their successors in interest, who are or will Be threatened with injury arising from defendants, actions as more fully described herein (the "Class"). Excluded from the Class are defendants herein and any person, firm, trust, corporation, or other entity related to or affiliated with any of the defendants. 6. This action is property maintainable as a class action. 7. The class is so numerous that joinder of all members is impracticable. There are over 25,000 stockholders of record located throughout the United States. 8. There are questions of law and fact which are common to the class and which predominate over questions affecting any individual class member. 9. Plaintiff is committed to prosecuting this action and has retained competent counsel experienced in litigation of this nature. The claims of the plaintiff are typical of the claims of other members of the class and plaintiff has the same interests as the other members of the class. Accordingly, plaintiff is an adequate representative of the class and will fairly and adequately protect the interests of the class. 3 BACKGROUND AND CLAIM FOR RELIEF 10. On or about October 18, 1995, Wells-Fargo & Co. ("Wells-Fargo") announced in a press release that it had submitted an unsolicited merger proposal to FIB (the "proposal"). Pursuant to the terms of the proposal, FIB shareholders would receive .625 a share of Wells-Fargo, representing a price of $133.50 for each FIB share based on its current trading price. The total transaction is valued at approximately $10 billion. 11. The proposal contemplates a merger of FIB and Wells-Fargo into a new company. 12. FIB has in place a shareholder rights plan (commonly known as a "poison pill") which makes an unwelcome takeover of the company prohibitively more expensive. The poison pill is triggered by the acquisition of 20% or more of FIB's common stock by a group or person. 13. FIB has previously been approached by Wells-Fargo and has been spurned; in February, 1994, FIB rejected a tentative merger proposal from Wells-Fargo valued at approximately $90 per share, which was rejected. According to The New York Times, Wells-Fargo's Chairman, Paul Hazen, met with defendant Siart in the last few weeks to discuss a possible transaction, and which was once again rejected. 14. In response to Wells-Fargo's announcement of the proposal, defendant Siart stated "I am deeply disappointed that 4 Wells-Fargo would take this uninvited action." From FIB's prior course of dealing with Wells-Fargo, it is likely that FIB will rebuff Wells-Fargo yet again. FIRST CLAIM FOR RELIEF 15. At all times herein, defendants were and are obli- gated to adequately consider, in a timely fashion and on an informed basis, any reasonable proposal from any party, not to place their own self-interests and personal considerations ahead of the interests of the stockholders, and to make corporate decisions in good faith. 16. Defendants' fiduciary obligations require them to: (a) arrange for the sale of FIB to the highest bidder, including obligating them to undertake an appropriate evaluation of any bona fide offers, provide nonpublic information to such offerors to enable them to make the highest possible bid for the Company and take such other appropriate steps to solicit the highest possible bid for the Company; and (b) act independently, including appointing a disinterested committee so that the interests of FIB's public stockholders would be protected; and (c) utilize the poison pill in a manner designed to maximize shareholder value. 5 17. By virtue of the acts and conduct alleged herein, the Individual Defendants, who direct the actions of the Company, are carrying out a preconceived plan and scheme to entrench themselves in office and to protect and advance their own parochial interests at the expense of FIB. Defendants' conduct has been a breach of their fiduciary obligation and has violated the mandate of the Company's shareholders to maximize value. 18. As a result of the foregoing, the Individual Defendants have breached and/or aided and abetted breaches of fiduciary duties owed to FIB and its stockholders. 19. Unless enjoined by this Court, defendants will breach their fiduciary duties owed to plaintiff and the other members of the class and may benefit themselves in their corporate offices, all to the irreparable harm of the class, as aforesaid. 20. Plaintiff and the other members of the Class have no adequate remedy at law. WHEREFORE, plaintiff demands judgment as follows: (a) declaring this to be a proper class action; (b) ordering the individual Defendants to carry out their fiduciary duties to plaintiff and the other members of the Class by taking all steps necessary to arrange for the sale of FIB to the highest bidder; 6 (c) ordering defendants, jointly and severally, to account to plaintiff and the other members of the Class for all damages suffered and to be suffered by them as a result of the acts and transactions alleged herein; (d) requiring defendants to utilize the poison pill in a manner consistent with maximizing shareholder value; (e) awarding plaintiff the costs and disbursements of the action, including a reasonable allowance for plaintiff's attorney's fees and experts' fees; and (f) granting such other and further relief as this court may deem to be just and proper. Dated: October 19, 1995 ROSENTHAL MONHAIT GROSS & GODDESS, P.A. By: _________________________________ Joseph A. Rosenthal First Federal Plaza, Suite 214 Box 1070 Wilmington, DE 19899 (302) 656-4433 OF COUNSEL: GOODKIND LABATON RUDOFF & SUCHAROW LLP 100 Park Avenue New York, New York 10017 (212) 907-0700 7 EX-99.23 24 COMPLAINT IN THE COURT OF CHANCERY IN THE STATE OF DELAWARE IN AND FOR NEW CASTLE COUNTY - - ------------------------------------------------x JULES BERNSTEIN, : Plaintiff, : against : C.A. No. 146.30 EDWARD M. CARSON, WILLIAM E. SIART : WILLIAM F. RANDALL, JOHN E. BRYSON, JEWEL PLUMMER COBB, RALPH P. DAVIDSON, : MYRON DUBAIN, DON C. FRISBEE, GEORGE M. KELLER, THOMAS L. LEE, WILLIAM P. : MILLER, FORREST M. SHUMWAY, STEVEN B. SAMPLE, RICHARD N. STEGEMEYER, DANIEL : L. TELLEP, AND FIRST INTERSTATE BANCORP. : Defendants. - - ------------------------------------------------x CLASS ACTION COMPLAINT Plaintiff, by his attorneys, Rosenthal, Monhait, Gross & Goddess, P.A., for his complaint against defendants, alleges upon information and belief, except for paragraph 2 hereof which is alleged upon knowledge, as follows: 1. Plaintiff brings this action pursuant to Rule 231 of the Rules of the Court of Chancery on his behalf and as a class action on behalf of all persons, other than defendants and those in privity with them, who own the common stock of First Interstate Bancorp. ("First Interstate or the "Company"). 2. Plaintiff has been the owner of the common stock of the Company since prior to the transaction herein complained of and continuously to date. 3. Defendant First Interstate is a corporation duly organized and existing under the laws of the State of Delaware. The Company is a bank holding company with subsidiaries which perform commercial banking operations. The Company also offers investment advisory services, mortgage banking services, international banking services and other related financial activities. 4. The following individual defendants (the "Individual Defendants") constitute the entire Board of Directors of First Interstate: Name Position - - ---- -------- Edward M. Carson Chairman William E. Siart Director, President and C.E.O. William F. Randall Director, C.O.O. John E. Bryson Director Jewel Plummer Cobb Director Ralph P. Davidson Director Myron Dubain Director Don C. Frisbee Director George M. Keller Director Thomas F. Lee Director 2 William F. Miller Director Steven B. Sample Director Forrest N. Shumway Director Richard J. Stegemeyer Director Daniel L. Tellep Director 5. The Individual Defendants named in paragraph 4 are in a fiduciary relationship with the plaintiff and the other public stockholders of First Interstate and owe them the highest obligations of good faith, due dare, candor and fair dealing. CLASS ACTION ALLEGATIONS 6. Plaintiff brings this action on his own behalf and as a class action, pursuant to Rule 23 of the Rules of the Court of Chancery, on behalf of all holders of common stock of the Company (except the defendants herein and any person, firm, trust, corporation, or other entity related to or affiliated with any of the defendants) and their successors in interest, who are or will be threatened with injury arising from defendants' actions as more fully described herein. 7. This action is properly maintainable as a class action. 8. The class is so numerous that joinder of all members is impracticable. There are approximately 3 75,985,361 shares of First Interstate common stock outstanding, owned by over 24,976 record shareholders scattered throughout the country. 9. There are questions of law and fact which are common to the class including, inter alia, the following: (a) whether defendants have breached their fiduciary and other common law duties owed by them to plaintiff and the members of the class; (b) whether defendants are unlawfully impeding a takeover attempt; (c) whether defendants' actions hereinafter described, constitute a breach of the duty of fair dealing with respect to the plaintiff and the other members of the class, a failure to maintain a level playing field and a failure to maximize shareholder value; and (d) whether the class is entitled to injunctive relief or damages as a result of defendants' wrongful conduct. 10. Plaintiff is committed to prosecuting this action and has retained competent counsel experienced in litigation of this nature. The claims of the plaintiff are typical of the claims of other members of the class and plaintiff has the same interests as the other members of the class. Plaintiff will fairly and adequately represent the class. 11. The prosecution of separate actions by indi- vidual members of the Class would create the risk of incon- 4 sistent or varying adjudications with respect to individual members of the Class which would establish incompatible standards of conduct for defendants, or adjudications with respect to individual members of the Class which would as a practical matter be dispositive of the interests of the other members not parties to the adjudications or substantially impair or impede their ability to protect their interests. 12. The defendants have acted, or refused to act, on grounds generally applicable to, and causing injury to, the Class and, therefore, preliminary and final injunctive relief on behalf of the Class as a whole is appropriate. SUBSTANTIVE ACTIONS 13. Wells Fargo & Co. ("Wells Fargo") has long been interested in acquiring First Interstate. Wells Fargo offered to purchase the Company for $90 per share in Febru- ary 1994. This offer was rebuffed by First Interstate. Paul Hazen, the chairman of Wells Fargo, met once in recent weeks with Defendant Siart to discuss a possible merger and was again rejected. 14. On October 18, 1995, Wells Fargo & Co. ("Wells Fargo") announced that it had made an unsolicited merger proposal to First Interstate providing for the acqui- sition of 100 percent of the common stock of First Inter- 5 state Bancorp. Pursuant to the terms of the merger proposal, Wells Fargo offered to exchange .625 of a share of its common stock for every share of First Interstate common stock. Based an the closing price of $213.62 per share of Wells Fargo common stock on October 17, 1995, each share of First interstate is valued at $133.50. The total value of the transaction is approximately $10.17 billion. 15. The reaction of the investment community to the proposed acquisition of First Interstate has been emphatically positive. In response to Wells Fargo's announcement, First Interstate's stock price soared from $106 per share to over $140 per share. Additionally, the price of Wells Fargo stock increased to $229 per share in response to this news. 16. Defendants owe fundamental fiduciary obligations to the First Interstate shareholders to take all necessary and appropriate steps to maximize the value of their shares. In addition, the individual Defendants have the responsibility to act independently so that the interests of First Interstate public stockholders will be protected, to seriously consider all bona fide offers for the company, and to conduct fair and active bidding procedures or other mechanisms for checking the market to assure that the highest possible price is achieved. Further, the direc- 6 tors of the Company must adequately insure that no conflict of interest exists between defendants' own interests and their fiduciary obligations to maximize stockholder value or, if such conflicts exist, to insure that all such conflicts will be resolved in the best interests of the company's public stockholders. 17. The Individual Defendants have breached their fiduciary and other common law duties owed to Plaintiff and other members of the Class in that they have not exercised and are not exercising independent business judge- ment and have acted and are acting to the detriment of the Class. The defendants' rejection of Wells Fargo's offer is an uninformed knee jerk reaction made without adequate information as to what Wells Fargo would be prepared to offer in a fully negotiated transaction, so that defendants can maintain their positions in control of the company. 18. Moreover, Defendants have refused to take those steps necessary to ensure that the Company's public shareholders will receive maximum value for their shares of First Interstate common stock. Defendants' failure to accept Wells Fargo's offer to enter into a definitive merger agreement is clearly the result of the desire by the Individual defendants to protect their own substantial salaries, perquisites and positions with the company. 7 19. The Individual Defendants have breached their fiduciary duties by reason of the acts and transactions complained of herein, including their failure to negotiate the possible acquisition of First Interstate. 20. Unless enjoined by this Court, the Individual Defendants will continue to breach their fiduciary duties owed to Plaintiff and the other members of the class. 21. Plaintiff and the class have no adequate remedy at law. WHEREFORE, plaintiff demands judgment as follows: A. declaring this to be a proper class action; B. ordering the Individual Defendants to carry out their fiduciary duties to plaintiff and the other members of the class by announcing their intention to: (1) cooperate fully with any person or entity, having a bona fide interest in proposing any transaction which would maximize shareholder value, including, but not limited to, a buyout or takeover of the Company by Wells Fargo; (2) undertake an appropriate evaluation of First Interstate's worth as a merger/acquisition candidate; (3) take all appropriate steps to enhance First Interstate value and attractiveness as a merg- er/acquisition candidate; 8 (4) take all appropriate steps to effectively expose First Interstate to the marketplace in an effort to create an active auction for First Interstate; (5) act independently so that the interests of First Interstate's public stockholders will be protected; and (6) adequately ensure that no conflicts of interest exist between the Individual Defendant's interests and their fiduciary obligation to maximize stockholder value or, if such conflicts exist, to ensure that all conflicts are resolved in the best interests of First Interstate's public stockholders; C. ordering the Individual Defendants, jointly and severally, to account to plaintiff and the class for all damages suffered and to be suffered by them as a result of the acts and transactions alleged herein; D. preliminarily and permanently enjoining the implementation or enforcement of any poison pill or other device to thwart Wells Fargo's or any other person's bid for First Interstate; E. awarding plaintiff the costs and disburse- ments of this action, including a reasonable allowance for plaintiff's attorneys' and experts' fees; and 9 F. granting such other and further relief as may be just and proper in the premises. Dated: October 19, 1995 ROSENTHAL, MONHAIT, GROSS & GODDESS, P.A. By:_________________________________________ First Federal Plaza, Suite 214 P.O. Box 1070 Wilmington, DE 19899-1070 (302) 656-4433 Attorneys for Plaintiff OF COUNSEL: BERNSTEIN LIEBHARD & LIPSHITZ 274 Madison Avenue New York, NY 10016 10 EX-99.24 25 COMPLAINT IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE IN AND FOR NEW CASTLE COUNTY - - ------------------------------------------------x : MOISE KATZ, : : C.A. No. 14632 Plaintiff, : : - against - : : CLASS ACTION FIRST INTERSTATE BANCORP, : COMPLAINT JOHN E. BRYSON, EDWARD M. : CARSON, JEWEL P. COBB, RALPH : P. DAVIDSON, MYRON DUBAIN, DON : C. FRISBEE, GEORGE M. KELLER, : THOMAS L. LEE, WILLIAM F. : MILLER, WILLIAM F. MILLER, : STEVEN B. SAMPLE, FORREST N. : SHUMWAY, WILLIAM E. B. SIART, : RICHARD J. STEGEMEIER, and DANIEL : M. TELLEP, : : Defendants. : : - - ------------------------------------------------x Plaintiff, by his attorneys, alleges upon personal knowledge as to himself and his own acts, and upon information and belief based upon the investigation conducted by counsel, as follows: SUMMARY OF THE ACTION 1. Plaintiff brings this action individually and as a class action on behalf of all persons, other than defendants, who own the securities of First Interstate Bancorp ("First Interstate" or the "Bank"), and who are similarly situated, and who have been deprived of the opportunity to maximize the value of their shares by defendants' breach of fiduciary duty (the "Class") in relation to the proposed acquisition by Wells Fargo & Co. (as defined below). PARTIES 2. Plaintiff Moise Katz is the owner of shares of First Interstate common stock. 3. Defendant First Interstate is a corporation duly organized and existing under the laws of the State of Delaware. First Interstate is a bank holding company with subsidiaries which perform commercial banking operations, investment advisory services, and mortgage banking. The Bank maintains its principal executive offices at 633 West Fifth Street, Los Angeles, CA 90071. First Interstate has, according to its latest Form 10-Q, approximately 75,985,361 shares of stock outstanding and thousands of stockholders of record. First Interstate stock trades on the New York Stock Exchange. 4. Defendant Edward M. Carson ("Carson") is the Chairman of the Board of Directors of the Bank. 5. Defendant William E.B. Siart ("Siart") is a direc- tor and the Chief Executive Officer of the Bank. 6. Defendants John E. Bryson, Jewel P. Cobb, Ralph P. Davidson, Myron DuBain, Don C. Frisbee, George M. Keller, Thomas L. Lee, William F. Miller, William F. Randall, Steven B. Sample, 2 Forrest N. Shumway, Richard Stegemeier, and Daniel M. Tellep are directors of First Interstate. 7. Because of their positions as directors of the Bank, the director defendants owe a fiduciary duty of loyalty and due care to plaintiff and the other members of the Class. 8. Each defendant herein is sued individually and as a conspirator and aider and abettor, as well as, where applicable, in his/her capacity as a director of the Bank. The liability of each arises from the fact that each has engaged in all or part of the unlawful acts, plans, schemes, or transactions complained of herein. CLASS ACTION ALLEGATIONS 9. Plaintiff brings this action on his own behalf and as a class action, pursuant to Rule 23 of the Rules of the Court of Chancery, on behalf of all stockholders of the Bank, except defendants herein and any person, firm, trust, corporation, or other entity related to or affiliated with any of the defendants, who will be threatened with injury arising from defendants' actions described more fully below. 10. This action is properly maintainable as a class action. 11. The Class is so numerous that joinder of all members is impracticable. The Bank has thousands of stockhold- ers. 3 12. There are questions of law and fact common to the Class that predominate over questions affecting any individual class member. The common questions include, inter alia, whether: (a) defendants have engaged in conduct constituting unfair dealing and have engaged in a plan and scheme which harms the Bank's public stockholders; (b) defendants have prevented and are continuing to prevent plaintiff and the Class from receiving the maximum value per share that could be received; (c) defendants have breached or aided and abetted the breach of the fiduciary and other common law duties owed by them to plaintiff and the members of the Class; (d) the director defendants, as directors of First Interstate, have fulfilled, and are capable of fulfilling, their fiduciary duties to plaintiff and the Class, including their duties of entire fairness, loyalty, due care, and candor; 13. Plaintiff is an adequate representative of the Class. Plaintiff is committed to prosecuting the action and has retained competent counsel experienced in litigation of this nature. Plaintiff's claims are typical of the claims of the other members of the Class and plaintiff has the same interests as the other members of the class. 4 THE ACQUISITION OFFER 14. On October 18, 1995, Wells Fargo & Co. ("Wells Fargo") made an offer to purchase the Bank in a proposed $10.84 billion deal (the "Bid"). The Bid was unsolicited or "hostile." Paul Hazen, the chairman of Wells Fargo, had met in recent weeks with Siart to discuss a possible merger, but was snubbed. 15. As reported in The Wall Street Journal on October 19, 1995, Wells Fargo is offering to exchange 0.625 of its common shares for each First Interstate share. 16. As also reported in The Wall Street Journal, the Bid, which offers a huge premium to the Bank's public shareholders, will meet with "fierce resistance" from the Bank. The Wall Street Journal reported that earlier this year, Siart was "determined to keep the [B]ank independent." 17. The Wall Street Journal quoted Carole Berger, a Salomon Brothers Inc. analyst, as stating that "[c]onceptually, this is an extraordinary transaction in the creation of shareholder value." Also quoted in the article was Raphael Soifer, an analyst at Brown Brothers Harriman & Co. who stated that "I don't think First Interstate has any options for its shareholders other than Wells, and no one else is in a better position than Wells to achieve the cost savings." 5 18. The New York Times reported on October 19, 1995 that "Wells's bid is so high that it would be hard for any other company to match it." CAUSE OF ACTION FOR BREACH OF FIDUCIARY DUTY AGAINST ALL DEFENDANTS 19. Plaintiff reavers and incorporates by reference all previous allegations. 20. By reason of all of the foregoing, defendants herein have willfully participated in unfair dealing toward plaintiff and the other members of the Class and have engaged in and substantially assisted and aided and abetted each other in breach of the fiduciary duties owed by them to the Class. 21. By the acts, transactions and courses of conduct alleged herein, defendants, individually and as part of a common plan and scheme in breach of their fiduciary duties to plaintiff and the Class, are attempting unfairly to deprive plaintiff and other members of the Class of consideration of a transaction which could provide them with the opportunity to maximize their investment in First Interstate. 22. In refusing to adequately consider the Bid, defendants have violated the fiduciary duties owed to the public shareholders of the Bank and have placed their personal interests ahead of the interests of the Bank's public shareholders. Defendants are using their positions as directors for the purpose of 6 pursuing their own agenda, all to the detriment of plaintiff and the Class. 23. The defendants have not, in accordance with their fiduciary duties: (a) acted independently so that the interests of the Bank's public shareholders would be protected; (b) adequately ensured that no conflicts of interest exist or if such conflicts exist to ensure that all conflicts would be resolved in the best interests of the Bank's public shareholders; and (c) taken all appropriate steps to enhance the Bank's value and attractiveness as a merger acquisition, restructuring or recapitalization candidate. 24. Because the director defendant dominate the business affairs of the Bank, and are in possession of private banking information concerning the Bank's assets, business and future prospects, there exists an imbalance of knowledge and economic power between them and the public stockholders of the Bank which makes it inherently unfair for them to reject any proposed transaction simply to entrench themselves in their positions as directors of First Interstate, at the expense of their duty to maximize stockholder value for the Bank's public shareholders. 7 25. As a result of the actions of defendants, plaintiff and the Class have been and will be damaged in that they have not and will not receive their fair proportion of the value of the Bank's assets and business. As a practical matter, no third party will bid for the Bank when Wells Fargo's bid has been met with such resistance. 26. Because the Bid is so valuable, there is an only a very slight likelihood that a so-called "white knight" will enter the picture to "save" the Bank from Wells Fargo. 27. Plaintiff and the Class have no adequate remedy of law. WHEREFORE, plaintiff prays for judgment and relief as follows: (a) declaring that this action is properly maintainable as a class action and certifying plaintiff as representative of the Class; (b) ordering the director defendants to discharge their fiduciary duties to plaintiff and the other members of the Class by announcing their intentions to: (1) act independently on a fully informed basis in the best interests of the Bank's public shareholders; (2) undertake an appropriate evaluation of First Interstate as a merger or acquisition candidate; 8 (3) take all appropriate steps to enhance the Bank's value and attractiveness as a merger or acquisition candidate; (4) cooperate with all persons having a bona fide interest in proposing any transaction which would maximize shareholder value; (5) take all steps to create an active auction for the Bank in order to maximize shareholder value; (7) adequately ensure that no conflicts of interest exist between defendants' own interests and their fiduciary obligation to maximize shareholder value or, if such conflicts exist, to ensure that all such conflicts are resolved in favor of the Bank's public shareholders. (c) declaring that the Defendants and each of them have committed or aided and abetted a gross abuse of trust and have breached their fiduciary duties to plaintiff and the other members of the Class; (d) ordering defendants to permit a stockholders' committee consisting of class members and their representatives to participate in any process undertaken in connection with the sale of the Bank in order to ensure a fair procedure, adequate procedural safeguards, and independent input by plaintiff and the Class in connection with any transaction for the public shares of First Interstate; 9 (e) awarding compensatory damages against defendants, jointly and severally, in an amount to be determined at trial, together with prejudgment interest at the maximum rate allowable by law; (f) awarding plaintiff and the Class their costs and disbursements and reasonable allowances for plaintiff's counsel and experts' fees and expenses; and (g) granting such other and further relief as may be just and proper. Dated: October 19, 1995 ROSENTHAL MONHAIT GROSS & GODDESS By:_______________________________ First Federal Plaza, Suite 214 P.O. Box 1070 Wilmington, Delaware 19899 (302) 656-4433 Attorneys for Plaintiff OF COUNSEL: WECHSLER HARWOOD HALEBIAN & FEFFER LLP Robert I. Harwood, Esq. Jorn A. Holl, Esq. 805 Third Avenue New York, New York 10022 10 EX-99.25 26 COMPLAINT IN THE COURT OF CHANCERY IN THE STATE OF DELAWARE IN AND FOR NEW CASTLE COUNTY - - --------------------------------------------------- HAROLD SACHS and KEN FELDER, : : Civil Action No. Plaintiffs, : : CLASS ACTION -against- : COMPLAINT : FIRST INTERSTATE BANCORP, JOHN E. : BRYSON, JEWEL PLUMMER COBB, RALPH P. : DAVIDSON, MYRON DU BAIN, DON C. : FRISBEE, GEORGE M. KELLER, THOMAS L. : LEE, WILLIAM F. RANDALL, STEVEN B. : SAMPLE, FORREST N. SHUMWAY, WILLIAM : E. B. SIART, RICHARD J. STEGEMEIER and : DANIEL M. TELLEP, : : Defendants. : - - ---------------------------------------------------- Plaintiffs, by their attorneys, allege upon information and belief (said information and belief being based, in part, upon the investigation conducted by and through their), except with respect to their ownership of First Interstate Bancorp ("First Interstate" or the "Company") common stock, which is alleged upon his personal knowledge as follows: THE PARTIES 1. Each plaintiff is the owner of shares of defendant First Interstate. 2. Defendant First Interstate is a corporation organized and existing under the laws of the State of Delaware. First Interstate maintains its principal offices at 633 West Fifth Street, Los Angeles, California. First Interstate is a bank holding company. 3. Defendant William E. B. Siart ("Siart") is a director and the Chairman of the Board of First Interstate. 4. The remaining individual defendants John E. Bryson, Jewel Plummer Cobb, Ralph P. Davidson, Myron Du Bain, Don C. Frisbee, George M. Keller, Thomas L. Lee, William F. Randall, Steven B. Sample, Forrest N. Shumway, Richard J. Stegemeier and Daniel M. Tellep are directors of First Interstate. 5. The foregoing individual defendants (collectively referred to herein as the "Director Defendants") are in a fiduciary relationship with plaintiffs and the public stockholders of First Interstate, and owe plaintiffs and the First Interstate public stockholders the highest obligations of good faith, fair dealing, due care, loyalty and full and candid disclosure. CLASS ACTION ALLEGATIONS 6. Plaintiffs bring this action on their own behalf and as a class action on behalf of all shareholders of defendant First Interstate (except defendants herein and any person, firm, trust, corporation or other entity related to or affiliated with any of the defendants) or their successors in interest, who have been or will be adversely affected by the conduct of defendants alleged herein. 2 7. This action is properly maintainable as a class action for the following reasons: (a) the class of shareholders for whose benefit this action is brought is so numerous that joinder of all Class members is impracticable. As of July 31, 1995, there were almost 76 million shares of First Interstate common stock outstanding, owned by nearly 25,000 shareholders of record scattered throughout the United States. (b) there are questions of law and fact which are common to members of the class including, inter alia, the following: (i) whether the Director Defendants have breached their fiduciary duties owed by them to plaintiffs and members of the class and/or have aided and abetted in such breach, by virtue of their participation and/or acquiescence and by their other conduct complained of herein; (ii) whether the Director Defendants have wrongfully failed and refused to fully consider a purchase of First Interstate and/or any and all of its various assets or divisions at the best price obtainable and to take all steps to maximize shareholder value; (iii) whether plaintiffs and the other members of the Class will be irreparably damaged by defendants' failure to explore all reasonable alternatives to maximize shareholder value; and 3 (iv) whether defendants have breached or aided and abetted the breaches of the fiduciary and other common law duties owed by them to plaintiffs and the other members of the Class. 8. Plaintiffs are committed to prosecuting this action and have retained competent counsel experienced in litigation of this nature. The claims of plaintiffs are typical of the claims of the other members of the Class and plaintiffs have the same interest as the other members of the Class. Accordingly, plaintiffs are adequate representatives of the Class and will fairly and adequately protect the interests of the Class. 9. Plaintiffs anticipate that there will not be any difficulty in the management of this litigation. 10. The prosecution of separate actions by individual members of the Class would create the risk of inconsistent or varying adjudications with respect to individual members of the Class which would establish incompatible standards of conduct for defendants, or adjudications with respect to individual members of the Class which would as a practical matter be dispositive of the interests of the other members not parties to the adjudications or substantially impair or impede their ability to protect their interests. 11. The defendants have acted, or refused to act, on grounds generally applicable to, and causing injury to, the Class and, therefore, preliminary and final injunctive relief on behalf of the Class as a whole is appropriate. 4 SUBSTANTIVE ALLEGATIONS 12. On October 18, 1995, Well Fargo & Co. ("Wells Fargo") announced a hostile offer to buy First Interstate for 0.625 Wells Fargo shares per First Interstate share, equal to approximately $10.90 billion or $140.75 per First Interstate share based on Wells Fargo's current market price of $229 per share. The market price of First Interstate stock immediately prior to the offer was only $105 per share, and it had traded as low as $85 3/8 as recently as August 4, 1995. 13. First Interstate had already rejected an offer from Wells Fargo during 1994 and it has given no indication that it intends to take all steps possible to maximize shareholder value. In fact, defendant Siart responded to the offer by stating, "I am deeply disappointed that Wells Fargo would take this uninvited action." First Interstate failed to commit to consummate any alternatives which would result in the maximization of stockholder value. 14. Defendants' conduct amounts to a breach of the fiduciary duties owed to plaintiffs and the Class in that plaintiffs and the Class are being deprived of their right to share in the valuable assets and businesses of First Interstate and to receive the maximum possible value for their shares. 15. Under the circumstances, the Director Defendants are obligated to explore all alternatives to maximize shareholder value. The Director Defendants will be in breach of their fiduciary duties owed to First Interstate's public shareholders if they fail to fully explore 5 and negotiate with respect to the Wells Fargo offer and to explore any other bona fide offers by potential acquirors for the purchase of the Company. 16. The Wells Fargo proposal represents an opportunity to effect a change in control of First Interstate, its business and affairs. In a change of control transaction, the Director Defendants necessarily and inherently suffer from a conflict of interest between their own personal desires to retain their offices in First Interstate, with the emoluments and prestige which accompany those offices, and their fiduciary obligation to maximize shareholder value in a change of control transaction. Because of such conflict of interest, it is unlikely that defendants will be able to represent the interests of First Interstate's public stockholders with the impartiality that their fiduciary duties require, nor will they be able to ensure that their conflicts of interest will be resolved in the best interests of First Interstate's public stockholders. 17. Plaintiffs and the Class will suffer irreparable damage unless defendants are enjoined from breaching their fiduciary duties to maximize shareholder value. 18. Plaintiffs have no adequate remedy at law. WHEREFORE, plaintiffs demand judgement as follows: A. Declaring this to be a proper class action; B. Ordering defendants to carry out their fiduciary duties to plaintiffs and the other members of the Class by announcing their intention to: 6 (i) undertake an appropriate evaluation of alternatives designed to maximize value for First Interstate's public stockholders; (ii) adequately ensure that no conflicts of interests exist between defendants' own interests and their fiduciary obligation to the public stockholders or, if such conflicts exist, to ensure that all of the conflicts would be resolved in the best interests of First Interstate's public stockholders; and (iii) act independently, by, among other things, appointing a disinterested committee so that the interests of First Interstate's public stockholders would be protected, or alternatively, appointing a shareholder committee to review all bona fide offers. C. Directing that defendants pay to plaintiffs and the Class all damages caused to them and account for all profits and any special benefits obtained as a result of their unlawful conduct; D. Awarding to plaintiffs the costs and disbursements of this action, including a reasonable allowance for the fees and expenses of plaintiff's attorneys and expert; and 7 E. Granting such other and further relief as may be just and proper in the premises. Dated: October 19, 1996 ROSENTHAL, MONHAIT, GROSS & GODDESS, P.A. By: _________________________________________ First Federal Plaza, Suite 214 P.O. Box 1070 Wilmington, DE 19899-1070 (302) 656-4433 Attorneys for Plaintiff OF COUNSEL: ABBEY & ELLIS 212 East 39th Street New York, New York 10016 Telephone: (212) 889-3700 Faruqui & Faruqui, LLP 415 Madison Avenue New York, New York 10017 Telephone: (212) Robert C. Susser, P.C. 6 East 43rd Street, Ste 1900 New York, New York 10017 Telephone: (212) 808-0298 8 EX-99.26 27 AMENDED CLASS ACTION COMPLAINT IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE IN AND FOR NEW CASTLE COUNTY - - ----------------------------------x JAMES T. WILLIAMSON, VICTORIA SHAEV, JULES BERNSTEIN, MOISE : Civil Action No. KATZ, HAROLD SACHS and KEN 14623 FELDER, : Plaintiffs, : AMENDED CLASS -against- : ACTION COMPLAINT FIRST INTERSTATE BANCORP, JOHN E. : BRYSON, EDWARD M. CARSON, JEWEL PLUMMER COBB, RALPH P. DAVIDSON, : MYRON DU BAIN, DON C. FRISBEE, GEORGE M. KELLER, THOMAS L. LEE, : WILLIAM F. MILLER, WILLIAM S. RANDALL, STEVEN B. SAMPLE, : FORREST N. SHUMWAY, WILLIAM E.B. SIART, RICHARD J STEGEMEIER, and : DANIEL M. TELLEP, : Defendants. : - - ----------------------------------x Plaintiffs allege upon information and belief except as to paragraph 1, which is alleged on knowledge, as follows: THE PARTIES 1. Plaintiffs James T, Williamson, Victoria Shaev, Jules Bernstein, Moise Katz, Harold Sachs and Ken Felder are and were, at all times relevant hereto, the owners of shares of the common stock of First Interstate Bancorp ("First Interstate" or the "Company"). 2. First Interstate is a bank holding company organized and existing under the laws of the State of Delaware. First Interstate operates approximately 1,000 offices in 13 states. It has approximately 76 million shares of common stock issued and outstanding, held by approximately 25,000 shareholders of record. Its shares are traded on various stock exchanges, including the New York Stock Exchange. 3. (a) Defendant Edward M. Carson ("Carson") is and was at all relevant times Chairman of the Board of Directors of First Interstate. (b) Defendant William S. Randall ("Randall") is and was at all relevant times a Director and Executive Vice President and Chief Operating Officer of First Interstate. (c) Defendant William E.B. Siart ("Siart") is and was at all relevant times a Director and President and Chief Executive Officer of First Interstate. (d) Defendants John E. Bryson ("Bryson"), Jewel Plummer Cobb ("Cobb"), Ralph P. Davidson ("Davidson") , Myron DuBain ("DuBain"), Don C. Frisbee ("Frisbee"), George M. Keller ("Keller"), Thomas L. Lee ("Lee"), William F. Miller ("Miller"), Steven B. Sample ("Sample"), Forrest N. Shumway ("Shumway"), Richard J. Stegemeier ("Stegemeier") and Daniel M. Tellep 2 ("Tellep") (together with defendants Carson, Randall, and Siart "the Individual Defendants") are and were at all relevant times directors of the Company. 4. The Individual Defendants are in a fiduciary relationship with plaintiffs and the other public stockholders of First Interstate and owe to plaintiffs and other members of the class (as hereinafter defined) the highest obligations of good faith, fair dealing and full and candid disclosure. CLASS ACTION ALLEGATIONS 5. Plaintiffs bring this case on their own behalf and as a class action, pursuant to Rule 23 of the Rules of the Court of Chancery, on behalf of all public stockholders of First Interstate, and their successors in interest who are or will be threatened with injury arising from defendants' actions as more fully described herein. Excluded from the class are defendants herein and any person, firm, trust, corporation, or other entity related to or affiliated with any of the defendants. 6. This action is properly maintainable as a class action. 7. The class is so numerous that joinder of all members is impracticable. There are approximately 25,000 stockholders of record located throughout the United States. 3 8. There are questions of law and fact which are common to the class and which predominate over questions affecting any individual class member, including whether the Individual Defendants have breached their fiduciary duties owed to plaintiffs and other members of the class. 9. The Plaintiffs are committed to prosecuting this action and have retained competent counsel experienced in litigation of this nature. The claims of plaintiffs are typical of the claims of other members of the class and plaintiffs have the same interests as the other members of the class. Accordingly, plaintiffs are adequate representatives of the class and will fairly and adequately protect the interests of the class. 10. The prosecution of separate actions by individual members of the class would create the risk of inconsistent or varying adjudications with respect to individual members of the class which would establish incompatible standards of conduct for defendants, or adjudications with respect to individual members of the class which would as a practical matter be dispositive of the interests of the other members not parties to the adjudications or substantially impair or impede their ability to protect their interests. 11. The defendants have acted, or refused to act, on grounds generally applicable to, and causing 4 injury to, the class and, therefore, preliminary and final injunctive relief on behalf of the class as a whole is appropriate. BACKGROUND AND CLAIM FOR RELIEF 12. Wells Fargo & Company ("Wells Fargo") is a Delaware corporation with executive offices at 420 Montgomery Street, San Francisco, California. Wells Fargo is a bank holding company with subsidiaries that perform commercial banking operations, investment advisory services, internatonal and mortgage banking services, credit card services and other related financial activities. 13. Wells Fargo has long been interested in acquiring First Interstate. In February 1994, Wells Fargo offered to purchase the Company, which offer was rebuffed by First Interstate. Moreover, Paul Hazen, Chairman of Wells Fargo met with defendant Siart in the last few weeks to discuss a possible transaction, and was once again rebuffed. 14. On or about October 18, 1995, Wells Fargo announced in a press release that it had submitted an unsolicited merger proposal to First Interstate to acquire 100 percent of the Company's common stock (the "proposal") . Pursuant to the terms of the proposal, First Interstate shareholders would receive .625 of a share of Wells Fargo, representing a value of $133.50 for 5 each First Interstate share based on the current trading price of Wells Fargo stock. The total transaction is valued at approximately $10 billion. The proposal contemplates a merger of First Interstate and Wells Fargo into a new company. 15. The reaction of the investment community to the proposal has been extremely positive. Analysts noted that the proposal was nearly three times First Interstate's book value, and that most recent bank mergers were priced closer to 2 or 2-1/2 times book value. Analysts referred to the proposal as "a knockout bid" (Bert Ely, an Alexandria, Virginia banking consultant); an "excellent" potential combination (Jeff Simons of Mackay Shields Financial Corp., which owns 1.4 million Company shares); and a "super deal" (Paul McKey of Dean Witter Reynolds). It was further reported that Kohlberg Kravis Roberts & Co., which owns approximately 9% of the Company's stock, supports the proposal. 16. In response to Wells Fargo's announcement, the Company's stock price soared from $106 per share to over $140 per share. Additionally, the price of Wells Fargo stock increased approximately 7% to $229 per share. 17. In contrast to the positive reaction of the investment community, the Company promptly reacted negatively to the proposal. On or about October 18, 1995, defendant Siart stated "I am deeply disappointed 6 that Wells Fargo would take this uninvited action." Siart reportedly also stated that it was in First Interstate's best interest to take six months to consider the Company's other options. 18. First Interstate has in place a shareholder rights plan (commonly known as a "poison pill") which makes an unwelcome takeover of the Company prohibitively expensive. The poison pill is triggered by the acquisition of 20% or more of First Interstate's common stock by a group or person unfavored by First Interstate's management. CLAIM FOR RELIEF 19. The Individual Defendants are obligated to carefully consider, in a timely fashion and on an informed basis, bona fide proposals from third parties to engage in transactions which will maximize value for First Interstate shareholders; not to place their own self-interests and personal considerations ahead of the interests of the public stockholders, and to make corporate decisions in good faith. 20. The Individual Defendants' fiduciary obligations require them to: (a) undertake an appropriate evaluation of all bona fide offers, and take appropriate steps to consider all potential bids for the Company or its assets or explore strategic alternatives; 7 (b) act independently, including appointing a disinterested committee so that the interests of First Interest's public stockholders will be protected; (c) adequately ensure that no conflicts of interest exist between the Individual Defendants' own interests and their fiduciary obligations to the public stockholders of First Interstate; and (d) utilize the poison pill in a manner designed to maximize shareholder value. 21. The Wells Fargo proposal represents an opportunity to effect a change of control of First Interstate, its business and affairs. In a change of control transaction, the Individual Defendants necessarily and inherently suffer from a conflict of interest between their own personal desires to retain their offices in First Interstate, with the emoluments and prestige which accompany those offices, and their fiduciary obligation to maximize shareholder value in a change of control transaction. Because of such conflict of interest, the Individual Defendants are unable to represent the interests of First Interstate's public stockholders with the impartiality that their fiduciary duties require, nor are they able to ensure that their conflicts of interest will be resolved in the best interests of First Interstate's public stockholders. 8 22. By virtue of the acts and conduct alleged herein, the Individual Defendants have breached their fiduciary duties owed to plaintiffs and other class members by carrying out a preconceived plan and scheme to entrench themselves in office and to protect and advance their own parochial interests at the expense of First Interstate's public shareholders. The Individual Defendants have not exercised and are not exercising independent business judgment and have acted and are acting to the detriment of the class. The Individual Defendants' negative response to Wells Fargo's proposal is an uninformed knee jerk reaction made without adequate information as to what Wells Fargo would be prepared to offer in a fully negotiated transaction. 23. The Individual Defendants have refused to take the steps necessary to ensure that the Company's public shareholders will receive maximum value for their shares of First Interstate common stock. The Individual Defendants' failure to meaningfully respond to Wells Fargo's proposal in a timely manner and to pursue negotiations regarding a value maximizing transaction with Wells Fargo or any other company is clearly the result of a desire by the Individual Defendants to protect their own substantial salaries, perquisites and positions with the Company. 9 24. As a result of the foregoing, the Individual Defendants have breached their fiduciary duties owed to First Interstate's stockholders. 25. Unless enjoined by this Court, the Individual Defendants will continue to breach their fiduciary duties owed to plaintiffs and the other members of the Class in order to benefit themselves at the expense and to the irreparable harm of the Class. 26. Plaintiffs and the other members of the Class have no adequate remedy at law. WHEREFORE, plaintiffs demand judgment as follows: 1. declaring this to be a proper class action; 2. ordering the Individual Defendants to carry out their fiduciary duties to plaintiffs and the other members of the Class by: (a) cooperating fully with any person or entity having a bona fide interest in proposing a transaction which would maximize shareholder value, including, but not limited to, a buyout or takeover of the Company by Wells Fargo; (b) undertaking an appropriate evaluation of First Interstate's worth as a merger/acquisition candidate; 10 (c) taking all appropriate steps to enhance First Interstate's value and attractiveness as a merger/acquisition candidate; (d) taking all appropriate steps to effectively expose First Interstate to the marketplace in an effort to create an active auction for First Interstate; (e) acting independently so that the interests of First Interstate's public stockholders will be protected; and (f) adequately ensuring that no conflicts of interest exist between the Individual Defendant's selfish interests and their fiduciary obligation to maximize stockholder value or, if such conflicts exist, ensuring that all conflicts are resolved in the best interests of First Interstate's public stockholders; 3. ordering the Individual Defendants, jointly and severally, to account to plaintiffs and the other members of the Class for all damages suffered and to be suffered by them as a result of the wrongs complained of herein; 4. directing the Individual Defendants to employ the poison pill in a manner consistent with maximizing shareholder value; 5. awarding plaintiffs the costs and disbursements of this action, including a reasonably 11 allowance for plaintiffs' attorneys' and experts' fees; and 6. granting such other and further relief as this Court may deem to be just and proper. CHIMICLES, JACOBSEN & TIKELLIS By:________________________ Pamela S. Tikellis James C. Strum One Rodney Square P.O. Box 1035 Wilmington, DE 19899 (302) 656-2500 Attorneys for Plaintiffs ROSENTHAL MONHAIT GROSS & GODDESS, P.A. By:________________________ Joseph A. Rosenthal First Federal Plaza, Suite 214 Box 1070 Wilmington, DE 19899 (302) 656-4433 OF COUNSEL: ABBEY & ELLIS 212 East 39th Street New York, New York 10016 (212) 889-3700 BERNSTEIN LIEBHARD & LIFSHITZ 274 Madison Avenue New York, New York 10016 (212) 779-1414 12 FARUQI & FARUQI 415 Madison Avenue New York, New York 10017 (212) 986-1074 GOODKIND LABATON RUDOFF & SUCHAROW LLP 100 Park Avenue New York, New York 10017 (212) 907-0700 CHARLES PIVEN, ESQUIRE The Legg Mason Tower Suite 2700 Baltimore, MD 21202 ROBERT C. SUSSER, P.C. 6 East 43rd Street New York, New York 10017 (212) 808-0298 WECHSLER HARWOOD HALEBIAN & FEFFER, LLP 805 Third Avenue New York, New York 10022 (212) 935-7400 13 CERTIFICATE OF SERVICE I, James C. Strum, do hereby certify that I caused to be served two copies of the foregoing Amended Class Action Complaint upon the following counsel this 25th day of October, 1995, by hand delivery. Karen Valihura, Esquire Skadden, Arps, Slate, Meagher & Flom One Rodney Square P.O. Box 636 Wilmington, DE 19801 ------------------------ James C. Strum EX-99.27 28 ANSWER IN SHAREHOLDER LITIGATION IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE IN AND FOR NEW CASTLE COUNTY - - ---------------------------------- IN RE FIRST INTERSTATE BANCORP | CONSOLIDATED BANCORP SHAREHOLDER LITIGATION | C.A. No. 14623 - - ---------------------------------- ANSWER Defendants First Interstate Bancorp ("First Interstate"), John E. Bryson, Edward M. Carson, Jewel Plummer Cobb, Ralph P. Davidson, Myron du Bain, Don C. Frisbee, George M. Keller, Thomas L. Lee, William F. Miller, William S. Randall, Steven B. Sample, Forrest N. Shumway, William E.G. Siart, Richard J. Stegemeier, and Daniel M. Tellep (collectively, the "Defendants"), by their counsel, respond to the Amended Class Action Com- plaint (the "Amended Complaint") dated October 25, 1995 as follows. 1. The Defendants are without knowledge or information sufficient to form a belief as to the truth of the allegations contained in paragraph 1 of the Amended Complaint. 2. Admitted. 3. The Defendants admit that Mr. Siart is Chief Executive Officer and a director of First Interstate; and that Messrs. Bryson, Carson, Davidson, Du Bain, Frisbee, Keller, Lee, Randall, Shumway, Stegemeier and Tellep and Drs. Cobb, Miller and Sample are members of the Board of Directors of First Interstate. The balance of the allegations contained in paragraph 3 of the Amended Complaint is denied. 4. Paragraph 4 of the Amended Complaint states conclusions of law as to which no responsive pleading is required. 5. The Defendants admit that the plaintiffs purport to bring this action on their own behalf and purport to bring the action on behalf of all public stockholders of First Interstate, and their successors in interest, excluding the Defendants and any person, firm, trust, corporation, or other entity related to or affiliated with any of the Defendants. The balance of the allegations contained in paragraph 5 of the Amended Complaint is denied. 6. Paragraph 6 of the Amended Complaint states conclusions of law as to which no responsive pleading is required. 7. The Defendants admit that there are approximately 25,000 stockholders of record of First Interstate. The balance of the allegations contained in paragraph 7 of the Amended Complaint states conclusions of law as to which no responsive pleading is required. 2 8. Paragraph 8 of the Amended Complaint states of law as to which responsive pleading is required. 9. The Defendants admit that plaintiffs' counsel are experienced and competent. The balance of the allegations contained in paragraph 9 of the Amended Complaint states conclusions of law as to which no responsive pleading is required. 10. Paragraph 10 of the Amended Complaint states conclusions of law as to which no responsive pleading is required. 11. Denied. 12. Admitted. 13. The Defendants are without knowledge or information sufficient to form a belief as to the truth of the allegations contained in the first sentence of paragraph 13 of the Amended Complaint. The Defendants admit that Wells Fargo proposed discussions regarding a combination with First Interstate in the spring of 1994, which did not result in the commencement of any negotiations on the part of First Interstate and Wells Fargo; and that Paul Hazen, Chairman of Wells Fargo has contacted Mr. Siart in the last few weeks regarding a possible transaction involving the two companies. The balance of the allegations contained in paragraph 13 of the Amended Complaint is denied. 3 14. The Defendants admit that on or about October 18, 1995, Wells Fargo issued a press release (the "Wells Fargo Press Release"), and respectfully refer the Court to the Wells Fargo Press Release for an accurate and complete description of its contents. 15. The Defendants are without knowledge or information sufficient to form a belief as to the truth of the allegations contained in paragraph 15 of the Amended Complaint. 16. The Defendants admit that the closing price of shares of First Interstate common stock on the New York Stock Exchange on October 17, 1995 was $105 1/4 per share; that the closing price of shares of First Interstate common stock on the New York Stock Exchange on October 18, 1995 was $140 1/4 per share; that the closing price of shares of Wells Fargo common stock on the New York Stock Exchange on October 17, 1995 was $207 per share; and that the closing price of shares of Wells Fargo common stock on the New York Stock Exchange on October 18, 1995 was $229 per share. The balance of the allegations contained in paragraph 16 of the Amended Complaint is denied. 17. With regard to the allegations contained in the second sentence of paragraph 17 of the Amended Complaint, the Defendants admit that on or about October 18, 1995, First Interstate issued a press release (the 4 "First Interstate Press Release"), and respectfully refer the Court to the First Interstate Press Release for an accurate and complete description of its contents. The balance of the allegations contained in paragraph 17 of the Amended Complaint is denied. 18. The Defendants admit that First Interstate has a shareholder rights plan and that certain provisions of the plan are contingent upon the acquisition of 20% or more of First Interstate's common stock by a person or group. The balance of the allegations contained in paragraph 18 of the Amended Complaint is denied. 19. Paragraph 19 of the Amended complaint states conclusions of law as to which no responsive pleading is required. 20. Paragraph 20 of the Amended complaint states conclusions of law as to which no responsive pleading is required. 21. Denied. 22. Denied. 23. Denied. 24. Denied. 25. Denied. 26. Denied. 5 FIRST AFFIRMATIVE DEFENSE Pursuant to 8 Del. C. ss. 102(b) (7), certain of the claims herein are barred by Article XIV of the Composite Certificate of Incorporation of First Interstate. SECOND AFFIRMATIVE DEFENSE The Amended Complaint fails to state a claim upon which relief may be granted. Therefore, the Defendants respectfully request that the Court enter judgment against the plaintiffs dismissing the Amended Complaint, awarding the defendants their cost and attorneys' fees, and awarding such other and further relief as is lust and appropriate. ------------------------------------ Steve J. Rothschild Karen L. Valihura Robert S. Saunders SKADDEN, ARPS, SLATE, MEAGHER & FLOM P.O. Box 636 Wilmington, Delaware 19899 (302) 651-3000 Attorneys for Defendants DATED: November 1, 1995 6 CERTIFICATE OF SERVICE I, Robert S. Saunders, do hereby certify that I caused to be served two copies of the foregoing Answer upon the following counsel this 1st day of November, 1995 by hand delivery: --------------------------------- Pamela S. Tikellis Chimicles, Jacobsen & Tikellis One Rodney Square P.O. Box 1035 Wilmington, Delaware 19899 Joseph A. Rosenthal Rosenthal, Monhait, Gross & Goddess, P.A. First Federal Plaza Suite 214 P.O. Box 1070 Wilmington, Delaware 19899 --------------------------------- Robert S. Saunders 7 EX-99.28 29 SUPPLEMENTAL CLASS ACTION COMPLAINT IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE IN AND FOR NEW CASTLE COUNTY - - ----------------------------------------------------------x Consolidated C.A. : No. 14623 : IN RE FIRST INTERSTATE BANCORP : SECOND AMENDED AND SHAREHOLDER LITIGATION : SUPPLEMENTAL CLASS : ACTION COMPLAINT : - - ----------------------------------------------------------x Plaintiffs allege upon information and belief except as to paragraph 1, which is alleged on knowledge, as follows: THE PARTIES 1. Plaintiffs are and have been at all relevant times, the owners of shares of the common stock of First Interstate Bancorp ("First Interstate" or the "Company") . 2. First Interstate is a bank holding company organized and existing under the laws of the State of Delaware. First Interstate operates approximately 1,000 offices in 13 states. It has approximately 76 million shares of common stock issued and outstanding, held by approximately 25,000 shareholders of record. Its shares are traded on various stock exchanges, including the New York Stock Exchange. 3. (a) Defendant Edward M. Carson ("Carson") is and was at all relevant times Chairman of the Board of Directors of First Interstate. (b) Defendant William S. Randall ("Randall") is and was at all relevant times a Director and Executive Vice President and Chief Operating Officer of First Interstate. (c) Defendant William E.B. Siart ("Siart") is and was at all relevant times a Director and President and Chief Executive Officer of First Interstate. (d) Defendants John E. Bryson ("Bryson"), Jewel Plummer Cobb ("Cobb"), Ralph P. Davidson ("Davidson"), Myron Du Bain ("Du Bain"), Don C. Frisbee ("Frisbee"), George M. Keller ("Keller"), Thomas L. Lee ("Lee"), William F. Miller ("Miller"), Steven B. Sample ("Sample"), Forrest N. Shumway ("Shumway"), Richard J. Stegemeier ("Stegemeier") and Daniel M. Tellep ("Tellep") (together with defendants Carson, Randall and Siart "the Individual Defendants") are and were at all relevant times directors of the Company. 4. The Individual Defendants are in a fiduciary relationship with plaintiffs and the other public stockholders of First Interstate and owe to plaintiffs and other members of the class (as hereinafter defined) the highest obligations of good faith, fair dealing and full and candid disclosure. 5. Defendant First Bank System, Inc. ("First Bank") is a Delaware bank holding corporation headquartered in Minneapolis, Minnesota. First Bank is named herein as an aider and abettor to the breaches of fiduciary duty alleged herein. 6. Defendant Eleven Acquisition Corporation is a Delaware corporation formed by First Bank for the purpose of effecting the First Bank Merger (defined below). CLASS ACTION ALLEGATIONS 7. Plaintiffs bring this case on their own behalf and as a class action, pursuant to Rule 23 of the Rules of the Court of Chancery, on behalf of all public stockholders of First Interstate, and their successors in interest, who are or will be threatened with injury arising from defendants' actions as more fully described herein. Excluded from the class are defendants herein and any person, firm, trust, corporation, or other entity related to or affiliated with any of the defendants. 8. This action is properly maintainable as a class action. 9. The class is so numerous that joinder of all members is impracticable. There are approximately 25,000 stockholders of record located throughout the United States. 10. There are questions of law and fact which are common to the class and which predominate over questions affecting any individual class member, including whether the Individual Defendants have breached their fiduciary duties owed to plaintiffs and other members of the class. 11. Plaintiffs are committed to prosecuting this action and have retained competent counsel experienced in litigation of this nature. The claims of plaintiffs are typical of the claims of other members of the class and plaintiffs have the same interests as the other members of the class. Accordingly, plaintiffs are adequate representatives of the class and will fairly and adequately protect the interests of the class. 12. The prosecution of separate actions by individual members of the class would create the risk of inconsistent or varying adjudications with respect to individual members of the class which would establish incompatible standards of conduct for defendants, or adjudications with respect to individual members of the class which would as a practical matter be dispositive of the interests of the other members not parties to the adjudications or substantially impair or impede their ability to protect their interests. 13. The defendants have acted, or refused to act, on grounds generally applicable to, and causing injury to, the class and, therefore, preliminary and final injunctive relief on behalf of the class as a whole is appropriate. BACKGROUND AND CLAIM FOR RELIEF The Original Wells Fargo Proposal 14. Wells Fargo & Company ("Wells Fargo") is a Delaware corporation with executive offices at 420 Montgomery Street, San Francisco, California. Wells Fargo is a bank holding company with subsidiaries that perform commercial banking operations, investment advisory services, international and mortgage banking services, credit card services and other related financial activities. 15. Wells Fargo has long been interested in acquiring First Interstate. In February 1994, Wells Fargo offered to purchase the Company, which offer was rebuffed by First Interstate. However, Paul Hazen, Chairman of Wells Fargo, met with defendant Siart in or around the first two weeks of October, 1995 to discuss a possible transaction, and was once again rebuffed. 16. On or about October 18, 1995, Wells Fargo announced in a press release that it had submitted an unsolicited merger proposal to First Interstate to acquire 100 percent of the Company's common stock (the "original WF proposal"). Pursuant to the terms of the original WF proposal, First Interstate shareholders would receive .625 of a share of Wells Fargo, representing a value of $133.50 for each First Interstate share based on the then-current trading price of Wells Fargo stock. The transaction, valued at approximately $10 billion, contemplated a merger of First Interstate and Wells Fargo into a new company. 17. The reaction of the investment community to the original WF proposal was positive. Analysts noted that the proposal was nearly three times First Interstate's book value, and that most recent bank mergers were priced closer to 2 to 2-1/2 times book value. Analysts referred to the proposal as "a knockout bid" (Bert Ely, an Alexandria, Virginia banking consultant); an "excellent" potential combination (Jeff Simons of Mackay Shields Financial Corp., which owns 1.4 million Company shares); and a "super deal" (Paul McKey of Dean Witter Reynolds). It was further reported that Kohlberg Kravis Roberts & Co., which owns approximately 9% of the Company's stock, supported the original WF proposal. 18. In response to Wells Fargo's announcement on October 18, 1995, the Co-mpany's stock price soared from $106 per share to over $140 per share. Additionally, the price of Wells Fargo stock increased immediately after the announcement of the original WF proposal approximately 7%, to $229 per share. First Interstate's Response and The First Bank Merger 19. In contrast to the positive reaction of the investment community, the Company promptly reacted negatively to the original WF proposal. On October 18, 1995, defendant Siart stated "I am deeply disappointed that Wells Fargo would take this uninvited action." Siart reportedly also stated that it was in First Interstate's best interest to take six months to consider the Company's other options. 20. Moreover, in response to Wells Fargo's offer to increase its proposal to .65 shares of Wells Fargo stock per First Interstate share, the First Interstate Board initiated an active bidding process seeking to sell First Interstate. First Interstate met and shared confidential information with at least three banks, including First Bank, Norwest Corporation and Banc One Corporation. However, in breach of fiduciary duties to First Interstate's public shareholders, the First Interstate Board wrongfully failed duly to explore, consider and evaluate the available alternatives, and to proceed in good faith to negotiate with respect to the alternatives to obtain the best transaction reasonably available for First Interstate shareholders. 21. Nevertheless, less than three weeks later, on or about November 6, 1995, First Interstate announced that it had agreed to be acquired by First Bank ("First Bank Merger") in a transaction which would give the First Interstate stockholders lower consideration than in the original WF proposal. Pursuant to the terms of the First Bank Merger, First Bank will exchange 2.6 shares of its common stock for each First Interstate share of common stock, valuing the Company's stock at $129.68 per share, for a total value of $10.05 billion. 22. Prior to November 6, 1995, Wells Fargo had offered to increase its offer to .65 shares of Wells Fargo common stock per First Interstate share. Based on the closing price of Wells Fargo common stock on November 3, 1995, the last trading date prior to announcement of the First Bank Merger, the .65 shares of Wells Fargo stock had an implied value of $137.96 per First Interstate share. 23. In connection with the First Bank Merger, First Interstate and First Bank agreed to a $100 million termination fee in the event a third party offer were accepted by First Interstate. Moreover, as a condition to the First Bank Merger, First Interstate and First Bank entered into reciprocal stock option agreements as of November 5, 1995 pursuant to which First Interstate granted First Bank an option to purchase up to 15,073,106 shares of the Company's common stock at a price of $127.75 per share and First Bank granted First Interstate an option to purchase up to 25,829,983 shares of First Bank common stock at a price of $50.875 per share. First Bank could reap profits of as much as $100,000,000 from the option granted to it. As a consequence of the termination fee and option agreement, Wells Fargo or any other interested bidder might have to pay First Bank as much as $200,000,000 if the First Bank Merger were terminated. 24. As a special enticement to the Individual Defendants to accept the First Bank Merger, First Bank agreed that the combined company would be called First Interstate and, although it would maintain principal offices in Minneapolis, its "core businesses" would be run from California, an obvious effort to placate First Interstate executives. Thus, the First Bank Merger assures that defendant Siart (who will be second in command in the combined company) and other First Interstate executives will maintain their positions and the valuable perquisites which flow therefrom. In addition, the Board of Directors of the combined entity will be evenly divided between First Bank and First Interstate directors. Not surprisingly, as a result, one analyst labeled the First Bank Merger as "a senior management job preservation act" for First Interstate executives. 25. In addition, the Individual Defendants, in agreeing to the First Bank Merger, failed to effectively conduct a fair bidding contest for the sale of the Company. Indeed, they agreed to the First Bank Merger to thwart spirited bidding by Wells Fargo or anyone other than First Bank desirous of acquiring First Interstate in a value maximizing transaction. The Individual Defendants failed to take all steps to ensure that First Interstate's shareholders had the benefit of the most advantageous transaction, including but not limited to, failing to negotiate for Wells Fargo's highest and best offer. Moreover, it has been reported that other potential First Interstate bidders, including Norwest Corp. or Banc One Corp., might have offered a higher bid, but did not because of Siart's and the other Individual Defendants' requirements that First Interstate keep its name and California headquarters. 26. In response to the announcement of the First Bank Merger, the prices of the common stock of both First Bank and First Interstate both declined. 27. Executives at First Bank and First Interstate quickly sought to justify time attractiveness of the deal, asserting that the companies would be able to save $500 million in expense reductions through overlapping operations. However, the only overlap between the companies is in Montana, Colorado and Wyoming. If the First Bank Merger were consummated, elimination of this redundancy would generate a mere one-time $80 million in savings. In contrast, a merger between Wells Fargo and First Interstate would create dozens of duplicate branches, which, when eliminated, would contribute substantially to the $800 million cost cuts forecast by Wells Fargo. 28. As announced, the consideration offered by the First Bank Merger on its face is lower than that offered even in the original WF proposal. 29. Evidencing the fact that the Individual Defendants acted precipitously and recklessly in agreeing to the First Bank Merger with knowledge that other and higher bids were available, on or about November 13, 1995, Wells Fargo announced that it would commence a tender offer for First Interstate stock. Pursuant to the terms of its tender offer Wells Fargo will give First Interstate stockholders two-thirds of a share of Wells Fargo common stock for each First Interstate share. Based upon the closing price of Wells Fargo on November 10, 1995, the value of the exchange offer is $143.58 per First Interstate share, or approximately $10.9 billion in total. 30. In addition, Wells Fargo announced that it intends to file preliminary proxy materials with the SEC in connection with the solicitation of First Interstate shareholders to vote against approval of the First Bank Merger, and announced that it will file with the SEC preliminary materials to solicit written consents from First Interstate stockholders to remove the First Interstate board and replace it with Wells Fargo nominees who are committed to removing any impediments to the consummation of the acquisition of First Interstate by Wells Fargo. Moreover, on November 13, 1995, Wells Fargo filed suit in this Court seeking declaratory and injunctive relief against First Interstate and its Board, and First Bank and Eleven Acquisition Corporation. 31. First Interstate also has in place a shareholder rights plan (commonly known as a "poison pill") which makes an unwelcome takeover of the Company prohibitively expensive. The poison pill is triggered by the acquisition of 20% or more of First Interstate's common stock by a group or persons unfavored by First Interstate's management. The poison pills effects a fundamental shift of power from the shareholders of First Interstate to the Individual Defendants. The poison pill permits the Individual Defendants to act as the prime negotiators of -- and, in effect, totally to preclude -- any and all acquisition offers which they disfavor through their power to redeem or to refuse to redeem the rights. 32. Further, By-law 4(b) of First Interstate's By-laws require that notice of a nomination of a candidate for director "delivered to or mailed and received at the principal executive offices of the Corporation not less than thirty days nor more than sixty days prior to the meeting. . . ". The By-law further states that "[o]nly persons who are nominated in accordance with [such] procedures shall be eligible for election as directors of [First Interstate]." The By-law wrongfully purports to restrict the power of First Interstate stockholders to act by written consent to elect or remove directors. 33. This fundamental shift of control of the Company's destiny from the hands of its shareholders to the hands of the Individual Defendants results in a heightened fiduciary duty on their part to consider, in good faith, a third-party bid, and further requires the Individual Defendants to pursue a third-party's interest in acquiring the Company and to negotiate in good faith on behalf of the Company's shareholders with a bidder such as Wells Fargo. In violation of their heightened fiduciary duties, the individual Defendants have used the poison pill to favor one bidder -- First Bank -- over another -- Wells Fargo. The First Bank Merger is exempt from the poison pill, whereas the poison pill still bars Wells Fargo from proceeding with its superior offer without the consent of the Individual Defendants. CLAIM FOR RELIEF 34. The Individual Defendants are obligated to carefully consider, in a timely fashion and on an informed basis, bona fide proposals from third parties to engage in transactions which will maximize value for First Interstate shareholders; not to place their own self-interests and personal considerations ahead of the interests of the public stockholders; and to make corporate decisions in good faith. 35. The Individual Defendants' fiduciary obligations require them to: (a) undertake an appropriate evaluation of all bona fide offers, and take appropriate steps to consider all potential bids for the Company or its assets or explore strategic alternatives, in order to maximize shareholder value; (b) act independently, including appointing a disinterested committee so that the interests of First Interstate's public stockholders will be protected; (c) adequately ensure that no conflicts of interest exist between the Individual Defendants' own interests and their fiduciary obligations to the public stockholders of First Interstate; (d) utilize the poison pill in a manner designed to maximize shareholder value; and (e) avoid implementing any procedures which would impede the maximum bona fide offer for First Interstate. 36. In effect, the Individual Defendants have initiated a process which has placed the Company up for sale, including initiating an active bidding contest seeking to sell the Company, obligating them to maximize shareholder value. Nevertheless, the Individual Defendants necessarily and inherently suffer from a conflict of interest between their own personal desires to retain their offices in First Interstate, with the emoluments and prestige which accompany those offices, and their fiduciary obligation to maximize shareholder value in a transaction. Because of such conflict of interest, the Individual Defendants have been and remain unable to represent the interests of First Interstate's public stockholders with the impartiality that their fiduciary duties require, nor have they been able to ensure that their conflicts of interest will be resolved in the best interests of First Interstate's public stockholders. 37. By virtue of the acts and conduct alleged herein, the individual Defendants have breached their fiduciary duties owed to plaintiffs and other class members by carrying out a preconceived plan and scheme to entrench themselves in office and to protect and advance their own parochial interests at the expense of First Interstate's public shareholders. The Individual Defendants have not exercised and are not exercising independent business judgment and have acted and are acting to the detriment of the class. The Individual Defendants' negative response to Wells Fargo, the hasty acceptance of the First Bank Merger which provides less consideration than the WF initial and amended proposals, and their failure to adequately consider other offers, was an uninformed knee-jerk reaction designed to advance their own interests and was made without adequate information as to what a third party would be prepared to offer in a fully negotiated transaction. 38. The Individual Defendants have refused to take the steps necessary to ensure that the Company's public shareholders will receive maximum value for their shares of First Interstate common stock. The Individual Defendants' agreement to the inferior First Bank Merger rather than meaningfully responding to Wells Fargo's proposals or pursuing a value maximizing transaction with other bona fide companies is clearly the result of a desire by the Individual Defendants to protect their own substantial salaries, perquisites and positions with the Company. 39. As a result of the foregoing, the Individual Defendants have breached their fiduciary duties owed to First Interstate's stockholders. 40. Defendants First Bank and Eleven Acquisition Corporation have knowingly and substantially participated in and are benefiting by breaches of fiduciary duties by the Individual Defendants and, therefore, are liable as aided and abettors thereof. Indeed the First Bank Merger could not proceed without the willing and active participation of First Bank and Eleven Acquisition Corporation. 41. Unless enjoined by this Court, defendants will continue to breach their fiduciary duties owed to plaintiffs and the other members of the Class and/or aid and abet such breaches in order to benefit themselves at the expense and to the irreparable harm of the Class. 42. Plaintiffs and the other members of the Class have no adequate remedy at law. WHEREFORE, plaintiffs demand judgment as follows: 1. declaring this to be a proper class action; 2. enjoining the First Bank Merger until all value maximizing alternatives are fully explored; 3. in the event the First Bank Merger is consummated, rescinding it or awarding rescissory damages to the class; 4. declaring null and void the termination fee and stock option agreements in the First Bank Merger agreement and bylaw 4(b) to the extent it obstructs shareholders action by written consent; 5. ordering the Individual Defendants to carry out their fiduciary duties to plaintiffs and the other members of the Class by: (a) cooperating fully with any person or entity having a bona fide interest in proposing a transaction which would maximize shareholder value; (b) undertaking an appropriate evaluation of First Interstate's worth as a merger/acquisition candidate; (c) taking all appropriate steps to enhance First Interstate's value and attractiveness as a merger/acquisition candidate; (d) taking all appropriate steps to effectively expose First Interstate to the marketplace in an effort to create an active auction for First Interstate; (e) acting independently so that the interests of First Interstate's public stockholders will be protected; and (f) adequately ensuring that no conflicts of interest exist between the Individual Defendants' own interests and their fiduciary obligation to maximize stockholder value or, if such conflicts exist, ensuring that all conflicts are resolved in the best interests of First Interstate's public stockholders; 6. ordering defendants, jointly and severally, to account to plaintiffs and the other members of the Class for all damages suffered and to be suffered by then as a result of the wrongs complained of herein; 7. directing the Individual Defendants to employ the poison pill in a manner consistent with maximizing shareholder value; 8. awarding plaintiffs the costs and disbursements of this action, including a reasonable allowance for plaintiffs attorneys' and experts' fees; and 9. granting such other and further relief as this Court may deem to be just and proper. CHIMICLES, JACOBSEN & TIKELLIS ------------------------------- Pamela S. Tikellis James C. Strum Robert J. Kriner, Jr. One Rodney Square P.O. Box 1035 Wilmington, DE 19899 (302) 656-2500 Co-Lead and Co-Liaison Counsel for Plaintiffs ROSENTHAL MONHAIT GROSS & GODDESS, P.A. ------------------------------- Joseph A. Rosenthal First Federal Plaza Suite 214 Box 1070 Wilmington, DE 19899 (302) 656-4433 Co-Liaison Counsel for Plaintiffs OF COUNSEL: ABBEY & ELLIS 212 East 39th Street New York, New York 10016 (212) 889-3700 GOODKIND LABATON RUDOFF & SUCHAROW LLP 100 Park Avenue New York, New York 10017 (212) 907-0700 BERNSTEIN LIEBHARD & LIPSHITZ 274 Madison Avenue New York, New York 10016 (212) 779-1414 FARQUI & FARQUI 415 Madison Avenue New York, New York 10017 (212) 779-1414 CHARLES PIVEN, ESQUIRE The Legg Mason Tower Suite 2700 Baltimore, MD 21202 ROBERT C. SUSSER, P.C. 6 East 43rd Street New York, New York 10017 (212) 808-0298 WECHSLER HARWOOD HALEBIAN & FEFFER, LLP 805 Third Avenue New York, New York 10022 EX-99.29 30 COMPLAINT MILBERG WEISS BERSHAD HYNES & LERACH WILLIAM S. LERACH (68581) 600 West Broadway, Suite 1900 San Diego, California 92101 Telephone: 619/231-1058 - and - MILBERG WEISS BERSHAD HYNES & LERACH JEFF S. WESTERMAN (94559) 355 South Grand Avenue Suite 4170 Los Angeles, California 90071 Telephone: 213/617-9007 WEISS & YOURMAN JOSEPH WEISS KEVIN J. YOURMAN (147159) 10940 Wilshire Blvd. 24th Floor Los Angeles, California 90024 Telephone: 310/208-2800 SKADDEN, ARPS, SLATE, MEAGHER & FLOM 300 South Grand Avenue, Suite 3400 Los Angeles, California 90071 (213) 687-5000 Attorneys for Plaintiff SUPERIOR COURT OF THE STATE OF CALIFORNIA FOR THE COUNTY OF LOS ANGELES CHARLES MESKO, On Behalf of Himself ) Case No. 11C137379 and All Others Similarly Situated, ) ) CLASS ACTION Plaintiff, ) ) vs. ) ) CLASS ACTION COMPLAINT JOHN E. BRYSON, DON C. FRISBEE, ) FOR BREACH OF FIDUCIARY STEVEN B. SAMPLE, EDWARD M. CARSON, ) DUTY, ABUSE OF CONTROL, GEORGE M. KELLER, FORREST N. SHUMWAY, ) UNJUST ENRICHMENT, JEWEL PLUMMER COBB, W.F. KIESCHNICK, ) INTERFERENCE WITH WILLIAM B. START, RALPH P. DAVIDSON, ) PROSPECTIVE ECONOMIC THOMAS L. LEE, RICHARD J. STEGEMEIER, ) ADVANTAGE AND EQUITABLE MYRON DuBAIN, WILLIAM F. MILLER, DAN- ) RELIEF AND DAMAGES IEL M. TELLEP and J.J. PINOLA, ) ) Defendants. ) Plaintiff Demands A ) Trial By Jury - - ------------------------------------------- 2 Plaintiff, as and for his complaint, alleges as follows upon information and belief except as to paragraph 5, which is alleged upon knowledge. Plaintiff's information and belief is based upon, inter alia, the investigation made by plaintiff by and through his counsel. INTRODUCTION AND OVERVIEW 1. This is a shareholder class action seeking equitable relief and compensatory damages on behalf of all shareholders of First Interstate Bancorp ("First Interstate" or the "Company") against First Interstate's top officers and the members of the Board of Directors of First Interstate, seeking to remedy violations of state law arising out of these defendants' actions and conduct undertaken to defeat a highly favorable acquisition offer for First Interstate stock by Wells Fargo & Co. ("Wells Fargo"). First Interstate's Board of Directors has pursued a course of conduct intended to and having the effect of making it extremely difficult for any outside party to successfully acquire First Interstate, even at prices well in excess of First Interstate stock's historical price range. This course of conduct has been undertaken by the defendants to secure and retain their lucrative positions of power, prestige and profit with respect to First Interstate and to enhance and aggrandize their own interests at the expense of First Interstate's other shareholders. 3 2. On October 18, 1995, Wells Fargo, a highly successful, profitable and well-capitalized bank, made an offer to acquire First Interstate at a price far in excess of First Interstate's then-market price, by exchanging in a tax-free exchange .625 shares of Wells Fargo stock for each share of First Interstate stock, an offer worth $133.50 per share based on the October 17, 1995 closing price of Wells Fargo stock of $213.62 per share. First Interstate's stock jumped from $106 per share to $140 per share upon this announcement. While Wells Fargo's stock increased to $228.65 per share, making the offer worth $142.65 per First Interstate share. However, the defendants are rejecting such offer and have refused to negotiate an acquisition of the Company at any higher price, even though Wells Fargo has told First Interstate's Board it is willing to negotiate a higher price and thus to offer a fair and reasonable price for First Interstate stock, well above the levels at which the stock has traded historically. 3. In recent years, defendants have consistently refused to entertain highly favorable acquisition offers or overtures for First Interstate, thus preventing an acquisition of the Company at a favorable price for the shareholders. Defendants have done this to retain their positions of prestige, power and profit, as they know they will lose those positions in the event First Interstate is acquired. Defendants' interests in 4 holding on to their positions of power, prestige and profit as officers and directors of First Interstate far exceeds their interests as shareholders in First Interstate, as they collectively own only about 144,000 of First Interstate's 75.7 million shares -- a minuscule .001% of its outstanding stock. PARTIES AND ACTORS 4. Plaintiff Roger Mondschein, the owner of shares of First Interstate, is and was at all times relevant hereto a common shareholder of First Interstate. Plaintiff brings this action on behalf of the holders of the common stock of First Interstate for injunctive and other relief in connection with the proposed acquisition of First Interstate by Wells Fargo. 5. (a) First Interstate is a corporation with its principal executive offices in Los Angeles, California and which operates principally in California, as well as several other western states. First Interstate is a bank holding company. (b) At December 31, 1994, it owned 16 banks (the "Subsidiary Banks") which operated approximately 1,100 banking offices in 13 states, including California. Ranked according to assets, the Company was the fourteenth largest commercial banking organization in the United States at December 31, 1994, having total deposits of $48.4 billion and total assets of $55.8 billion. 5 (c) The Subsidiary Banks accept checking, savings and other time deposit accounts and employ these funds principally by making consumer, real estate and commercial loans and investing in securities and other interest-bearing assets. (d) The Company also provides banking-related financial services and products. These include asset-based commercial financing, asset management and investment counseling, bank card operations, mortgage banking, venture capital and investment products. It engages in these activities both through non-bank subsidiaries of the Company and through the Subsidiary Banks and their subsidiaries. (e) The larger Subsidiary Banks provided international banking services on a limited basis through the international departments of their domestic offices. They also maintain correspondent relationships with major banks throughout the world. 6. (a) Defendant John E. Bryson ("Bryson") was a direc- tor of First Interstate and Board Chairman and Chief Executive Officer or SCECorp and Southern Edison Company at all times relevant hereto. (b) Defendant Don C. Frisbee ("Frisbee") was a First Interstate director and Chairman Emeritus PacifiCorp at all times relevant hereto. 6 (c) Defendant Steven B. Sample ("Sample") was a First Interstate director and President University of Southern California at all times relevant hereto. (d) Defendant Edward M. Carson ("Carson") was Chair- man of the Board of First Interstate at all times relevant hereto. (e) Defendant George M. Keller ("Keller") was a director of First Interstate and the retired Chairman and Chief Executive Officer of Chevron Corporation at all times relevant hereto. (f) Defendant Forrest N. Shumway ("Shumway") was a director of First Interstate and former Vice-Chairman of the Board Allied-Signal, Inc. at all times relevant hereto. (g) Defendant Jewel Plummer Cobb ("Cobb") was a director of First Interstate and President Emeritus California State University, Fullerton at all times relevant hereto. (h) Defendant W.F. Kieschnick ("Kieschnick") was a director of First Interstate and retired President and Chief Executive Officer Atlantic Richfield Company at all times relevant hereto. (i) Defendant William B. Siart ("Siart") was Presi- dent and Chief Executive Officer First Interstate and a direc- tor at all times relevant hereto. 7 (j) Defendant Ralph P. Davidson ("Davidson") was a director of First Interstate and former Chairman of The John F. Kennedy Center for the Performing Arts at all times relevant hereto. (k) Defendant Thomas L. Lee ("Lee") was a director of First Interstate and Chairman and Chief Executive Officer of The Newhall Land and Farming Company at all times relevant hereto. (l) Defendant Richard J. Stegemeier ("Stegemeier") was a director of First Interstate and Chairman of the Board Unocal Corporation at all times relevant hereto. (m) Defendant Myron DuBain ("DuBain") was a director of First Interstate and retired Chairman and Chief Executive Officer Fireman's Fund Corporation at all times relevant hereto. (n) Defendant William F. Miller ("Miller") was a director of First Interstate and President Emeritus SRI Inter- national at all times relevant hereto. (o) Defendant Daniel M. Tellap ("Tellap") was a director of First Interstate and Chairman and Chief Executive Officer Lockheed Corporation at all times relevant hereto. (p) Defendant J.J. Pinola ("Pinola"), was the retired Chairman and Chief Executive Officer of First Interstate and a director at all times relevant hereto. 8 7. Defendants (hereinafter collectively referred to as the "Individual Defendants") are each members of First Interstate's Board of Directors. 8. The Individual Defendants owed and owe First Interstate's public shareholders fiduciary obligations and were and are required to: (i) use their ability to manage First Interstate in a fair, just and equitable manner; (ii) act in furtherance of the best interests of First Interstate and its shareholders; (iii) act to maximize shareholder value; (iv) govern First Interstate in such a manner as to head the expressed views of its public shareholders; (v) refrain from abusing their positions of control, power, prestige and profit; and (vi) not favor their own interests at the expense of First Interstate and its shareholders. By reason of their fiduciary relationships, these defendants owed and owe plaintiff and other members of the Class the highest obligation of good faith, fair dealing, loyalty and due care. 9. Wells Fargo is a corporation with its principal executive offices in San Francisco, California. Wells Fargo is a huge bank holding company and one of the most well-managed, profitable and well-capitalized banks in the United States. With more than 600 branch outlets, 1,900 round-the-clock Wells Fargo Express(TM) ATMs and a popular 24-hour telephone banking service, Wells Fargo operates one of the largest and busiest 9 consumer banking businesses in the United States. Besides serving as banker to some 3.5 million California households, Wells Fargo provides a full range of banking services to commercial, agribusiness, real estate and small-business customers, mainly in California. It is one of the nation's leading managers of personal trust accounts, corporate 401(k) plans and mutual funds, with approximately $57 billion in assets under its management and administration. 10. Each defendant herein is sued individually as a conspirator and aider and abettor, as well as in his capacity as a director of the Company, and the liability of each arises from the fact that he has engaged in all or part of the unlawful acts, plans, schemes, or transactions complained of herein. CLASS ACTION ALLEGATIONS 11. Plaintiff brings this lawsuit on behalf of himself and all other common shareholders of First Interstate (except defendants herein and any person, firm, trust, corporation or other entity related to, controlled by or affiliated with any of the defendants and any of their successors in interest (the "Class"). 12. This action is properly maintainable as a class action for the following reasons: (a) The Class is so numerous that joinder of all Class members is impracticable. As of January 31, 1995, First 10 Interstate had over 75 million shares of common stock outstanding owned by over 20,000 shareholders. Members of the Class are scattered throughout the United States and are so numerous as to make it impracticable to bring them all before this Court. 13. There are questions of law and fact which are common to members of the Class and which predominate over any questions affecting only individual members. The common questions include, inter alia, the following: (a) Whether the Individual Defendants have breached their fiduciary duties owed by them to plaintiff and the other members of the Class; (b) Whether the Individual Defendants have failed, in violation of their fiduciary duties, to hold a fair auction of the Company or its assets or to sell the Company on the favorable terms; (c) Whether the Individual Defendants have failed, in violation of their fiduciary duties, to provide for a mail of First Interstate; (d) Whether plaintiff and the other members of the Class will be irreparably damaged if the Wells Fargo acquisi- tion is not completed; (e) Whether the Individual Defendants have breached or aided and abetted the breach of the fiduciary and other 11 common law duties owed by them to plaintiff and other members of the Class; and (f) Whether plaintiff and other members of the Class are being and will continue to be injured by the wrongful conduct alleged herein and, if so, what is the proper remedy and/or measure of damages. 14. The claims of plaintiff are typical of the claims of other members of the Class and plaintiff has no interests that are adverse and antagonistic to the interests of the Class. 15. Plaintiff is committed to the vigorous prosecution of this action and has retained competent counsel experienced in litigation of this nature. Accordingly, plaintiff is an adequate representative of the Class and will fairly and adequately protect the interests of the Class. 16. Plaintiff anticipates that there will not be any difficulty in the management of this litigation as a class action. 17. For the reasons stated herein, a class action is superior to any other method available for the fair and efficient adjudication of this controversy since it would be impractical and undesirable for each of the members of the class who has suffered or will suffer damages to bring separate actions in various parts of the country. Classwide remedies 12 will assure uniform standards of conduct for the Individual Defendants and avoid the risk of inconsistent judgments. SUBSTANTIVE ALLEGATIONS 18. As pleaded earlier, First Interstate is an interstate banking corporation. First Interstate's stock performed poorly in 1994 through mid-1995, due to First Interstate's lackluster performance and perceptions that it was poorly managed. For instance, First Interstate's stock traded at a high of $85 per share and then fell, falling to a low of $67 per share in December 1994. First Interstate did not reach $85 per share again until mid-1995. After June 1995, First Interstate's stock performed better, reaching over $100 per share in late September 1995, due to an increase in the prices in bank stocks generally and because of rumors that a favorable acquisition offer for First Interstate would be forthcoming as part of the waive of bank acquisitions and mergers now sweeping the United States. However, even with this increase, First Interstate's stock has been relatively poor performer when compared to other bank stocks. Because in recent years First Interstate has not been viewed to be well-managed as many other large banks and thus has not performed as well in terms of many of its key ratios and measurements of success as other banks, its stock has not performed well and thus, shareholders in First Interstate have, in recent years, obtained a below-industry 13 trendline or industry average return. The chart below shows the price action of First Interstate stock in 1994-1995: [The hardcopy Complaint filed with the Court contains a line graph showing the daily common stock price for First Inter- state for the period December 31, 1993 through October 17, 1995. Because the document for which this Complaint is an Exhibit has been filed with the Securities and Exchange Commission by elec- tronic transmission, this graph is not contained herein. The following information summarizes the First Interstate daily closing stock price, plotted along the graph's vertical axis, for the dates indicated on the horizontal axis of the graph: Date Common Stock Price - - ---- ------------------ December 31, 1993 64 1/8 March 25, 1994 77 7/8 June 17, 1994 75 3/4 September 9, 1994 79 1/4 December 2, 1994 69 3/8 February 24, 1995 81 3/8 May 19, 1995 81 August 11, 1995 87 1/2 October 17, 1995 106] 19. In recent years, certain other large financial institutions have approached First Interstate with favorable acquisition inquiries and offers. Some years ago, Bank of America approached First Interstate about a possible acquisition. Approximately a year ago, Wells Fargo approached First Interstate about a possible acquisition of First Interstate at a premium price. First Interstate's Board and its top management have rejected and frustrated all of these prior acquisition overtures and offers, even though those offers would have resulted in First Interstate shareholders receiving a substantial premium over the then-market price of First Interstate stock. Defendants have done this because they know that in the event First Interstate is acquired by another bank, most or all of the directors of First Interstate will, either in connection with the acquisition or shortly thereafter, be removed from the board of the surviving bank because their services will not be necessary and they will be mere surplusage and thus such an 14 acquisition would bring an end to their positions of power, prestige and profit as directors of this huge bank. At the same time, top managers at First Interstate have caused these prior acquisition overtures and offers to be rejected and/or frustrated, because they also know that, in the event of an acquisition, they will also lose their prestigious positions of power, prestige and profit as officers of a major banking institution. In so acting, these defendants have been aggrandizing their own personal positions and interests over that of First Interstate and its broader shareholder community to whom they owe fiduciary duties to bring about a sales of First Interstate on favorable terms to all the shareholders, even if it results in them losing their lucrative positions. 20. Shortly prior to October 18, 1995, Wells Fargo approached First Interstate and offered to negotiate an acquisition of First Interstate for a price far in excess of First Interstate's current stock price. First Interstate's Chairman refused this offer and told Wells Fargo that First Interstate would not negotiate to sell the bank and would resist any offer by Wells Fargo to buy the bank. On October 18, 1995, Wells Fargo made an unsolicited acquisition offer for First Interstate offering to exchange .625 shares of its stock for each share of First Interstate stock, a $133.50 per share offer based on the October 17, 1995 closing price of Wells Fargo 15 stock of $213.62 per share. Upon the announcement of this favorable acquisition offer, First Interstate's stock instantly skyrocketed from $106 per share to over $140 per share, reflecting the extremely large premium being offered to First Interstate shareholders in this tax-free exchange, and the increase in Wells Fargo's stock price to $228 per share making the offer worth $142 per First Interstate share. Wells Fargo's offer to acquire First Interstate is approximately three times First Interstate's book value, which is a high offer compared to recent bank acquisition prices. The acquisition price is also approximately 12.1 times First Interstate's estimated 1995 earnings per share of $11.29 per share, which is also reasonable in light of other recent bank acquisitions, although it is lower than 15 times the estimated next year's earnings paid in other bank acquisitions. 21. Wells Fargo has privately indicated to First Inter- state's officers and directors that they are willing and will increase the price of their offer to acquire First Interstate if First Interstate's Board will cooperate in bringing about a consensual acquisition. However, First Interstate's top officers and its Board are resisting and are going to continue to resist this acquisition offer so that they can, as they have in the past, retain themselves in their positions or power, prestige and profit. For instance, members of First Interstate's 16 Board of Directors own only a minuscule portion of First Inter- state's outstanding common stock. They actually own only 144,000 shares of First Interstate's 75.7 million shares of outstanding common stock, or just .001% of the stock. Thus, whatever interest the defendants have as shareholders in First Interstate based on their minuscule holdings of the Company's stock is far outweighed by their interest in retaining their lucrative positions of power, prestige and profit as directors and/or officers of the Company from which they receive lucrative fees, prestige in the community, large salaries, and other emoluments of office, which they will lose if First Interstate is acquired. 22. The rejection of the Wells Fargo offer is a breach of defendants' fiduciary duties, an abuse of control, provides unjust enrichment to all defendants, is an unfair business practice and has been perpetrated through tortious interference with the class members' prospective economic interests and opportunities and through material misrepresentations and the failure by defendants to disclose material information to the members of the Class. 23. Unless defendants are enjoined from refusing to negotiate a sale of First Interstate, plaintiff and the members of the Class will continue to suffer injury. Plaintiff and the members of the Class have no adequate remedy at law. 17 FIRST CAUSE OF ACTION BREACH OF FIDUCIARY DUTIES 24. Plaintiff incorporates by reference P. P. 1-23 above. 25. The Individual Defendants engaged in the aforesaid conduct in intentional breach and/or reckless disregard of their fiduciary duties to plaintiff and the members of the Class. 26. Defendants, at the time they rejected Wells Fargo's offer, knew that the market price of First Interstate stock reflected both the intrinsic value of First Interstate and a premium which resulted from market expectations that Wells Fargo's efforts to acquire control of First Interstate would produce greater returns for investors. 27. As a proximate result, the plaintiff and other members of the Class have been substantially injured and request compensatory damages. SECOND CAUSE OF ACTION NEGLIGENT BREACH OF FIDUCIARY DUTIES 28. Plaintiff incorporates by reference P. P. 1-23 above. 29. The Individual Defendants engaged in the aforesaid conduct without exercising the reasonable and ordinary care which directors and officers owe to their shareholders, and thereby breached their fiduciary duties to plaintiff and other members of the Class. 18 30. Defendants, at the time they rejected Wells Fargo's offer, knew or should have known, that the market price of First Interstate stock at the time reflected both the intrinsic value of First Interstate and a premium which resulted from market expectations that Wells Fargo's efforts to acquire control of First Interstate would produce a greater return for investors. 31. As a proximate result, the plaintiff and other members of the Class have been substantially injured and request compensatory damages. 32. Defendants did the things alleged herein without exercising the reasonable and ordinary care owed by corporate directors and officers. THIRD CAUSE OF ACTION ABUSE OF CONTROL 33. Plaintiff incorporates by reference P. P. 1-23 above. 34. The Individual Defendants owed duties as controlling persons and/or as controlling or dominant directors to plaintiff and the other members of the Class not to use their positions of control of First Interstate for their own personal interests and contrary to the interests of First Interstate's remaining shareholders. 35. The foregoing conduct by the director defendants amount to an abuse of their abilities to control First Inter- 19 state in violation of their obligations to plaintiff and the other members of the Class. 36. As a proximate result, plaintiff and the other members of the Class have been damaged and will continue to be damaged unless defendants are enjoined, and defendants are each jointly and severally liable to plaintiff and the other members of the Class for all loss and damage they have suffered reflect in from the matters set forth herein. FOURTH CAUSE OF ACTION UNJUST ENRICHMENT 37. Plaintiff incorporates by reference P. P. 1-23 above. 38. As a proximate result of the tortious conduct de- scribed above, all of the defendants have been and will be unjustly enriched at the expense of the members of the Class. The director defendants will retain control of First Interstate and their positions of power, prestige and profit. Defendants have obtained these unjust benefits at the expense of the members of the Class by rejecting the Wells Fargo offer and refusing to negotiate a beneficial sale of First Interstate. FIFTH CAUSE OF ACTION TORTIOUS INTERFERENCE WITH PROSPECTIVE ECONOMIC ADVANTAGE 39. Plaintiff incorporates by reference P. P. 1-23 above. 20 40. By reason, inter alia, of Wells Fargo's announced offer to purchase First Interstate stock at $133+ a share, plaintiff and the members of the Class had an expectancy that they could tender their shares and realize at least the $133+ per share offer. Moreover, all class members had the expectancy of sharing in any premium that results from acquisition attempts. 41. Defendants knew of these prospective advantages presented to plaintiff and the members of the Class and defendants intended to interfere and did interfere with those advantages when they rejected the Wells Fargo offer. 42. Plaintiff and the members of the Class were prevented from obtaining the foregoing advantages as a result of the conduct of all defendants described above. 43. The defendants, and each of them, did the things alleged in this Complaint with the intent to injure plaintiff and the members of the Class. WHEREFORE, plaintiff and members of the Class demand judgment against defendants as follows: 1. Declaring that this action is properly maintainable as a class action and certifying plaintiff as the representa- tive of the Class; 21 2. Declaring that the defendants have breached and are breaching their fiduciary and other duties to plaintiff and other members of the Class; 3. Preliminary and permanently enjoining the defendants and their counsel, agents, employees and all persons acting under, in concert with, or for them, from taking to prevent or frustrate the sale to Wells Fargo or refusing to proceed with negotiations with Wells Fargo to increase the offered price; 4. Awarding compensatory damages against defendants individually and severally in an amount to be determined at trial, together with prejudgment interest at the maximum rate allowable by law, arising from the proposed transaction; 5. Awarding plaintiff his costs and disbursements and reasonable allowances of fees for plaintiff's counsel and experts and reimbursement of expenses; and 6. Granting plaintiff and the Class such other and further relief as the Court may deem just and proper. JURY DEMAND Plaintiff demands a trial by jury. DATED: October 19, 1995 WILBERG WEISS BERSHAD HYNES & LERACH --------------------------------- WILLIAM S. LERACH 22 600 West Broadway, Suite 1800 San Diego, California 92101 Telephone: 619/231-1058 -and- JEFF S. WESTERMAN 355 South Grand Avenue Suite 4170 Los Angeles, California 90071 Telephone: 213/617-9007 WEISS & YOURMAN JOSEPH WEISS KEVIN J. YOURMAN (147159) 10940 Wilshire Blvd. 24th Floor Los Angeles, CA 90024 Telephone: 310/208-2800 Attorneys for Plaintiff 23 EX-99.30 31 COMPLAINT MILBERG WEISS BERSHAD HYNES & LERACH WILLIAM S. LERACH (68581) 600 West Broadway, Suite 1900 San Diego, California 92101 Telephone: 619/231-1058 - and - MILBERG WEISS BERSHAD HYNES & LERACH JEFF S. WESTERMAN (94559) 355 South Grand Avenue Suite 4170 Los Angeles, California 90071 Telephone: 213/617-9007 BLUMENTHAL & OSTROFF SULLIVAN, HILL, LEWIN & MARKHAM A Partnership of DAVID MARKHAM Professional Law Corporations 550 West "C" Street NORMAN BLUMENTHAL Suite 1500 1420 Kettner Boulevard San Diego, California 92101 Seventh floor Telephone: 619/233-4100 San Diego, California 92101 Telephone: 619/239-7373 SKADDEN, ARPS, SLATE, MEAGHER & FLOM 300 South Grand Avenue, Suite 3400 Los Angeles, California 90071 (213) 687-5000 Attorneys for Plaintiff SUPERIOR COURT OF THE STATE OF CALIFORNIA FOR THE COUNTY OF LOS ANGELES BERT L. EAVES, IRA, On Behalf of Himself ) Case No. 11C137380 and All Others Similarly Situated, ) ) CLASS ACTION Plaintiff, ) ) vs. ) CLASS ACTION COMPLAINT ) FOR BREACH OF FIDUCIARY JOHN E. BRYSON, DON C. FRISBEE, ) DUTY, ABUSE OF CONTROL, STEVEN B. SAMPLE, EDWARD M. CARSON, ) UNJUST ENRICHMENT, GEORGE M. KELLER, FORREST N. SHUMWAY, ) INTERFERENCE WITH JEWEL PLUMMER COBB, W.F. KIESCHNICK, ) PROSPECTIVE ECONOMIC WILLIAM B. START, RALPH P. DAVIDSON, ) ADVANTAGE AND EQUITABLE THOMAS L. LEE, RICHARD J. STEGEMEIER, ) RELIEF AND DAMAGES MYRON DuBAIN, WILLIAM F. MILLER, DAN- ) IEL M. TELLEP and J.J. PINOLA, ) ) Defendants. ) Plaintiff Demands A ) Trial By Jury - - ------------------------------------------- --------------------------- Plaintiff, as and for his complaint, alleges as follows upon information and belief except as to paragraph 5, which is alleged upon knowledge. Plaintiff's information and belief is based upon, inter alia, the investigation made by plaintiff by and through his counsel. INTRODUCTION AND OVERVIEW 1. This is a shareholder class action seeking equitable relief and compensatory damages on behalf of all shareholders of First Interstate Bancorp ("First Interstate" or the "Company") against First Interstate's top officers and the members of the Board of Directors of First Interstate, seeking to remedy violations of state law arising out of these defendants' actions and conduct undertaken to defeat a highly favorable acquisition offer for First Interstate stock by Wells Fargo & Co. ("Wells Fargo"). First Interstate's Board of Directors has pursued a course of conduct intended to and having the effect of making it extremely difficult for any outside party to successfully acquire First Interstate, even at prices well in excess of First Interstate stock's historical price range. This course of conduct has been undertaken by the defendants to secure and retain their lucrative positions of power, prestige and profit with respect to First Interstate and to enhance and aggrandize their own interests at the expense of First Interstate's other shareholders. 3 2. On October 18, 1995, Wells Fargo, a highly successful, profitable and well-capitalized bank, made an offer to acquire First Interstate at a price far in excess of First Interstate's then-market price, by exchanging in a tax-free exchange .625 shares of Wells Fargo stock for each share of First Interstate stock, an offer worth $133.50 per share based on the October 17, 1995 closing price of Wells Fargo stock of $213.62 per share. First Interstate's stock jumped from $106 per share to $140 per share upon this announcement. While Wells Fargo's stock increased to $228.65 per share, making the offer worth $142.65 per First Interstate share. However, the defendants are rejecting such offer and have refused to negotiate an acquisition of the Company at any higher price, even though Wells Fargo has told First Interstate's Board it is willing to negotiate a higher price and thus to offer a fair and reasonable price for First Interstate stock, well above the levels at which the stock has traded historically. 3. In recent years, defendants have consistently refused to entertain highly favorable acquisition offers or overtures for First Interstate, thus preventing an acquisition of the Company at a favorable price for the shareholders. Defendants have done this to retain their positions of prestige, power and profit, as they know they will lose those positions in the event First Interstate is acquired. Defendants' interests in 4 holding on to their positions of power, prestige and profit as officers and directors of First Interstate far exceeds their interests as shareholders in First Interstate, as they collectively own only about 144,000 of First Interstate's 75.7 million shares -- a minuscule .001% of its outstanding stock. PARTIES AND ACTORS 4. Plaintiff Roger Mondschein, the owner of shares of First Interstate, is and was at all times relevant hereto a common shareholder of First Interstate. Plaintiff brings this action on behalf of the holders of the common stock of First Interstate for injunctive and other relief in connection with the proposed acquisition of First Interstate by Wells Fargo. 5. (a) First Interstate is a corporation with its principal executive offices in Los Angeles, California and which operates principally in California, as well as several other western states. First Interstate is a bank holding company. (b) At December 31, 1994, it owned 16 banks (the "Subsidiary Banks") which operated approximately 1,100 banking offices in 13 states, including California. Ranked according to assets, the Company was the fourteenth largest commercial banking organization in the United States at December 31, 1994, having total deposits of $48.4 billion and total assets of $55.8 billion. 5 (c) The Subsidiary Banks accept checking, savings and other time deposit accounts and employ these funds principally by making consumer, real estate and commercial loans and investing in securities and other interest-bearing assets. (d) The Company also provides banking-related financial services and products. These include asset-based commercial financing, asset management and investment counseling, bank card operations, mortgage banking, venture capital and investment products. It engages in these activities both through non-bank subsidiaries of the Company and through the Subsidiary Banks and their subsidiaries. (e) The larger Subsidiary Banks provided international banking services on a limited basis through the international departments of their domestic offices. They also maintain correspondent relationships with major banks throughout the world. 6. (a) Defendant John E. Bryson ("Bryson") was a direc- tor of First Interstate and Board Chairman and Chief Executive Officer or SCECorp and Southern Edison Company at all times relevant hereto. (b) Defendant Don C. Frisbee ("Frisbee") was a First Interstate director and Chairman Emeritus PacifiCorp at all times relevant hereto. 6 (c) Defendant Steven B. Sample ("Sample") was a First Interstate director and President University of Southern California at all times relevant hereto. (d) Defendant Edward M. Carson ("Carson") was Chair- man of the Board of First Interstate at all times relevant hereto. (e) Defendant George M. Keller ("Keller") was a director of First Interstate and the retired Chairman and Chief Executive Officer of Chevron Corporation at all times relevant hereto. (f) Defendant Forrest N. Shumway ("Shumway") was a director of First Interstate and former Vice-Chairman of the Board Allied-Signal, Inc. at all times relevant hereto. (g) Defendant Jewel Plummer Cobb ("Cobb") was a director of First Interstate and President Emeritus California State University, Fullerton at all times relevant hereto. (h) Defendant W.F. Kieschnick ("Kieschnick") was a director of First Interstate and retired President and Chief Executive Officer Atlantic Richfield Company at all times relevant hereto. (i) Defendant William B. Siart ("Siart") was Presi- dent and Chief Executive Officer First Interstate and a direc- tor at all times relevant hereto. 7 (j) Defendant Ralph P. Davidson ("Davidson") was a director of First Interstate and former Chairman of The John F. Kennedy Center for the Performing Arts at all times relevant hereto. (k) Defendant Thomas L. Lee ("Lee") was a director of First Interstate and Chairman and Chief Executive Officer of The Newhall Land and Farming Company at all times relevant hereto. (l) Defendant Richard J. Stegemeier ("Stegemeier") was a director of First Interstate and Chairman of the Board Unocal Corporation at all times relevant hereto. (m) Defendant Myron DuBain ("DuBain") was a director of First Interstate and retired Chairman and Chief Executive Officer Fireman's Fund Corporation at all times relevant hereto. (n) Defendant William F. Miller ("Miller") was a director of First Interstate and President Emeritus SRI Inter- national at all times relevant hereto. (o) Defendant Daniel M. Tellap ("Tellap") was a director of First Interstate and Chairman and Chief Executive Officer Lockheed Corporation at all times relevant hereto. (p) Defendant J.J. Pinola ("Pinola"), was the retired Chairman and Chief Executive Officer of First Interstate and a director at all times relevant hereto. 8 7. Defendants (hereinafter collectively referred to as the "Individual Defendants") are each members of First Interstate's Board of Directors. 8. The Individual Defendants owed and owe First Interstate's public shareholders fiduciary obligations and were and are required to: (i) use their ability to manage First Interstate in a fair, just and equitable manner; (ii) act in furtherance of the best interests of First Interstate and its shareholders; (iii) act to maximize shareholder value; (iv) govern First Interstate in such a manner as to head the expressed views of its public shareholders; (v) refrain from abusing their positions of control, power, prestige and profit; and (vi) not favor their own interests at the expense of First Interstate and its shareholders. By reason of their fiduciary relationships, these defendants owed and owe plaintiff and other members of the Class the highest obligation of good faith, fair dealing, loyalty and due care. 9. Wells Fargo is a corporation with its principal executive offices in San Francisco, California. Wells Fargo is a huge bank holding company and one of the most well-managed, profitable and well-capitalized banks in the United States. With more than 600 branch outlets, 1,900 round-the-clock Wells Fargo Express(TM) ATMs and a popular 24-hour telephone banking service, Wells Fargo operates one of the largest and busiest 9 consumer banking businesses in the United States. Besides serving as banker to some 3.5 million California households, Wells Fargo provides a full range of banking services to commercial, agribusiness, real estate and small-business customers, mainly in California. It is one of the nation's leading managers of personal trust accounts, corporate 401(k) plans and mutual funds, with approximately $57 billion in assets under its management and administration. 10. Each defendant herein is sued individually as a conspirator and aider and abettor, as well as in his capacity as a director of the Company, and the liability of each arises from the fact that he has engaged in all or part of the unlawful acts, plans, schemes, or transactions complained of herein. CLASS ACTION ALLEGATIONS 11. Plaintiff brings this lawsuit on behalf of himself and all other common shareholders of First Interstate (except defendants herein and any person, firm, trust, corporation or other entity related to, controlled by or affiliated with any of the defendants and any of their successors in interest (the "Class"). 12. This action is properly maintainable as a class action for the following reasons: (a) The Class is so numerous that joinder of all Class members is impracticable. As of January 31, 1995, First 10 Interstate had over 75 million shares of common stock outstanding owned by over 20,000 shareholders. Members of the Class are scattered throughout the United States and are so numerous as to make it impracticable to bring them all before this Court. 13. There are questions of law and fact which are common to members of the Class and which predominate over any questions affecting only individual members. The common questions include, inter alia, the following: (a) Whether the Individual Defendants have breached their fiduciary duties owed by them to plaintiff and the other members of the Class; (b) Whether the Individual Defendants have failed, in violation of their fiduciary duties, to hold a fair auction of the Company or its assets or to sell the Company on the favorable terms; (c) Whether the Individual Defendants have failed, in violation of their fiduciary duties, to provide for a mail of First Interstate; (d) Whether plaintiff and the other members of the Class will be irreparably damaged if the Wells Fargo acquisi- tion is not completed; (e) Whether the Individual Defendants have breached or aided and abetted the breach of the fiduciary and other 11 common law duties owed by them to plaintiff and other members of the Class; and (f) Whether plaintiff and other members of the Class are being and will continue to be injured by the wrongful conduct alleged herein and, if so, what is the proper remedy and/or measure of damages. 14. The claims of plaintiff are typical of the claims of other members of the Class and plaintiff has no interests that are adverse and antagonistic to the interests of the Class. 15. Plaintiff is committed to the vigorous prosecution of this action and has retained competent counsel experienced in litigation of this nature. Accordingly, plaintiff is an adequate representative of the class and will fairly and adequately protect the interests of the Class. 16. Plaintiff anticipates that there will not be any difficulty in the management of this litigation as a class action. 17. For the reasons stated herein, a class action is superior to any other method available for the fair and efficient adjudication of this controversy since it would be impractical and undesirable for each of the members of the class who has suffered or will suffer damages to bring separate actions in various parts of the country. Classwide remedies 12 will assure uniform standards of conduct for the Individual Defendants and avoid the risk of inconsistent judgments. SUBSTANTIVE ALLEGATIONS 18. As pleaded earlier, First Interstate is an interstate banking corporation. First Interstate's stock performed poorly in 1994 through mid-1995, due to First Interstate's lackluster performance and perceptions that it was poorly managed. For instance, First Interstate's stock traded at a high of $85 per share and then fell, falling to a low of $67 per share in December 1994. First Interstate did not reach $85 per share again until mid-1995. After June 1995, First Interstate's stock performed better, reaching over $100 per share in late September 1995, due to an increase in the prices in bank stocks generally and because of rumors that a favorable acquisition offer for First Interstate would be forthcoming as part of the waive of bank acquisitions and mergers now sweeping the United States. However, even with this increase, First Interstate's stock has been relatively poor performer when compared to other bank stocks. Because in recent years First Interstate has not been viewed to be well-managed as many other large banks and thus has not performed as well in terms of many of its key ratios and measurements of success as other banks, its stock has not performed well and thus, shareholders in First Interstate have, in recent years, obtained a below-industry 13 trendline or industry average return. The chart below shows the price action of First Interstate stock in 1994-1995: [The hardcopy Complaint filed with the Court contains a line graph showing the daily common stock price for First Inter- state for the period December 31, 1993 through October 17, 1995. Because the document for which this Complaint is an Exhibit has been filed with the Securities and Exchange Commission by elec- tronic transmission, this graph is not contained herein. The following information summarizes the First Interstate daily closing stock price, plotted along the graph's vertical axis, for the dates indicated on the horizontal axis of the graph: Date Common Stock Price - - ---- ------------------ December 31, 1993 64 1/8 March 25, 1994 77 7/8 June 17, 1994 75 3/4 September 9, 1994 79 1/4 December 2, 1994 69 3/8 February 24, 1995 81 3/8 May 19, 1995 81 August 11, 1995 87 1/2 October 17, 1995 106] 19. In recent years, certain other large financial institutions have approached First Interstate with favorable acquisition inquiries and offers. Some years ago, Bank of America approached First Interstate about a possible acquisition. Approximately a year ago, Wells Fargo approached First Interstate about a possible acquisition of First Interstate at a premium price. First Interstate's Board and its top management have rejected and frustrated all of these prior acquisition overtures and offers, even though those offers would have resulted in First Interstate shareholders receiving a substantial premium over the then-market price of First Interstate stock. Defendants have done this because they know that in the event First Interstate is acquired by another bank, most or all of the directors of First Interstate will, either in connection with the acquisition or shortly thereafter, be removed from the board of the surviving bank because their services will not be necessary and they will be mere surplusage and thus such an 14 acquisition would bring an end to their positions of power, prestige and profit as directors of this huge bank. At the same time, top managers at First Interstate have caused these prior acquisition overtures and offers to be rejected and/or frustrated, because they also know that, in the event of an acquisition, they will also lose their prestigious positions of power, prestige and profit as officers of a major banking institution. In so acting, these defendants have been aggrandizing their own personal positions and interests over that of First Interstate and its broader shareholder community to whom they owe fiduciary duties to bring about a sales of First Interstate on favorable terms to all the shareholders, even if it results in them losing their lucrative positions. 20. Shortly prior to October 18, 1995, Wells Fargo approached First Interstate and offered to negotiate an acquisition of First Interstate for a price far in excess of First Interstate's current stock price. First Interstate's Chairman refused this offer and told Wells Fargo that First Interstate would not negotiate to sell the bank and would resist any offer by Wells Fargo to buy the bank. On October 18, 1995, Wells Fargo made an unsolicited acquisition offer for First Interstate offering to exchange .625 shares of its stock for each share of First Interstate stock, a $133.50 per share offer based on the October 17, 1995 closing price of Wells Fargo 15 stock of $213.62 per share. Upon the announcement of this favorable acquisition offer, First Interstate's stock instantly skyrocketed from $106 per share to over $140 per share, reflecting the extremely large premium being offered to First Interstate shareholders in this tax-free exchange, and the increase in Wells Fargo's stock price to $228 per share making the offer worth $142 per First Interstate share. Wells Fargo's offer to acquire First Interstate is approximately three times First Interstate's book value, which is a high offer compared to recent bank acquisition prices. The acquisition price is also approximately 12.1 times First Interstate's estimated 1995 earnings per share of $11.29 per share, which is also reasonable in light of other recent bank acquisitions, although it is lower than 15 times the estimated next year's earnings paid in other bank acquisitions. 21. Wells Fargo has privately indicated to First Inter- state's officers and directors that they are willing and will increase the price of their offer to acquire First Interstate if First Interstate's Board will cooperate in bringing about a consensual acquisition. However, First Interstate's top officers and its Board are resisting and are going to continue to resist this acquisition offer so that they can, as they have in the past, retain themselves in their positions or power, prestige and profit. For instance, members of First Interstate's 16 Board of Directors own only a minuscule portion of First Inter- state's outstanding common stock. They actually own only 144,000 shares of First Interstate's 75.7 million shares of outstanding common stock, or just .001% of the stock. Thus, whatever interest the defendants have as shareholders in First Interstate based on their minuscule holdings of the Company's stock is far outweighed by their interest in retaining their lucrative positions of power, prestige and profit as directors and/or officers of the Company from which they receive lucrative fees, prestige in the community, large salaries, and other emoluments of office, which they will lose if First Interstate is acquired. 22. The rejection of the Wells Fargo offer is a breach of defendants' fiduciary duties, an abuse of control, provides unjust enrichment to all defendants, is an unfair business practice and has been perpetrated through tortious interference with the class members' prospective economic interests and opportunities and through material misrepresentations and the failure by defendants to disclose material information to the members of the Class. 23. Unless defendants are enjoined from refusing to negotiate a sale of First Interstate, plaintiff and the members of the Class will continue to suffer injury. Plaintiff and the members of the Class have no adequate remedy at law. 17 FIRST CAUSE OF ACTION BREACH OF FIDUCIARY DUTIES 24. Plaintiff incorporates by reference P. P. 1-23 above. 25. The Individual Defendants engaged in the aforesaid conduct in intentional breach and/or reckless disregard of their fiduciary duties to plaintiff and the members of the Class. 26. Defendants, at the time they rejected Wells Fargo's offer, knew that the market price of First Interstate stock reflected both the intrinsic value of First Interstate and a premium which resulted from market expectations that Wells Fargo's efforts to acquire control of First Interstate would produce greater returns for investors. 27. As a proximate result, the plaintiff an other members of the Class have been substantially injured and request compensatory damages. SECOND CAUSE OF ACTION NEGLIGENT BREACH OF FIDUCIARY DUTIES 28. Plaintiff incorporates by reference P. P. 1-23 above. 29. The Individual Defendants engaged in the aforesaid conduct without exercising the reasonable and ordinary care which directors and officers owe to their shareholders, and thereby breached their fiduciary duties to plaintiff and other members of the Class. 18 30. Defendants, at the time they rejected Wells Fargo's offer, knew or should have known, that the market price of First Interstate stock at the time reflected both the intrinsic value of First Interstate and a premium which resulted from market expectations that Wells Fargo's efforts to acquire control of First Interstate would produce a greater return for investors. 31. As a proximate result, the plaintiff and other members of the Class have been substantially injured and request compensatory damages. 32. Defendants did the things alleged herein without exercising the reasonable and ordinary care owed by corporate directors and officers. THIRD CAUSE OF ACTION ABUSE OF CONTROL 33. Plaintiff incorporates by reference P. P. 1-23 above. 34. The Individual Defendants owed duties as controlling persons and/or as controlling or dominant directors to plaintiff and the other members of the Class not to use their positions of control of First Interstate for their own personal interests and contrary to the interests of First Interstate's remaining shareholders. 35. The foregoing conduct by the director defendants amount to an abuse of their abilities to control First Inter- 19 state in violation of their obligations to plaintiff and the other members of the Class. 36. As a proximate result, plaintiff and the other members of the Class have been damaged and will continue to be damaged unless defendants are enjoined, and defendants are each jointly and severally liable to plaintiff and the other members of the Class for all loss and damage they have suffered reflect in from the matters set forth herein. FOURTH CAUSE OF ACTION UNJUST ENRICHMENT 37. Plaintiff incorporates by reference P. P. 1-23 above. 38. As a proximate result of the tortious conduct de- scribed above, all of the defendants have been and will be unjustly enriched at the expense of the members of the Class. The director defendants will retain control of First Interstate and their positions of power, prestige and profit. Defendants have obtained these unjust benefits at the expense of the members of the Class by rejecting the Wells Fargo offer and refusing to negotiate a beneficial sale of First Interstate. FIFTH CAUSE OF ACTION TORTIOUS INTERFERENCE WITH PROSPECTIVE ECONOMIC ADVANTAGE 39. Plaintiff incorporates by reference P. P. 1-23 above. 20 40. By reason, inter alia, of Wells Fargo's announced offer to purchase First Interstate stock at $133+ a share, plaintiff and the members of the Class had an expectancy that they could tender their shares and realize at least the $133+ per share offer. Moreover, all class members had the expectancy of sharing in any premium that results from acquisition attempts. 41. Defendants knew of these prospective advantages presented to plaintiff and the members of the Class and defendants intended to interfere and did interfere with those advantages when they rejected the Wells Fargo offer. 42. Plaintiff and the members of the Class were prevented from obtaining the foregoing advantages as a result of the conduct of all defendants described above. 43. The defendants, and each of them, did the things alleged in this Complaint with the intent to injure plaintiff and the members of the Class. WHEREFORE, plaintiff and members of the Class demand judgment against defendants as follows: 1. Declaring that this action is properly maintainable as a class action and certifying plaintiff as the representa- tive of the Class; 21 2. Declaring that the defendants have breached and are breaching their fiduciary and other duties to plaintiff and other members of the Class; 3. Preliminary and permanently enjoining the defendants and their counsel, agents, employees and all persons acting under, in concert with, or for them, from taking to prevent or frustrate the sale to Wells Fargo or refusing to proceed with negotiations with Wells Fargo to increase the offered price; 4. Awarding compensatory damages against defendants individually and severally in an amount to be determined at trial, together with prejudgment interest at the maximum rate allowable by law, arising from the proposed transaction; 5. Awarding plaintiff his costs and disbursements and reasonable allowances of fees for plaintiff's counsel and experts and reimbursement of expenses; and 6. Granting plaintiff and the Class such other and further relief as the Court may deem just and proper. JURY DEMAND Plaintiff demands a trial by jury. DATED: October 19, 1995 WILBERG WEISS BERSHAD HYNES & LERACH --------------------------------- WILLIAM S. LERACH 22 600 West Broadway, Suite 1800 San Diego, California 92101 Telephone: 619/231-1058 -and- JEFF S. WESTERMAN 255 South Grand Avenue Suite 4170 Los Angeles, California 90071 Telephone: 213/617-9007 BLUMENTHAL & OSTROFF A Partnership of Professional Law Corporations NORMAN BLUMENTHAL 1420 Kettner Boulevard Seventh Floor San Diego, California 92101 Telephone: 619/239-7373 SULLIVAN, HILL, LEWIN & MARKHAM DAVID MARKHAM 500 West "C" Street Suite 1500 San Diego, California 92101 Telephone: 619/233-4100 Attorneys for Plaintiff 23 EX-99.31 32 COMPLAINT MILBERG WEISS BERSHAD HYNES & LERACH WILLIAM S. LERACH (68581) 600 West Broadway, Suite 1900 San Diego, California 92101 Telephone: 619/231-1058 - and - JEFF S. WESTERMAN (94559) 355 South Grand Avenue Suite 4170 Los Angeles, California 90071 Telephone: 213/617-9007 STULL, STULL & BRODY JULES BRODY 6 East 45th Street 4th Floor New York, New York 10017 Telephone: 212/687-7230 SKADDEN, ARPS, SLATE, MEAGHER & FLOM 300 South Grand Avenue, Suite 3400 Los Angeles, California 90071 (213) 687-5000 Attorneys for Plaintiff SUPERIOR COURT OF THE STATE OF CALIFORNIA FOR THE COUNTY OF LOS ANGELES MAX GRILL, On Behalf of Himself and ) Case No. All Others Similarly Situated, ) ) CLASS ACTION Plaintiff, ) ) vs. ) ) CLASS ACTION COMPLAINT JOHN E. BRYSON, DON C. FRISBEE, ) FOR BREACH OF FIDUCIARY STEVEN B. SAMPLE, EDWARD M. CARSON, ) DUTY, ABUSE OF CONTROL, GEORGE M. KELLER, FORREST N. SHUMWAY, ) UNJUST ENRICHMENT, JEWEL PLUMMER COBB, W.F. KIESCHNICK, ) INTERFERENCE WITH WILLIAM B. SIART, RALPH P. DAVIDSON, ) PROSPECTIVE ECONOMIC THOMAS L. LEE, RICHARD J. STEGEMEIER, ) ADVANTAGE AND EQUITABLE ) RELIEF AND DAMAGES MYRON DuBAIN, WILLIAM F. MILLER, DAN- ) IEL M. TELLEP and J.J. PINOLA, ) Plaintiff Demands A ) Trial By Jury Defendants. ) ) - - --------------------------------------------- 2 Plaintiff, as and for his complaint, alleges as follows upon information and belief except as to paragraph 5, which is alleged upon knowledge. Plaintiff's information and belief is based upon, inter alia, the investigation made by plaintiff by and through his counsel. INTRODUCTION AND OVERVIEW 1. This is a shareholder class action seeking equitable relief and compensatory damages on behalf of all shareholders of First Interstate Bancorp ("First Interstate" or the "Company") against First Interstate's top officers and the members of the Board of Directors of First Interstate, seeking to remedy violations of state law arising out of these defendants' actions and conduct undertaken to defeat a highly favorable acquisition offer for First Interstate stock by Wells Fargo & Co. ("Wells Fargo"). First Interstate's Board of Directors has pursued a course of conduct intended to and having the effect of making it extremely difficult for any outside party to successfully acquire First Interstate, even at prices well in excess of First Interstate stock's historical price range. This course of conduct has been undertaken by the defendants to secure and retain their lucrative positions of power, prestige and profit with respect to First Interstate and to enhance and aggrandize their own interests at the expense of First Interstate's other shareholders. 3 2. On October 18, 1995, Wells Fargo, a highly successful, profitable and well-capitalized bank, made an offer to acquire First Interstate at a price far in excess of First Interstate's then-market price, by exchanging in a tax-free exchange .625 shares of Wells Fargo stock for each share of First Interstate stock, an offer worth $133.50 per share based on the October 17, 1995 closing price of Wells Fargo stock of $213.62 per share. First Interstate's stock jumped from $106 per share to $140 per share upon this announcement. While Wells Fargo's stock increased to $228.65 per share, making the offer worth $142.65 per First Interstate share. However, the defendants are rejecting such offer and have refused to negotiate an acquisition of the Company at any higher price, even though Wells Fargo has told First Interstate's Board it is willing to negotiate a higher price and thus to offer a fair and reasonable price for First Interstate stock, well above the levels at which the stock has traded historically. 3. In recent years, defendants have consistently refused to entertain highly favorable acquisition offers or overtures for First Interstate, thus preventing an acquisition of the Company at a favorable price for the shareholders. Defendants have done this to retain their positions of prestige, power and profit, as they know they will lose those positions in the event First Interstate is acquired. Defendants' interests in 4 holding on to their positions of power, prestige and profit as officers and directors of First Interstate far exceeds their interests as shareholders in First Interstate, as they collectively own only about 144,000 of First Interstate's 75.7 million shares -- a minuscule .001% of its outstanding stock. PARTIES AND ACTORS 4. Plaintiff Roger Mondschein, the owner of shares of First Interstate, is and was at all times relevant hereto a common shareholder of First Interstate. Plaintiff brings this action on behalf of the holders of the common stock of First Interstate for injunctive and other relief in connection with the proposed acquisition of First Interstate by Wells Fargo. 5. (a) First Interstate is a corporation with its principal executive offices in Los Angeles, California and which operates principally in California, as well as several other western states. First Interstate is a bank holding company. (b) At December 31, 1994, it owned 16 banks (the "Subsidiary Banks") which operated approximately 1,100 banking offices in 13 states, including California. Ranked according to assets, the Company was the fourteenth largest commercial banking organization in the United States at December 31, 1994, having total deposits of $48.4 billion and total assets of $55.8 billion. 5 (c) The Subsidiary Banks accept checking, savings and other time deposit accounts and employ these funds principally by making consumer, real estate and commercial loans and investing in securities and other interest-bearing assets. (d) The Company also provides banking-related financial services and products. These include asset-based commercial financing, asset management and investment counseling, bank card operations, mortgage banking, venture capital and investment products. It engages in these activities both through non-bank subsidiaries of the Company and through the Subsidiary Banks and their subsidiaries. (e) The larger Subsidiary Banks provided international banking services on a limited basis through the international departments of their domestic offices. They also maintain correspondent relationships with major banks throughout the world. 6. (a) Defendant John E. Bryson ("Bryson") was a direc- tor of First Interstate and Board Chairman and Chief Executive Officer or SCECorp and Southern Edison Company at all times relevant hereto. (b) Defendant Don C. Frisbee ("Frisbee") was a First Interstate director and Chairman Emeritus PacifiCorp at all times relevant hereto. 6 (c) Defendant Steven B. Sample ("Sample") was a First Interstate director and President University of Southern California at all times relevant hereto. (d) Defendant Edward M. Carson ("Carson") was Chair- man of the Board of First Interstate at all times relevant hereto. (e) Defendant George M. Keller ("Keller") was a director of First Interstate and the retired Chairman and Chief Executive Officer of Chevron Corporation at all times relevant hereto. (f) Defendant Forrest N. Shumway ("Shumway") was a director of First Interstate and former Vice-Chairman of the Board Allied-Signal, Inc. at all times relevant hereto. (g) Defendant Jewel Plummer Cobb ("Cobb") was a director of First Interstate and President Emeritus California State University, Fullerton at all times relevant hereto. (h) Defendant W.F. Kieschnick ("Kieschnick") was a director of First Interstate and retired President and Chief Executive Officer of Atlantic Richfield Company at all times relevant hereto. (i) Defendant William B. Siart ("Siart") was Presi- dent and Chief Executive Officer First Interstate and a direc- tor at all times relevant hereto. 7 (j) Defendant Ralph P. Davidson ("Davidson") was a director of First Interstate and former Chairman of The John F. Kennedy Center for the Performing Arts at all times relevant hereto. (k) Defendant Thomas L. Lee ("Lee") was a director of First Interstate and Chairman and Chief Executive Officer of The Newhall Land and Farming Company at all times relevant hereto. (l) Defendant Richard J. Stegemeier ("Stegemeier") was a director of First Interstate and Chairman of the Board Unocal Corporation at all times relevant hereto. (m) Defendant Myron DuBain ("DuBain") was a director of First Interstate and retired Chairman and Chief Executive Officer Fireman's Fund Corporation at all times relevant hereto. (n) Defendant William F. Miller ("Miller") was a director of First Interstate and President Emeritus SRI Inter- national at all times relevant hereto. (o) Defendant Daniel M. Tellap ("Tellap") was a director of First Interstate and Chairman and Chief Executive Officer Lockheed Corporation at all times relevant hereto. (p) Defendant J.J. Pinola ("Pinola"), was the retired Chairman and Chief Executive Officer of First Interstate and a director at all times relevant hereto. 8 7. Defendants (hereinafter collectively referred to as the "Individual Defendants") are each members of First Interstate's Board of Directors. 8. The Individual Defendants owed and owe First Interstate's public shareholders fiduciary obligations and were and are required to: (i) use their ability to manage First Interstate in a fair, just and equitable manner; (ii) act in furtherance of the best interests of First Interstate and its shareholders; (iii) act to maximize shareholder value; (iv) govern First Interstate in such a manner as to head the expressed views of its public shareholders; (v) refrain from abusing their positions of control, power, prestige and profit; and (vi) not favor their own interests at the expense of First Interstate and its shareholders. By reason of their fiduciary relationships, these defendants owed and owe plaintiff and other members of the Class the highest obligation of good faith, fair dealing, loyalty and due care. 9. Wells Fargo is a corporation with its principal executive offices in San Francisco, California. Wells Fargo is a huge bank holding company and one of the most well-managed, profitable and well-capitalized banks in the United States. With more than 600 branch outlets, 1,900 round-the-clock Wells Fargo Express(TM) ATMs and a popular 24-hour telephone banking service, Wells Fargo operates one of the largest and busiest 9 consumer banking businesses in the United States. Besides serving as banker to some 3.5 million California households, Wells Fargo provides a full range of banking services to commercial, agribusiness, real estate and small-business customers, mainly in California. It is one of the nation's leading managers of personal trust accounts, corporate 401(k) plans and mutual funds, with approximately $57 billion in assets under its management and administration. 10. Each defendant herein is sued individually as a conspirator and aider and abettor, as well as in his capacity as a director of the Company, and the liability of each arises from the fact that he has engaged in all or part of the unlawful acts, plans, schemes, or transactions complained of herein. CLASS ACTION ALLEGATIONS 11. Plaintiff brings this lawsuit on behalf of himself and all other common shareholders of First Interstate (except defendants herein and any person, firm, trust, corporation or other entity related to, controlled by or affiliated with any of the defendants and any of their successors in interest (the "Class"). 12. This action is properly maintainable as a class action for the following reasons: (a) The Class is so numerous that joinder of all Class members is impracticable. As of January 31, 1995, First 10 Interstate had over 75 million shares of common stock outstanding owned by over 20,000 shareholders. Members of the Class are scattered throughout the United States and are so numerous as to make it impracticable to bring them all before this Court. 13. There are questions of law and fact which are common to members of the Class and which predominate over any questions affecting only individual members. The common questions include, inter alia, the following: (a) Whether the Individual Defendants have breached their fiduciary duties owed by them to plaintiff and the other members of the Class; (b) Whether the Individual Defendants have failed, in violation of their fiduciary duties, to hold a fair auction of the Company or its assets or to sell the Company on the favorable terms; (c) Whether the Individual Defendants have failed, in violation of their fiduciary duties, to provide for a mail of First Interstate; (d) Whether plaintiff and the other members of the Class will be irreparably damaged if the Wells Fargo acquisi- tion is not completed; (e) Whether the Individual Defendants have breached or aided and abetted the breach of the fiduciary and other 11 common law duties owed by them to plaintiff and other members of the Class; and (f) Whether plaintiff and other members of the Class are being and will continue to be injured by the wrongful conduct alleged herein and, if so, what is the proper remedy and/or measure of damages. 14. The claims of plaintiff are typical of the claims of other members of the class and plaintiff has no interests that are adverse and antagonistic to the interests of the Class. 15. Plaintiff is committed to the vigorous prosecution of this action and has retained competent counsel experienced in litigation of this nature. Accordingly, plaintiff is an adequate representative of the Class and will fairly and adequately protect the interests of the Class. 16. Plaintiff anticipates that there will not be any difficulty in the management of this litigation as a class action. 17. For the reasons stated herein, a class action is superior to any other method available for the fair and efficient adjudication of this controversy since it would be impractical and undesirable for each of the members of the class who has suffered or will suffer damages to bring separate actions in various parts of the country. Classwide remedies 12 will assure uniform standards of conduct for the Individual Defendants and avoid the risk of inconsistent judgments. SUBSTANTIVE ALLEGATIONS 18. As pleaded earlier, First Interstate is an interstate banking corporation. First Interstate's stock performed poorly in 1994 through mid-1995, due to First Interstate's lackluster performance and perceptions that it was poorly managed. For instance, First Interstate's stock traded at a high of $85 per share and then fell, falling to a low of $67 per share in December 1994. First Interstate did not reach $85 per share again until mid-1995. After June 1995, First Interstate's stock performed better, reaching over $100 per share in late September 1995, due to an increase in the prices in bank stocks generally and because of rumors that a favorable acquisition offer for First Interstate would be forthcoming as part of the wave of bank acquisitions and mergers now sweeping the United States. However, even with this increase, First Interstate's stock has been relatively poor performer when compared to other bank stocks. Because in recent years First Interstate has not been viewed to be well-managed as many other large banks and thus has not performed as well in terms of many of its key ratios and measurements of success as other banks, its stock has not performed well and thus, shareholders in First Interstate have, in recent years, obtained a below-industry 13 trendline or industry average return. The chart below shows the price action of First Interstate stock in 1994-1995: [The hardcopy Complaint filed with the Court contains a Line graph showing the daily common stock price for First Inter- state for the period December 31, 1993 through October 17, 1995. Because the document for which this Complaint is an Exhibit has been filed with the Securities and Exchange Commission by elec- tronic transmission, this graph is not contained herein. The following information summarizes the First Interstate daily closing stock price, plotted along the graph's vertical axis, for the dates indicated on the horizontal axis of the graph: Date Common Stock Price - - ---- ------------------ December 31, 1993 64 1/8 March 25, 1994 77 7/8 June 17, 1994 75 3/4 September 9, 1994 79 1/4 December 2, 1994 69 3/8 February 24, 1995 81 3/8 May 19, 1995 81 August 11, 1995 87 1/2 October 17, 1995 106] 19. In recent years, certain other large financial institutions have approached First Interstate with favorable acquisition inquiries and offers. Some years ago, Bank of America approached First Interstate about a possible acquisition. Approximately a year ago, Wells Fargo approached First Interstate about a possible acquisition of First Interstate at a premium price. First Interstate's Board and its top management have rejected and frustrated all of these prior acquisition overtures and offers, even though those offers would have resulted in First Interstate shareholders receiving a substantial premium over the then-market price of First Interstate stock. Defendants have done this because they know that in the event First Interstate is acquired by another bank, most or all of the directors of First Interstate will, either in connection with the acquisition or shortly thereafter, be removed from the board of the surviving bank because their services will not be necessary and they will be mere surplusage and thus such an 14 acquisition would bring an end to their positions of power, prestige and profit as directors of this huge bank. At the same time, top managers at First Interstate have caused these prior acquisition overtures and offers to be rejected and/or frustrated, because they also know that, in the event of an acquisition, they will also lose their prestigious positions of power, prestige and profit as officers of a major banking institution. In so acting, these defendants have been aggrandizing their own personal positions and interests over that of First Interstate and its broader shareholder community to whom they owe fiduciary duties to bring about a sales of First Interstate on favorable terms to all the shareholders, even if it results in them losing their lucrative positions. 20. Shortly prior to October 18, 1995, Wells Fargo approached First Interstate and offered to negotiate an acquisition of First Interstate for a price far in excess of First Interstate's current stock price. First Interstate's Chairman refused this offer and told Wells Fargo that First Interstate would not negotiate to sell the bank and would resist any offer by Wells Fargo to buy the bank. On October 18, 1995, Wells Fargo made an unsolicited acquisition offer for First Interstate offering to exchange .625 shares of its stock for each share of First Interstate stock, a $133.50 per share offer based on the October 17, 1995 closing price of Wells Fargo 15 stock of $213.62 per share. Upon the announcement of this favorable acquisition offer, First Interstate's stock instantly skyrocketed from $106 per share to over $140 per share, reflecting the extremely large premium being offered to First Interstate shareholders in this tax-free exchange, and the increase in Wells Fargo's stock price to $228 per share making the offer worth $142 per First Interstate share. Wells Fargo's offer to acquire First Interstate is approximately three times First Interstate's book value, which is a high offer compared to recent bank acquisition prices. The acquisition price is also approximately 12.1 times First Interstate's estimated 1995 earnings per share of $11.29 per share, which is also reasonable in light of other recent bank acquisitions, although it is lower than 15 times the estimated next year's earnings paid in other bank acquisitions. 21. Wells Fargo has privately indicated to First Inter- state's officers and directors that they are willing and will increase the price of their offer to acquire First Interstate if First Interstate's Board will cooperate in bringing about a consensual acquisition. However, First Interstate's top officers and its Board are resisting and are going to continue to resist this acquisition offer so that they can, as they have in the past, retain themselves in their positions or power, prestige and profit. For instance, members of First Interstate's 16 Board of Directors own only a minuscule portion of First Inter- state's outstanding common stock. They actually own only 144,000 shares of First Interstate's 75.7 million shares of outstanding common stock, or just .001% of the stock. Thus, whatever interest the defendants have as shareholders in First Interstate based on their minuscule holdings of the Company's stock is far outweighed by their interest in retaining their lucrative positions of power, prestige and profit as directors and/or officers of the Company from which they receive lucrative fees, prestige in the community, large salaries, and other emoluments of office, which they will lose if First Interstate is acquired. 22. The rejection of the Wells Fargo offer is a breach of defendants' fiduciary duties, an abuse of control, provides unjust enrichment to all defendants, is an unfair business practice and has been perpetrated through tortious interference with the class members' prospective economic interests and opportunities and through material misrepresentations and the failure by defendants to disclose material information to the members of the Class. 23. Unless defendants are enjoined from refusing to negotiate a sale of First Interstate, plaintiff and the members of the Class will continue to suffer injury. Plaintiff and the members of the Class have no adequate remedy at law. 17 FIRST CAUSE OF ACTION BREACH OF FIDUCIARY DUTIES 24. Plaintiff incorporates by reference P. P. 1-23 above. 25. The Individual Defendants engaged in the aforesaid conduct in intentional breach and/or reckless disregard of their fiduciary duties to plaintiff and the members of the Class. 26. Defendants, at the time they rejected Wells Fargo's offer, knew that the market price of First Interstate stock reflected both the intrinsic value of First Interstate and a premium which resulted from market expectations that Wells Fargo's efforts to acquire control of First Interstate would produce greater returns for investors. 27. As a proximate result, the plaintiff an other members of the Class have been substantially injured and request compensatory damages. SECOND CAUSE OF ACTION NEGLIGENT BREACH OF FIDUCIARY DUTIES 28. Plaintiff incorporates by reference P. P. 1-23 above. 29. The Individual Defendants engaged in the aforesaid conduct without exercising the reasonable and ordinary care which directors and officers owe to their shareholders, and thereby breached their fiduciary duties to plaintiff and other members of the Class. 18 30. Defendants, at the time they rejected Wells Fargo's offer, knew or should have known, that the market price of First Interstate stock at the time reflected both the intrinsic value of First Interstate and a premium which resulted from market expectations that Wells Fargo's efforts to acquire control of First Interstate would produce a greater return for investors. 31. As a proximate result, the plaintiff and other members of the Class have been substantially injured and request compensatory damages. 32. Defendants did the things alleged herein without exercising the reasonable and ordinary care owed by corporate directors and officers. THIRD CAUSE OF ACTION ABUSE OF CONTROL 33. Plaintiff incorporates by reference P. P. 1-23 above. 34. The Individual Defendants owed duties as controlling persons and/or as controlling or dominant directors to plaintiff and the other members of the Class not to use their positions of control of First Interstate for their own personal interests and contrary to the interests of First Interstate's remaining shareholders. 35. The foregoing conduct by the director defendants amount to an abuse of their abilities to control First Inter- 19 state in violation of their obligations to plaintiff and the other members of the Class. 36. As a proximate result, plaintiff and the other members of the Class have been damaged and will continue to be damaged unless defendants are enjoined, and defendants are each jointly and severally liable to plaintiff and the other members of the Class for all loss and damage they have suffered reflect in from the matters set forth herein. FOURTH CAUSE OF ACTION UNJUST ENRICHMENT 37. Plaintiff incorporates by reference P. P. 1-23 above. 38. As a proximate result of the tortious conduct de- scribed above, all of the defendants have been and will be unjustly enriched at the expense of the members of the Class. The director defendants will retain control of First Interstate and their positions of power, prestige and profit. Defendants have obtained these unjust benefits at the expense of the members of the Class by rejecting the Wells Fargo offer and refusing to negotiate a beneficial sale of First Interstate. FIFTH CAUSE OF ACTION TORTIOUS INTERFERENCE WITH PROSPECTIVE ECONOMIC ADVANTAGE 39. Plaintiff incorporates by reference P. P. 1-23 above. 20 40. By reason, inter alia, of Wells Fargo's announced offer to purchase First Interstate stock at $133+ a share, plaintiff and the members of the Class had an expectancy that they could tender their shares and realize at least the $133+ per share offer. Moreover, all class members had the expectancy of sharing in any premium that results from acquisition attempts. 41. Defendants knew of these prospective advantages presented to plaintiff and the members of the Class and defendants intended to interfere and did interfere with those advantages when they rejected the Wells Fargo offer. 42. Plaintiff and the members of the Class were prevented from obtaining the foregoing advantages as a result of the conduct of all defendants described above. 43. The defendants, and each of them, did the things alleged in this Complaint with the intent to injure plaintiff and the members of the Class. WHEREFORE, plaintiff and members of the Class demand judgment against defendants as follows: 1. Declaring that this action is properly maintainable as a class action and certifying plaintiff as the representa- tive of the Class; 21 2. Declaring that the defendants have breached and are breaching their fiduciary and other duties to plaintiff and other members of the Class; 3. Preliminary and permanently enjoining the defendants and their counsel, agents, employees and all persons acting under, in concert with, or for them, from taking to prevent or frustrate the sale to Wells Fargo or refusing to proceed with negotiations with Wells Fargo to increase the offered price; 4. Awarding compensatory damages against defendants individually and severally in an amount to be determined at trial, together with prejudgment interest at the maximum rate allowable by law, arising from the proposed transaction; 5. Awarding plaintiff his costs and disbursements and reasonable allowances of fees for plaintiff's counsel and experts and reimbursement of expenses; and 6. Granting plaintiff and the Class such other and further relief as the Court may deem just and proper. JURY DEMAND Plaintiff demands a trial by jury. DATED: October 19, 1995 WILBERG WEISS BERSHAD HYNES & LERACH --------------------------------- WILLIAM S. LERACH 22 600 West Broadway, Suite 1800 San Diego, California 92101 Telephone: 619/231-1058 -and- JEFF S. WESTERMAN 355 South Grand Avenue Suite 4170 Los Angeles, California 90071 Telephone: 213/617-9007 STULL, STULL & BRODY JULES BRODY 6 East 45th Street 4th Floor New York, New York 10017 Telephone: 212/687-7230 Attorneys for Plaintiff 23 EX-99.32 33 COMPLAINT MILBERG WEISS BERSHAD HYNES & LERACH WILLIAM S. LERACH (68581) 600 West Broadway, Suite 1900 San Diego, California 92101 Telephone: 619/231-1058 - and - MILBERG WEISS BERSHAD HYNES & LERACH JEFF S. WESTERMAN (94559) 355 South Grand Avenue Suite 4170 Los Angeles, California 90071 Telephone: 213/617-9007 WOLF HALDENSTEIN ADLER FREEMAN & HERZ, L.L.P. FRANCIS M. GREGOREK (144785) 600 West Broadway, Suite 1800 San Diego, California 92101 Telephone: 619/338-4599 SKADDEN, ARPS, SLATE, MEAGHER & FLOM 300 South Grand Avenue, Suite 3400 Los Angeles, California 90071 (213) 687-5000 Attorneys for Plaintiff SUPERIOR COURT OF THE STATE OF CALIFORNIA FOR THE COUNTY OF LOS ANGELES ROGER MONDSCHEIN, On Behalf of Him- ) Case No. 11C137379 self and All Others Similarly Situ- ) ated, ) CLASS ACTION ) Plaintiff, ) ) vs. ) CLASS ACTION COMPLAINT ) FOR BREACH OF FIDUCIARY JOHN E. BRYSON, DON C. FRISBEE, ) DUTY, ABUSE OF CONTROL, STEVEN B. SAMPLE, EDWARD M. CARSON, ) UNJUST ENRICHMENT, GEORGE M. KELLER, FORREST N. SHUMWAY, ) INTERFERENCE WITH JEWEL PLUMMER COBB, W.F. KIESCHNICK, ) PROSPECTIVE ECONOMIC WILLIAM B. SIART, RALPH P. DAVIDSON, ) THOMAS L. LEE, RICHARD J. STEGEMEIER, ) ADVANTAGE AND EQUITABLE MYRON DuBAIN, WILLIAM F. MILLER, DAN- ) RELIEF AND DAMAGES IEL M. TELLEP and J.J. PINOLA, ) ) Defendants. ) Plaintiff Demands A ) Trial By Jury - - ------------------------------------------------ 2 Plaintiff, as and for his complaint, alleges as follows upon information and belief except as to paragraph 5, which is alleged upon knowledge. Plaintiff's information and belief is based upon, inter alia, the investigation made by plaintiff by and through his counsel. INTRODUCTION AND OVERVIEW 1. This is a shareholder class action seeking equitable relief and compensatory damages on behalf of all shareholders of First Interstate Bancorp ("First Interstate" or the "Company") against First Interstate's top officers and the members of the Board of Directors of First Interstate, seeking to remedy violations of state law arising out of these defendants' actions and conduct undertaken to defeat a highly favorable acquisition offer for First Interstate stock by Wells Fargo & Co. ("Wells Fargo"). First Interstate's Board of Directors has pursued a course of conduct intended to and having the effect of making it extremely difficult for any outside party to successfully acquire First Interstate, even at prices well in excess of First Interstate stock's historical price range. This course of conduct has been undertaken by the defendants to secure and retain their lucrative positions of power, prestige and profit with respect to First Interstate and to enhance and aggrandize their own interests at the expense of First Interstate's other shareholders. 3 2. On October 18, 1995, Wells Fargo, a highly successful, profitable and well-capitalized bank, made an offer to acquire First Interstate at a price far in excess of First Interstate's then-market price, by exchanging in a tax-free exchange .625 shares of Wells Fargo stock for each share of First Interstate stock, an offer worth $133.50 per share based on the October 17, 1995 closing price of Wells Fargo stock of $213.62 per share. First Interstate's stock jumped from $106 per share to $140 per share upon this announcement. While Wells Fargo's stock increased to $228.65 per share, making the offer worth $142.65 per First Interstate share. However, the defendants are rejecting such offer and have refused to negotiate an acquisition of the Company at any higher price, even though Wells Fargo has told First Interstate's Board it is willing to negotiate a higher price and thus to offer a fair and reasonable price for First Interstate stock, well above the levels at which the stock has traded historically. 3. In recent years, defendants have consistently refused to entertain highly favorable acquisition offers or overtures for First Interstate, thus preventing an acquisition of the Company at a favorable price for the shareholders. Defendants have done this to retain their positions of prestige, power and profit, as they know they will lose those positions in the event First Interstate is acquired. Defendants' interests in 4 holding on to their positions of power, prestige and profit as officers and directors of First Interstate far exceeds their interests as shareholders in First Interstate, as they collectively own only about 144,000 of First Interstate's 75.7 million shares -- a minuscule .001% of its outstanding stock. PARTIES AND ACTORS 4. Plaintiff Roger Mondschein, the owner of shares of First Interstate, is and was at all times relevant hereto a common shareholder of First Interstate. Plaintiff brings this action on behalf of the holders of the common stock of First Interstate for injunctive and other relief in connection with the proposed acquisition of First Interstate by Wells Fargo. 5. (a) First Interstate is a corporation with its principal executive offices in Los Angeles, California and which operates principally in California, as well as several other western states. First Interstate is a bank holding company. (b) At December 31, 1994, it owned 16 banks (the "Subsidiary Banks") which operated approximately 1,100 banking offices in 13 states, including California. Ranked according to assets, the Company was the fourteenth largest commercial banking organization in the United States at December 31, 1994, having total deposits of $48.4 billion and total assets of $55.8 billion. 5 (c) The Subsidiary Banks accept checking, savings and other time deposit accounts and employ these funds principally by making consumer, real estate and commercial loans and investing in securities and other interest-bearing assets. (d) The Company also provides banking-related financial services and products. These include asset-based commercial financing, asset management and investment counseling, bank card operations, mortgage banking, venture capital and investment products. It engages in these activities both through non-bank subsidiaries of the Company and through the Subsidiary Banks and their subsidiaries. (e) The larger Subsidiary Banks provided international banking services on a limited basis through the international departments of their domestic offices. They also maintain correspondent relationships with major banks throughout the world. 6. (a) Defendant John E. Bryson ("Bryson") was a direc- tor of First Interstate and Board Chairman and Chief Executive Officer or SCECorp and Southern Edison Company at all times relevant hereto. (b) Defendant Don C. Frisbee ("Frisbee") was a First Interstate director and Chairman Emeritus PacifiCorp at all times relevant hereto. 6 (c) Defendant Steven B. Sample ("Sample") was a First Interstate director and President University of Southern California at all times relevant hereto. (d) Defendant Edward M. Carson ("Carson") was Chair- man of the Board of First Interstate at all times relevant hereto. (e) Defendant George M. Keller ("Keller") was a director of First Interstate and the retired Chairman and Chief Executive Officer of Chevron Corporation at all times relevant hereto. (f) Defendant Forrest N. Shumway ("Shumway") was a director of First Interstate and former Vice-Chairman of the Board Allied-Signal, Inc. at all times relevant hereto. (g) Defendant Jewel Plummer Cobb ("Cobb") was a director of First Interstate and President Emeritus California State University, Fullerton at all times relevant hereto. (h) Defendant W.F. Kieschnick ("Kieschnick") was a director of First Interstate and retired President and Chief Executive Officer Atlantic Richfield Company at all times relevant hereto. (i) Defendant William B. Siart ("Siart") was Presi- dent and Chief Executive Officer First Interstate and a direc- tor at all times relevant hereto. 7 (j) Defendant Ralph P. Davidson ("Davidson") was a director of First Interstate and former Chairman of The John F. Kennedy Center for the Performing Arts at all times relevant hereto. (k) Defendant Thomas L. Lee ("Lee") was a director of First Interstate and Chairman and Chief Executive Officer of The Newhall Land and Farming Company at all times relevant hereto. (l) Defendant Richard J. Stegemeier ("Stegemeier") was a director of First Interstate and Chairman of the Board Unocal Corporation at all times relevant hereto. (m) Defendant Myron DuBain ("DuBain") was a director of First Interstate and retired Chairman and Chief Executive Officer Fireman's Fund Corporation at all times relevant hereto. (n) Defendant William F. Miller ("Miller") was a director of First Interstate and President Emeritus SRI Inter- national at all times relevant hereto. (o) Defendant Daniel M. Tellap ("Tellap") was a director of First Interstate and Chairman and Chief Executive Officer Lockheed Corporation at all times relevant hereto. (p) Defendant J.J. Pinola ("Pinola"), was the retired Chairman and Chief Executive Officer of First Interstate and a director at all times relevant hereto. 8 7. Defendants (hereinafter collectively referred to as the "Individual Defendants") are each members of First Interstate's Board of Directors. 8. The Individual Defendants owed and owe First Interstate's public shareholders fiduciary obligations and were and are required to: (i) use their ability to manage First Interstate in a fair, just and equitable manner; (ii) act in furtherance of the best interests of First Interstate and its shareholders; (iii) act to maximize shareholder value; (iv) govern First Interstate in such a manner as to head the expressed views of its public shareholders; (v) refrain from abusing their positions of control, power, prestige and profit; and (vi) not favor their own interests at the expense of First Interstate and its shareholders. By reason of their fiduciary relationships, these defendants owed and owe plaintiff and other members of the Class the highest obligation of good faith, fair dealing, loyalty and due care. 9. Wells Fargo is a corporation with its principal executive offices in San Francisco, California. Wells Fargo is a huge bank holding company and one of the most well-managed, profitable and well-capitalized banks in the United States. With more than 600 branch outlets, 1,900 round-the-clock Wells Fargo Express(TM) ATMs and a popular 24-hour telephone banking service, Wells Fargo operates one of the largest and busiest 9 consumer banking businesses in the United States. Besides serving as banker to some 3.5 million California households, Wells Fargo provides a full range of banking services to commercial, agribusiness, real estate and small-business customers, mainly in California. It is one of the nation's leading managers of personal trust accounts, corporate 401(k) plans and mutual funds, with approximately $57 billion in assets under its management and administration. 10. Each defendant herein is sued individually as a conspirator and aider and abettor, as well as in his capacity as a director of the Company, and the liability of each arises from the fact that he has engaged in all or part of the unlawful acts, plans, schemes, or transactions complained of herein. CLASS ACTION ALLEGATIONS 11. Plaintiff brings this lawsuit on behalf of himself and all other common shareholders of First Interstate (except defendants herein and any person, firm, trust, corporation or other entity related to, controlled by or affiliated with any of the defendants and any of their successors in interest (the "Class"). 12. This action is properly maintainable as a class action for the following reasons: (a) The Class is so numerous that joinder of all Class members is impracticable. As of January 31, 1995, First 10 Interstate had over 75 million shares of common stock outstanding owned by over 20,000 shareholders. Members of the Class are scattered throughout the United States and are so numerous as to make it impracticable to bring them all before this Court. 13. There are questions of law and fact which are common to members of the Class and which predominate over any questions affecting only individual members. The common questions include, inter alia, the following: (a) Whether the Individual Defendants have breached their fiduciary duties owed by them to plaintiff and the other members of the Class; (b) Whether the Individual Defendants have failed, in violation of their fiduciary duties, to hold a fair auction of the Company or its assets or to sell the Company on the favorable terms; (c) Whether the Individual Defendants have failed, in violation of their fiduciary duties, to provide for a mail of First Interstate; (d) Whether plaintiff and the other members of the Class will be irreparably damaged if the Wells Fargo acquisi- tion is not completed; (e) Whether the Individual Defendants have breached or aided and abetted the breach of the fiduciary and other 11 common law duties owed by them to plaintiff and other members of the Class; and (f) Whether plaintiff and other members of the Class are being and will continue to be injured by the wrongful conduct alleged herein and, if so, what is the proper remedy and/or measure of damages. 14. The claims of plaintiff are typical of the claims of other members of the Class and plaintiff has no interests that are adverse and antagonistic to the interests of the Class. 15. Plaintiff is committed to the vigorous prosecution of this action and has retained competent counsel experienced in litigation of this nature. Accordingly, plaintiff is an adequate representative of the Class and will fairly and adequately protect the interests of the Class. 16. Plaintiff anticipates that there will not be any difficulty in the management of this litigation as a class action. 17. For the reasons stated herein, a class action is superior to any other method available for the fair and efficient adjudication of this controversy since it would be impractical and undesirable for each of the members of the class who has suffered or will suffer damages to bring separate actions in various parts of the country. Classwide remedies 12 will assure uniform standards of conduct for the Individual Defendants and avoid the risk of inconsistent judgments. SUBSTANTIVE ALLEGATIONS 18. As pleaded earlier, First Interstate is an interstate banking corporation. First Interstate's stock performed poorly in 1994 through mid-1995, due to First Interstate's lackluster performance and perceptions that it was poorly managed. For instance, First Interstate's stock traded at a high of $85 per share and then fell, falling to a low of $67 per share in December 1994. First Interstate did not reach $85 per share again until mid-1995. After June 1995, First Interstate's stock performed better, reaching over $100 per share in late September 1995, due to an increase in the prices in bank stocks generally and because of rumors that a favorable acquisition offer for First Interstate would be forthcoming as part of the waive of bank acquisitions and mergers now sweeping the United States. However, even with this increase, First Interstate's stock has been relatively poor performer when compared to other bank stocks. Because in recent years First Interstate has not been viewed to be well-managed as many other large banks and thus has not performed as well in terms of many of its key ratios and measurements of success as other banks, its stock has not performed well and thus, shareholders in First Interstate have, in recent years, obtained a below-industry 13 trendline or industry average return. The chart below shows the price action of First Interstate stock in 1994-1995: [The hardcopy Complaint filed with the Court contains a line graph showing the daily common stock price for First Inter- state for the period December 31, 1993 through October 17, 1995. Because the document for which this Complaint is an Exhibit has been filed with the Securities and Exchange Commission by elec- tronic transmission, this graph is not contained herein. The following information summarizes the First Interstate daily closing stock price, plotted along the graph's vertical axis, for the dates indicated on the horizontal axis of the graph: Date Common Stock Price - - ---- ------------------ December 31, 1993 64 1/8 March 25, 1994 77 7/8 June 17, 1994 75 3/4 September 9, 1994 79 1/4 December 2, 1994 69 3/8 February 24, 1995 81 3/8 May 19, 1995 81 August 11, 1995 87 1/2 October 17, 1995 106] 19. In recent years, certain other large financial institutions have approached First Interstate with favorable acquisition inquiries and offers. Some years ago, Bank of America approached First Interstate about a possible acquisition. Approximately a year ago, Wells Fargo approached First Interstate about a possible acquisition of First Interstate at a premium price. First Interstate's Board and its top management have rejected and frustrated all of these prior acquisition overtures and offers, even though those offers would have resulted in First Interstate shareholders receiving a substantial premium over the then-market price of First Interstate stock. Defendants have done this because they know that in the event First Interstate is acquired by another bank, most or all of the directors of First Interstate will, either in connection with the acquisition or shortly thereafter, be removed from the board of the surviving bank because their services will not be necessary and they will be mere surplusage and thus such an 14 acquisition would bring an end to their positions of power, prestige and profit as directors of this huge bank. At the same time, top managers at First Interstate have caused these prior acquisition overtures and offers to be rejected and/or frustrated, because they also know that, in the event of an acquisition, they will also lose their prestigious positions of power, prestige and profit as officers of a major banking institution. In so acting, these defendants have been aggrandizing their own personal positions and interests over that of First Interstate and its broader shareholder community to whom they owe fiduciary duties to bring about a sales of First Interstate on favorable terms to all the shareholders, even if it results in them losing their lucrative positions. 20. Shortly prior to October 18, 1995, Wells Fargo approached First Interstate and offered to negotiate an acquisition of First Interstate for a price far in excess of First Interstate's current stock price. First Interstate's Chairman refused this offer and told Wells Fargo that First Interstate would not negotiate to sell the bank and would resist any offer by Wells Fargo to buy the bank. On October 18, 1995, Wells Fargo made an unsolicited acquisition offer for First Interstate offering to exchange .625 shares of its stock for each share of First Interstate stock, a $133.50 per share offer based on the October 17, 1995 closing price of Wells Fargo 15 stock of $213.62 per share. Upon the announcement of this favorable acquisition offer, First Interstate's stock instantly skyrocketed from $106 per share to over $140 per share, reflecting the extremely large premium being offered to First Interstate shareholders in this tax-free exchange, and the increase in Wells Fargo's stock price to $228 per share making the offer worth $142 per First Interstate share. Wells Fargo's offer to acquire First Interstate is approximately three times First Interstate's book value, which is a high offer compared to recent bank acquisition prices. The acquisition price is also approximately 12.1 times First Interstate's estimated 1995 earnings per share of $11.29 per share, which is also reasonable in light of other recent bank acquisitions, although it is lower than 15 times the estimated next year's earnings paid in other bank acquisitions. 21. Wells Fargo has privately indicated to First Inter- state's officers and directors that they are willing and will increase the price of their offer to acquire First Interstate if First Interstate's Board will cooperate in bringing about a consensual acquisition. However, First Interstate's top officers and its Board are resisting and are going to continue to resist this acquisition offer so that they can, as they have in the past, retain themselves in their positions or power, prestige and profit. For instance, members of First Interstate's 16 Board of Directors own only a minuscule portion of First Inter- state's outstanding common stock. They actually own only 144,000 shares of First Interstate's 75.7 million shares of outstanding common stock, or just .001% of the stock. Thus, whatever interest the defendants have as shareholders in First Interstate based on their minuscule holdings of the Company's stock is far outweighed by their interest in retaining their lucrative positions of power, prestige and profit as directors and/or officers of the Company from which they receive lucrative fees, prestige in the community, large salaries, and other emoluments of office, which they will lose if First Interstate is acquired. 22. The rejection of the Wells Fargo offer is a breach of defendants' fiduciary duties, an abuse of control, provides unjust enrichment to all defendants, is an unfair business practice and has been perpetrated through tortious interference with the class members' prospective economic interests and opportunities and through material misrepresentations and the failure by defendants to disclose material information to the members of the Class. 23. Unless defendants are enjoined from refusing to negotiate a sale of First Interstate, plaintiff and the members of the Class will continue to suffer injury. Plaintiff and the members of the Class have no adequate remedy at law. 17 FIRST CAUSE OF ACTION BREACH OF FIDUCIARY DUTIES 24. Plaintiff incorporates by reference P. P. 1-23 above. 25. The Individual Defendants engaged in the aforesaid conduct in intentional breach and/or reckless disregard of their fiduciary duties to plaintiff and the members of the Class. 26. Defendants, at the time they rejected Wells Fargo's offer, knew that the market price of First Interstate stock reflected both the intrinsic value of First Interstate and a premium which resulted from market expectations that Wells Fargo's efforts to acquire control of First Interstate would produce greater returns for investors. 27. As a proximate result, the plaintiff an other members of the Class have been substantially injured and request compensatory damages. SECOND CAUSE OF ACTION NEGLIGENT BREACH OF FIDUCIARY DUTIES 28. Plaintiff incorporates by reference P. P. 1-23 above. 29. The Individual Defendants engaged in the aforesaid conduct without exercising the reasonable and ordinary care which directors and officers owe to their shareholders, and thereby breached their fiduciary duties to plaintiff and other members of the Class. 18 30. Defendants, at the time they rejected Wells Fargo's offer, knew or should have known, that the market price of First Interstate stock at the time reflected both the intrinsic value of First Interstate and a premium which resulted from market expectations that Wells Fargo's efforts to acquire control of First Interstate would produce a greater return for investors. 31. As a proximate result, the plaintiff and other members of the Class have been substantially injured and request compensatory damages. 32. Defendants did the things alleged herein without exercising the reasonable and ordinary care owed by corporate directors and officers. THIRD CAUSE OF ACTION ABUSE OF CONTROL 33. Plaintiff incorporates by reference P. P. 1-23 above. 34. The Individual Defendants owed duties as controlling persons and/or as controlling or dominant directors to plaintiff and the other members of the Class not to use their positions of control of First Interstate for their own personal interests and contrary to the interests of First Interstate's remaining shareholders. 35. The foregoing conduct by the director defendants amount to an abuse of their abilities to control First Inter- 19 state in violation of their obligations to plaintiff and the other members of the Class. 36. As a proximate result, plaintiff and the other members of the Class have been damaged and will continue to be damaged unless defendants are enjoined, and defendants are each jointly and severally liable to plaintiff and the other members of the Class for all loss and damage they have suffered reflect in from the matters set forth herein. FOURTH CAUSE OF ACTION UNJUST ENRICHMENT 37. Plaintiff incorporates by reference P. P. 1-23 above. 38. As a proximate result of the tortious conduct de- scribed above, all of the defendants have been and will be unjustly enriched at the expense of the members of the Class. The director defendants will retain control of First Interstate and their positions of power, prestige and profit. Defendants have obtained these unjust benefits at the expense of the members of the Class by rejecting the Wells Fargo offer and refusing to negotiate a beneficial sale of First Interstate. FIFTH CAUSE OF ACTION TORTIOUS INTERFERENCE WITH PROSPECTIVE ECONOMIC ADVANTAGE 39. Plaintiff incorporates by reference P. P. 1-23 above. 20 40. By reason, inter alia, of Wells Fargo's announced offer to purchase First Interstate stock at $133+ a share, plaintiff and the members of the Class had an expectancy that they could tender their shares and realize at least the $133+ per share offer. Moreover, all class members had the expectancy of sharing in any premium that results from acquisition attempts. 41. Defendants knew of these prospective advantages presented to plaintiff and the members of the Class and defendants intended to interfere and did interfere with those advantages when they rejected the Wells Fargo offer. 42. Plaintiff and the members of the Class were prevented from obtaining the foregoing advantages as a result of the conduct of all defendants described above. 43. The defendants, and each of them, did the things alleged in this Complaint with the intent to injure plaintiff and the members of the Class. WHEREFORE, plaintiff and members of the Class demand judgment against defendants as follows: 1. Declaring that this action is properly maintainable as a class action and certifying plaintiff as the representa- tive of the Class; 21 2. Declaring that the defendants have breached and are breaching their fiduciary and other duties to plaintiff and other members of the Class; 3. Preliminary and permanently enjoining the defendants and their counsel, agents, employees and all persons acting under, in concert with, or for them, from taking to prevent or frustrate the sale to Wells Fargo or refusing to proceed with negotiations with Wells Fargo to increase the offered price; 4. Awarding compensatory damages against defendants individually and severally in an amount to be determined at trial, together with prejudgment interest at the maximum rate allowable by law, arising from the proposed transaction; 5. Awarding plaintiff his costs and disbursements and reasonable allowances of fees for plaintiff's counsel and experts and reimbursement of expenses; and 6. Granting plaintiff and the Class such other and further relief as the Court may deem just and proper. JURY DEMAND Plaintiff demands a trial by jury. DATED: October 19, 1995 WILBERG WEISS BERSHAD HYNES & LERACH --------------------------------- WILLIAM S. LERACH 22 600 West Broadway, Suite 1800 San Diego, California 92101 Telephone: 619/231-1058 -and- JEFF S. WESTERMAN 355 South Grand Avenue Suite 4170 Los Angeles, California 90071 Telephone: 213/617-9007 WOLF HALDENSTEIN, ADLER FREEMAN & HERZ, L.L.P. FRANCIS M. GREGOREK 600 West Broadway, Suite 1800 San Diego, California 92101 Telephone: 619/338-4599 Attorneys for Plaintiff 23 EX-99.33 34 COMPLAINT MILBERG WEISS BERSHAD HYNES & LERACH WILLIAM S. LERACH (68581) SALLIE A. BLACKMAN (141830) ERIN C. WARD (147063) 600 West Broadway, Suite 1800 San Diego, CA 92101 Telephone: 619/231-1058 - and - JEFF S. WESTERMAN (94559) 355 South Grand Avenue Suite 4170 Los Angeles, CA 90071 Telephone: 213/617-9007 KAPLAN, KILSHEIMER & FOX, LLP FEDERIC S. FOX 685 Third Avenue, 26th Floor New York, NY 10017 Telephone: 212/687-1980 Attorneys for Plaintiff SUPERIOR COURT OF THE STATE OF CALIFORNIA COUNTY OF LOS ANGELES DEBORAH KAPLAN, On Behalf of ) Case No. Herself and All Others Similarly ) Situated, ) CLASS ACTION ) Plaintiff, ) ) vs. ) ) JOHN E. BRYSON, DON C. FRISBEE, ) CLASS ACTION COMPLAINT STEVEN B. SAMPLE, EDWARD M. CARSON,) FOR BREACH OF FIDUCIARY GEORGE M. KELLER, FORREST N. ) DUTY, ABUSE OF CONTROL, SHUMWAY, JEWEL PLUMMER COBB, W.F. ) UNJUST ENRICHMENT, KIESCHNICK, WILLIAM B. SIART, RALPH) INTERFERENCE WITH P. DAVIDSON, THOMAS L. LEE, RICHARD) PROSPECTIVE ECONOMIC J. STEGEMEIER, MYRON DuBAIN, ) ADVANTAGE AND EQUITABLE WILLIAM F. MILLER, DANIEL M. TELLEP) RELIEF AND DAMAGES AND J.J. PINOLA, ) ) Defendants. ) Plaintiff Demands A ) Trial By Jury Plaintiff, as and for her complaint, alleges as follows upon information and belief except as to paragraph 5, which is alleged upon knowledge. Plaintiff's information and belief is based upon, inter alia, the investigation made by plaintiff by and through her counsel. INTRODUCTION AND OVERVIEW 1. This is a shareholder class action seeking equitable relief and compensatory damages on behalf of all shareholders of First Interstate Bancorp ("First Interstate" or the "Company") against First Interstate's top officers and the members of the Board of Directors of First Interstate, seeking to remedy viola- tions of state law arising out of these defendants' actions and conduct undertaken to defeat a highly favorable acquisition offer for First Interstate stock by Wells Fargo & Co. ("Wells Fargo"). First Interstate's Board of Directors has pursued a course of conduct intended to and having the effect of making it extremely difficult for any outside party to successfully ac- quire First Interstate, even at prices well in excess of First Interstate stock's historical price range. This course of conduct has been undertaken by the defendants to secure and retain their lucrative positions of power, prestige and profit with respect to First Interstate and to enhance and aggrandize their own interests at the expense of First Interstate's other shareholders. 2. On October 18, 1995, Wells Fargo, a highly successful, profitable and well-capitalized bank, made an offer to acquire First Interstate at a price far in excess of First Interstate's then-market price, by exchanging in a tax-free exchange .625 shares of Wells Fargo stock for each share of First Interstate stock, an offer worth $133.50 per share based on the October 17, 1995 closing price of Wells Fargo stock of $213.62 per share. First Interstate's stock jumped from $106 per share to $140 per share upon this announcement, while Wells Fargo's stock in- creased to $228.65 per share, making the offer worth $142.65 per First Interstate share. However, the defendants are rejecting such offer and have refused to negotiate an acquisition of the Company at any higher price, even though Wells Fargo has told First Interstate's Board it is willing to negotiate a higher price and thus to offer a fair and reasonable price for First Interstate stock, well above the levels at which the stock has traded historically. 3. In recent years, defendants have consistently refused to entertain highly favorable acquisition offers or overtures for First Interstate, thus preventing an acquisition of the Company at a favorable price for the shareholders. Defendants have done this to retain their positions of prestige, power and profit, as they know they will lose those positions in the event First Interstate is acquired. Defendants' interests in holding on to their positions of power, prestige and profit as officers and directors of First Interstate far exceeds their interests as shareholders in First Interstate, as they collectively own only about 144,000 of First Interstate's 75.7 million shares -- a minuscule .001% of its outstanding stock. PARTIES AND ACTORS 4. Plaintiff Deborah Kaplan, the owner of shares of First Interstate, is and was at all times relevant hereto a common shareholder of First Interstate. Plaintiff brings this action on behalf of the holders of the common stock of First Interstate for injunctive and other relief in connection with the proposed acquisition of First Interstate by Wells Fargo. 5. (a) First Interstate is a corporation with its prin- cipal executive offices in Los Angeles, California and which operates principally in California, as well as several other western states. First Interstate is a bank holding company. (b) At December 31, 1994, it owned 16 banks (the "Subsidiary Banks") which operated approximately 1,100 banking offices in 13 states, including California. Ranked according to assets, the Company was the fourteenth largest commercial bank- ing organization in the United States at December 31, 1994, having total deposits of $48.4 billion and total assets of $55.8 billion. (c) The Subsidiary Banks accept checking, savings and other time deposit accounts and employ these funds principally by making consumer, real estate and commercial loans and invest- ing in securities and other interest-bearing assets. (d) The Company also provides banking-related finan- cial services and products. These include asset-based commer- cial financing, asset management and investment counseling, bank card operations, mortgage banking, venture capital and invest- ment products. It engages in these activities both through non- bank subsidiaries of the Company and through the Subsidiary Banks and their subsidiaries. (e) The larger Subsidiary Banks provide international banking services on a limited basis through the international departments of their domestic offices. They also maintain correspondent relationships with major banks throughout the world. 6. (a) Defendant John E. Bryson ("Bryson") was a direc- tor of First Interstate and Board Chairman and Chief Executive Officer of SCEcorp and Southern California Edison Company at all times relevant hereto. (b) Defendant Don C. Frisbee ("Frisbee") was a First Interstate director and Chairman Emeritus PacifiCorp at all times relevant hereto. (c) Defendant Steven B. Sample ("Sample") was a First Interstate director and President University of Southern Cali- fornia at all times relevant hereto. (d) Defendant Edward M. Carson ("Carson") was Chair- man of the Board of First Interstate at all times relevant here- to. (e) Defendant George M. Keller ("Keller") was a director of First Interstate and the retired Chairman and Chief Executive Officer of Chevron Corporation at all times relevant hereto. (f) Defendant Forrest N. Shumway ("Shumway") was a director of First Interstate and former Vice-Chairman of the Board Allied-Signal, Inc. at all times relevant hereto. (g) Defendant Jewel Plummer Cobb ("Cobb") was a director of First Interstate and President Emeritus California State University, Fullerton at all times relevant hereto. (h) Defendant W.F. Kieschnick ("Kieschnick") was a director of First Interstate and retired President and Chief Executive Officer Atlantic Richfield Company at all times rele- vant hereto. (i) Defendant William B. Siart ("Siart") was Presi- dent and Chief Executive Officer First Interstate and a director at all times relevant hereto, (j) Defendant Ralph P. Davidson ("Davidson") was a director of First Interstate and former Chairman of The John F. Kennedy Center for the Performing Arts at all times relevant hereto. (k) Defendant Thomas L. Lee ("Lee") was a director of First Interstate and Chairman and Chief Executive Officer The Newhall Land and Farming Company at all times relevant hereto. (l) Defendant Richard J. Stegemeier ("Stegemeier") was a director of First Interstate and Chairman of the Board Unocal Corporation at all times relevant hereto. (m) Defendant Myron DuBain ("DuBain") was a director of First Interstate and retired Chairman and Chief Executive officer Fireman's Fund Corporation at all times relevant hereto. (n) Defendant William F. Miller ("Miller") was a director of First Interstate and President Emeritus SRI Inter- national at all times relevant hereto. (o) Defendant Daniel M. Tellep ("Tellep") was a director of First Interstate and Chairman and Chief Executive Officer Lockheed Corporation at all times relevant hereto. (p) Defendant J.J. Pinola ("Pinola") was the retired Chairman and Chief Executive Officer of First Interstate and a director at all times relevant hereto. 7. Defendants (hereinafter collectively referred to as the "Individual Defendants") are each members of First Intersta- te's Board of Directors. 8. The Individual Defendants owed and owe First Intersta- te's public shareholders fiduciary obligations and were and are required to: (i) use their ability to manage First Interstate in a fair, just and equitable manner; (ii) act in furtherance of the best interests of First Interstate and its shareholders; (iii) act to maximize shareholder value; (iv) govern First Interstate in such a manner as to heed the expressed views of its public shareholders; (v) refrain from abusing their posi- tions of control, power, prestige and profit; and (vi) not favor their own interests at the expense of First Interstate and its shareholders. By reason of their fiduciary relationships, these defendants owed and owe plaintiff and other members of the Class the highest obligation of good faith, fair dealing, loyalty and due care. 9. Wells Fargo is a corporation with its principal execu- tive offices in San Francisco, California. Wells Fargo is a huge bank holding company and one of the most well-managed, profitable and well-capitalized banks in the United States. With more than 600 branch outlets, 1,900 round-the-clock Wells Fargo Express ATMs and a popular 24-hour telephone banking service, Wells Fargo operates one of the largest and busiest consumer banking businesses in the United States. Besides serving as banker to some 3.5 million California households, Wells Fargo provides a full range of banking services to commer- cial, agribusiness, real estate and small-business customers, mainly in California. It is one of the nation's leading manag- ers of personal trust accounts, corporate 401(k) plans and mutual funds, with approximately $57 billion in assets under its management and administration. 10. Each defendant herein is sued individually as a con- spirator and aider and abettor, as well as in his capacity as a director of the Company, and the liability of each arises from the fact that he has engaged in all or part of the unlawful acts, plans, schemes, or transactions complained of herein. CLASS ACTION ALLEGATIONS 11. Plaintiff brings this lawsuit on behalf of herself and all other common shareholders of First Interstate (except defen- dants herein and any person, firm, trust, corporation or other entity related to, controlled by or affiliated with any of the defendants and any of their successors in interest (the "Class"). 12. This action is properly maintainable as a class action for the following reasons: (a) The Class is so numerous that joinder of all class members is impracticable. AS of January 31, 1995, First Interstate had over 75 million shares of common stock outstand- ing owned by over 20,000 shareholders. Members of the Class are scattered throughout the United States and are so numerous as to make it impracticable to bring them all before this Court. 13. There are questions of law and fact which are common to members of the Class and which predominate over any questions affecting only individual members. The common questions in- clude, inter alia, the following: (a) Whether the Individual Defendants have breached their fiduciary duties owed by them to plaintiff and the other members of the Class; (b) Whether the Individual Defendants have failed, in violation of their fiduciary duties, to held a fair auction of the Company or its assets or to sell the Company on the favor- able terms; (c) Whether the Individual Defendants have failed, in violation of their fiduciary duties, to provide for a sale of First Interstate; (d) Whether plaintiff and the other members of the Class will be irreparably damaged if the Wells Fargo acquisition is not completed; (e) Whether the Individual Defendants have breached or aided and abetted the breach of the fiduciary and other common law duties owed by them to plaintiff and other members of the Class; and (f) Whether plaintiff and other members of the Class are being and will continue to be injured by the wrongful con- duct alleged herein and, if so, what is the proper remedy and/or measure of damages. 14. The claims of plaintiff are typical of the claims of other members of the Class and plaintiff has no interests that are adverse or antagonistic to the interests of the Class. 15. Plaintiff is committed to the vigorous prosecution of this action and has retained competent counsel experienced in litigation of this nature. Accordingly, plaintiff is an ade- quate representative of the Class and will fairly and adequately protect the interests of the Class. 16. Plaintiff anticipates that there will not be any difficulty in the management of this litigation as a class action. 17. For the reasons stated herein, a class action is supe- rior to any other method available for the fair and efficient adjudication of this controversy since it would be impractical and undesirable for each of the members of the class who has suffered or will suffer damages to bring separate actions in various parts of the country. Classwide remedies will assure uniform standards of conduct for the Individual Defendants and avoid the risk of inconsistent judgments. SUBSTANTIVE ALLEGATIONS 18. As pleaded earlier, First Interstate is an interstate banking corporation. First Interstate's stock performed poorly in 1994 through mid-1995, due to First Interstate's lackluster performance and perceptions that it was poorly managed. For instance, First Interstate's stock traded at a high of $85 per share and then fell, falling to a low of $67 per share in Decem- ber 1994. First Interstate did not reach $85 per share again until mid-1995. After June 1995, First Interstate's stock performed better, reaching over $100 per share in late September 1995, due to an increase in the prices in bank stocks generally and because of rumors that a favorable acquisition offer for First Interstate would be forthcoming as part of the wave of bank acquisitions and mergers now sweeping the United States. However, even with this increase, First Interstate's stock has been a relatively poor performer when compared to other bank stocks. Because in recent years First Interstate has not been viewed to be as well-managed as many other large banks and thus has not performed as well in terms of many of its key ratios and measurements of success as other banks, its stock has not per- formed well and thus, shareholders in First Interstate have, in recent years, obtained a below-industry trendline or industry average return. The chart below shows the price action of First interstate stock in 1994-1995: [The hardcopy Complaint filed with the Court contains a line graph showing the daily common stock price for First Inter- state for the period December 31, 1993 through October 17, 1995. Because the document for which this Complaint is an Exhibit has been filed with the Securities and Exchange Commission by elec- tronic transmission, this graph is not contained herein. The following information summarizes the First Interstate daily closing stock price, plotted along the graph's vertical axis, for the dates indicated on the horizontal axis of the graph: Date Common Stock Price - - ---- ------------------ December 31, 1993 64 1/8 March 25, 1994 77 7/8 June 17, 1994 75 3/4 September 9, 1994 79 1/4 December 2, 1994 69 3/8 February 24, 1995 81 3/8 May 19, 1995 81 August 11, 1995 87 1/2 October 17, 1995 106] 19. In recent years, certain other large financial insti- tutions have approached First Interstate with favorable acquisi- tion inquiries and offers. Some years ago, Bank of America ap- proached First Interstate about a possible acquisition. Approximately a year ago, Wells Fargo approached First inter- state about a possible acquisition of First Interstate at a premium price. First Interstate's Board and its top management have rejected and frustrated all of these prior acquisition overtures and offers, even though those offers would have re- sulted in First Interstate shareholders receiving a substantial premium over the then-market price of First Interstate stock. Defendants have done this because they know that in the event First Interstate is acquired by another bank, most or all of the directors of First Interstate will, either in connection with the acquisition or shortly thereafter, be removed from the Board of the surviving bank because their services will not be neces- sary and they will be mere surplusage and thus such an acquisi- tion would bring an end to their positions of power, prestige and profit as directors of this huge bank. At the same time, top managers at First Interstate have caused these prior acqui- sition overtures and offers to be rejected and/or frustrated, because they also know that, in the event of an acquisition, they will also lose their lucrative jobs and their prestigious positions of power, prestige and profit as office-s of a major banking institution. In so acting, these defendants have been aggrandizing their own personal positions and interests over that of First Interstate and its broader shareholder community to whom they owe fiduciary duties to bring about a sale of First Interstate on favorable terms to all the shareholders, even if it results in them losing their lucrative positions. 20. Shortly prior to October 18, 1995, Wells Fargo ap- proached First Interstate and offered to negotiate an acquisi- tion of First Interstate for a price far in excess of First Interstate's current stock price. First Interstate's Chairman refused this offer and told Wells Fargo that First Interstate's Board would not negotiate to sell the bank and would resist any offer by Wells Fargo to buy the bank. On October 18, 1995, Wells Fargo made an unsolicited acquisition offer for First Interstate offering to exchange .625 shares of its stock for each share of First interstate stock, a $133.50 per share offer based on the October 17, 1995 closing price of Wells Fargo stock of $213.62 per share. Upon the announcement of this favorable acquisition offer, First Interstate's stock instantly skyrocket- ed from $106 per share to over $140 per share, reflecting the extremely large premium being offered to First Interstate share- holders in this tax-free exchange, and the increase in Wells Fargo's, stock price to $228 per share making the offer worth $142 per First interstate share. Wells Fargo's offer to acquire First Interstate is approximately three times First Interstat- e's book value, which is a high offer compared to recent bank acquisition prices. The acquisition price is also approximately 12.1 times First Interstate's estimated 1995 earnings per share of $11.29 per share, which is also reasonable in light of other recent bank acquisitions, although it is lower than 15 times the estimated next year's earnings paid in other bank acquisitions. 21. Wells Fargo has privately indicated to First Intersta- te's officers and directors that they are willing and will increase the price of their offer to acquire First Interstate if First Interstate's Board will cooperate in bringing about a consensual acquisition. However, First Interstate's top offi- cers and its Board are resisting and are going to continue to resist this acquisition offer so that they can, as they have in the past, retain themselves in their positions of power, pres- tige and profit. For instance, members of First Interstate's Board of Directors own only a minuscule portion of First Inters- tate's outstanding common stock. They actually own only 144,000 shares of First Interstate's 75.7 million shares of outstanding common stock, or just .001% of the stock. Thus, whatever inter- est the defendants have as shareholders in First Interstate based on their minuscule holdings of the Company's stock is far outweighed by their interest in retaining their lucrative posi- tions of power, prestige and profit as directors and/or officers of the company from which they receive lucrative fees, prestige in the community, large salaries, and other emoluments of of- fice, which they will lose if First Interstate is acquired. 22. The rejection of the Wells Fargo offer is a breach of defendants' fiduciary duties, an abuse of control, provides unjust enrichment to all defendants, is an unfair business practice and has been perpetrated through tortious interference with the class members, prospective economic interests and opportunities and through material misrepresentations and the failure by defendants to disclose material information to the members of the class. 23. Unless defendants are enjoined from refusing to nego- tiate a sale of First Interstate or taking other actions to avoid maximizing shareholder value, plaintiff and the members of the Class will continue to suffer injury. Plaintiff and the members of the Class have no adequate remedy at law. FIRST CAUSE OF ACTION BREACH OF FIDUCIARY DUTIES 24. Plaintiff incorporates by reference P.P. 1-23 above. 25. The individual Defendants engaged in the afore- said conduct in intentional breach and/or reckless disregard of their fiduciary duties to plaintiff and the members of the Class. 26. Defendants, at the time they rejected Wells Fargo's offer, knew that the market price of First interstate stock reflected both the intrinsic value of First Interstate and a premium which resulted from market expectations that Wells Fargo's efforts to acquire control of First interstate would produce greater returns for investors. 27. As a proximate result, the plaintiff and other members of the Class have been substantially injured and request compen- satory damages. SECOND CAUSE OF ACTION NEGLIGENT BREACH OF FIDUCIARY DUTIES 28. Plaintiff incorporates by reference P. P. 1-23 above. 29. The Individual Defendants engaged in the aforesaid conduct without exercising the reasonable and ordinary care which directors and off officers owe to their shareholders, and thereby breached their fiduciary duties to plaintiff and other members of the class. 30. Defendants, at the time they rejected Wells Fargo's offer, knew or should have known, that the market price of First Interstate stock at the time reflected both the intrinsic value of First Interstate and a premium which resulted from market expectations that Wells Fargo's efforts to acquire control of First Interstate would produce greater returns for investors. 31. As a proximate result, the plaintiff and other members of the Class have been substantially injured and request compen- satory damages. 32. Defendants did the things alleged herein without exer- cising the reasonable and ordinary care owed by corporate direc- tors and officers. THIRD CAUSE OF ACTION ABUSE OF CONTROL 33. Plaintiff incorporates by reference P. P. 1-23 above. 34. The Individual Defendants owed duties as controlling persons and/or as controlling or dominant directors to plaintiff and the other members of the Class not to use their positions of control of First Interstate for their own personal interests and contrary to the interests of First Interstate's remaining share- holders. 35. The foregoing conduct by the director defendants amounted to an abuse of their abilities to control First Inter- state in violation of their obligations to plaintiff and the other members of the Class. 36. As a proximate result, plaintiff and the other members of the Class have been damaged and will continue to be damaged unless defendants are enjoined, and defendants are each jointly and severally liable to plaintiff and the other members of the Class for all loss and damage they have suffered resulting from the matters set forth herein. FOURTH CAUSE OF ACTION UNJUST ENRICHMENT 37. Plaintiff incorporates by reference P.P. 1-23 above. 38. As a proximate result of the tortious conduct de- scribed above, all of the defendants have been and will be unjustly enriched at the expense of the members of the Class. The director defendants will retain control of First Interstate and their positions of power, prestige and profit. Defendants have obtained these unjust benefits at the expense of the mem- bers of the Class by rejecting the Wells Fargo offer and refus- ing to negotiate a beneficial sale of First Interstate. FIFTH CAUSE OF ACTION TORTIOUS INTERFERENCE WITH PROSPECTIVE ECONOMIC ADVANTAGE 39. Plaintiff incorporates by reference P.P. 1-23 above. 40. By reason, inter alia, of Wells Fargo's announced offer to purchase First Interstate stock at $133+ a share, plaintiff and the members of the Class had an expectancy that they could tender their shares and realize at least the $133+ per share offer. Moreover, all class members had the expectancy of sharing in any premium that results from acquisition at- tempts. 41. Defendants knew of these prospective advantages pre- sented to plaintiff and the members of the class and defendants intended to interfere and did interfere with those advantages when they rejected the Wells Fargo offer. 42. Plaintiff and the members of the Class were prevented from obtaining the foregoing advantages as a result of the conduct of all defendants described above. 43. The defendants, and each of them, did the things al- leged in this Complaint with the intent to injure plaintiff and the members of the Class, WHEREFORE, plaintiff and members of the Class demand judg- ment against defendants as follows: 1. Declaring that this action is properly maintainable an a class action and certifying plaintiff as the representative of the Class; 2. Declaring that the defendants have breached and are breaching their fiduciary and other duties to plaintiff and other members of the Class; 3. Preliminarily and permanently enjoining the defendants and their counsel, agents, employees and all persons acting under, in concert with, or for them, from taking steps to pre- vent or frustrate the sale to Wells Fargo or refusing to proceed with negotiations with Wells Fargo to increase the offered price and/or failing or refusing to auction the Company and/or from taking defensive steps which do not maximize shareholder value; 4. Awarding compensatory damages against defendants indi- vidually and severally in an amount to be determined at trial, together with prejudgment interest at the maximum rate allowable by law, arising from their wrongful conduct; 5. Awarding plaintiff his costs and disbursements and reasonable allowances of fees for plaintiff's counsel and ex- perts and reimbursement of expenses; and 6. Granting plaintiff and the Class such other and fur- ther relief as the Court may deem just and proper. JURY DEMAND Plaintiff demands a trial by jury. DATED: November 6, 1995 MILBERG WEISS BERSHAD HYNES & LERACH WILLIAM S. LERACH SALLIE A. BLACKMAN ERIN C. WARD ___________________________ WILLIAM S. LERACH 600 West Broadway, Suite 1800 San Diego, CA 92101 Telephone: 619/231-1058 MILBERG WEISS BERSHAD HYNES & LERACH JEFF S. WESTERMAN 355 South Grand Avenue Suite 4170 Los Angeles, CA 90071 Telephone: 213/617-9007 KAPLAN, KILSHEIMER & FOX, LLP FREDERIC S. FOX 685 Third Avenue, 26th Floor Now York, NY 10017 Telephone: 212/687-1980 Attorneys for Plaintiff EX-99.34 35 COMPLAINT Daniel C. Girard (SBN 114826) Robert S. Green (SBN 136183) GIRARD & GREEN, P.C. 160 Sansome Street, Suite 300 San Francisco, California 94104 Telephone: (415) 981-4800 Facsimile: (415) 981-4846 Attorneys for Individual and Representative Plaintiff SUPERIOR COURT OF THE STATE OF CALIFORNIA IN AND FOR THE COUNTY OF LOS ANGELES - - - - - - - - - - - - - - - - - - - - - - THEODORE N. KAPLAN, on behalf of himself and all others similarly situated, Case No. Plaintiff, CLASS ACTION v. CLASS ACTION COMPLAINT FOR BREACH OF FIDUCIARY JOHN E. BRYSON, DON C. FRISBEE, DUTY, ABUSE OF CONTROL, STEVEN B. SAMPLE, GEORGE M. AND EQUITABLE RELIEF AND KELLER, FORREST N. SHUMWAY, JEWEL DAMAGES PLUMMER COBB, W. F. KIESCHNICK, WILLIAM E. B. SIART, RALPH P. Plaintiff Demands a DAVIDSON, THOMAS L. LEE, RICHARD Trial By Jury J. STEGEMEIER, MYRON Du BAIN, WILLIAM F. MILLER, DANIEL M. TELLEP AND J. J. PINOLA, Defendants. - - - - - - - - - - - - - - - - - - - - - - Daniel C. Girard (SBN 114826) Robert S. Green (SBN 136183) GIRARD & GREEN, P.C. 160 Sansome Street, Suite 300 San Francisco, California 94104 Telephone: (415) 981-4800 Facsimile: (415) 981-4846 Attorneys for Individual and Representative Plaintiff SUPERIOR COURT OF THE STATE OF CALIFORNIA IN AND FOR THE COUNTY OF LOS ANGELES - - - - - - - - - - - - - - - - - - - - - - x THEODORE N. KAPLAN, on behalf of himself and all others similarly : situated, Case No. : Plaintiff, CLASS ACTION : v. CLASS ACTION COMPLAINT : FOR BREACH OF FIDUCIARY JOHN E. BRYSON, DON C. FRISBEE, DUTY, ABUSE OF CONTROL, STEVEN B. SAMPLE, GEORGE M. : AND EQUITABLE RELIEF AND KELLER, FORREST N. SHUMWAY, JEWEL DAMAGES PLUMMER COBB, W. F. KIESCHNICK, : WILLIAM E. B. SIART, RALPH P. Plaintiff Demands a DAVIDSON, THOMAS L. LEE, RICHARD : Trial By Jury J. STEGEMEIER, MYRON Du BAIN, WILLIAM F. MILLER, DANIEL M. : TELLEP AND J. J. PINOLA, : Defendants. : - - - - - - - - - - - - - - - - - - - - - - x Plaintiff, as and for his complaint, alleges as follows upon information and belief except as to paragraph 4, which is alleged upon knowledge. Plaintiff's information and belief is based upon, inter alia, the investigation made by Plaintiff by and through his counsel. INTRODUCTION AND OVERVIEW 1. This is a shareholder class action seeking equitable relief and compensatory damages on behalf of all shareholders of First Interstate Bancorp ("First Interstate" or the "Company") against First Interstate's top officers and the members of the Board of Directors of First Interstate, seeking to remedy violations of state law arising out of these Defendants' actions and conduct undertaken to defeat a highly favorable acquisition offer for First Interstate stock by Wells Fargo & Co. ("Wells Fargo"). First Interstate's Board of Directors has pursued a course of conduct intended to and having the effect of making it extremely difficult for any outside party unacceptable to Defendants to successfully acquire First Interstate, even at prices well in excess of First Interstate stock's historical price range. This course of conduct has been undertaken by the Defendants to secure and retain their lucrative positions of power, prestige and profit with First Interstate and to enhance and aggrandize their own interests at the expense of First Interstate's shareholders. 2. On October 18, 1995, Wells Fargo, a highly successful profitable and well-capitalized bank, made an offer to acquire First Interstate at a price far in excess of First Interstate's then-market price, by exchanging in a tax-free exchange .625 shares of Wells Fargo stock for each share of First Interstate stock, an offer worth $133.50 per share based on the October 17, 1995 closing price of Wells Fargo stock of $213.62 per share. First Interstate's stock jumped from $106 per share to $140.25 per share upon this announcement, while Wells Fargo's stock increased to $229 per share, making the offer worth over $143 per First Interstate share. Defendants immediately expressed hostility to Wells Fargo's offer and have refused to negotiate with Wells Fargo, even though Wells Fargo has told First Interstate's Board it is willing to negotiate a higher price and thus to offer a fair and reasonable price for First Interstate stock, well above the levels at which the stock has traded historically. Instead, Defendants have undertaken to attract a "white knight" by offering to make available financial information to certain favored bidders while refusing to negotiate with Wells Fargo, despite Wells Fargo's continuing offer to negotiate a higher price. The bidders favored by Defendants are based outside California, and accordingly, are more likely to permit Defendants to retain highly compensated executive positions following the consummation of a strategic business combination. 3. In recent years, Defendants have consistently refused to entertain highly favorable acquisition offers or overtures for First Interstate, thus preventing an acquisition of the Company at a favorable price for the shareholders. Defendants, who collectively own only about 144,000 of First Interstate's 75.7 million shares -- a minuscule .001% of its outstanding stock, have done this to retain highly compensated positions they consider themselves likely to lose if First Interstate is acquired. PARTIES AND ACTORS 4. Plaintiff Theodore N, Kaplan is and was at all times relevant hereon a common shareholder of First Interstate. Plaintiff brings this action on behalf of the holders of the common stock of First Interstate for injunctive and other relief in connection with the proposed acquisition of First Interstate by Wells Fargo. 5. (a) First Interstate is a corporation with its principal executive offices in Los Angeles, California and which operates principally in California, as well as several other western states. First Interstate is a bank holding company. (b) At December 31, 1994, it owned 16 banks (the "Subsidiary Banks") which operated approximately 1,100 banking offices in 13 states, including California. Ranked according to assets, the Company was the fourteenth largest commercial banking organization in the United States at December 31, 1994, having total deposits of $48.4 billion and total assets of $55.8 billion. (c) The Subsidiary Banks accept checking, savings and other time deposit accounts and employ these funds principally by making consumer, real estate and commercial loans and investing in securities and other interest-bearing assets. (d) The Company also provides banking-related financial services and products. These include asset-based commercial financing, asset management and investment counseling, bank card operations, mortgage banking, venture capital and investment products. It engages in these activities both through non-bank subsidiaries of the Company and through the Subsidiary Banks and their subsidiaries. (e) The larger Subsidiary Banks provide international banking services on a limited basis through the international departments of their domestic offices. They also maintain correspondence relationships with major banks throughout the world. 6. (a) Defendant John E. Bryson ("Bryson") was a director of First Interstate and Board Chairman and Chief Executive Officer of SCEcorp and Southern California Edison Company at all times relevant hereto. (b) Defendant Don C. Frisbee ("Frisbee") was a First Interstate director and Chairman Emeritus of PacificCorp at all times relevant hereto. (c) Defendant Steven S. Sample ("Sample") was a First Interstate director and President of the University of Southern California at all times relevant hereto. (d) Defendant George M. Keller ("Keller") was a director of First Interstate and the retired Chairman and Chief Executive Officer of Chevron Corporation at all times relevant hereto. (e) Defendant Forrest N. Shumway ("Shumway") was a director of First Interstate and former Vice-Chairman of the Board of Allied-Signal, Inc. at all times relevant hereto. (f) Defendant Jewel Plummer Cobb ("Cobb") was a director of First Interstate and President Emeritus of California State University, Fullerton at all times relevant hereto. (g) Defendant W. F. Kieschnick ("Kieschnick") was a director of First Interstate and retired President and Chief Executive Officer of Atlantic Richfield Company at all times relevant hereto. (h) Defendant William E. B. Siart ("Siart") was Chairman of the Board and Chief Executive Officer at First Interstate at all times relevant hereto. (i) Defendant Ralph P. Davidson ("Davidson") was a director of First Interstate and former Chairman of The John F. Kennedy Center for the Performing Arts at all times relevant hereto. (j) Defendant Thomas L. Lee ("Lee") was a director of First Interstate and Chairman and Chief Executive Officer of the Newhall Land and Farming Company at all times relevant hereto. (k) Defendant Richard J, Stegemeier ("Stegemeier") was a director of First Interstate and Chairman of the Board of Unocal Corporation at all times relevant hereto. (l) Defendant Myron Du Bain ("Du Bain") was a director of First Interstate and retired Chairman and Chief Executive Officer of Fireman's Fund Corporation at all times relevant hereto. (m) Defendant William F. Miller ("Miller") was a director of First Interstate and President Emeritus of SRI International at all times relevant hereto. (n) Defendant Daniel M. Tellep ("Tellep") was a director of First Interstate and Chairman and Chief Executive Officer of Lockheed Corporation at all times relevant hereto. (o) Defendant J. J. Pinola ("Pinola") was the retired Chairman and Chief Executive Officer of First Interstate and a director at all times relevant hereto. 7. Defendants (hereinafter collectively referred to as the "Individual Defendants") are each members of First Interstate's Board of Directors. 8. The Individual Defendants owed and owe First Interstate's public shareholders fiduciary obligations and were and are required to: (i) use their ability to manage First Interstate in a fair, just and equitable manner; (ii) act in furtherance of the best interests of First Interstate and its shareholders; (iii) act to maximize shareholder value; (iv) govern First Interstate in such a manner as to heed the expressed views of its public shareholders; (v) refrain from abusing their positions; and (vi) refrain from favoring their own interests at the expense of First Interstate and its shareholders. By reason of their fiduciary relationships, these defendants owed and owe plaintiff and other members of the Class the highest obligation of good faith, fair dealing, loyalty and due care. 9. Wells Fargo & Co. ("Wells Fargo") is a corporation with its principal executive offices in San Francisco, California. Wells Fargo is a huge bank holding company and is generally viewed as one of the most well-managed, profitable and well-capitalized banks in the United States. With more than 600 branch outlets, 1,900 round-the-clock Wells Fargo Express ATMs and a popular 24-hour telephone banking service, Wells Fargo operates one of the largest and busiest consumer banking businesses in the United States. Besides serving as banker to some 3.5 million California households, Wells Fargo provides a full range of banking services to commercial, agribusiness, real estate and small-business customers, mainly in California. It is one of the nation's leading managers of personal trust accounts, corporate 401(k) plans and mutual funds, with approximately $57 billion in assets under its management and administration. 10. Each defendant herein is sued individually as a conspirator and aider and abettor, as well as in his capacity as a director of the Company, and the liability of each arises from the fact that he has engaged in all or part of the unlawful acts, plans, schemes, or transactions complained of herein. CLASS ACTION ALLEGATIONS 11. Plaintiff brings this lawsuit on behalf of himself and all other common shareholders of First Interstate (except defendants herein and any person, firm, trust, corporation or other entity related to, controlled by or affiliated with any of the defendants and any of their successors in interest) (the "Class"). 12. This action is properly maintainable as a class action for the following reasons: (a) The class is so numerous that joinder of all class members is impracticable. As of February 28, 1995, First Interstate had over 75 million shares of common stock outstanding owned by over 24,000 shareholders. Members of the Class are scattered throughout the United States and are so numerous as to make it impracticable to bring them all before this Court. 13. There are questions of law and fact which are common to members of the Class and which predominate over any questions affecting only individual members. The common questions include, inter alia, the following: (a) Whether the Individual Defendants have breached fiduciary duties owed by them to plaintiff and the other members of the Class by interfering with Wells Fargo's efforts to acquire First Interstate; (b) Whether the Individual Defendants have failed, in violation of their fiduciary duties, to hold a fair auction of the Company or its assets or to sell the Company on the most favorable terms; (c) Whether the Individual Defendants have failed, in violation of their fiduciary duties, to provide for a sale of First Interstate; (d) Whether plaintiff and the other members of the Class will be irreparably damaged if the Individual Defendants are not enjoined from impeding Wells Fargo's tender offer; (e) Whether the Individual Defendants have breached or aided and abetted the breach of their fiduciary duties and other common law duties owed by them to plaintiff and other members of the Class; and (f) Whether plaintiff and other members of the Class are being and will continue to be injured by the wrongful conduct alleged herein and, if so, what is the proper remedy and/or measure of damages. 14. The claims of plaintiff are typical of the claims of other members of the Class and plaintiff has no interests that are adverse or antagonistic to the interests of the Class. 15. Plaintiff is committed to the vigorous prosecution of this action and has retained competent counsel experienced in litigation of this nature. Accordingly, plaintiff is an adequate representative of the Class and will fairly and adequately protect the interests of the Class. 16. Plaintiff anticipates that there will not be any difficulty in the management of this litigation as a class action. 17. For the reasons stated herein, a class action is superior to any other method available for the fair and efficient adjudication of this controversy since it would be impractical and undesirable for each of the members of the Class who has suffered or will suffer damages to bring separate actions in various parts of the country. Classwide remedies will assure uniform standards of conduct for the Individual Defendants and avoid the risk of inconsistent judgments. SUBSTANTIVE ALLEGATIONS 18. As pleaded earlier, First Interstate is an interstate banking corporation. First Interstate's stock performed poorly in 1994 through mid-1995, due to First Interstate's lackluster performance and perceptions that it was poorly managed. For instance, First Interstate's stock traded at a high of $85 per share and then fell, falling to a low of $67 per share in December 1994. First Interstate did not reach $85 per share again until mid-1995. After June 1995, First Interstate's stock performance improved, reaching over $100 per share in late September 1995, due to increase in the prices in bank stocks generally and because of rumors that a favorable acquisition offer for First Interstate would be forthcoming as part of the wave of bank acquisitions and mergers now sweeping the United States. However, even with this increase, First Interstate's stock has been a relatively poor performer when compared to other bank stocks. Because in recent years First Interstate has not been considered as well-managed as many other large banks and has not performed as well in terms of many of its key ratios and measurements of success as other banks, its stock has not performed well and thus, shareholders in First Interstate have, obtained a below-industry trendline or industry average return. 19. In recent years, certain other large financial institutions, including Bank of America, have approached First Interstate with acquisition inquiries and offers. Approximately one year ago, Wells Fargo approached First Interstate about a possible acquisition of First Interstate at a premium price. First Interstate's Board and its top management have rejected and frustrated all of these prior acquisition overtures and offers, even though those offers would have resulted in First Interstate shareholders receiving a substantial premium over the then-market price of First Interstate stock. Defendants know that if First Interstate is acquired by another bank, most or all of the directors of First Interstate will, either in connection with the acquisition or shortly thereafter, be removed from the Board of the surviving bank because their services will be mere surplusage. Thus, such an acquisition would bring an end to their positions as directors of one of the country's largest banks. At the same time, top executives at First Interstate have caused these prior acquisition overtures and offers to be rejected and/or frustrated, because they also know that, in the event of an acquisition, they will also lose their lucrative jobs and positions as officers of a major banking institution. In so acting, the defendants have been aggrandizing their own personal positions and interests over those of First Interstate shareholders to whom they owe fiduciary duties to bring about a sale of First Interstate on favorable terms even if the sale results in First Interstate's directors and officers losing their lucrative positions. 20. Shortly prior to October 18, 1995, Wells Fargo approached First Interstate and offered to negotiate an acquisition of First Interstate for a price far in excess of First Interstate's current stock price. First Interstate's Chairman refused this offer and told Wells Fargo that First Interstate's Board would not negotiate to sell the bank and would resist any offer by Wells Fargo to buy the bank. On October 18, 1995, Wells Fargo made an unsolicited acquisition offer for First Interstate to exchange .625 shares of Wells Fargo stock for each share of First Interstate stock, a $133.50 per share offer based on the October 17, 1995 closing price of Wells Fargo stock of $213.62 per share. Upon the announcement of this favorable acquisition offer, First Interstate's stock price instantly increased from $106 per share to $140.25 per share, reflecting the extremely large premium being offered to First Interstate shareholders in this tax-free exchange, plus the increase in Wells Fargo's stock price to $229 per share making the offer worth over $143 per First Interstate share. 21. Wells Fargo's offer to acquire First Interstate is approximately three times First Interstate's book value, which is a high offer compared to recent bank acquisition prices. The acquisition price is also approximately 12.1 times First Interstate's estimated 1995 earnings per share of $11.29 per share, which is also reasonable in light of other recent bank acquisitions, although it is lower than 15 times the estimated next year's earnings paid in some bank acquisitions. 22. Wells Fargo has privately indicated to First Interstate's officers and directors that they are willing and will increase the price of their offer to acquire First Interstate if First Interstate's Board will cooperate in bringing about a consensual acquisition. However, First Interstate's top officers and its Board are resisting and intend to continue to resist this acquisition offer. Members of First Interstate's Board of Directors own very little of First Interstate's outstanding common stock. As a group, they own only 144,000 shares of First Interstate's 75.7 million shares of outstanding common stock, or just .001% of the stock. Thus, whatever interest the defendants have as shareholders in First Interstate based on their minuscule holdings of the Company's stock is far outweighed by their interest in retaining their positions as directors and/or officers of the Company which provides them with lucrative fees, prestige in the community, large salaries, and other emoluments of office, which they will lose if First Interstate is acquired. 23. In an effort to attract a "white knight" and retain their lucrative positions, Defendants have invited certain bidders to discuss an acquisition of, or a merger with First Interstate, which is putting the Company up for sale now that the sale or breakup of First Interstate is inevitable, while refusing to negotiate with Wells Fargo. In so doing, Plaintiff alleges on information and belief that the Individual Defendants have made confidential financial information available to certain favored bidders, but have refused to provide the same information to Wells Fargo. 24. The Individual Defendants' refusals to consider the Wells Fargo offer breaches defendants' fiduciary duties and is an abuse of control. 25. Unless defendants are enjoined from refusing to negotiate a sale of First Interstate in which all potential bidders are given equal consideration, plaintiff and the members of the Class will continue to suffer injury. Plaintiff and the members of the Class have no adequate remedy at law. FIRST COURSE OF ACTION 26. Plaintiff incorporates by reference Paragraph Paragraph 1-25 above. 27. The Individual Defendants engaged in the aforesaid conduct in intentional breach and/or reckless disregard of their fiduciary duties to plaintiff and the members of the Class. 28. Defendants, at the time they rejected Wells Fargo's offer, knew that the market price of First Interstate Stock reflected both the intrinsic value of First Interstate and a premium which resulted from market expectations that Wells Fargo's efforts to acquire control of First Interstate would produce greater returns for investors. Regardless, Defendants have refused to negotiate with Wells Fargo and chosen instead to attempt to attract other possible suitors to defeat Wells Fargo, rather than engage in efforts to maximize the value received for shareholders. 29. As a proximate result, the plaintiff and other members of the Class have been substantially injured and request compensatory damages. SECOND CAUSE OF ACTION NEGLIGENT BREACH OF FIDUCIARY DUTIES 30. Plaintiff incorporates by reference Paragraph Paragraph 1-29 above. 31. The Individual Defendants engaged in the aforesaid conduct without exercising the reasonable and ordinary care which directors and officers owe to their shareholders, and thereby breached their fiduciary duties to plaintiff and other members of the Class. 32. Defendants, at the time they rejected Wells Fargo's offer, knew or should have known, that the market price of First Interstate stock at the time reflected both the intrinsic value of First Interstate and a premium which resulted from market expectations that Wells Fargo's efforts to acquire control of First Interstate would produce greater returns for investors. Regardless, Defendants refused to negotiate with Wells Fargo, or act in a neutral manner to obtain the highest value for the shareholder class members. 33. As a proximate result, the plaintiff and other members of the Class have been substantially injured and request compensatory damages. 34. Defendants did the things alleged herein without exercising the reasonable and ordinary care owed by corporate directors and officers. THIRD CAUSE OF ACTION ABUSE OF CONTROL 35. Plaintiff incorporates by reference Paragraph Paragraph 1-34 above. 36. The Individual Defendants owed duties as controlling persons and/or as controlling or dominant directors to plaintiff and the other members of the Class not to use their positions of control of First Interstate for their own personal interests and contrary to the interests of First Interstate's remaining shareholders. 37. The foregoing conduct by the director defendants amounted to an abuse of their abilities to control First Interstate in violation of their obligations to plaintiff and the other members of the Class. 38. As a proximate result, plaintiff and the other members of the Class have been damaged and will continue to be damaged unless defendants are enjoined, and defendants are each jointly and severally liable to plaintiff and the other members of the Class for all loss and damage they have suffered resulting from the matters set forth herein. WHEREFORE, plaintiff and members of the Class demand judgment against defendants as follows: 1. Declaring that this action is property maintainable as a class action and certifying plaintiff as the representative of the Class; 2. Declaring that the defendants have breached and are breaching their fiduciary and other duties to plaintiff and other members of the Class; 3. Preliminarily and permanently enjoining the defendants and their counsel, agents, employees and all person acting under, in concert with, or for them, from caking any actions which are not designed to maximize the value attainable by all shareholders, and/or from refusing to proceed with negotiations with Wells Fargo on an equal footing with other potential bidders viewed more favorably by Individual Defendants; 4. Awarding compensatory damages against defendants individually and severally in an amount to be determined at trial, together with prejudgment interest at the maximum rate allowable by law, arising from their wrongful conduct; 5. Awarding plaintiff his costs and disbursements and reasonable allowances of fees for plaintiff's counsel and experts and reimbursement of expenses; and 6. Granting plaintiff and the Class such other and further relief as the Court may deem just and proper. JURY DEMAND Plaintiff demands a trial by jury. Dated: November 2, 1995 GIRARD & GREEN, P.C. By:_____________________________ Robert S. Green 160 Sansome Street, Suite 300 San Francisco, CA 94104 Telephone: (415) 981-4800 EX-99.35 36 COMPLAINT IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE IN AND FOR NEW CASTLE COUNTY - - ---------------------------------------------X WELLS FARGO & COMPANY, a Delaware : corporation, : C.A. No. 14696 Plaintiff, : -against- : FIRST INTERSTATE BANCORP, a Delaware corporation, FIRST BANK SYSTEM, INC., a : Delaware corporation, ELEVEN ACQUISITION CORPORATION, a Delaware : corporation, JOHN E. BRYSON, EDWARD M. CARSON, JEWEL PLUMMER COBB, RALPH P. : DAVIDSON, MYRON DU BAIN, DON C. FRISBEE, GEORGE M. KELLER, THOMAS L. : LEE, WILLIAM F. MILLER, WILLIAM S. RANDALL, STEPHEN B. SAMPLE, FORREST N. : SHUMWAY, WILLIAM E. B. SIART, RICHARD J. STEGEMEIER, AND DANIEL M. : TELLEP, Defendants. : - - ---------------------------------------------X VERIFIED COMPLAINT FOR PRELIMINARY AND PERMANENT INJUNCTIVE RELIEF AND DECLARATORY JUDGMENT Wells Fargo & Company ("Wells Fargo"), as and for its complaint, alleges upon knowledge with respect to itself and its own acts, and upon information and belief as to all other matters, as follows: Nature of the Action 1. Plaintiff brings this action for injunctive and/or declaratory relief: (a) to prevent First Interstate Bancorp ("First Interstate") and its directors from breaching their fiduciary duty to their stockholders by entering into or consummating an unfair, inadequate and unlawful proposed merger (the "First Bank Proposed Merger") with First Bank System, Inc. ("First Bank") and to prevent First Bank from aiding and abetting that breach; (b) to prevent the anti-takeover devices of defendant First interstate from being utilized to impede or delay Wells Fargo's proxy solicitation to solicit proxies in opposition to the First Bank Proposed Merger, its proposed exchange offer which is considerably more favorable to First Interstate's stockholders than the First Bank Proposed Merger, and Wells Fargo's consent solicitation, which is designed to elect new directors to the First Interstate Board of Directors, in violation of the fiduciary duties of First Interstate's Board of Directors; and (c) to prevent First Interstate from otherwise taking actions that impede or delay Wells Fargo's higher exchange offer, its proposed proxy solicitation and consent solicita- 2 tion, all of which will be made in compliance with all applicable laws, obligations and agreements. The Parties 2. Plaintiff Wells Fargo is a Delaware corpora- tion with its principal place of business in California. Wells Fargo is a bank holding company registered under the Bank Holding Company Act of 1956, as amended. Based on assets as of December 31, 1994, it was the 15th largest bank holding company in the United States. Wells Fargo's subsidiary banks provide a full range of banking services to commercial, agribusiness, real estate and small business customers and consumers. It is one of the nation's leading managers of personal trust accounts, corporate 401(k) plans and mutual funds. Wells Fargo is the beneficial owner for its own account of 100 shares of common stock of First Interstate. 3. Defendant First Interstate is a Delaware corporation with its principal place of business in Califor- nia. First Interstate is a bank holding company registered under the Bank Holding Company Act of 1956, as amended. Its subsidiary banks accept checking, savings and other time deposit accounts and employ those funds principally by making consumer, real estate and commercial loans and investing in securities and other interest-bearing assets. 3 First Interstate also provides banking-related financial services and products both through non-bank subsidiaries and through its bank subsidiary and the bank subsidiary's subsidiaries. 4. Defendant First Bank is a Delaware corporation with its principal place of business in Minnesota. First Bank is a bank holding company registered under the Bank Holding Company Act of 1956, as amended. 5. Defendant Eleven Acquisition Corporation is a Delaware corporation. Eleven Acquisition Corporation is a corporation created by First Bank solely for the purposes of effecting the Proposed Merger. For the purposes of this Complaint, all references to defendant First Bank include Eleven Acquisition Corporation. 6. Defendant William E. B. Siart is Chairman of the Board of Directors, President and Chief Executive Offi- cer of First Interstate. Defendant William S. Randall is Executive Vice President, Chief Operating Officer and a director of First Interstate. Edward M. Carson, John E. Bryson, Dan C. Frisbee, Steven B. Sample, George M. Keller, Forrest N. Shumway, Jewel Plummer Cobb, Ralph P. Davidson, Thomas L. Lee, Richard J. Stegemeier, Myron Du Bain, William F. Miller, and Daniel M. Tellep are all directors of First Interstate. The foregoing individual directors of First 4 Interstate (collectively the "defendant directors"), owe fiduciary duties to First Interstate and its stockholders. Factual Background 7. On October 17, 1995, Wells Fargo delivered a letter to First Interstate submitting for its consideration a proposal for a tax-free merger (the "letter") in which each First Interstate stockholder would receive 0.625 shares of Wells Fargo common stock for each share of First Interstate common stock. Based on the price of Wells Fargo's common stock at the time the letter was delivered, that exchange ratio represented a price of $133.50 for each First Interstate share, a 26% premium over the market value of First Interstate common stock at the time of the letter. 8. Despite the immediate premium to the stockholders of First Interstate and the extraordinary long-term economic benefits to the stockholders of both companies that would accrue under the merger described in the letter, Siart asked for six months to consider the Wells Fargo proposal. Siart also publicly responded negatively, saying that he was "deeply disappointed" by Wells Fargo's unsolicited proposal. 9. Following Wells Fargo's letter, the press reported that Siart was actively soliciting other offers from, and sharing First Interstate's confidential information with, other suitors. Press reports indicated that First 5 Interstate invited Bank One Corporation and Norwest Corporation to review its loan and financial books. During the same time, First Interstate also conducted merger negotiations with, at least, First Bank. 10. On November 6, 1985, First Interstate announced that it had entered into an agreement with First Bank to merge the two corporations. First Bank agreed to exchange 2.6 shares of its common stock for each share of First Interstate's common stock. Based on the closing price of First Bank stock on November 3, 1995, the last trading day prior to announcement of the Proposed Merger, that exchange ratio represented a price of $132.28 per share of First Interstate stock. First Interstate also agreed to pay a break-up fee of $100 million and granted First Bank a lock-up stock option to purchase First Interstate stock that would yield it a profit of up to $100 million in the event the First Bank merger agreement was not consummated. 11. The market reacted negatively to the news of the Proposed Merger. Public reactions by analysts and stockholders were negative. The deal has been called "a senior management job preservation act" for First Interstate executives and Siart has been accused of failing to "show"[] a lot of interest in the shareholder." In addition, immediately following the public announcement of the First Bank 6 Proposed Merger, more than 50% of the purchases of First Bank stock (an amount aggregating more than $90 million) were in large blocks of stock purchased by or through a single broker. Although the identity of the person or company for whom those purchases were made was not disclosed, the size of those purchases, coupled with the fact that they were all made through the same broker, has had the effect of supporting the price of the First Bank stock, thus making the First Bank Proposed Merger appear to be more attractive than it would have appeared in the absence of those large block purchases. 12. Before First Interstate entered into its agreement with First Bank, Wells Fargo had offered to increase the exchange ratio of its offer to 0.65 shares of Wells Fargo common stock for each share of First Interstate common stock, a ratio that would have continued to offer more value than the First Bank Proposed Merger. Based on the closing price of Wells Fargo common stock on November 3, 1995, the last trading day prior to announcement of the First Bank Proposed Merger, that bid increased the value of the Wells Fargo proposal to $137.96 per share of First Interstate common stock, considerably in excess of the consideration to be received in the First Bank Proposed Merger. Despite the clear superiority of that Wells Fargo 7 proposal, First Interstate rejected it in favor of the inferior First Bank Proposed Merger and granted the break-up fee and lock-up stock option to First Bank. 13. By meeting and sharing confidential information with at least three banks (First Bank, Norwest Corporation and Banc One Corporation) in response to the letter from Wells Fargo and Wells Fargo's subsequent offer to improve its bid, First Interstate's directors initiated an active bidding process seeking to sell the company. 14. As a result, the defendant directors had the duty (a) to be diligent and vigilant in examining critically all alternative offers; (b) to act in good faith; (c) to obtain, and act with due care on all material information reasonably available, including information necessary to compare all offers to determine which of them would provide the best value reasonably available to the stockholders; and (d) to negotiate actively and in good faith with all bidders to that end. 15. The fiduciary duties of the defendant directors require them to assess whether each anti-takeover device or contractual provision (separately and in the aggregate) under the facts and circumstances prevailing at the time (a) adversely affects the value provided to First Interstate stockholders; (b) inhibits or encourages alterna- 8 tive bids; (c) is an enforceable contractual obligation in light of the directors' fiduciary duties; and (d) in the end would advance or retard the First Interstate directors' obligation to secure for the First Interstate stockholders the best value reasonably available under the circumstances. To the extent such devices or provisions are inconsistent with the defendant directors' fiduciary duties, as they are here, they are invalid and unenforceable. 16. On November 13, 1995, Wells Fargo announced that it intends to commence an exchange offer for all outstanding shares of common stock of First Interstate Bancorp (the "Exchange Offer"). Wells Fargo will offer to exchange two-thirds of a share of Wells Fargo common stock for each outstanding share of First Interstate common stock. Based on the closing price of Wells Fargo common stock on November 10, 1995, the last trading day before the announcement of the Exchange Offer, the value of the Exchange Offer is $143.58 per share of First Interstate common stock. First Interstate has approximately 76 million shares outstanding, giving the transaction a total equity value of approximately $11 billion. Wells Fargo's offer is therefore considerably higher than the current value of the consideration offered to First Interstate's stockholders in the First Bank Proposed Merger. 9 17. Also on November 13, 1995, Wells Fargo announced that it intends to file preliminary proxy materials with the Securities and Exchange Commission ("SEC") for use in connection with the solicitation of First Interstate stockholders to vote against the approval of a merger with First Bank at any meeting of stockholders of First Interstate to be called to consider the First Bank Proposed Merger (the "Proxy Solicitation"). 18. Concurrently, Wells Fargo announced that it will file with the SEC preliminary materials for the solicitation of written consents from stockholders of First Interstate to remove First Interstate's current board of directors and to replace them with nominees of Wells Fargo who are committed to removing any impediments to the consummation of the acquisition of First Interstate by Wells Fargo (the "Consent Solicitation"). 19. Wells Fargo's Exchange Offer clearly will be in the best interests of First Interstate's stockholders. It will be available to all First Interstate stockholders for all outstanding shares. It will not be "front-end loaded" or otherwise coercive in nature. Moreover, the Exchange Offer will provide First Interstate's stockholders with the opportunity to realize a substantial premium over the market price of their shares immediately prior to the public an- 10 nouncement of Wells Fargo's October 17 letter. The closing price of First Interstate's common stock on October 17, 1995, the last full trading day prior to the public announcement of that letter, was $106 per share and the average closing price of First Interstate's common stock for the 20 consecutive trading days immediately preceding October 17, 1995, was $102.59 per share. 20. In addition to the greater immediate financial value of the Wells Fargo Exchange Offer, a combination of Wells Fargo and First Interstate also will result in greater savings than can be realized through the First Bank Proposed Merger. Despite having overlapping operations only in Colorado, Montana and Wyoming, First Bank claims that $500 million in savings will result from the First Bank Proposed Merger. Due to the greater geographical overlap between Wells Fargo and First Interstate, a merger of the two companies would result in an estimated $700 million in net cost savings, approximately $30 per share based on the present value of the projected future savings. 21. The Exchange Offer will give First Interstate stockholders an opportunity to participate in the future performance of the combined company, and to benefit from the synergies expected to result from the combination of the two 11 companies, through the equity interest in the combined company that would continue to be held by such stockholders. 22. The Exchange Offer will not pose any threat to the interests of First Interstate's stockholders or to First Interstate's corporate policy and effectiveness. 23. The Exchange Offer, Proxy Solicitation and Consent Solicitation will comply with all applicable laws, obligations and agreements including, without limitation, the securities laws and all other legal obligations to which plaintiff is subject, including any contractual and common law obligations that may be owed by plaintiff to First Interstate. The Exchange Offer, Proxy Solicitation and Consent Solicitation will not constitute tortious interference with, or any other business-related tort in connection with, the First Bank Proposed Merger. The Exchange Offer, Proxy Solicitation and Consent Solicitation materials will fully disclose all required information in compliance with plaintiff's obligations under the securities laws. 24. Unless modified, First Interstate's anti-takeover devices will interfere with the Exchange Offer and may have the effect of preventing or impeding the consummation of the Proxy Solicitation and the Consent Solicitation. Given the nature of the Exchange Offer and its benefits to First Interstate stockholders, First Interstate should not 12 be permitted to erect impediments to it. Nor should First Interstate be permitted to impede or delay plaintiff's, efforts to conduct its Proxy Solicitation and Consent Solicitation, activities to which plaintiff has a right under Delaware law. 25. First Interstate's anti-takeover devices and other defensive measures will adversely affect the value available to First Interstate stockholders, will inhibit alternative bids to the First Bank Proposed Merger, are (in the case of the break-up fee and lock-up stock option granted to First Bank and described infra) not enforceable contractual obligations in light of the breach of the defendant directors' fiduciary duties, and will retard the defendant directors in carrying out their obligation to secure for the First Interstate stockholders the best value reasonably available under the circumstances. First Interstate's anti-takeover devices and other defensive measures are therefore invalid and unenforceable. First Interstate's Anti-Takeover Devices and Other Defensive Measures Break-Up Fee and Lock-Up Stock Option 26. As a stated inducement to First Bank to enter into the First Bank Proposed Merger agreement, First Bank is 13 to be paid a $100 Million fee (the "Break-up Fee) and First Bank was granted an option to purchase up to 15,073,106 shares of First Interstate stock at a price of $127.75 per share, a price that will yield it a profit of up to $100 million in the event the Proposed merger is not consummated (the "Lock-Up Stock Option"). 27. The Break-Up Fee and the Lock-Up Stock Option were designed not to induce a higher bid, but to compel First Interstate stockholders to accept a lower bid for their stock. First Interstate's Board had, at the time the Break-Up Fee and the Lock-Up Stock Option were agreed to, already received and rejected a bid from wells Fargo that would have been worth at least $200 million more to the stockholders of First Interstate than the offer made by First Bank. 28. The Break-Up Fee and Lock-Up Stock Option thus signal the Board's support for, and increase the expense of offering alternatives to, the First Bank Proposed Merger, which will serve the interests of the entrenched management of First Interstate over those of the company's stockholders. 29. The Break-Up Fee and Lock-Up stock option violate the fiduciary duties owed to First Interstate stock- holders because they promote the self-interest of First 14 Interstate's directors at the expense of its stockholders, and are intended to coerce First Interstate's stockholders into approving the Proposed Merger. 30. To the extent that First Interstate modifies the First Bank Proposed Merger in response to the Wells Fargo Exchange Offer or enters into any modified or future agreement with First Bank, the defendant directors will have a duty to eliminate the Break-Up Fee, the Look-Up Stock Option and any similar provision in order to fulfill their obligation to seek the best value reasonably available on the stockholders' behalf and in order to avoid further breaching their fiduciary duties. Poison Pill 31. On November 21, 1988, First Interstate's Board adopted a stockholder rights plan (the "Poison Pill") that allows the Board to prevent the consummation of any tender or exchange offer, even one providing substantial benefits to First Interstate's stockholders. The Board declared a dividend of one common stock purchase right (a "Right"), payable to each of First Interstate's stockholders of record as of December 30, 1988. Each Right entitles the holder to purchase one share of First Interstate common stock at a price of $170.00 per share (the "exercise price"), subject to adjustment. 15 32. Until the earlier to occur of (a) 10 days following a public announcement that a person or group of affiliated or associated persons (an "Acquiring Person") has acquired beneficial ownership of 20% or more of the outstanding common stock other than pursuant to a Qualified Offer (as defined below), or (b) 10 business days (or such later date as may be determined by action of the Board of Directors prior to such time as any person becomes an Acquiring Person) following the commencement of, or announcement of an intention to make, a tender offer or exchange offer the consummation of which would result in the beneficial ownership by a person or group of 20% or more of such outstanding common stock (the earlier of such dates, being called the "Distribution Date"), the Rights are evidenced by the common stock certificates. However, unless the First Interstate Board takes specific action to delay the "Distribution Date" under the Poison Pill, on the tenth business day after the announcement of the Wells Fargo Exchange offer the "Distribution Date" will occur, resulting in the distribution of separately tradeable and exercisable Rights certificates. 33. In the event that any person becomes an Acquiring Person (other than pursuant to a Qualified Offer), each holder of a Right (other than Rights beneficially owned 16 by the Acquiring Person (which will thereafter be void)) will thereafter have the right to receive upon exercise a number of shares of First Interstate common stock having a market value of two times the exercise price of the Right. 34. A "Qualified offer" is defined as a tender offer or exchange offer for all outstanding common stock that is determined by the non-management directors to be adequate and otherwise in the best interests of the Company and its stockholders. 35. First Interstate's Board can redeem the Rights at a redemption price of $.001 per Right or can amend the Poison Pill to make the Rights inapplicable to the Wells Fargo Exchange Offer. 36. Due to the prohibitive costs the Poison Pill imposes on an Acquiring Person, any tender offer or exchange offer (such as the Wells Fargo Exchange Offer) that would trigger the Rights cannot practically be consummated unless First Interstate's Board redeems or amends the Pill or declares the offer to be a Qualified Offer. Accordingly, First Interstate's Board can block any proposed tender or exchange offer regardless of the interests of First Interstate's stockholders. The triggering of the Poison Pill would be particularly unjustified in this case given 17 the non-coercive nature of Wells Fargo's Exchange Offer and the substantial benefits it would generate. 37. In light of the nature and value of Wells Fargo's Exchange Offer, the First Interstate Board should declare that the Offer is "Qualified". Alternatively, the Board should redeem the Rights under the Poison Pill or amend it to make it inapplicable to Wells Fargo's Exchange Offer and the second-step merger with Wells Fargo or a subsidiary that would be expected to be consummated following the successful completion of the Wells Fargo Exchange offer. Only when the Exchange Offer is deemed to be a Qualified Offer or the Poison Pill has been redeemed, amended or invalidated so that it is inapplicable to the Exchange Offer will First Interstate's stockholders be able to benefit from the Exchange Offer. 38. The failure of First Interstate's Board to declare Wells Fargo's Exchange Offer a "Qualified Offer" or to redeem or amend the Poison Pill violates the fiduciary duties owed to plaintiff because it will deny plaintiff meaningful access to or control over the assets of First Interstate and will hinder or prevent plaintiff from exercising its fundamental stockholder rights under Delaware law. Plaintiff will suffer irreparable injury as a result 18 of the loss of the unique opportunity to acquire control of First Interstate. Amendments to the Poison Pill 39. First Interstate's current Board could frustrate the power of any future Board, such as one that might be elected pursuant to the Consent solicitation, to redeem the Poison Pill by, for example, adding a "Dead Hand" provision. Under a "Dead Hand" provision, if a company's board is replaced pursuant to a stockholder consent solicitation, the power to redeem a pill is exercisable only by the former directors. Accordingly, the newly-elected board would be powerless to redeem a poison pill, even if it believed that it was in the best interests of the stockholders to do so. Similarly, First Interstate's Board might attempt to amend the Poison Pill to make it non-redeemable by anyone. 40. Because any such amendment would purport to prevent future directors from exercising certain corporate powers and to limit the ability of future directors to direct the management of the business and affairs of the corporation, any such amendment would violate Delaware law. 41. The adoption of any such amendment would vio- late First Interstate's Board's fiduciary duties because it would be designed to prevent future directors from acting in the best interests of the company and its stockholders. Any 19 such provision or amendment would represent an intentional effort by the current Board to nullify the effectiveness of a stockholder vote pursuant to the Consent Solicitation, thereby preventing plaintiff from exercising its fundamental stockholder rights under Delaware law. Bylaw 4(b)--the "Nominating Restriction" 42. First Interstate's Bylaws require that notice of a nomination of a candidate for director be "delivered to or mailed and received at the principal executive offices of the Corporation not less than thirty days nor more than sixty days prior to the meeting . . ." (the "Nominating Restriction"). The Nominating Restriction further states that "[o]nly persons who are nominated in accordance with [these] procedures shall be eligible for election as Directors of [First Interstate]". As there is no meeting in the consent solicitation context, the Nominating Restriction, if applied to a consent solicitation, would effectively prohibit the election of directors by written consent. 43. The Nominating Restriction, if applied to a consent solicitation, would impose an arbitrary restraint on stockholders that would frustrate their ability to exercise effectively the consent solicitation power given to than under Delaware law. 8 Del. C. S 228. The requirement of prior notification is clearly inconsistent with section 228 20 in that, among other things, Section 228 expressly permits stockholder action without prior notice. Accordingly, the Nominating Restriction cannot lawfully be applied to election of directors by consent solicitation. Delaware business Combination statute, Section 203 44. Section 203, entitled "Business Combinations with Interested Stockholders" (8 Del. C. ss. 203), applies to any Delaware corporation that has not opted out of the statute's coverage. First Interstate has not opted out of the statute's coverage. 45. Section 203 was designed to impede coercive and inadequate tender offers. Section 203 provides that if a person acquires 15% or more of a corporation's voting stock (thereby becoming an "interested stockholder"), such interested stockholder may not engage in a "business combination" (defined to include a merger or consolidation) with the corporation for three years after the interested stockholder becomes such, unless: (i) prior to the 15% acquisition, the Board of Directors has approved either the acquisition or the business combination, (ii) the interested stockholder acquires 85% of the corporation's voting stock in the same transaction in which it crosses the 15% threshold or (iii) on or subsequent to the date of the 15% acquisition, the business combination is approved by the Board of 21 Directors and authorized at an annual or special meeting of stockholders (and not by written consent) by the affirmative vote of at least 66-2/3% of the outstanding voting stock that is not owned by the interested stockholder. Section 203 does not apply if the business combination is proposed prior to the consummation or abandonment of and subsequent to the announcement of a proposed merger with another party. 46. Plaintiff anticipates that First Interstate will assert that Section 203 would apply to block any merger between Wells Fargo and First Interstate. Section 203 should not be applicable because Wells Fargo's Exchange offer and the second-step merger with wells Fargo or a subsidiary that would be expected to be consummated following successful completion of the Exchange offer has been proposed subsequent to announcement of the First Bank Proposed Merger, but before consummation or abandonment of the First Bank Proposed Merger, and is thus exempt from the section's restrictions under Section 203(b)(6). 47. Even if a merger between First Interstate and Wells Fargo is found not to fall within the Section 203(b)(6) exemption, the Court should conclude that under the circumstances, section 203 should not be applied to this transaction. Should the Court decline to do so, First Interstate's Board's fiduciary duties require the Board to 22 approve the Wells Fargo Exchange offer under Section 203(a)(1). Declaratory Relief 48. The Court may grant the declaratory relief sought herein pursuant to 10 Del, C. ss. 6501. First Interstate's Board's rejection of Wells Fargo's offers and its hasty decision to accept the First Bank Proposed Merger clearly demonstrate that there is a substantial controversy between the parties. The adverse legal interests of the parties are real and immediate in light of First Interstate's announced deal with First Bank. Moreover, First Interstate's unreasonable anti-takeover devices and other defensive measures will interfere with plaintiff's Proxy Solicitation, Exchange Offer and Consent Solicitation. 49. The granting of the requested declaratory relief will serve the public interest by affording relief from uncertainty and by avoiding delay and will conserve judicial resources by avoiding piecemeal litigation. Irreparable Injury 50. First Interstate's agreement to pay a Break- Up Fee to First Bank and to grant the Lock-Up Stock Option to First Bank will inhibit future bids to acquire or merge with First Interstate and will deny First Interstate's stockholders their right to receive maximum value for their 23 stock. First Interstate's use of or reliance upon its anti-takeover devices and other defensive measures to obstruct plaintiff's Exchange Offer, Proxy Solicitation and Consent Solicitation will hinder and prevent plaintiff from exercising its fundamental stockholder rights under Delaware law including, but not limited to, the right to conduct a proxy solicitation and consent solicitation. Plaintiff's resulting injury will not be compensable in money damages and plaintiff has no adequate remedy at law. COUNT ONE (INJUNCTIVE AND DECLARATORY RELIEF AGAINST FIRST INTERSTATE AND DEFENDANT DIRECTORS: THE, FIRST BANK PROPOSED MERGER, THE BREAK-UP FEE AND THE LOCK-UP STOCK OPTION ARE VOID AND UNENFORCEABLE) 51. Plaintiff repeats and realleges each and every allegation set forth in paragraphs 1 through 50 here- of. 52. Wells Fargo's Exchange Offer is substantially superior to the First Bank Proposed Merger. Wells Fargo's Exchange Offer will give First Interstate's stockholders considerably more for their shares than they would receive under the First Bank Proposed Merger. In addition, a combination of wells Fargo and First interstate will result in greater combined savings than the First Bank Proposed Merg- 24 er, and thus will provide greater long-term value to First Interstate stockholders. 53. First Interstate's decision to enter into the First Bank Proposed Merger was unreasonable and was in breach of the fiduciary duties owed to the First Interstate stockholders. In addition, First Interstate's decision to agree to pay First Bank a Break-Up Fee and to grant to First Bank a Lock-Up stock Option was also unreasonable under the circumstances. Neither the Break-Up Fee nor the Look-Up Stock Option was granted in order to induce higher bidding. Rather, the Break-Up Fee and Lock-Up Stock Option were intended to compel First Interstate's stockholders to accept an inferior price for their shares so that current management could be entrenched. Accordingly, the Break-Up Fee and Lock-Up Stock Option granted to First Bank are a breach of the fiduciary duties owed to First Interstate's stockholders. 54. Plaintiff seeks declaratory relief declaring the First Bank Proposed Merger, the Break-Up Fee and the Lock-Up Stock Option to be void and unenforceable and in- junctive relief enjoining the consummation of the First Bank Proposed Merger, the payment of any such Break-Up Fee and the issuance of First Interstate stock (or any payment of money) to First Bank pursuant to the Lock-up Stock Option. 25 In the alternative, plaintiff seeks an injunction compelling the defendant directors to terminate the First Bank Proposed Merger and invalidating the Break-Up Fee and Lock-Up Stock Option. 55. Plaintiff has no adequate remedy at law. COUNT TWO [INJUNCTIVE RELIEF AGAINST FIRST INTERSTATE AND THE DEFEN- DANT DIRECTORS: CONTINUING VIOLATION OF FIDUCIARY DUTIES) 56. Plaintiff repeats and realleges each and every allegation set forth in paragraphs I through 54 here- of. 57. If First Interstate modifies the First Bank Proposed Merger, considers any future merger or enters into any future agreement with First Bank, the First Interstate defendant directors will have the duty to eliminate the Break-up Fee, the Lock-Up Stock Option and any similar provision from such agreement in order to fulfill their obligation to seek the best value reasonably available on the stockholders' behalf. 58. The retention of the Break-Up Fee and-the Lock-Up Stock Option in any modified agreement or future agreement with First Bank would constitute an additional violation of the First Interstate Board's fiduciary duties. 26 59. Plaintiff therefore seeks injunctive relief enjoining First Interstate and the defendant directors from, including the Break-Up Fee, the Lock-Up Stock Option or any similar provision in any modified or future agreement with First Bank. 60. Plaintiff has no adequate remedy at law. COUNT THREE (INJUNCTIVE RELIEF AGAINST FIRST INTERSTATE AND THE DEFENDANT DIRECTORS; REDEEM THE POISON PILL 61. Plaintiff repeats and realleges each and every allegation set forth in paragraphs 1 through 59 here- of. 62. Wells Fargo's Exchange offer is non-coercive and non-discriminatory; it is fair to First Interstate stockholders; and it represents a substantial premium over the market price of First Interstate shares prior to the public announcement of the Wells Fargo October 17 letter and the First Bank Proposed Merger. 63. The Poison Pill is not proportionate to any threat posed by, or within the range of reasonable responses to, the Exchange offer. In addition, the Board's failure to determine that plaintiff's Exchange Offer is fair and in the best interests of First Interstate and its stockholders will 27 constitute a violation of its fiduciary duties to First Interstate stockholders. 64. Plaintiff seeks injunctive relief compelling First Interstate and the defendant directors to declare Wells Fargo's Exchange Offer to be a "Qualified Offer," to redeem the Rights under the Poison Pill, or otherwise to amend the Poison Pill to make it inapplicable to the Exchange Offer or to any follow-on merger. 65. Plaintiff has no adequate remedy at law. COUNT FOUR (INJUNCTIVE RELIEF AGAINST FIRST INTERSTATE AND DEFENDANT DIRECTORS: NO DEFENSIVE MEASURES) 66. Plaintiff repeats and realleges each and every allegation set forth in paragraphs 1 through 64 here- of. 67. Wells Fargo's Exchange offer is fair to First Interstate stockholders and it represents a substantial premium over the market price of First Interstate shares prior to the public announcement of Wells Fargo's October 17 letter and the First Bank Proposed Merger. 68. The Exchange Offer complies with all applicable laws, obligations and agreements including, without limitation, the securities laws, and all other legal obligations to which plaintiff is subject, including any con- 28 tractual and common law obligations that may be owed by plaintiff to First Interstate. 69. The Exchange Offer poses no threat to the interests of First Interstate's stockholders or to First Interstate's corporate policy and effectiveness. 70. Adoption of any provision or amendment of the Poison Pill (by a "Dead Hand" amendment or otherwise) or any other defensive measure against the Exchange Offer, Proxy Solicitation or Consent Solicitation that would have the effect of impeding that offer or solicitation or that would prevent a future Board of Directors from exercising its fiduciary duties would itself be a violation of the current Board's fiduciary duties to First Interstate stockholders. 71. Plaintiff seeks injunctive relief against any such defensive measure by First Interstate and the defendant directors to thwart the Exchange Offer, Proxy Solicitation or Consent Solicitation or the consummation of any subsequent merger in violation of their fiduciary duties. 72. Plaintiff has no adequate remedy at law. 29 COUNT FIVE (INJUNCTIVE AND DECLARATORY RELIEF AGAINST FIRST INTERSTATE AND DEFENDANT DIRECTORS: DELAWARE BUSINESS COMBINATION STATUTE, SECTION 203) 73. Plaintiff repeats and realleges each and every allegation set forth in paragraphs 1 through 71 here- of. 74. The Delaware Business Combination Statute, Section 203, if sought to be enforced against a merger between Wells Fargo and First Interstate, should be found inapplicable because any such merger would fall within the Section 203(b)(6) exemption. 75. Plaintiff seeks a declaratory judgment that any merger between Wells Fargo and First Interstate would fall within the Section 203(b)(6) exemption, or if it does not, that under the circumstances, section 203 should not be applied to prohibit such a merger. 76. Alternatively, plaintiff seeks injunctive relief to require First Interstate and the defendant directors to approve Wells Fargo's becoming an interested stockholder pursuant to the Exchange Offer or to approve any merger between Wells Fargo and First Interstate that is found not to fall within the 203(b)(6) exemption. 77. Plaintiff has no adequate remedy at law. 30 COUNT SIX (INJUNCTIVE AND DECLARATORY RELIEF AGAINST FIRST INTERSTATE AND DEFENDANT DIRECTORS: THE NOMINATING RESTRICTION 78. Plaintiff repeats and realleges each and every allegation set forth in paragraphs 1 through 76, hereof. 79. The Nominating Restriction in First Interstate's Bylaws, if applied to consent solicitations, effectively prohibits First Interstate stockholders from exercising their right to elect directors by written consent or though a consent solicitation. 80. The Nominating Restriction can be applied lawfully only to the nomination of directors prior to a stockholders' meeting and, as a matter of law, cannot be applied to the election of directors pursuant to plaintiff's Consent Solicitation. 81. Plaintiff is entitled to a declaration that the Nominating Restriction violates Delaware law if applied to consent solicitations and is, to that extent, void. Alternatively, plaintiff is entitled to a declaration that the Nominating Restriction does not apply to plaintiff's Consent Solicitation. 82. Plaintiff seeks injunctive relief against any attempt by First Interstate or the defendant directors to 31 apply the Nominating Restriction to the Consent Solicita- tion. 83. Plaintiff has no adequate remedy at law. COUNT SEVEN (INJUNCTIVE RELIEF AGAINST FIRST INTERSTATE AND DEFENDANT DIRECTORS: DUTY TO CONDUCT SALE ON A LEVEL PLAYING FIELD) 84. Plaintiff repeats and realleges each and every allegation set forth in paragraphs 1 through 82 here- of. 85. By meeting and sharing confidential information with at least three banks (First Bank, Norwest Corporation and Banc One corporation) in response to the letter from Wells Fargo offering a bid for First Interstate, First Interstate's directors initiated an active bidding process seeking to sell the company. Moreover, given the size of the proposed combination of First Interstate and First Bank, that combination, unless enjoined, would be the last practical opportunity for the First Interstate stockholders to obtain a control premium for their stock. Under those circumstances, the defendant directors had the duty (a) to be diligent and vigilant in examining critically the First Bank Proposed Merger and all alternative offers; (b) to act in good faith; (c) to obtain, and act with due care on, all material information reasonably available, including infor- 32 mation necessary to compare all offers to determine which of the transactions would provide the best value reasonably available to the stockholders; and (d) to negotiate actively and in good faith with Wells Fargo to that end. 86. By refusing to share the same confidential information with plaintiff that it shared with First Bank and other suitors, by entering into the First Bank Proposed Merger, by granting the Break-Up Fee and the Lock-Up Stock Option to First Bank, by adopting and/or refusing to redeem or amend the Poison Pill or to declare the Exchange Offer to be a Qualified Offer and by applying the Nominating Restriction to the Consent Solicitation, the defendant directors will breach or have already wilfully breached their fiduciary duties as fair and neutral stewards of First Interstate. 87. Those breaches of fiduciary duties have injured plaintiff and all other First Interstate stockholders and will continue to injure then by depriving them of the benefits of a fair and evenhanded bidding process and have put the sale of the company on an uneven playing field. 88. Plaintiff seeks injunctive relief enjoining the consummation of the First Bank Proposed Merger and the payment of any such Break-Up Fee or the issuance of First Interstate stock (or any payment of money) to First Bank pursuant to the Lock-Up Stock Option. In the alternative, 33 plaintiff seeks an injunction compelling the defendant directors to terminate the First Bank Proposed Merger and invalidating the Break-Up Fee and Lock-Up Stock Option. 89. Plaintiff has no adequate remedy at law. COUNT EIGHT (INJUNCTIVE AND DECLARATORY RELIEF AGAINST FIRST BANK: AIDING AND ABETTING BREACHES OF FIDUCIARY DUTY) 90. Plaintiff repeats and realleges each and every allegation set forth in paragraphs 1 through 88 here- of. 91. First Bank, with knowledge of the breaches of fiduciary duties alleged herein on the part of First Interstate and the defendant directors, substantially assisted in such breaches by agreeing to the Break-Up Fee and Lock-Up Stock Option and the First Bank Proposed Merger, thereby aiding and abetting First Interstate and the defendant directors in such breaches. 92. Plaintiff seeks a declaration that First Bank aided and abetted First Interstate and the defendant directors in their breach of fiduciary duty and injunctive relief against First Bank's participation in First Interstate's and the defendant directors' breaches of their fiduciary duties, including, but not limited to, an injunction prohibiting the acceptance of a Break-Up Fee or the receipt of any First 34 Interstate stock (or receipt of any money) from First Interstate pursuant to the Lock-Up Stock Option. 93. Plaintiff has no adequate remedy at law. COUNT NINE (DECLARATORY JUDGMENT AGAINST FIRST BANK: THE WELLS FARGO EXCHANGE OFFER, PROXY SOLICITATION AND CONSENT SOLICITATION DO NOT CONSTITUTE TORTIOUS INTERFERENCE WITH OR ANY OTHER BUSINESS-RELATED TORT IN CONNECTION WITH THE FIRST INTERSTATE-FIRST BANK PROPOSED MERGER) 94. Plaintiff repeats and realleges each and every allegation set forth in paragraphs 1 through 93 here- of. 95. First Interstate stockholders benefit from free, open and unfettered competitive bidding in the face of a proposed merger and will be the beneficiaries if permitted to consider the Wells Fargo Exchange Offer. Indeed, the First Bank Proposed Merger contemplates the possibility of a higher offer since it may be terminated by First Interstate following tile receipt of another takeover proposal. Moreover, the stockholders of First Interstate are entitled to know what offers are available to them at the time they vote. Accordingly, Wells Fargo's Exchange Offer, Proxy Solicitation and Consent Solicitation do not constitute and should not be deemed to be tortious interference with, or 35 any other business-related tort in connection with, the First Bank Proposed Merger. 96. Plaintiff seeks a declaratory judgment that neither the Exchange Offer, the Proxy Solicitation nor the Consent Solicitation constitutes tortious interference with, or any other business-related tort in connection with, the First Bank Proposed Merger. 97. Plaintiff has no adequate remedy at law. WHEREFORE, plaintiff respectfully requests that this Court enter judgment against all defendants, and all persons in active concert or participation with them, as follows: A. Declaring that the First Bank Proposed Merger, the Break-Up Fee and the Lock-Up Stock Option breach the fiduciary duties that the defendant directors owe to First Interstate's stockholders and are, therefore, void and unenforceable. B. Permanently enjoining First Interstate and the defendant directors from: (i) consummating the First Bank Proposed Merger; (ii) making any payments to First Bank pursuant to the Break-Up Fee or issuing any stock (or making any 36 payment of money) to First Bank pursuant to the Lock-Up Stock Option; (iii) taking any action that would interfere with the Exchange Offer, or entering into any agreement or arrangement or using any device that would interfere with, restrict or that would have the effect of restricting consummation of the Exchange offer, (iv) employing any defensive device to interfere with the Proxy Solicitation, (v) employing any defensive device or taking any steps to interfere with the Consent Solicitation or to interfere with, or limit the power of, directors elected pursuant to the Consent Solicitation to execute fully their fiduciary duties; (vi) permitting the "Distribution Date" to occur under the Poison Pill; and (vii) applying the Nominating Restriction to the Consent Solicitation. C. Permanently enjoining First Bank and all persons in active concert or participation with it from anticipating in the consummation of the Proposed Merger and the payment of the Break-Up Fee or issuance of First Interstate Stock (or any payment of money) to First Bank pursuant to the Lock-Up Stock Option. 37 D. Declaring that First Bank aided and abetted First Interstate and the defendant directors' breaches of their fiduciary duties. E. Compelling First Interstate and its defendant directors to declare Wells Fargo's Exchange Offer to be a "Qualified Offer," to redeem the Rights under the Poison Pill or otherwise to amend the Poison Pill to make it inapplicable to the Exchange Offer or to any follow-on merger. F. Declaring that the Nominating Restriction has no application to the Consent Solicitation or, in the alternative, that it violates Delaware law if applied to the Consent Solicitation and is, to that extent, void. G. Declaring that the Exchange Offer and any subsequent merger are exempt from Section 203 of the Delaware Corporation Law pursuant to Section 203(b)(6), or that Section 203 is otherwise inapplicable to the Exchange Offer and any subsequent merger or, in the alternative, compelling First Interstate and the defendant directors to approve the Wells Fargo Exchange Offer under Section 203. H. Declaring that the Wells Fargo Exchange offer, Proxy Solicitation and Consent Solicitation do not constitute tortious interference with, or any other business-related tort in connection with, the Proposed Merger. 38 I. Granting damages for all incidental injuries suffered as a result of defendants' unlawful conduct. J. Awarding plaintiff the costs and disbursements of this action, including attorneys' fees. K. Granting plaintiff such other and further relief as the Court deems just and proper. ---------------------------------- Jesse A. Finkelstein Todd C. Schiltz RICHARDS, LAYTON & FINGER One Rodney Square P.O. Box 551 Wilmington, DE 19899 (302) 658-6541 Attorneys for Plaintiff Of counsel: CRAVATH, SWAINE & MOORE Worldwide Plaza 825 Eighth Avenue New York, NY 10019 (212) 474-1000 39 IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE IN AND FOR NEW CASTLE COUNTY - - -------------------------------------------X WELLS FARGO & COMPANY, a Delaware cor- : poration, C.A. No. Plaintiff, : -against- : FIRST INTERSTATE BANCORP, a Delaware : corporation, FIRST BANK SYSTEM, INC., a Delaware corporation,, ELEVEN : ACQUISITION CORPORATION, a Delaware corporation, JOHN E. BRYSON, EDWARD M. : CARSON, JEWEL PLUMMER COBB, RALPH P. DAVIDSON, MYRON DU BAIN, DON C. FRIS- : BEE, GEORGE M. KELLER, THOMAS L. LEE, WILLIAM F. MILLER, WILLIAM S. RANDALL, : STEPHEN B. SAMPLE, FORREST N. SHUMWAY, WILLIAM E. B. SIART, : RICHARD J. STEGEMEIER, AND DANIEL M. : TELLEP, : Defendants. - - -------------------------------------------X STATE OF CALIFORNIA ) ) ss.: COUNTY OF SAN FRANCISCO ) GUY ROUNSAVILLE, JR., being duly sworn, deposes and says: I am Executive Vice President and Chief Counsel of plaintiff, Wells Fargo & Company, and I know the allegations of the foregoing Verified Complaint to be true of my own 40 knowledge, except as to matters alleged upon information and belief. As to those matters, I believe them to be true. Sworn to before me this ______ day of November 1995 Notary Public 41 -----END PRIVACY-ENHANCED MESSAGE-----