-----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, MjE/PVmktkg1tS89Ro6ZiZ74zxuSNT5M+aPtBJgYqCo68Fh2Oyh+QCQ7EvtyQk5x 1FMXt3FXD90YDm4SDtEY3g== 0000950172-95-000477.txt : 19951220 0000950172-95-000477.hdr.sgml : 19951220 ACCESSION NUMBER: 0000950172-95-000477 CONFORMED SUBMISSION TYPE: SC 14D9/A PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 19951219 SROS: NYSE SROS: PSE SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: FIRST INTERSTATE BANCORP /DE/ CENTRAL INDEX KEY: 0000105982 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 951418530 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D9/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-11891 FILM NUMBER: 95602653 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: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 951418530 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D9/A 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/A 1 SCHEDULE 14D9 - AMENDMENT NO. 4 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 AMENDMENT NO. 4 TO 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 First Interstate Bancorp ("First Interstate") hereby amends and supplements its statement on Schedule 14D-9 initially filed with the Securities and Exchange Commission on November 20, 1995, as amended by Amendments No. 1 through No. 3 thereto (the "Schedule 14D-9"). Unless otherwise indicated herein, each capitalized term used but not defined herein shall have the meaning assigned to such term in the Schedule 14D-9. ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED. The information set forth in the "Litigation" subsection of Item (8) of the Schedule 14D-9 is hereby amended and supplemented by the following information: On December 12, 1995 the plaintiffs in the Delaware Consolidated Action were granted leave to file a Third Amended and Supplemental Class Action Complaint (the "Third Amended Complaint"). In addition to the claims previously alleged in the Second Amended Complaint, the Third Amended Complaint alleges that the First Interstate Board, during its evaluation of potential strategic partners, failed to consider adequately that FBS' repurchases of its own stock "artificially inflated or supported" the market price of FBS' common stock and therefore effected negatively the fairness of the consideration offered in the Merger. The Third Amended Complaint also alleges that First Interstate's Schedule 14D-9, press release and letter to shareholders, all dated and filed with the SEC on November 20, 1995, contain untrue statements of material facts and omit other material facts. In addition to the relief previously requested, the Third Amended Complaint requests, among other things, an order compelling the defendants to make supplemental disclosure of the allegedly omitted facts. The defendants intend to defend vigorously against these new claims. On December 18, 1995 First Interstate filed suit against Wells in the Federal District Court in Delaware (the "Delaware Federal Action"). In its complaint, First Interstate alleges that Wells has embarked upon a campaign of deceit and manipulation designed to undermine the Merger and force the First Interstate Board to accept the Wells Offer. First Interstate alleges that Wells' campaign has included non-disclosure and misrepresentation of numerous material facts in violation of Sections 14(a) and 14(e) of the Securities Exchange Act of 1934, as amended. First Interstate requests, among other things, injunctive relief ordering Wells to publicly disclose and correct its violations of the securities laws. First Interstate also requests an order enjoining Wells from pursuing the Wells Offer until such time in 1996 as the 1996 earnings and other estimates disseminated by Wells can be verified or disproved through the reporting of actual earnings. First Interstate intends to pursue vigorously these claims. ITEM 9. MATERIAL TO BE FILED AS EXHIBITS. The following Exhibits are filed herewith: Exhibit 45: Third Amended and Supplemental Class Action Complaint in In re First Interstate Bancorp Shareholder Litig. (Delaware Chancery Court). Exhibit 46: Complaint in First Interstate Bancorp v. Wells Fargo & Company, et al. (Delaware Chancery Court). 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: December 19, 1995 EX-99 2 EXHIBIT 45 - THIRD AMENDED COMPLAINT IN DELAWARE CONSOLIDATED ACTION IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE IN AND FOR NEW CASTLE COUNTY - - - - - - - - - - - - - - - - - x : Consolidated IN RE FIRST INTERSTATE BANCORP C.A. No. 14623 SHAREHOLDER LITIGATION, : THIRD AMENDED AND : 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 record and beneficial holders of First Interstate common stock as of October 17, 1995, and their successors in interest. Excluded from the class are defendants 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 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. Paul Hazen ("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 17, 1995, Hazen telephoned Siart and informed him that Wells Fargo intended to deliver a letter concerning a merger proposal to the Company and would like to meet with Siart to discuss it. Siart indicated that he saw no reason to meet with Hazen. Later that day, Wells Fargo's written merger proposal was delivered to the Company. 17. 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 stock, 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. 18. 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. 19. In response to Wells Fargo's announcement on October 18, 1995, the Company'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 20. 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. 21. Thereafter, and prior to November 6, 1995, Wells Fargo offered to increase its offer to .65 shares of Wells Fargo common stock per each First Interstate share (the "amended WF proposal") . In response, 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. 22. 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, purportedly valuing the Company's stock at $129.68 per share, for a total value of $10.05 billion. 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. Executives at First Bank and First Interstate quickly sought to justify the 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. 27. When announced, the consideration offered by the First Bank Merger was lower than that offered in the original and amended WF proposals. In an effort to bolster its stock price and thereby create the appearance that the First Bank Merger provided consideration competitive to that offered Company shareholders in the original and amended WF proposals, beginning on or about November 7, 1995, First Bank, through its broker, Donaldson, Lufkin & Jenrette ("DLJ"), began secretly purchasing large amounts of its common stock in connection with a previously announced repurchase program. As a result, the market price of First Bank's stock at relevant times (i.e., shortly after the announcement of the First Bank Merger and at the time the Wells Fargo Offer (described below) was considered by the Individual Defendants) was artificially inflated or supported. Certain valuations and analyses considered by the Individual Defendants relating to the First Bank Merger and Wells Fargo Offer were therefore erroneous and inaccurate. 28. 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 l3, 1995, Wells Fargo announced that it would commence a tender offer (the "Offer") for First Interstate stock. Pursuant to the terms of its 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 Offer is $143.58 per First Interstate share, or approximately $10.9 billion in total. 29. In addition, Wells Fargo also announced on November 13, 1995 that it intended 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 would 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. 30. On or about November 20, 1995, the Individual Defendants caused First Interstate to file its Schedule 14D- 9 (the "14D-9") with respect to the Offer. In the 14D-9, the Company represented that it was committed to completing the First Bank Merger and recommended that the Company's stockholders not tender their shares in the Offer. In reaching these decisions, and in violation of their fiduciary obligations, the Individual Defendants failed to adequately consider First Bank's repurchase of its shares and the effect that had on the fairness of the consideration offered in the First Bank Merger. 31. The l4D-9 was false and misleading, and failed to provide sufficient information to Company shareholders to enable them to make an informed decision as to whether or not to tender their shares into the Offer, in at least the following respects: (a) First Bank's Repurchase Program. The 14D-9 failed to disclose that shortly after the announcement of the First Bank Merger, First Bank, through DLJ, purchased large amounts of its common stock pursuant to the repurchase program described above; that the market value of First Bank's stock at relevant times was thereby artificially inflated or supported by those purchases; and that as a result, certain valuations and analyses relating to the fairness of the First Bank Merger consideration and the Individual Defendants' recommendation to reject the Offer referred to in the 14D-9 were erroneous and inaccurate. As a result, First Interstate shareholders are unable to obtain an accurate reading of the value of the First Bank Merger consideration, or to meaningfully compare the value of that transaction with that of the Offer. (b) Failure to Disclose Comparative Implied Purchase Prices of the Offer and First Bank Merger. In order to compare the respective benefits of the Offer and First Bank Merger, shareholders should have been given information in the 14D-9 concerning the comparative purchase prices implied by the respective transactions (i.e., identifying the respective implied purchase prices of the Offer compared to the First Bank Merger at certain relevant dates such as the date of the First Bank Merger agreement and the date of the 14D-9), and the extent to which the Individual Defendants relied upon such information. In fact, such information is not included in the 14D-9. (c) Failure to Disclose that First Interstate Concurred With Wells Fargo's Cost Savings Estimates. As noted in the 14D-9, one of the factors relied upon by the Individual Defendants in approving the First Bank Merger and rejecting the Offer was the comparative cost savings and operating efficiencies available from a First Bank-Company merger versus a Wells Fargo-Company combination. In that regard, although the 14D-9 discloses that Hazen and Siart considered Wells Fargo's cost savings estimates resulting from a First Interstate-Wells Fargo merger at meetings held by them on October 26 and 31, 1995, it fails to disclose that according to Wells Fargo, Siart stated at those meetings that First Interstate agreed with Wells Fargo's cost savings estimates. (d) Failure to Accurately Disclose Information Relating to the Decision of the Individual Defendants to Approve the First Bank Merger and Recommend Rejection of the Offer. The 14D-9 cites a series of "material factors" considered by the Individual Defendants in approving the First Bank Merger and recommending rejection of the Offer. These are false and misleading for the reasons described below: (i) The 14D-9 states that the Company has a "longstanding desire to achieve greater geographic diversification." In fact, four out of its five most recent significant acquisitions have been in California, and the company has sold its operations in Oklahoma and part of its operation in New Mexico. (ii) The 14D-9 states that a Wells Fargo-Company merger would create a materially increased exposure to real estate lending which "is inconsistent with First Interstate's credit philosophy." In fact First Interstate's internal policy has been and continues to be to increase its real estate loan portfolio. (iii) The 14D-9 states that the Company's Board had "concerns" that the trading price of Wells Fargo common stock in relation to book value and earnings is "among the highest in the banking industry," which might not be sustained. However, it fails to disclose the First Bank's stock price, which was considered by the Individual Defendants in rejecting the Offer, was artificially inflated or sustained as a result of First Bank's repurchase of shares described above and could not be sustained; and as a result, the First Bank stock price to book value and earnings ratios considered by the Individual Defendants were inaccurate; 32. Also on or about November 20, 1995, the Individual Defendants caused First Interstate to disseminate a press release (the "Nov. 20 press release") and letter to its shareholders (the "letter to shareholders") which described the Individual Defendants' recommendation to reject the Offer and reaffirm the First Bank Merger. These documents were false and misleading since they failed to disclose First Bank's post November 5, 1995 repurchase of shares and other related matters referred to above. 33. 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 pill 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. 34. Further, By-law 4(b) of First Interstate's By-laws (the "By-Law") requires 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 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. 35. 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 offer without the consent of the Individual Defendants. FIRST CLAIM FOR RELIEF FOR BREACH OF FIDUCIARY DUTY AND AIDING AND ABETTING AGAINST ALL DEFENDANTS 36. Plaintiffs repeat and reallege paragraphs 1 through 35 as if fully set forth herein. 37. 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. 38. 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. 39. 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. 40. 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 currently provides less consideration than the WF original and amended proposals, their failure to adequately consider other offers, including Wells Fargo's Offer, and their failure to adequately consider the effect of First Bank's repurchases of its own stock on the fairness of the First Bank Merger 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. 41. 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, potential offerors is clearly motivated by the desire of the Individual Defendants to protect their own substantial salaries, perquisites and prestigious positions with the Company. 42. As a result of the foregoing, the Individual Defendants have breached their fiduciary duties owed to First Interstate's stockholders and have used and are using First Interstate as an instrumentality to effect those breaches of fiduciary duties. 43. Defendants First Bank and Eleven Acquisition Corporation have knowingly and substantially participated in and are benefiting by the breaches of fiduciary duties by the Individual Defendants and, therefore, are liable as aiders and abettors thereof. Indeed, the First Bank Merger could not proceed without the willing and active participation of First Bank and Eleven Acquisition Corporation. First Bank's active and knowing participation in the Individual Defendants' wrongdoing includes First Bank's undisclosed repurchases of its stock described above designed to artificially inflate the market price of its stock, and support the purported fairness of the First Bank Merger. 44. 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. 45. Plaintiffs and the other members of the Class have no adequate remedy at law. SECOND CLAIM FOR RELIEF AGAINST THE INDIVIDUAL DEFENDANTS 46. Plaintiffs repeat and reallege paragraphs 1 through 45 as if fully set forth herein. 47. The statements contained in the 14D-9, the Nov. 20, 1995 press release and letter to shareholders contained untrue statements of material fact and omitted to state material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading. 48. By reason of the foregoing, the Individual Defendants have violated their fiduciary duties to plaintiffs and members of the Class by failing to deal with the Company's stockholders with complete candor. 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 by-law 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 the defendants, after fully considering First Bank's repurchases of its shares and their impact upon the market price of First Bank's stock to reconsider their decision to (i) complete the First Bank Merger and (ii) recommend that Company shareholders not tender their shares into the Offer; 7. 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 them as a result of the wrongs complained of herein; 8. enjoining First Bank or anyone affiliated with it or any of the defendants from making any further purchases of First Bank stock during the pendency of the Offer or any other transaction involving the acquisition of First Interstate, its assets or its stock; 9. compelling the Individual Defendants to disclose all pertinent information regarding First Bank's repurchases of its shares; 10. compelling defendants to make supplemental disclosures of all other material information necessary to enable First Interstate shareholders to make an informed decision with respect to the Offer and the First Bank Merger; 11. directing the Individual Defendants to employ the poison pill in a manner consistent with maximizing shareholder value; 12. awarding plaintiffs the costs and disbursements of this action, including a reasonable allowance for plaintiffs' attorneys' and experts' fees; and 13. 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 P. 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 CO-LEAD COUNSEL FOR PLAINTIFFS BERNSTEIN LIEBHARD & LIFSHITZ 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, ESQ. 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 3 EXHIBIT 46 - FIRST INTERSTATE COMPLAINT IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE FIRST INTERSTATE BANCORP, a : Delaware corporation, : No. : Plaintiff, : : v. : : WELLS FARGO & COMPANY, a : Delaware corporation, PAUL HAZEN, : H. JESSE ARNELLE, WILLIAM R. : BREUNER, WILLIAM S. DAVILA, : RAYBURN S. DEZEMBER, ROBERT K. : JAEDICKE, ELLEN M. NEWMAN, PHILIP : J. QUIGLEY, CARL E. REICHARDT, : DONALD B. RICE, SUSAN G. SWENSON, : CHANG-LIN TIEN, JOHN A. YOUNG and : WILLIAM F. ZUENDT, : : Defendants. : COMPLAINT FOR PRELIMINARY AND PERMANENT INJUNCTIVE AND DECLARATORY RELIEF First Interstate Bancorp ("First Interstate" or the "Company"), by its attorneys, for its Complaint alleges on knowledge as to itself and upon information and belief as to all other matters as follows: Nature of the Claims 1. The claims alleged herein arise out of Wells Fargo & Company's and the individual defendant directors' (collectively referred to as "Wells") violations of the federal securities laws in connection with its unsolicited offer for the securities and control of First Interstate (the "Hostile Offer"). 2. Wells has long desired to achieve substantial growth in California, its primary market, but has been unable to achieve that growth through its own operations. Consequently, Wells devised a strategy by which it would grow through an acquisition of First Interstate. This strategy would also enable Wells to eliminate an important competitor in California. 3. Wells has anticipated acquiring First Interstate for a considerable period of time. Wells has publicly admitted that an acquisition of First Interstate was "imperative" to achieving its financial strategy. Wells proposed to acquire First Interstate on October 17, 1995 and publicly announced its Proposal (the "Wells Proposal") on October 18, 1995. Wells proposed converting each share of First Interstate common stock into 0.625 shares of Wells common stock. 4. Following its receipt of the Wells Proposal, the First Interstate board of directors (the "Board") carefully considered the Proposal and other alternatives available to the Company. 5. On November 5, 1995, the First Interstate Board met to consider the Wells Proposal as well as a proposal for a strategic merger with First Bank System, Inc. ("First Bank"). After carefully considering the merit of these strategic alternatives and their findings regarding other alternatives, the First Interstate Board voted to reject the Wells Proposal and to approve a strategic merger with First Bank (the "FI/FB Merger"). 6. Wells was intensely frustrated by First Interstate's decision to merge with First Bank rather than Wells. On November 13, 1995, Wells announced that it intended to commence its Hostile Offer for all of First Interstate's outstanding stock. Subsequently, Wells embarked upon a campaign of deceit and manipulation (the "Campaign") designed to undermine the FI/FB Merger and force the First Interstate Board to accept Wells' Hostile Offer. 7. Beginning with its public announcement of the Hostile Offer, Wells has injected into the marketplace misleading information about the FI/FB Merger and the Hostile Offer and has purposely manipulated its stock price to make its Hostile Offer appear more attractive. 8. As set forth in detail below, Wells' Campaign, manifested by Wells' non-disclosure and misrepresentation of numerous material facts, was conducted in violation of Sections 14(a) and 14(e) of the Securities Exchange Act of 1934 (the "Exchange Act") and the rules promulgated thereunder. Among Wells' repeated violations of the federal securities laws are the following: a. Wells has disseminated false and deceptive analyses of the relative economic benefits of the FI/FB Merger and the Hostile Offer. These analyses overstate the benefits of the Hostile Offer and understate the benefits of the FI/FB Merger; b. Wells has falsely claimed that its Hostile Offer can be consummated on the same timetable as the FI/FB Merger, thus concealing various obstacles to regulatory approval unique to its Hostile Offer; c. In violation of Rule 10b-6, Wells held meetings with securities analysts at which meetings Wells made statements with the intent of manipulating the price of its stock; and d. In violation of Rule 10b-13, Wells falsely represented to the public that it could purchase First Interstate shares after its announcement of the Hostile Offer, notwithstanding that Rule's prohibition against such purchases. 9. Wells' Campaign is intended to interfere with the ability of First Interstate's shareholders to fairly and accurately evaluate the merits of the FI/FB Merger. 10. As intended, Wells' Campaign has deprived First Interstate's shareholders and the investing public of the ability to exercise their right to make informed decisions as to whether to buy, sell or hold First Interstate stock, and how to vote on the FI/FB Merger. First Interstate's shareholders and the investing public are being forced to make important decisions in a market distorted by the defendants' illegal conduct and false and misleading statements. 11. Accordingly, by its Complaint, First Interstate seeks injunctive relief requiring Wells to fulfill its obligations under the federal securities laws by correcting its false and misleading statements, and disclosing all material information so that First Interstate shareholders can make informed decisions about the FI/FB Merger and the Hostile Offer. Absent such relief, First Interstate and its shareholders will be irreparably deprived of the full and accurate information guaranteed by federal law to allow them to make informed investment decisions and, thus, they may lose the unique opportunity presented by the FI/FB Merger. 12. Unless enjoined, Wells will continue to cause serious irreparable injury to First Interstate, its shareholders, and the investing public. 13. With this Complaint, First Interstate requests that this Court enjoin Wells from pursuing its Campaign, and enter an order: a. declaring that Wells has conducted its Campaign in violation of the federal securities laws; b. requiring Wells to publicly disclose its violations of the securities laws; c. requiring Wells to correct its numerous misstatements concerning the FI/FB Merger and the Hostile Offer; d. enjoining Wells from pursuing its Hostile Offer until it reports its actual results for the future performance Wells illegally estimated during its distribution period; and e. enjoining Wells from committing further violations. JURISDICTION AND VENUE 14. This Court has subject matter jurisdiction over this action pursuant to Section 27 of the Exchange Act, 15 U.S.C. SECTION 78aa, and 28 U.S.C. SECTION 1331. The claims alleged herein arise under Sections 14(a) and 14(e) of the Exchange Act and the rules and regulations promulgated thereunder by the Securities and Exchange Commission ("SEC"). In connection with the unlawful conduct complained of herein, Wells has directly and indirectly used the means and instrumentalities of interstate commerce and of the mails. 15. Venue is proper in this district, under Section 27 of the Exchange Act, 15 U.S.C. SECTION 78aa, because Wells transacts its affairs in the District of Delaware, where it is incorporated. THE PARTIES AND RELEVANT NON-PARTIES 16. Plaintiff, First Interstate, is a Delaware corporation and bank holding company. Through its subsidiaries, First Interstate provides banking services and banking-related financial services in California and 13 other western states. 17. Defendant, Wells, is a Delaware corporation and a bank holding company registered under the Bank Holding Company Act of 1956, as amended, with its principal place of business in California. 18. First Bank, not a party to this action, is a Delaware corporation headquartered in Minneapolis, Minnesota. First Bank is a bank holding company, which, through its subsidiaries, provides complete financial services to individuals and institutions through 8 banks, a savings association and other financial companies with 366 offices, located primarily in the 11 states of Minnesota, Colorado, North Dakota, South Dakota, Montana, Illinois, Wisconsin, Iowa, Kansas, Nebraska and Wyoming. 19. Defendant, Paul Hazen, has been, at all relevant times, the Chairman and Chief Executive Officer of Wells. 20. William F. Zuendt, H. Jesse Arnelle, William R. Breuner, William S. Davila, Rayburn S. Dezember, Robert K. Jaedicke, Ellen M. Newman, Philip J. Quigley, Carl E. Reichardt, Donald B. Rice, Susan G. Swenson, Chang-Lin Tien, and John A. Young are directors of Wells and have been directors of Wells at all relevant times. FACTUAL BACKGROUND A. Background of the Wells Proposal 21. Wells first indicated its interest in acquiring First Interstate as far back as February 1994, when it sent an unsolicited letter to First Interstate proposing a merger of the two companies. First Interstate's board of directors considered Wells' proposal and determined to decline to pursue a merger with Wells in favor of pursuing other strategies aimed at enhancing shareholder value with First Interstate remaining as an independent company. 22. Wells renewed its unsolicited efforts to acquire First Interstate in the fall of 1995. In August 1995, Wells' Chairman and Chief Executive Officer, Paul Hazen, told William Siart, First Interstate's Chairman and Chief Executive Officer, that the acquisition of First Interstate was a strategic "imperative" for Wells. On October 17, 1995, Mr. Hazen delivered a letter to First Interstate proposing a merger of Wells and First Interstate. 23. Wells made its proposal public on October 18, 1995. Later that day, three large regional bank holding companies, including First Bank, contacted First Interstate to express their interest in initiating discussions to assess the merits of a strategic partnership. First Interstate's senior management, together with First Interstate's financial advisors, Goldman Sachs & Co. ("Goldman Sachs") and Morgan Stanley & Co. ("Morgan Stanley"), 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 First Interstate, and they continued to evaluate the options of remaining independent and a possible transaction with Wells. 24. On October 26, 1995, Mr. Siart met with Mr. Hazen to discuss the possibility of pursuing a merger of First Interstate and Wells. Among other things, they 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. 25. Messrs. Siart and Hazen were joined later that day by Mr. William Bogaard, First Interstate's General Counsel, Mr. 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. 26. Mr. Buffett stated that he had studied both companies in some detail and stated, among other things, that the exchange ratio of .625 made sense to him. 27. Mr. Roberts stated 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 was required in order to make the transaction equitable. 28. During these discussions, Mr. Hazen stated that although Wells might consider increasing the exchange ratio, the maximum exchange ratio it might be prepared to offer was .650. 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 .650 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. 29. On October 31, 1995, Messrs. Siart and Hazen met again. Extensive discussions concerning potential cost savings, operating efficiencies and revenue losses also took place, with Mr. Siart voicing 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 .680. Mr. Hazen then excused himself from the meeting. Upon his return, he stated that he had consulted with Mr. Buffett, reiterated that the maximum exchange ratio that Wells and its major shareholder would consider was .650 and stated that Mr. Buffett fully concurred with this decision. 30. On November 1, 1995, Messrs. Siart and Hazen spoke by telephone. Mr. Siart asked Mr. Hazen if he had reconsidered his position. Mr. Hazen stated that his position remained unchanged and that .650 was the maximum exchange ratio that Wells would consider. B. The FI/FB Merger 31. On November 5, 1995, after considering and rejecting the Wells Proposal, the First Interstate Board considered and approved a proposed strategic alliance with First Bank, a high-growth institution widely recognized for its sound management, extraordinarily efficient operations and sophisticated multi-state banking experience. The FI/FB Merger offers substantial economic benefits to First Interstate's shareholders that are not available from the Hostile Offer. Among these expected benefits are: a. The FI/FB Merger, which will be accounted for as a pooling-of-interests, will not create goodwill and will, therefore, maximize future shareholder earnings and value. A Wells/First Interstate combination, in contrast, would rely on purchase accounting and would create more than $8 billion in additional goodwill and other intangibles, the annual amortization of which would dramatically reduce reported earnings for up to 25 years. b. The FI/FB Merger will not cause any substantial loss of revenue, because the cost savings will be achieved primarily by consolidation of "back office" and operations systems. A combination of Wells with First Interstate, in contrast, would result in sizable revenue losses due to the large number of shutdowns of California branches, massive layoffs of personnel involved in revenue-generating corporate banking and trust activities, and the large number of branch divestitures expected to be necessary to avoid antitrust violations. c. The FI/FB Merger is expected to lead to substantial increases in reported earnings per share ("EPS") for First Interstate shareholders in 1996, while a Wells/First Interstate union, by contrast, would result in an EPS decrease in the same period. d. The combined FI/FB entity will reduce the percentage of First Interstate's California assets from over 40% to less than 30%. A combination with Wells would lead to excessive concentration in the California market, where 70% of the combined companies' total assets would be located, and a resulting increased risk profile. e. First Interstate's shareholders will own 58% of the combined FI/FB entity but would own only 52% of a combined Wells/First Interstate entity. 32. After the First Interstate Board approved the FI/FB Merger, First Interstate entered into an Agreement and Plan of Merger dated as of November 5, 1995 (the "Merger Agreement") to combine, in a strategic merger of equals, with First Bank. The FI/FB Merger was announced to the Public on November 6, 1995. 33. Pursuant to the Merger Agreement, each holder of First Interstate common stock will receive 2.6 First Bank shares for each share of First Interstate common stock. Also pursuant to the Merger Agreement, the FI/FB Merger is subject to the approval of First Interstate's shareholders. After the FI/FB Merger, the new institution, which will retain the First Interstate name, will have $92.4 billion in assets, $7.3 billion in shareholders' equity and the largest service territory west of the Mississippi. C. Wells' Hostile Offer 34. On November 13, 1995, Wells announced that it intended to commence a hostile exchange offer for all outstanding shares of common stock of First Interstate. Pursuant to that Hostile Offer, Wells stated its intent to offer to exchange two-thirds of a share of Wells common stock for each outstanding share of First Interstate common stock. 35. Also on November 13, 1995, Wells announced its intent to file preliminary proxy materials with the SEC for use in connection with the solicitation of First Interstate shareholders to vote against the approval of the FI/FB Merger at any meeting of shareholders of First Interstate to be called to consider the FI/FB Merger. 36. Concurrently, Wells announced that it would file with the SEC preliminary materials for the solicitation of written consents from shareholders of First Interstate to remove First Interstate's current board of directors 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. D. Wells' Campaign of Deceit and Manipulation 37. Wells, aware that its Hostile Offer is unlikely to prevail based upon a fair assessment of its merits relative to the merits of the FI/FB Merger, has resorted to its Campaign of deceit and manipulation designed to artificially inflate the value of the Hostile Offer. To wage this Campaign, Wells has knowingly and willfully made false statements in the Registration Statement on Form S-4 it filed on November 27, 1995 ("S-4"), its Preliminary Proxy Materials filed on December 5, 1995 ("Preliminary Proxy Materials"), its press releases and in its widely reported representations to securities analysts. Wells' Exaggeration of Its Cost Savings 38. Wells has repeatedly made false and misleading material statements about the projected cost savings it expects to realize from its acquisition of First Interstate pursuant to the Hostile Offer. 39. In its S-4, Preliminary Proxy Materials, and at its meetings with securities analysts, Wells has asserted that it will be able to cut expenses at First Interstate by $500 million more than First Bank. This translates into a claim that Wells will reduce approximately 44% of First Interstate's expense base, or cut $1 billion from First Interstate's anticipated 1996 expenses of $2.3 billion. 40. Wells has implied that the $500 million in cost reductions beyond First Bank's will be realized principally by reducing First Interstate's expenses in California. 41. Wells has made statements to this effect in its S-4, Preliminary Proxy Materials and to securities analysts, notwithstanding its knowledge that it cannot use the California overlap to reduce First Interstate's expenses by $500 million because First Interstate's California branch and business line expenses total only $495 million. Even by closing every one of First Interstate's California facilities -- which Wells does not purport to intend to do -- Wells could not cut $500 million in expenses. 42. In an effort to make its $500 million cost savings plan appear plausible, Wells, in its S-4, falsely characterizes its proposed combination with First Interstate as an "in market" transaction, i.e., a transaction between entities located in and serving the same market, thereby creating far greater opportunities for consolidation and cost reductions than are available in out-of-market or "market extension" transactions. (S- 4 at 20) Yet, as Wells well knows, First Interstate has only about 44% of its deposits and 37% of its branches in California, and less than one-fourth of First Interstate's expenses are attributed to California. 43. Wells purposely compares its projected cost savings to cost savings achieved in true "in-market" transactions to make it appear that its projects' cost savings -- about 44% of First Interstate's base expenses -- are reasonable. Wells' comparison appears in a chart in its S-4. That chart was subsequently published in the American Banker on November 30, 1995 (the "Chart"). 44. While a Wells/First Interstate combination would involve an overlap of only 44% of deposits and 37% of branches, the true "in-market" transactions Wells chose to compare itself with in the Chart involved (a) 99% deposit/branch overlap (Fleet Shawmut), (b) 100% overlap (UJB/Summit), (c) 82%/73% (Corestates/Meridian), (d) 90%/70% (Chemical/Chase), and (e) 62%/70% (PNC/Midlantic). Thus, Wells' Chart was intended to be, and is, patently deceptive. 45. While exaggerating its own expense savings, Wells, in the Chart, also intentionally misleads First Interstate's shareholders and the public about the feasibility of the savings projections for the FI/FB Merger. For each of the "market extension" transactions on the Chart, Wells reported the percentage of cost savings for each transaction as a percentage of the acquired entity's anticipated stand-alone expenses. Yet, Wells presents the cost savings for the FI/FB Merger as a percentage of First Bank's expenses, not of First Interstate's expenses. This manipulation was intended to make the cost savings projected by First Bank -- 42% -- appear to be unreasonably large when compared to the 15- 24% range achieved in other comparable transactions. In its Preliminary Proxy Materials, Wells uses this manipulation to attack First Bank's projected cost savings for the FI/FB Merger as "two to three times those projected in comparable transactions." (Preliminary Proxy Materials at 9) In fact, as Wells knows, when properly expressed as a percentage of First Interstate's expenses, the resulting figure -- 22% -- is within the range of cost savings achieved in other transactions. Wells' Grossly Understated Revenue Loss Estimates 46. In addition to intentionally exaggerating the projected expense cuts attainable in a Wells/First Interstate merger, Wells has intentionally understated the projected revenue losses it will suffer from its announced slashing of First Interstate's operations. 47. Wells has publicly stated that the measures necessary to achieve $1 billion in cost savings in a merger between Wells and First Interstate will result in revenue losses of only $100 million in California. This amounts to a loss of only 7% of First Interstate's California-based revenue, even though Wells has admitted that it intends to close 85% of First Interstate's California branches. 48. Wells knows that a merger between First Interstate and Wells will result in revenue losses well in excess of $100 million. That Wells' understatement of revenue loss was knowing and deliberate is evidenced by Wells' own experience in its 1986 merger with Crocker National Bank ("Crocker"). In connection with that merger, Wells suffered an attrition rate in demand deposits of 28.1% when it closed 62% of Crocker's branches. While Wells discusses its Crocker experience in its S-4 (see S-4 at 21), the S-4 understates the revenue loss in that transaction because it fails to disclose that other California banks' demand deposits increased during the same period that Crocker's were declining. 49. In order to mask its understatement of the revenue losses attendant to a Wells/First Interstate merger, Wells, in its S-4, manipulates the projected EPS resulting from such a transaction. In its S-4, Wells appropriates First Bank's projections for First Interstate's 1996-97 revenue and then mismatches them with First Interstate's estimated 1995 expenses. (S-4 at 22) Through this contrivance, Wells conjures up approximately $200 million in additional annual pre-tax earnings. Wells' Misrepresentations Regarding Accounting Methods 50. Wells' extensive repurchases of its own stock in recent years has forced Wells to account for its proposed acquisition of First Interstate under the "purchase" method of accounting rather than under the more advantageous "pooling-of-interests" accounting rules. Under purchase accounting rules, Wells would be forced to record more than $8 billion in additional goodwill and other intangibles for an acquisition of First Interstate. Purchase accounting rules require that this $8 billion sum be amortized against reported earnings for up to 25 years, which will significantly depress those earnings. In addition, purchase accounting rules will reduce Wells' financial flexibility by potentially limiting Wells' ability to engage in future acquisitions, and those same rules may raise regulatory problems for Wells. 51. First Bank, on the other hand, will be able to record the FI/FB Merger under the "pooling-of- interests" accounting method, under which the FI/FB entity will not record any additional goodwill, and, therefore, will avoid the severe disadvantages which Wells would encounter if it combined with First Interstate. 52. Aware that First Bank's ability to use the pooling method makes the FI/FB Merger substantially more attractive than the Hostile Offer, Wells has attempted to deceive First Interstate's shareholders and the public into believing that purchase accounting will have no impact on First Interstate's shareholders. 53. Despite the obvious advantages of pooling accounting, Wells, in its Preliminary Proxy Materials, falsely asserted that "there is no meaningful difference between purchase accounting and pooling of interests accounting." (Wells Preliminary Proxy at 11; see also S-4 at 23) 54. Belying its claim that there is no meaningful difference between the purchase and pooling accounting methods, however, Wells has falsely questioned First Bank's ability to use the pooling-of-interests technique. On November 22, 1995, Wells' Chief Financial Officer reported that Wells' accounting firm stated that, "they don't see how First Bank can do a pooling transaction." Daniel Kaplan and Barton Crokett, "Accounting Becomes Crucial In Battle to Buy First Interstate," American Banker, November 22, 1995. Wells has continued to question First Bank's ability to use the pooling method, Wells Preliminary Proxy Materials at 6, notwithstanding the fact that Ernst & Young, the independent auditor to First Bank and First Interstate, issued a letter dated December 4, 1995, stating that the FI/FB Merger will qualify for pooling-of-interests treatment. Wells' Misrepresentations Regarding First Bank's Stock Repurchases 55. Wells has falsely stated that First Bank's repurchase program has had the effect of artificially raising the price of First Bank stock, thereby denying First Interstate's shareholders an accurate reading of the market value of the FI/FB Merger. 56. Wells has falsely and misleadingly insinuated in various public filings and public statements that First Bank's purchases of its own stock was done as a clandestine, recently-conceived merger- related tactic. What Wells has omitted to disclose is that First Bank has had a continuing, publicly-announced stock repurchase program throughout 1993, 1994 and 1995. 57. For example, as publicly reported in its Reports on Forms 10-K for 1993 and 1994, First Bank repurchased 6.2 million and 6.3 million shares in 1993 and 1994, respectively. On January 19, 1995 and February 15, 1995, First Bank announced programs to repurchase 2 million and 14 million shares, respectively, by the end of 1996. 58. First Bank further publicly announced that it expected to repurchase up to 24.3 million shares during 1995 and 1996 as a result of these previously announced repurchase programs. 59. The repurchase programs were reconfirmed at the November 6, 1995 analysts' meeting in connection with the announcement of the merger of First Bank and First Interstate and described in the joint press release announcing the merger, which was also filed as an exhibit to First Bank's Report on Form 8-K filed November 13. First Bank's Form 10-Q filed with the SEC on November 13, 1995, and the First Bank Registration Statement on Form S-4 filed on November 20, 1995, each also contains references to such repurchase programs. 60. As publicly reported in First Bank's 1995 quarterly reports on Form 10-Q, First Bank repurchased 1,040,475, 2,644,410 and 4,306,620 shares in the first, second and third quarters, respectively. 61. First Bank's management implemented these programs long before First Interstate and First Bank ever engaged in merger negotiations. 62. Wells also knows that federal rules prohibit repurchases by First Bank during a period of at least one month prior to the shareholder vote on the merger. 63. Despite these public filings and Wells' knowledge of the federal rules which prohibit repurchase prior to any merger, Wells continues to make false and misleading statements with respect to the First Bank repurchase program. These false and misleading statements are intentionally designed to divert attention from the fact that the FI/FB Merger is superior to the Wells' Hostile Offer. Wells' Misleading Statements Regarding the Reciprocal Fees and Options 64. In its S-4, Wells misleadingly characterizes various provisions, including the reciprocal termination fees and the reciprocal options that were agreed upon in connection with the FI/FB Merger as "obstacles." This is highly misleading since Wells' Hostile Offer is not conditioned upon the elimination or invalidation of these agreements. Wells' Misrepresentations Regarding Who Could Benefit From Its Hostile Offer 65. At its meeting with analysts on December 6-7, 1995, Wells attempted to suggest that First Bank itself believes the Hostile Offer is in the interests of First Interstate's shareholders. Thus, Wells asserted that Rick Zona, the Chief Financial Officer of First Bank, stated: "Wells' proposal is clearly a great deal for their shareholders." This statement is patently misleading because it suggests that Rick Zona and First Bank believe the Hostile Offer would be beneficial to First Interstate's shareholders. In fact, and as Wells certainly knows, Mr. Zona was commenting that Wells' shareholders -- not First Interstate's shareholders -- would benefit from a potential Wells/First Interstate combination. The Dow Jones News Service reported Mr. Zona as saying: "Wells' proposal is clearly a great proposal - for their (Wells') shareholders," ... "However, it is inferior to ours when compared to the impact on First Interstate shareholders." "First Bank: Wells Fargo Bid for First Interstate Inferior," Dow Jones News Service, November 17, 1995. Mr. Hazen's False and Misleading Statements 66. Mr. Hazen has attempted to mislead the investing public by, among other things, advising the public, without any reasonable basis, of the future price of Wells' stock. 67. For example, Mr. Hazen is reported in a November 14, 1995 article appearing in The Los Angeles Times as stating that if shareholders could be certain that the Wells deal would happen, the stock would bounce back to the high of $230.25 that it hit when Wells made the unsolicited public offer. 68. This highly misleading speculation, made without any reasonable basis, was intended solely to mislead the investing public and the First Interstate shareholders. Wells' Misrepresentations Concerning the Timetable for the Hostile Offer 69. As Wells knows, the timing of the FI/FB Merger is a critical fact. Wells has made false and misleading statements about its ability to obtain regulatory approval for the Hostile Offer on the same timetable as the FI/FB Merger. 70. In its Preliminary Proxy Materials, Wells stated that "it will be able to obtain the necessary regulatory approvals ... no later than the date on which First Bank would be able to obtain the necessary regulatory approvals for the FI/FB Merger." (Preliminary Proxy Materials at 4) Wells made an identical representation in its S-4, at pages 3 and 16, and Wells' Chairman states on the second page of his letter to First Interstate shareholders, as part of the Wells Proxy Statement, that "there is no timing advantage to the FBS Proposal." These assertions are misleading, because they fail to disclose that Wells must overcome significant obstacles to regulatory approval that are not at issue in the FI/FB Merger. 71. Wells knows, for example, that because Wells' entire franchise is in California, and First Interstate is one of its principal competitors there, consummation of the Hostile Offer raises serious antitrust concerns under the federal antitrust law and banking laws. Wells also knows that there is no such problem with the FI/FB Merger. Wells has also significantly understated the amount of deposits it will need to divest to win regulatory approval for an acquisition of First Interstate. These sizable divestitures will inevitably prolong the approval process. Wells' Misrepresentations Concerning Its Ability to Purchase First Interstate Shares 72. Wells has also knowingly and willfully used alleged regulatory approval under the Hart-Scott- Rodino Antitrust Improvement Act ("HSR") in a misleading attempt to build momentum for the Hostile Offer. In a press release dated November 17, 1995, just four days after it announced its Hostile Offer, Wells issued a press release claiming that it had received HSR clearance, enabling it to purchase up to 5% of the shares of First Interstate. Wells' press release explicitly claimed that Wells can purchase the shares "any time after today by means of open market or privately negotiated purchases." 73. Under SEC Rule 10b-13, however, a party which has publicly disclosed the intention to commence a tender offer, such as Wells' Hostile Offer, cannot engage in any purchases of securities that are the subject of the offer. Wells' statement to the contrary was plainly false. E. Wells' Manipulation of the Price of Its Stock in Violation of SEC Rule 10b-6 76. Wells is also blatantly violating SEC Rule 10b-6 by promoting its stock during a distribution of that stock. Wells broadcast its manipulated stock prices at what has been accurately reported in the press as "Wells' most elaborate presentation in years for Wall Street banking analysts." This presentation was marked by the unusual step of personal appearances in New York on December 6 and 7, 1995 by Wells' Chairman and Chief Executive Officer, its President and its Vice Chairman and Chief Financial Officer at a meeting for more than 200 people. Thomas S. Mulligan, "Paul Hazen Seeks to Sell Future of Bank to Wall Street," The Los Angeles Times, December 7, 1995. 77. At this meeting, Wells issued new and unprecedented projections. It claimed that its 1996 revenue, without giving effect to a transaction with First Interstate, will increase by 8%, its net interest income will increase by 5% and its non-interest expense will grow by 2-3%, and non-interest income will increase by 12%. These projections translate into a 12% increase in pre-tax, pre-provision earnings. Wells informed its audience that these estimates meant that Wells' 1996 earnings would be in the mid-$20 range. 78. These dramatic new disclosures, in the middle of the distribution period for the Wells stock to be used to effect the Hostile Offer, had precisely the effect Wells intended for them: the analysts immediately raised their estimates of Wells' 1996 performance, and Wells' stock price went up accordingly. 79. The substance of the analyst presentation, however, was misleading and manipulative. Wells projected 8% revenue growth in 1996, even though it experienced adjusted average annual growth of less than 2.5% over the last two years. The 8% revenue growth projection, which is based partly on a projected 5% growth of net interest income, is highly implausible, given that (a) Wells had no net interest income growth in the last two years; and (b) other factors, such as deposit pricing pressures and increasingly competitive loan pricing, are affecting net interest income. 80. As one analyst observed, "Wells is smart. Before the First Interstate battle, it was in their interest to conservatively report earnings to permit share buybacks at lower prices. Now reverse goals are in force, and earnings may be aggressively reported to raise the stock price." James Rosenberg, Lehman Bros., Wells: Let's Put Upbeat Meeting in Perspective: 1996 Estimate Up, December 8, 1995. 81. Even if the substance of the presentation were not misleading, Wells' manipulation of its stock constitutes a clear violation of SEC Rule 10b-6, which provides that it is unlawful for an issuer or other person on whose behalf a distribution of securities is made to attempt to induce any person to purchase any security which is the subject of such distribution. The purpose of this rule, as stated by the SEC, is to "prevent participants in a distribution from artificially conditioning the market for the securities in order to facilitate the distribution." Release 34-22510 (October 10, 1985). Both the timing and content of Wells' sales pitch were carefully calculated to induce market participants to purchase Wells' stock and thus cause the price of its stock to rise, resulting in an increase in the perceived value of the Hostile Offer. Unlike issuer stock repurchases, which are permitted until two trading days prior to the mailing of the prospectus, there is no similar cooling-off period concept that would permit Wells' illegal artificial conditioning of the market. FIRST CLAIM (For Violation of Section 14(e)) 82. First Interstate repeats and realleges the allegations contained in each of the preceding paragraphs as if fully set forth herein. 83. Section 14(e) of the Exchange Act, 15 U.S.C. SECTION 78n(e), makes it unlawful for any person: to make any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading, or to engage in any fraudulent, deceptive, or manipulative acts or practices, in connection with any tender offer or request or invitation for tenders. 84. In connection with its Hostile Offer, Wells has caused to be disseminated, in its S-4, Preliminary Proxy Materials, press releases and at analysts' meetings, to First Interstate shareholders, the public and analysts, statements of material fact, which were, at the time and in light of the circumstances under which they were made, false and misleading. Wells has also omitted to state material facts necessary in order to make these statements not false or misleading, all as described above. 85. Wells has engaged in other fraudulent, deceptive and manipulative acts and practices, in contravention of Section 10(b) of the Exchange Act and Rule 10b-6 thereunder, all as described above. 86. Wells' many false and misleading statements and non-disclosures, along with its fraudulent, deceptive and manipulative acts and practices, as described herein, violated Section 14(e) of the Exchange Act. SECOND CLAIM (For Violation of Section 14(a) and Rule 14a-9) 87. First Interstate repeats and realleges the allegations contained in each of the preceding paragraphs as if fully set forth herein. 88. Section 14(a) of the Exchange Act, 15 U.S.C. SECTION 78n(a), makes it unlawful for any person: in contravention of such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors, to solicit or to permit the use of his name to solicit any proxy or consent or authorization in respect of any security (other than an exempted security) registered pursuant to section 781 of this title. Rule 14a-9, promulgated pursuant to Section 14(a) of the Exchange Act, provides: No solicitation subject to this regulation shall be made by means of any proxy statement, form of proxy, notice of meeting or other communication, written or oral, containing any statement which, at the time and in the light of the circumstances under which it is made, is false and misleading with respect to any material fact, or which omits to state any material fact necessary in order to make the statements therein not false or misleading or necessary to correct any statement in any earlier communication with respect to the solicitation of a proxy for the same meeting or subject matter which has become false or misleading. 89. In connection with its Hostile Offer, Wells has caused to be disseminated to First Interstate shareholders, the public and analysts proxy statements and other materials, and made oral solicitations, which were, at the time and in the light of the circumstances under which they were made, false and misleading, and omitted to state material facts necessary in order to make these statements not false or misleading, all as described above. 90. Wells has engaged in other fraudulent, deceptive and manipulative acts and practices, in contravention of the securities laws, all as described above. 91. Wells' many false and misleading statements and non-disclosures, along with its fraudulent, deceptive and manipulative acts and practices, as described herein, violated Section 14(a) of the Exchange Act and Rule 14a-9 promulgated thereunder. IRREPARABLE INJURY Unless Wells is enjoined from disseminating further false and misleading information, required to correct its numerous misstatements and enjoined from pursuing its Hostile Offer until the estimates disseminated at the December 6-7, 1995 meeting can be verified or disproved through the reporting of actual earnings, (a) First Interstate shareholders will be deprived of their right to evaluate the FI/FB Merger based upon accurate information; (b) First Interstate shareholders will be denied an honest and fair opportunity to evaluate the FI/FBS Merger as compared to the Hostile Offer; (c) First Bank will be deprived of the opportunity to present an honest and accurate picture of the FI/FB Merger; and (d) the federal securities laws will continue to be violated by Wells. Monetary damages are inadequate to redress this injury. PRAYER FOR RELIEF WHEREFORE, plaintiff respectfully requests that this Court enter an order and judgment: a. entering judgment in favor of plaintiff; b. declaring that, by its conduct, Wells has violated the federal securities laws; c. enjoining Wells from pursuing its Hostile Offer until such time in 1996 as the 1996 earnings and other estimates disseminated by Wells at the December 6-7, 1995 meeting can be verified or disproved through the reporting of actual earnings; d. requiring Wells to disclose publicly its clear and continuing violation of the federal securities laws as a material consideration of the Hostile Offer; e. enjoining Wells from engaging in similar violations in the future; f. requiring Wells to rescind and correct the numerous false and misleading statements it has made in connection with the FI/FB Merger and Hostile Offer; g. awarding plaintiff its reasonable costs and expenses; and h. granting such other relief as the Court deems just and proper. _____________________________ Steven J. Rothschild (#659) Karen L. Valihura (#2638) Robert S. Saunders (#3207) Herbert W. Mondros (#3308) SKADDEN, ARPS, SLATE, MEAGHER & FLOM One Rodney Square P.O. Box 636 Wilmington, Delaware 19899 (302) 651-3000 Attorneys for Plaintiff First Interstate Bancorp DATED: December 18, 1995 -----END PRIVACY-ENHANCED MESSAGE-----