S-4 1 y72243sv4.htm FORM S-4 S-4
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As filed with the Securities and Exchange Commission on October 31, 2008
Registration No. 333-[          ]
 
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM S-4
 
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
 
WELLS FARGO & COMPANY
(Exact name of registrant as specified in its charter)
 
         
Delaware
(State or other jurisdiction of
incorporation or organization)
  6712
(Primary Standard Industrial
Classification Code Number)
  41-0449260
(I.R.S. Employer
Identification Number)
 
420 Montgomery Street
San Francisco, California 94163
(866) 878-5865
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
 
James M. Strother, Esq.
Executive Vice President and General Counsel
Wells Fargo & Company
420 Montgomery Street
San Francisco, California 94163
(415) 396-1793
Facsimile: (415) 975-7867
(Name, address, including zip code, and telephone number, including area code, of agent for service)
 
Copies to:
 
             
Edward D. Herlihy, Esq.
Lawrence S. Makow, Esq.
Wachtell, Lipton,
Rosen & Katz
51 West 52nd Street
New York, New York 10019
Telephone: (212) 403-1000
Facsimile: (212) 403-2000
  Robert J. Kaukol
Senior Counsel
Wells Fargo & Company
MAC C7300-126
1740 Broadway
Denver, Colorado 80274
Telephone: (303) 863-2731
Facsimile: (303) 863-2750
  Jane C. Sherburne, Esq.
Senior Executive Vice
President, General
Counsel and Secretary
Ross E. Jeffries, Jr., Esq.
Deputy General Counsel
Wachovia Corporation
301 South College Street
Charlotte, North Carolina 28288
Telephone: (704) 374-6611
Facsimile: (704) 715-4494
  H. Rodgin Cohen, Esq.
Mitchell S. Eitel, Esq.
Sullivan & Cromwell LLP
125 Broad Street
New York, New York 10004
Telephone: (212) 558-4000
Facsimile: (212) 558-3588
 
Approximate date of commencement of proposed sale to the public: As soon as practicable following the effectiveness of this Registration Statement and the effective time of the merger described herein.
 
If the securities being registered on this form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box.  o
 
If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o
 
If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
 
             
Large accelerated filer  þ
      Accelerated filer  o   Non-accelerated filer  o   Smaller reporting company  o
        (Do not check if a smaller
reporting company)
   


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CALCULATION OF REGISTRATION FEE
 
                         
            Proposed maximum
          Amount of
Title of each class of
    Amount to be
    offering price
    Proposed maximum
    registration
securities to be registered     registered(1)     per share     aggregate offering price     fee (4)
Common Stock, $12/3 Par Value
    499,999,000     N/A     $14,063,256,653.60(2)     $552,685.99
Dividend Equalization Preferred Shares, no par value
    97,000     N/A     $970,000(3)     $38.13
Class A Preferred Stock, Series G, no par value
    50,000     N/A     $750,000,000(3)     $29.475.00
Class A Preferred Stock, Series I, no par value
    25,010     N/A     $2,501,000,000(3)     $98,289.30
8.00% Non-Cumulative Perpetual Class A Preferred Stock, Series J, no par value
    2,300,000     N/A     $2,300,000,000(3)     $90,390.00
Fixed-to-Floating Rate Non-Cumulative Perpetual Class A Preferred Stock, Series K, no par value
    3,500,000     N/A     $3,500,000,000(3)     $137,550.00
7.50% Non-Cumulative Perpetual Convertible Class A Preferred Stock, Series L, no par value
    4,025,000     N/A     $4,025,000,000(3)     $158,182.50
                         
 
(1) Represents the maximum number of shares of Wells Fargo & Company (i) common stock, (ii) Dividend Equalization Preferred Shares, no par value, (iii) Class A Preferred Stock, Series G, no par value, (iv) Class A Preferred Stock Series I, no par value, (v) 8.00% Non-Cumulative Perpetual Class A Preferred Stock, Series J, no par value, (vi) Fixed-to-Floating Rate Non-Cumulative Perpetual Class A Preferred Stock, Series K, no par value and (vii) 7.50% Non-Cumulative Perpetual Convertible Class A Preferred Stock, Series L, no par value, estimated to be issuable in the transaction described herein. The number of shares of common stock is based on the number of shares of Wachovia Corporation common stock outstanding and reserved for issuance under various plans and in connection with various convertible securities as of October 29, 2008, and the exchange of each such share of Wachovia Corporation common stock for 0.1991 of a share of the Registrant’s common stock, pursuant to the Agreement and Plan of Merger, dated as of October 3, 2008, by and between Wachovia Corporation and the Registrant. The number of shares of each series of preferred stock is based on the number of shares of each series of Wachovia Corporation preferred stock outstanding or reserved for issuance as of October 29, 2008. Pursuant to Rule 416 of the Securities Act, this registration statement also covers additional securities that may be issued as a result of stock splits, stock dividends or similar transactions.
 
(2) Estimated solely for the purpose of calculating the registration fee required by Section 6(b) of the Securities Act and computed pursuant to Rule 457(f)(1) and 457(c)(1) of the Securities Act. The proposed maximum aggregate offering price of the registrant’s common stock was calculated based upon the market value of shares of Wachovia Corporation common stock (the securities to be cancelled in the merger) in accordance with Rule 457(c) under the Securities Act as follows: (A) the product of (1) $5.60, the average of the high and low prices per share of the common stock of Wachovia Corporation as reported on the New York Stock Exchange on October 24, 2008 and (2) 2,511,295,831, the estimated maximum number of shares of Wachovia Corporation common stock which may be canceled and exchanged in the merger.
 
(3) Based on the book value, computed as of the latest practicable date prior to the date of filing the registration statement, per share of Wachovia Corporation preferred stock as of September 30, 2008, pursuant to Rule 457(f)(2) of the Securities Act.
 
(4) Based on $39.30 per $1,000,000 of the proposed maximum aggregate offering price.
 
The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until this Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
 


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The information in this document is not complete and may be changed. A registration statement relating to the securities described in this document has been filed with the Securities and Exchange Commission. We may not sell the securities offered by this document until the registration statement filed with the Securities and Exchange Commission is effective. This document is not an offer to sell these securities, and we are not soliciting an offer to buy these securities, in any state where the offer or sale is not permitted.
 
     
WELLS FARGO LOGO   WACHOVIA LOGO
 
PROPOSED MERGER — YOUR VOTE IS VERY IMPORTANT
Dear Wachovia Shareholders:
 
We are pleased to report that the board of directors of Wachovia Corporation has unanimously adopted a plan of merger involving Wachovia and Wells Fargo & Company. Before we can complete the merger, we must obtain the approval of Wachovia shareholders. We are sending you this document to ask you to approve the plan of merger contained in the merger agreement at a special meeting of Wachovia shareholders to be held at the time and place indicated in the meeting notice on the next page. No vote of Wells Fargo stockholders is required to complete the merger. Wachovia shareholders may also be asked to vote on a proposal to adjourn or postpone the meeting to a later date, if necessary or appropriate, in order to solicit additional proxies in favor of the proposal to approve the plan of merger contained in the merger agreement.
 
If the merger is completed, each of your shares of Wachovia common stock will be converted into 0.1991 of a share of Wells Fargo common stock, and cash instead of any fractional shares of Wells Fargo common stock. The number of shares of Wells Fargo common stock that Wachovia common shareholders will receive in the merger is fixed. The dollar value of the consideration Wachovia common shareholders will receive in the merger will change depending on changes in the market price of Wells Fargo common stock and will not be known at the time you vote on the merger. The following table shows the closing sale prices of Wells Fargo common stock and Wachovia common stock as reported on the New York Stock Exchange on October 2, 2008, the last trading day before public announcement of the merger, and on [•], 2008, the last practicable trading day before the distribution of this document. This table also shows the implied value of the merger consideration proposed for each share of Wachovia common stock as of each of those dates, which we calculated by multiplying the closing price of Wells Fargo common stock on each of those dates by 0.1991, the exchange ratio.
 
                         
                Implied Value of
 
                One Share of
 
    Wells Fargo
    Wachovia
    Wachovia Common
 
    Common Stock     Common Stock     Stock  
 
At October 2, 2008
  $ 35.16     $ 3.91     $ 7.00  
At [•], 2008
  $ [•]     $ [•]     $ [•]  
 
If the merger is completed, each share of each series of Wachovia preferred stock will be converted into a share, or fractional share, of Wells Fargo preferred stock of corresponding series having rights, privileges, powers and preferences substantially identical to those of the relevant series of Wachovia preferred stock.
 
In connection with entering into the merger agreement, Wachovia and Wells Fargo also entered into a share exchange agreement pursuant to which Wachovia issued, on October 20, 2008, 10 shares of its Series M, Class A Preferred Stock to Wells Fargo in exchange for the issuance by Wells Fargo to Wachovia of 1,000 shares of Wells Fargo common stock. The Series M, Class A Preferred Stock issued to Wells Fargo votes together with Wachovia common stock as a single class and represents 39.9% of the total voting power of holders of Wachovia capital stock entitled to vote at the special meeting (including on the approval of the plan of merger contained in the merger agreement).


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The merger is intended to qualify as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended, and holders of Wachovia common stock are not expected to recognize any gain or loss for United States federal income tax purposes on the exchange of shares of Wachovia common stock for shares of Wells Fargo common stock in the merger, except with respect to any cash received instead of fractional shares of Wells Fargo common stock. This document provides you with important information about the proposed merger. In addition to being a proxy statement of Wachovia, this document is also the prospectus of Wells Fargo for Wells Fargo common and preferred stock that will be issued in connection with the merger. We encourage you to read the entire document carefully. Please pay particular attention to the section entitled “Risk Factors” beginning on page [•] for a discussion of risks related to the merger and owning Wells Fargo common stock after the merger.
 
We cannot complete the merger unless Wachovia shareholders approve the plan of merger contained in the merger agreement. Please read the attached proxy statement-prospectus carefully for information about the matters you are being asked to consider and vote upon. Your vote is very important. A majority of the votes entitled to be cast on the plan of merger consisting of all outstanding shares of Wachovia common stock and the Series M, Class A Preferred Stock, voting together as a single class, constitutes a quorum required for transacting business by shareholders at the special meeting. In order to approve the plan of merger contained in the merger agreement, the affirmative vote of a majority of the votes entitled to be cast on the plan of merger consisting of all outstanding shares of Wachovia common stock and the Series M, Class A Preferred Stock, voting together as a single class, is required. Wells Fargo has informed Wachovia that it intends to vote its shares of Series M, Class A Preferred Stock in favor of approval of the plan of merger contained in the merger agreement at the special meeting. An abstention or failure to vote or to instruct your broker how to vote will have the same effect as voting against the plan of merger contained in the merger agreement. Whether or not you plan to attend the meeting, please promptly return your completed proxy so that your shares are voted at the meeting. You may revoke your proxy at any time before it is voted at the special meeting. If you attend the meeting and vote in person, your vote will supersede any proxy you may have previously authorized. You can also vote on the Internet or by telephone by following the instructions on the proxy card.
 
Your board of directors unanimously recommends that you vote “FOR” approval of the plan of merger contained in the merger agreement.
 
Sincerely,
 
Robert K. Steel
Chief Executive Officer
Wachovia Corporation
 
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the securities to be issued in the merger or determined if this proxy statement-prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
 
The securities to be issued in the merger are not savings and deposit accounts and are not insured by the Federal Deposit Insurance Corporation or any other governmental agency.
 
This proxy statement-prospectus is dated [•], 2008, and is first being mailed to Wachovia shareholders on or about [•], 2008.


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Wachovia Logo
Wachovia Corporation
301 South College Street, Charlotte, North Carolina 28288
 
 
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS TO BE HELD [•], 2008
 
 
To the Shareholders of Wachovia Corporation:
 
A special meeting of shareholders of Wachovia Corporation will be held at [•], on [•], [•] [•], 2008, at [•], to consider and vote on:
 
  •  a proposal to approve the plan of merger contained in the Agreement and Plan of Merger, by and between Wachovia Corporation and Wells Fargo & Company, dated as of October 3, 2008, as it may be amended from time to time, pursuant to which Wachovia will merge with and into Wells Fargo, with Wells Fargo surviving the merger; and
 
  •  a proposal to approve the adjournment or postponement of the special meeting, if necessary or appropriate, to solicit additional proxies in favor of the proposal to approve the plan of merger contained in the merger agreement.
 
Upon completion of the merger, each share of Wachovia common stock will be converted into 0.1991 of a share of Wells Fargo common stock and cash instead of fractional shares of Wells Fargo common stock. Upon completion of the merger, each share of each series of Wachovia preferred stock will be converted into a share, or fractional share, of Wells Fargo preferred stock of corresponding series having rights, privileges, powers and preferences substantially identical to those of the relevant series of Wachovia preferred stock. Holders of Wachovia common stock do not have rights of dissent and appraisal with respect to the merger. Holders of Wachovia preferred stock will have rights of dissent and appraisal with respect to the merger under Article 13 of the North Carolina Business Corporation Act, a copy of which is included as Appendix D to the proxy statement-prospectus. Please refer to the accompanying proxy statement-prospectus for information about the plan of merger contained in the merger agreement. A copy of the merger agreement is included as Appendix A to the proxy statement-prospectus and incorporated herein by reference.
 
The board of directors has fixed [•], 2008 as the record date for the special meeting. Only those holders of record of Wachovia common stock and the Series M, Class A Preferred Stock, as of the close of business on that date are entitled to notice of and to vote at the special meeting or any adjournment or postponement of the special meeting. Except for holders of Wachovia’s Series M, Class A Preferred Stock, holders of Wachovia preferred stock and holders of depositary shares representing Wachovia preferred stock are not, as such, entitled to and are not being requested to vote to approve the plan of merger contained in the merger agreement at the special meeting. The Series M, Class A Preferred Stock was issued to Wells Fargo in connection with the entry into the merger agreement by Wells Fargo and Wachovia and represents 39.9% of the total voting power of holders of Wachovia capital stock entitled to vote at the special meeting (including on the approval of the plan of merger contained in the merger agreement). Wells Fargo is the sole holder of all shares of Series M, Class A Preferred Stock and has informed Wachovia that it intends to vote these shares in favor of approving the plan of merger contained in the merger agreement.
 
Our board of directors has unanimously adopted, and recommends our shareholders vote “FOR” approval of the plan of merger contained in the merger agreement.
 
 
By order of the board of
directors,
 
 
Jane C. Sherburne
Secretary
Charlotte, North Carolina
[•], 2008
 
 
YOUR VOTE IS IMPORTANT
 
Your vote is important regardless of the number of common shares that you own. Whether or not you plan to attend the meeting, please complete, sign, date and return the accompanying proxy card in the enclosed postage paid envelope. Alternatively, you can vote by calling the toll-free telephone number indicated on the proxy card or by visiting the website indicated on the proxy card.


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ADDITIONAL INFORMATION
 
This document incorporates important business and financial information about Wells Fargo & Company and Wachovia Corporation from documents that are not included in or delivered with this document. You can obtain documents incorporated by reference in this document without charge through the Securities and Exchange Commission website (http://www.sec.gov) or upon written or oral request to Wells Fargo or Wachovia as follows:
 
     
Wells Fargo & Company   Wachovia Corporation
MAC A0101-25   301 South College Street
420 Montgomery Street, 2nd Floor   Charlotte, North Carolina 28288
San Francisco, California 94104   Attention: Investor Relations
Attention: Investor Relations   Telephone: (704) 374-6782
Telephone: (415) 396-3668    
 
To obtain information in time for the special meeting, your request should be received by [], 2008.
 
For additional details about where you can find information about Wells Fargo and Wachovia, see “Where You Can Find More Information” on page [•].
 
You should rely only on the information contained or incorporated by reference in this document. We have not authorized anyone to provide you with different information. This document is dated [], 2008. You should not assume that information contained or incorporated by reference in this document is accurate as of any date other than that date. Neither the mailing of this document to Wachovia shareholders nor the issuance by Wells Fargo of its common stock in the merger will create any implication to the contrary.
 
Wachovia has supplied all information relating to Wachovia contained or incorporated by reference in this document, and Wells Fargo has supplied all information relating to Wells Fargo contained or incorporated by reference in this document.
 
Information on the Internet websites of Wells Fargo or Wachovia, or any subsidiary of Wells Fargo or Wachovia, is not part of this document. You should not rely on that information in deciding how to vote on the proposal to approve the plan of merger contained in the merger agreement.


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 EX-23.2: CONSENT OF KPMG LLP
 EX-23.3: CONSENT OF KPMG LLP
 EX-24: POWERS OF ATTORNEY
 EX-99.4: CONSENT OF GOLDMAN, SACHS & CO.
 EX-99.5: CONSENT OF PERELLA WEINBERG PARTNERS LP


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QUESTIONS AND ANSWERS
 
The following are answers to certain questions that you, as a shareholder of Wachovia Corporation, may have regarding the merger and the special meeting of Wachovia shareholders. We urge you to read carefully the remainder of this proxy statement-prospectus because the information in this section may not provide all the information that might be important to you with respect to the merger. Additional important information is also contained in the appendices to, and the documents incorporated by reference in, this proxy statement-prospectus.
 
Q: What am I being asked to vote on?
 
A: You are being asked to vote to approve the plan of merger contained in the merger agreement between Wachovia and Wells Fargo. You are also being asked to vote on a proposal to approve the adjournment or postponement of the special meeting, if necessary or appropriate, to solicit additional proxies in favor of the plan of merger contained in the merger agreement.
 
Q: Who is entitled to vote?
 
A: Only holders of record of our common stock and Wachovia’s Series M, Class A Preferred Stock (Series M Preferred Stock) at the close of business on [•], 2008 will be entitled to vote at the special meeting. Except for holders of our Series M Preferred Stock, holders of Wachovia preferred stock and holders of depositary shares representing Wachovia preferred stock are not, as such, entitled to vote and are not being requested to vote at the special meeting.
 
Q: Why is my vote important?
 
A: We cannot complete the merger unless Wachovia shareholders approve the plan of merger contained in the merger agreement. Approval of the plan of merger contained in the merger agreement requires the affirmative vote of a majority of the votes entitled to be cast on the plan of merger consisting of all outstanding shares of Wachovia common stock and the Series M Preferred Stock, voting together as a single class. An abstention or failure to vote or to instruct your broker how to vote on the plan of merger contained in the merger agreement will have the same effect as a vote against approval of the plan of merger contained in the merger agreement. As of the record date for the special meeting, Wells Fargo held 10 shares of Series M Preferred Stock of Wachovia that votes as a single class with Wachovia’s common stock, representing 39.9% of the total voting power of holders of Wachovia capital stock entitled to vote at the special meeting, and also held [•] shares of Wachovia common stock, representing (together with the Series M Preferred Stock) [•]% of the total voting power of holders of Wachovia capital stock entitled to vote at the special meeting. Wells Fargo has informed Wachovia that it intends to vote these shares in favor of approval of the plan of merger contained in the merger agreement. If Wells Fargo does vote its shares of Series M Preferred Stock and Wachovia common stock in favor of approval of the plan of merger contained in the merger agreement, the plan of merger contained in the merger agreement will be approved if approximately [•]% of the voting power of the other outstanding shares of Wachovia capital stock entitled to vote at the special meeting also vote in favor of approval of the plan of merger contained in the merger agreement.
 
Q: When and where is the special meeting?
 
A: The Wachovia special meeting will be held at the [•], on [•], [•] [•], 2008, at [•].
 
Q: What should I do now?
 
A: After you have carefully read this document, indicate on your proxy card how you want your shares to be voted. Then complete, sign, date and mail your proxy card in the enclosed postage paid return envelope as soon as possible. Alternatively, you may vote by telephone or the Internet by following the instructions on the proxy card. This will enable your shares to be represented and voted at the special meeting.


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Q: If my shares are held in street name by my broker, will my broker automatically vote my shares for me?
 
A: No. Without instructions from you, your broker will not be able to vote your shares. You should instruct your broker to vote your shares, following the directions your broker provides. Please check the voting form used by your broker to see if it offers telephone or Internet voting.
 
Q: What if I abstain from voting or fail to instruct my broker?
 
A: If you abstain from voting or fail to instruct your broker to vote shares you hold in “street name,” the abstention or resulting broker non-vote will have the same effect as a vote against approval of the plan of merger contained in the merger agreement.
 
Q: Can I change my vote?
 
A: Yes. If you have not voted through your broker, there are three ways you can change your vote after you have submitted your proxy (whether by mail, phone or the Internet):
 
• First, you may send a written notice to the corporate secretary of Wachovia stating that you would like to revoke your proxy.
 
• Second, you may complete and submit a new proxy card or vote again by telephone or the Internet. Your latest vote actually received before the special meeting will be counted, and any earlier votes will be revoked.
 
• Third, you may attend the special meeting and vote in person. Any earlier proxy will thereby be revoked. However, simply attending the meeting without voting will not revoke an earlier proxy you may have given.
 
If you have instructed a broker to vote your shares, you must follow the directions you receive from your broker in order to change or revoke your vote.
 
Q: Am I entitled to exercise dissenters’ rights in connection with the merger?
 
A: Under North Carolina law, holders of Wachovia common stock will not be entitled to exercise dissenters’ rights in connection with the merger. Under North Carolina law, holders of Wachovia preferred stock who perfect their dissenters’ rights in accordance with applicable law will have dissenters’ rights, also referred to as appraisal rights, as a result of the merger.
 
The depositary shares representing Wachovia Preferred Stock Series J are not a class or series of shares issued by Wachovia and thus dissenters’ rights under Article 13 of the North Carolina Business Corporation Act (NCBCA) do not independently apply to the depositary shares. However, while it is not entirely clear under North Carolina law, Wachovia has agreed to treat each holder of currently outstanding depositary shares for Wachovia Preferred Stock Series J as a beneficial owner of the Wachovia Preferred Stock Series J represented thereby. Unless shares of Wachovia Preferred Stock Series J are withdrawn from the depositary, the depositary, which is currently U.S. Bank, National Association, is the holder of record of the shares of Wachovia Preferred Stock Series J. Accordingly, to exercise dissenters’ rights with respect to Wachovia Preferred Stock Series J, holders of depositary shares will be required to follow the procedures for beneficial owners of preferred stock.
 
The procedures for exercising dissenters’ rights are described in Appendix D of this proxy statement-prospectus and are summarized in the section entitled “The Merger — Dissenters’ or Appraisal Rights” beginning on page [•]. Failure to follow the applicable procedures will result in the loss of dissenters’ rights.
 
Q: Should I send in my stock certificates now?
 
A: No. After we complete the merger, Wells Fargo will send instructions to you explaining how to exchange your Wachovia shares for a certificate for your Wells Fargo shares.


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Q: How does the Wachovia board of directors recommend that I vote?
 
A: The Wachovia board of directors unanimously recommends that you vote “FOR” approval of the plan of merger contained in the merger agreement.
 
Q: When do you expect to complete the merger?
 
A: We currently expect to complete the merger by the end of 2008. However, we cannot assure you when or if the merger will occur. We must first obtain the approval of Wachovia shareholders at the special meeting and the necessary regulatory approvals.
 
Q: Whom should I call with questions?
 
A: If you have questions about the merger or the process for voting or if you need additional copies of this document or a replacement proxy card, please contact:
 
Wachovia Investor Relations
301 South College Street NC 0206
Charlotte, NC 28288-0206
(704) 383-0798
or
 
Georgeson Inc.
17 State Street, 10th Floor
New York, NY 10004
1-800-255-8670


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SUMMARY
 
This summary highlights selected information from this proxy statement-prospectus. It does not contain all of the information that may be important to you. You should carefully read this entire document and the documents to which it refers you to fully understand the merger. See “Where You Can Find More Information” on page [•]. Each item in this summary refers to the page or pages of this document where that subject is discussed in more detail.
 
In the Merger, Each Share of Wachovia Corporation Common Stock Will Automatically Be Converted into 0.1991 of a Share of Wells Fargo & Company Common Stock (Page [•])
 
In the merger, Wachovia will merge with and into Wells Fargo. Wells Fargo will be the surviving corporation in the merger. Each share of Wachovia common stock issued and outstanding immediately prior to the completion of the merger, except for specified shares of Wachovia common stock held by Wachovia and Wells Fargo, will automatically be converted into 0.1991 of a share of Wells Fargo common stock. Wells Fargo will not issue any fractional shares of Wells Fargo common stock in the merger. Instead, a Wachovia shareholder who otherwise would have received a fraction of a share of Wells Fargo common stock will instead receive an amount in cash rounded to the nearest cent. This cash amount will be determined by multiplying the fraction of a share of Wells Fargo common stock to which the holder would otherwise be entitled by the average of the closing sale prices of Wells Fargo common stock on the New York Stock Exchange for the five trading days immediately prior to the date on which the merger is completed.
 
Example: If you own 100 shares of Wachovia common stock, you will receive 19 shares of Wells Fargo common stock and a cash payment instead of the 0.91 shares of Wells Fargo common stock that you otherwise would have received.
 
The merger agreement between Wachovia and Wells Fargo governs the merger. The merger agreement is included in this document as Appendix A. Please read the merger agreement carefully. All descriptions in this summary and elsewhere in this document of the terms and conditions of the merger are qualified by reference to the merger agreement.
 
What Holders of Wachovia Stock Options and Other Equity-Based Awards Will Receive (Page [•])
 
At the effective time of the merger, each option to purchase Wachovia common stock granted by Wachovia and each other equity-based award of Wachovia that is then outstanding will be converted automatically into an option or other equity-based award for shares of Wells Fargo common stock, generally subject to the same terms and conditions that applied to the Wachovia option or other equity-based award before the effective time of the merger. The number of shares of Wells Fargo common stock subject to these stock options and other equity-based awards, and the exercise price of the Wachovia stock options, will be adjusted based on the exchange ratio of 0.1991.
 
Treatment of Wachovia Preferred Stock in the Merger (Page [•])
 
Upon completion of the merger, (i) each Dividend Equalization Preferred Share, no par value, of Wachovia, referred to as Wachovia DEP Shares, issued and outstanding immediately prior to completion of the merger will be automatically converted into one one-thousandth of a Wells Fargo Dividend Equalization Preferred Share, no par value, referred to as Wells Fargo DEP Shares, (ii) each share of Wachovia Class A Preferred Stock, Series G, no par value, referred to as Wachovia Preferred Stock Series G, issued and outstanding immediately prior to completion of the merger will be automatically converted into one one-hundredth of a share of Wells Fargo Class A Preferred Stock, Series G, no par value, referred to as the Wells Fargo Preferred Stock Series G, (iii) each share of Wachovia Class A Preferred Stock, Series H, no par value, referred to as Wachovia Preferred Stock Series H, issued and outstanding immediately prior to completion of the merger will be automatically converted into one one-hundredth of a share of Wells Fargo Class A Preferred Stock, Series H, no par value, referred to as the Wells Fargo Preferred Stock Series H, (iv) each share of Wachovia Class A Preferred Stock, Series I, no par value, referred to as Wachovia Preferred Stock Series I, issued and outstanding immediately prior to completion of the merger will be automatically converted into one share of Wells Fargo Class A Preferred Stock, Series I, no par value, referred to as the Wells Fargo Preferred Stock Series I, (v) each share of Wachovia Preferred Stock Series J, no par value, referred to as Wachovia


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Preferred Stock Series J, issued and outstanding immediately prior to completion of the merger will be automatically converted into one share of Wells Fargo 8.00% Non-Cumulative Perpetual Class A Preferred Stock, Series J, no par value, referred to as the Wells Fargo Preferred Stock Series J, (vi) each share of Wachovia Fixed-to-Floating Rate Non-Cumulative Perpetual Class A Preferred Stock, Series K, no par value, referred to as Wachovia Preferred Stock Series K, issued and outstanding immediately prior to completion of the merger will be automatically converted into one share of Wells Fargo, Fixed-to-Floating Rate Non-Cumulative Perpetual Class A Preferred Stock, Series K, no par value, referred to as the Wells Fargo Preferred Stock Series K, (vii) each share of Wachovia 7.50% Non-Cumulative Perpetual Convertible Class A Preferred Stock, Series L, no par value, referred to as Wachovia Preferred Stock Series L, issued and outstanding immediately prior to the completion of the merger will be automatically converted into one share of Wells Fargo 7.50% Non-Cumulative Perpetual Convertible Class A Preferred Stock, Series L, no par value, referred to as the Wells Fargo Preferred Stock Series L and (viii) each share of Wachovia Series M, Class A Preferred Stock, no par value, issued and outstanding immediately prior to the completion of the merger will be automatically converted into one share of Wells Fargo Series M, Class A Preferred Stock, no par value, referred to as the Wells Fargo Preferred Stock Series M. As of the date of this proxy statement-prospectus, no shares of Wachovia Preferred Stock Series G, Wachovia Preferred Stock Series H or Wachovia Preferred Stock Series I are issued.
 
The terms of each share of the Wells Fargo Preferred Stock Series I, Wells Fargo Preferred Stock Series J, Wells Fargo Preferred Stock Series K, Wells Fargo Preferred Stock Series L and Wells Fargo Preferred Stock Series M will be substantially identical to the terms of one share of the corresponding series of Wachovia Class A Preferred Stock. The terms of each one one-thousandth of a Wells Fargo DEP Share will be substantially identical to the terms of one Wachovia DEP Share. The terms of each one one-hundredth of a share of Wells Fargo Preferred Stock Series G and one one-hundredth of a share of Wells Fargo Preferred Stock Series H will be substantially identical to the terms of one share of Wachovia Preferred Stock Series G and Wachovia Preferred Stock Series H, respectively. We sometimes refer to the Wells Fargo DEP Shares, Wells Fargo Preferred Stock Series G, Wells Fargo Preferred Stock Series H, Wells Fargo Preferred Stock Series I, Wells Fargo Preferred Stock Series J, Wells Fargo Preferred Stock Series K and Wells Fargo Preferred Stock Series L collectively as the “New Wells Fargo Preferred Stock.” Any shares of Wachovia preferred stock as to which preferred shareholders have perfected their dissenters’ rights pursuant to North Carolina law will not be exchanged for New Wells Fargo Preferred Stock.
 
Each outstanding share of the Wachovia Preferred Stock Series J is presently represented by depositary shares that are listed on the New York Stock Exchange and represent a one-fortieth interest in a share of Wachovia Preferred Stock Series J. Upon completion of the merger, Wells Fargo will assume the obligations of Wachovia under the Deposit Agreement, dated as of December 21, 2007, between Wachovia, U.S. Bank, National Association as depositary, and the holders from time to time of depositary shares. Wells Fargo will instruct U.S. Bank, referred to as the Depositary, as depositary under the deposit agreement, referred to as the Series J Deposit Agreement, to treat the shares of New Wells Fargo Preferred Stock received by it in exchange for shares of Wachovia Preferred Stock Series J as newly deposited securities under the Series J Deposit Agreement. In accordance with the terms of the Series J Deposit Agreement, the Wachovia depositary shares will thereafter represent shares of Wells Fargo Preferred Stock Series J. Such depositary shares will continue to be listed on the New York Stock Exchange upon completion of the merger under a new name and traded under a new symbol.
 
Holders of Wachovia preferred stock (except for the Series M Preferred Stock issued to Wells Fargo (which represents 39.9% of the total voting power of holders of Wachovia capital stock entitled to vote)) and Wachovia depositary shares are not entitled to vote on the plan of merger contained in the merger agreement or at the special meeting.
 
The Merger Is Intended to Be Tax-Free to Wachovia Shareholders as to the Shares of Wells Fargo Common Stock They Receive (Page [•])
 
The merger is intended to qualify as a “reorganization” within the meaning of Section 368(a) of the Code, and it is a condition to our respective obligations to complete the merger that each of Wells Fargo and Wachovia receive a legal opinion to that effect. Accordingly, the merger generally will be tax-free to you for


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United States federal income tax purposes as to the shares of Wells Fargo common stock you receive in the merger, except for any gain or loss that may result from the receipt of cash instead of fractional shares of Wells Fargo common stock that you would otherwise be entitled to receive.
 
The United States federal income tax consequences described above may not apply to all holders of Wachovia common stock. Your tax consequences will depend on your individual situation. Accordingly, we strongly urge you to consult your tax advisor for a full understanding of the particular tax consequences of the merger to you.
 
Opinions of Wachovia’s Financial Advisors [•])
 
Wachovia’s financial advisors, Goldman, Sachs & Co. and Perella Weinberg Partners LP, referred to as Goldman Sachs and Perella Weinberg respectively, each rendered an opinion dated October 3, 2008, to the board of directors of Wachovia, that, as of such date, and based upon and subject to the factors, limitations and assumptions set forth in their respective written opinions, as well as the extraordinary circumstances facing Wachovia described in their respective written opinions, the exchange ratio of 0.1991 of a share of Wells Fargo common stock to be received in respect of each share of Wachovia common stock pursuant to the merger agreement was fair from a financial point of view to the holders of Wachovia common stock other than Wells Fargo and its affiliates.
 
The full text of the written opinions of Goldman Sachs and Perella Weinberg, which set forth the factors considered, assumptions made, procedures followed and limitations that apply in with connection with each such opinion, are attached to this document as Appendix B and Appendix C, respectively. The opinions of Goldman Sachs and Perella Weinberg were provided for the information and assistance of the board of directors of Wachovia in connection with its consideration of the merger and do not constitute a recommendation as to how any holder of shares of Wachovia common stock should vote or otherwise act with respect to the merger or any other matter.
 
Pursuant to engagement letters dated September 28, 2008 and October 1, 2008, Goldman Sachs is entitled to receive a transaction fee of $25 million for its services in connection with the merger, of which $20 million is contingent upon consummation of the merger. Pursuant to an engagement letter dated September 28, 2008, Perella Weinberg is entitled to receive fees for its services, of which $5 million was payable upon the execution of the merger agreement, and $20 million is contingent upon the closing of the merger.
 
Wachovia’s Board of Directors Unanimously Recommends that You Vote “FOR” Approval of the Plan of Merger Contained in the Merger Agreement (Page [•])
 
Wachovia’s board of directors believes that the merger is in the best interests of Wachovia and its shareholders, has unanimously adopted the plan of merger contained in the merger agreement and recommends that you vote “FOR” approval of the plan of merger contained in the merger agreement at the special meeting. For the factors considered by Wachovia’s board in deciding to approve the merger agreement, see “The Merger — Wachovia’s Reasons for the Merger and Recommendation of the Wachovia Board” on page [•].
 
Wachovia’s Directors and Executive Officers May Receive Additional Benefits from the Merger (Page [•])
 
Certain of Wachovia’s executive officers and directors have interests in the merger as individuals that are different from, or in addition to, the interests of Wachovia shareholders generally. The Wachovia board of directors was aware of these interests and considered them, among other matters, in adopting the merger agreement and the transactions contemplated by the merger agreement.
 
The Wachovia stock incentive plans generally provide for the vesting of equity-based awards following a change in control. The merger will constitute such a change in control of Wachovia. In addition, certain executives have employment agreements with Wachovia that provide for severance payments in connection with a qualifying termination of employment following a change in control.


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Wachovia’s executive officers and directors also have rights to indemnification and directors’ and officers’ liability insurance that will survive completion of the merger. Please see “The Proposed Merger — Interests of Certain Wachovia Directors and Executive Officers in the Merger” on page [•] for further information on these interests.
 
Holders of Wachovia Preferred Stock, But Not Common Stock, Have Dissenters’ Rights (Page [•])
 
Holders of Wachovia Common Stock.  Under North Carolina law, holders of Wachovia common stock are not entitled to dissenters’ or appraisal rights in connection with the merger because Wachovia common stock is listed on a national securities exchange and Wachovia shareholders will receive shares of Wells Fargo common stock, which is also listed on a national securities exchange, and cash in lieu of fractional shares.
 
Holders of Wachovia Preferred Stock.  Holders of shares of Wachovia preferred stock who perfect their dissenters’ rights under North Carolina law will have dissenters’ rights, also referred to as appraisal rights, as a result of the merger. The Wachovia depositary shares representing the Wachovia Preferred Stock Series J are not a class or series of shares issued by Wachovia and thus dissenters’ rights under North Carolina law do not independently apply to the depositary shares. However, while it is not entirely clear under North Carolina law, Wachovia has agreed to treat each holder of currently outstanding depositary shares for Wachovia Preferred Stock Series J as a beneficial owner of the Wachovia Preferred Stock Series J represented thereby. Unless shares of the Wachovia Preferred Stock Series J are withdrawn from the depositary, the depositary is the holder of record of the shares of Wachovia Preferred Stock Series J. Accordingly, to exercise dissenters’ rights with respect to the Wachovia Preferred Stock Series J, holders of depositary shares will be required to follow the procedures described in this document for beneficial owners of Wachovia Preferred Stock Series J. Additional information on dissenters’ rights of holders of Wachovia preferred stock is located beginning on page [•].
 
Conditions That Must Be Satisfied or Waived for the Merger to Occur (Page [•])
 
Currently, we expect to complete the merger by the end of 2008. As more fully described in this document and in the merger agreement, the completion of the merger depends on a number of conditions being satisfied or, where legally permissible, waived. These conditions include, among others, approval of the plan of merger contained in the merger agreement by Wachovia shareholders and the receipt of certain required regulatory approvals.
 
We cannot be certain when, or if, the conditions to the merger will be satisfied or waived, or that the merger will be completed.
 
Regulatory Approvals Required for the Merger (Page [•])
 
Wachovia and Wells Fargo have agreed to use their reasonable best efforts to obtain all regulatory approvals, including all antitrust clearances, required to complete the transactions contemplated by the merger agreement. These approvals include approval from or notices to the Board of Governors of the Federal Reserve System (Federal Reserve), foreign and state securities authorities, various other federal, state and foreign antitrust and regulatory authorities and self-regulatory organizations, the Department of Justice (DOJ), and the Federal Trade Commission (FTC). Wells Fargo and Wachovia have completed, or will complete promptly following the date of this proxy statement-prospectus, the filing of applications and notifications to obtain the required regulatory approvals. The waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR Act) was terminated on October 10, 2008. The Federal Reserve approved the merger on October 12, 2008.
 
Although we do not know of any reason why we cannot obtain the remaining regulatory approvals in a timely manner, we cannot be certain when or if we will obtain them.


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Termination of the Merger Agreement (Page [•])
 
Wachovia and Wells Fargo may mutually agree to terminate the merger agreement before completing the merger, even after shareholder approval, as long as the termination is approved by each of their respective boards of directors.
 
In addition, either Wachovia or Wells Fargo may decide to terminate the merger agreement, even after shareholder approval:
 
  •  if any of the required regulatory approvals are denied or completion of the merger has been prohibited or made illegal by a court or other governmental entity (and the denial or prohibition is final and nonappealable);
 
  •  if the merger has not been completed by October 3, 2009, unless the failure to complete the merger by that date is due to the terminating party’s failure to abide by the merger agreement;
 
  •  if there is a breach by the other party that would cause the failure of conditions to the terminating party’s obligation to complete the merger described above, unless the breach is capable of being, and is, cured within 60 days of notice of the breach; or
 
  •  if the approval of the plan of merger contained in the merger agreement by Wachovia’s shareholders has not been obtained at a meeting of Wachovia’s shareholders held for such purpose.
 
In addition, Wells Fargo may terminate the merger agreement:
 
  •  if Wachovia’s board of directors (1) submits the proposal for the plan of merger contained in the merger agreement to its shareholders without a recommendation for approval, or otherwise withdraws or materially and adversely modifies (or discloses its intention to withdraw or materially and adversely modify) its recommendation, or (2) recommends to its shareholders a business combination proposal other than the merger with Wells Fargo as contemplated by the merger agreement; or
 
  •  if an order, injunction or decree issued by a governmental or self-regulatory entity that permanently enjoins or prohibits or makes illegal the issuance of shares of the Series M Preferred Stock to Wells Fargo or prevents Wells Fargo from voting such shares in favor of approving the plan of merger contained in the merger agreement at the special meeting becomes final and nonappealable.
 
Wells Fargo and Wachovia Entered into a Share Exchange Agreement (Page [•])
 
On October 3, 2008, Wells Fargo and Wachovia, in connection with entering into the merger agreement, entered into a share exchange agreement, under which Wells Fargo agreed to purchase 10 newly issued shares of Wachovia Series M Preferred Stock, which vote together with Wachovia common stock as a single class and have voting rights equivalent to 39.9% of the total voting power of holders of Wachovia capital stock entitled to vote, in exchange for the issuance of 1,000 shares of Wells Fargo common stock to Wachovia.
 
Wells Fargo and Wachovia completed the transactions contemplated by the share exchange agreement on October 20, 2008. As of [•], 2008, the record date for the special meeting, Wells Fargo had the power to vote approximately [•]% of the total voting power of shares entitled to vote on the approval of the plan of merger contained in the merger agreement.
 
Effect of Merger on Rights of Wachovia Shareholders (Page [•])
 
The rights of Wachovia shareholders are governed by North Carolina law, as well as Wachovia’s restated articles of incorporation and bylaws. After completion of the merger, the rights of former Wachovia shareholders who receive Wells Fargo common stock and preferred stock in the merger will be governed by Delaware law and Wells Fargo’s restated certificate of incorporation and bylaws. This document contains descriptions of the material differences in shareholder rights beginning on page [•].


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Wells Fargo’s Dividend Policy Will Determine Your Dividends After the Merger
 
Holders of Wells Fargo common stock receive dividends if, when and as declared by the Wells Fargo board of directors out of legally available funds. The amount and timing of any future dividends on Wells Fargo common stock will depend on the earnings, cash requirements and financial condition of Wells Fargo and its subsidiaries, applicable law and regulations, including federal banking regulations, and other factors deemed relevant by the Wells Fargo board of directors.
 
In addition, pursuant to a Letter Agreement and related Securities Purchase Agreement dated October 26, 2008 between Wells Fargo and the United States Department of the Treasury, Wells Fargo is currently subject to a general restriction on the making of dividends on its common stock other than regular quarterly cash dividends not in excess of $0.34 per share. Please see “Wells Fargo Capital Stock — Restrictions on Payment of Dividends” on page [•] for further information on this restriction.
 
Wachovia Shareholders Will Vote on the Merger at the Special Meeting (Page [•])
 
The special meeting of Wachovia shareholders will be held on [•], 2008, at [•], at [•]. At the special meeting, Wachovia shareholders will be asked to:
 
  •  approve the plan of merger contained in the merger agreement; and
 
  •  approve the adjournment or postponement of the special meeting, if necessary or appropriate, to solicit additional proxies in favor of the proposal to approve the plan of merger contained in the merger agreement.
 
The board of directors has fixed [•], 2008 as the record date for the special meeting. Only those shareholders of record of Wachovia common stock and Series M Preferred Stock as of the close of business on that date are entitled to notice of and to vote at the special meeting or any adjournment or postponement of the special meeting. To approve the plan of merger contained in the merger agreement, the affirmative vote of a majority of the votes entitled to be cast on the plan of merger consisting of all outstanding shares of Wachovia common stock and the Series M Preferred Stock, voting together as a single class, is required.
 
At the record date, there were [•] shares of Wachovia common stock outstanding and entitled to vote at the special meeting. Directors and executive officers of Wachovia and their affiliates had the right to vote [•] shares of Wachovia common stock at the special meeting, or approximately [•]% of the voting power of the outstanding Wachovia capital stock entitled to vote at the special meeting. All of the members of the Wachovia board of directors have indicated their intention as of [•], 2008 to vote the shares of Wachovia common stock they own (or have the power to vote or direct the vote) as of the record date (if any) in favor of the approval of the plan of merger contained in the merger agreement. In addition, as of the record date for the special meeting, Wells Fargo held 10 shares of Series M Preferred Stock of Wachovia that votes as a single class with Wachovia’s common stock representing 39.9% of the total voting power of holders of Wachovia capital stock entitled to vote, and also held [•] shares of Wachovia common stock, representing (together with the Series M Preferred Stock) [•]% of the total voting power of holders of Wachovia capital stock entitled to vote at the special meeting. Wells Fargo has informed Wachovia that intends to vote these shares in favor of the proposal to approve the plan of merger contained in the merger agreement. If Wells Fargo does vote such Series M Preferred Stock and Wachovia common stock in favor of the plan of merger contained in the merger agreement, the plan of merger contained in the merger agreement will be approved if approximately [•]% of the other outstanding shares of Wachovia capital stock entitled to vote at the special meeting also vote in favor of the proposal to approve the plan of merger contained in the merger agreement.
 
No Wells Fargo Stockholder Approval
 
Wells Fargo stockholders are not required to approve the plan of merger or the issuance of shares of Wells Fargo common stock as part of the merger consideration.


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Litigation Related to the Merger (Page [•])
 
Certain litigation is pending in connection with the merger. See “The Merger — Litigation Related to the Merger” on page [•].
 
Information about Wells Fargo and Wachovia (Page [•])
 
Wells Fargo & Company
420 Montgomery Street
San Francisco, California 94163
(866) 878-5865
 
Wells Fargo & Company is a diversified financial services company organized under the laws of the state of Delaware and registered as a financial holding company and a bank holding company under the Bank Holding Company Act of 1956, as amended, referred to as the Bank Holding Company Act. Its businesses provide banking, insurance, investments, mortgages and consumer finance through stores, the Internet and other distribution channels across North America and elsewhere internationally. At September 30, 2008, Wells Fargo had assets of $622.4 billion, loans of $411.0 billion, deposits of $353.6 billion and stockholders’ equity of $47.0 billion. Based on assets, Wells Fargo was the seventh largest bank holding company in the United States. Wells Fargo common stock trades on the New York Stock Exchange under the symbol WFC.
 
Wachovia Corporation
301 South College Street
Charlotte, North Carolina 28288-0013
(704) 374-6565
 
Wachovia was incorporated under the laws of North Carolina in 1967 and is registered as a financial holding company and a bank holding company under the Bank Holding Company Act.
 
Wachovia provides a wide range of commercial and retail banking and trust services through full-service banking offices in Alabama, Arizona, California, Colorado, Connecticut, Delaware, Florida, Georgia, Illinois, Kansas, Maryland, Mississippi, Nevada, New Jersey, New York, North Carolina, Pennsylvania, South Carolina, Tennessee, Texas, Virginia and Washington, D.C. Wachovia’s primary banking affiliate, Wachovia Bank, National Association, operates a substantial majority of these banking offices, except those in Delaware, which are operated by Wachovia Bank of Delaware, National Association. Wachovia also provides various other financial services, including mortgage banking, investment banking, investment advisory, home equity lending, asset-based lending, leasing, insurance, international and securities brokerage services, through other subsidiaries. Wachovia’s retail securities brokerage business is conducted through Wachovia Securities, LLC, and operates in 50 states. At September 30, 2008, Wachovia had assets of $764.4 billion, loans of $482.4 billion, deposits of $418.8 billion and stockholders’ equity of $50.0 billion. Based on assets, Wachovia is sixth largest bank holding company in the United States. Wachovia common stock trades on the New York Stock Exchange under the symbol WB.


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SELECTED FINANCIAL DATA AND MARKET PRICE INFORMATION
 
The following selected financial information is to aid you in understanding certain financial aspects of the merger. The following tables present selected historical financial data for Wells Fargo and Wachovia. The annual historical information for Wells Fargo and Wachovia is derived from their respective audited consolidated financial statements for the fiscal years ended December 31, 2003 through 2007. The selected data for the nine months ended September 30, 2008 and September 30, 2007 is derived from their respective unaudited consolidated interim financial statements. The unaudited financial statements include all adjustments, consisting of normal recurring adjustments, which management of Wells Fargo and Wachovia, as the case may be, consider necessary for fair presentation of the financial position and results of operations for such periods. The information for Wells Fargo reflects the two-for-one stock split in the form of a 100% stock dividend distributed on August 11, 2006. The historical results set forth below and elsewhere in this document are not necessarily indicative of the future performance of Wells Fargo or Wachovia.
 
The information is only a summary and should be read with each company’s historical consolidated financial statements and related notes contained in that company’s Annual Report on Form 10-K for the year ended December 31, 2007 and Quarterly Report on Form 10-Q for the quarter ended September 30, 2008, as well as other information filed by the company with the SEC. See “Where You Can Find More Information” on page [•]. All amounts are in U.S. dollars.
 
Wells Fargo common stock trades on the New York Stock Exchange under the symbol “WFC.” Wachovia common stock trades on the New York Stock Exchange under the symbol “WB.”


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Wells Fargo & Company and Subsidiaries
 
                                                         
    Nine Months Ended
    Years Ended
 
    September 30,     December 31,  
    2008     2007     2007     2006     2005     2004     2003  
    (Dollars in millions, except per share amounts)  
 
For the Period:
                                                       
Net interest income
  $ 18,419     $ 15,486     $ 20,974     $ 19,951     $ 18,504     $ 17,150     $ 16,007  
Provision for credit losses
    7,535       2,327       4,939       2,204       2,383       1,717       1,722  
Noninterest income
    13,982       13,699       18,416       15,740       14,445       12,909       12,382  
Noninterest expense
    16,839       16,924       22,824       20,837       19,018       17,573       17,190  
Net income
    5,389       6,696       8,057       8,420       7,671       7,014       6,202  
Earnings per common share
    1.63       1.99       2.41       2.50       2.27       2.07       1.84  
Diluted earnings per common share
    1.62       1.97       2.38       2.47       2.25       2.05       1.83  
Dividends declared per common share
    0.96       0.87       1.18       1.08       1.00       0.93       0.75  
At Period End:
                                                       
Securities available for sale
  $ 86,882     $ 57,440     $ 72,951     $ 42,629     $ 41,834     $ 33,717     $ 32,953  
Loans
    411,049       362,922       382,195       319,116       310,837       287,586       253,073  
Allowance for loan losses
    7,865       3,829       5,307       3,764       3,871       3,762       3,891  
Goodwill
    13,520       12,018       13,106       11,275       10,787       10,681       10,371  
Assets
    622,361       548,727       575,442       481,996       481,741       427,849       387,798  
Deposits
    353,574       334,956       344,460       310,243       314,450       274,858       247,527  
Long-term debt
    107,350       95,592       99,393       87,145       79,668       73,580       63,642  
Stockholders’ equity
    46,957       47,566       47,628       45,814       40,660       37,866       34,469  
Capital ratios:
                                                       
Risk-based capital
                                                       
Tier 1 capital
    8.59 %     8.17 %     7.59 %     8.93 %     8.26 %     8.41 %     8.42 %
Total capital
    11.51       11.07       10.68       12.49       11.64       12.07       12.21  
Tier 1 leverage
    7.54       7.26       6.83       7.88       6.99       7.08       6.93  
Book value per common share
  $ 14.14     $ 14.30     $ 14.45     $ 13.57     $ 12.12     $ 11.17     $ 10.15  
Common Stock Price:
                                                       
High
  $ 44.68     $ 37.99     $ 37.99     $ 36.99     $ 32.35     $ 32.02     $ 29.59  
Low
    20.46       32.66       29.29       30.31       28.81       27.16       21.64  
Period End
    37.53       35.62       30.19       35.56       31.42       31.08       29.45  


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Wachovia Corporation and Subsidiaries
 
                                                         
    Nine Months Ended
    Years Ended
 
    September 30,     December 31,  
    2008     2007     2007     2006     2005     2004     2003  
    (Dollars in thousands, except per share amounts)  
 
For the Period:
                                                       
Net interest income
  $ 14,033     $ 13,500     $ 18,130     $ 15,249     $ 13,681     $ 11,961     $ 10,607  
Provision for credit losses
    15,027       764       2,261       434       249       257       586  
Noninterest income
    6,675       10,907       13,297       14,665       12,323       10,779       9,482  
Noninterest expense
    43,802       14,500       20,393       18,010       16,293       14,850       13,423  
Net income available to common shareholders
    (33,704 )     6,261       6,312       7,791       6,643       5,214       4,259  
Earnings per common share
    (16.28 )     3.31       3.31       4.72       4.27       3.87       3.21  
Diluted earnings per common share
    (16.28 )     3.26       3.26       4.63       4.19       3.81       3.18  
Dividends declared per common share
    1.07       1.76       2.40       2.14       1.94       1.66       1.25  
At Period End:
                                                       
Securities available for sale
  $ 107,693     $ 111,827     $ 115,037     $ 108,619     $ 113,698     $ 110,597     $ 100,445  
Loans
    482,373       449,206       461,954       420,158       259,015       223,840       165,571  
Allowance for loan losses
    15,351       3,505       4,507       3,360       2,724       2,757       2,348  
Goodwill
    18,353       38,848       43,122       38,379       21,807       21,526       11,149  
Assets
    764,378       754,168       782,896       707,121       520,755       493,324       401,188  
Deposits
    418,840       421,937       449,129       407,458       324,894       295,053       221,225  
Long-term debt
    183,350       158,584       161,007       138,594       48,971       46,759       36,730  
Stockholders’ equity
    50,003       70,140       76,872       69,716       47,561       47,317       32,428  
Capital ratios:
                                                       
Risk-based capital
                                                       
Tier 1 capital
    7.49 %     7.10 %     7.35 %     7.42 %     7.50 %     8.01 %     8.52 %
Total capital
    12.40       10.84       11.82       11.33       10.82       11.11       11.54  
Tier 1 leverage
    5.70       6.10       6.09       6.01       6.12       6.38       6.36  
Book value per common share
  $ 18.59     $ 36.90     $ 37.66     $ 36.61     $ 30.55     $ 29.79     $ 24.71  
Common Stock Price:
                                                       
High
  $ 38.76     $ 58.77     $ 58.77     $ 59.85     $ 56.01     $ 54.52     $ 46.59  
Low
    1.84       44.94       38.03       51.09       46.49       43.56       32.72  
Period End
    3.50       50.15       38.03       56.95       52.86       52.60       46.59  


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Comparative Market Value of Securities
 
The following table shows the closing sale prices of Wells Fargo common stock and Wachovia common stock as reported on the New York Stock Exchange on October 2, 2008, the last trading day before public announcement of the merger, and on [•], 2008, the last practicable trading day before the date of this document. This table also shows the implied value of the merger consideration proposed for each share of Wachovia common stock as of each of those dates, which was calculated by multiplying the closing price of Wells Fargo common stock on each of those dates by 0.1991, the exchange ratio.
 
                         
                Implied Value of
 
                One Share of
 
    Wells Fargo
    Wachovia
    Wachovia Common
 
    Common Stock     Common Stock     Stock  
 
As of October 2, 2008
  $ 35.16     $ 3.91     $ 7.00  
As of [•], 2008
  $ [•]     $ [•]     $ [•]  
 
For each share of Wachovia common stock, Wachovia common shareholders will receive 0.1991 of a share of Wells Fargo common stock and cash instead of fractional shares of Wells Fargo common stock, based on the average closing price of Wells Fargo common stock on the New York Stock Exchange over the five trading days immediately prior to the date on which the merger is completed. The market prices of both Wells Fargo common stock and Wachovia common stock will fluctuate prior to the merger. You should obtain current stock price quotations for Wells Fargo common stock and Wachovia common stock. You can get these quotations from a newspaper, on the Internet or by calling your broker. Wells Fargo common stock trades on the New York Stock Exchange under the symbol “WFC.” Wachovia common stock trades on the New York Stock Exchange under the symbol “WB.”


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Comparative Per Common Share Data (Unaudited)
 
The following table shows, for the nine months ended September 30, 2008 and the year ended December 31, 2007, selected per share information for Wells Fargo common stock on a historical and pro forma combined basis and for Wachovia common stock on a historical and pro forma equivalent basis. Except for the historical information as of and for the year ended December 31, 2007, the information in the table is unaudited. You should read the data with the historical consolidated financial statements and related notes of Wells Fargo and Wachovia contained in their respective Annual Reports on Form 10-K for the year ended December 31, 2007 and Quarterly Report on Form 10-Q for the quarter ended September 30, 2008. See “Where You Can Find More Information” on page [•]. Amounts are in U.S. dollars.
 
The Wells Fargo pro forma combined earnings per share were calculated by dividing (1) the sum of (a) Wells Fargo’s net income applicable to common stock plus (b) Wachovia’s net income applicable to common stock by (2) pro forma equivalent common shares. The Wells Fargo pro forma combined cash dividends per common share represent Wells Fargo historical cash dividends per common share. The Wells Fargo pro forma combined book value per share was calculated by dividing total combined Wells Fargo and Wachovia common shareholders’ equity by pro forma equivalent common shares. The Wachovia pro forma equivalent per common share amounts were calculated by multiplying the Wells Fargo pro forma combined per share amounts by the exchange ratio of 0.1991.
 
                                 
    Wells Fargo     Wachovia  
          Pro Forma
          Pro Forma
 
    Historical     Combined     Historical     Equivalent  
 
Earnings (Loss) Per Share
                               
Basic
                               
Nine Months Ended September 30, 2008
  $ 1.63     $ 1.17     $ (16.28 )   $ 0.23  
Year Ended December 31, 2007
    2.41       4.73       3.31       0.94  
Diluted
                               
Nine Months Ended September 30, 2008
    1.62       1.17       (16.28 )     0.23  
Year Ended December 31, 2007
    2.38       4.68       3.26       0.93  
Cash Dividends Declared Per Share
                               
Nine Months Ended September 30, 2008
    0.96       0.96       1.07       0.19  
Year Ended December 31, 2007
    1.18       1.18       2.40       0.23  
Book Value Per Share
                               
Nine Months Ended September 30, 2008
    14.14       16.43       18.59       3.27  
Year Ended December 31, 2007
    14.45       26.19       37.66       5.21  


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UNAUDITED SELECTED PRO FORMA COMBINED FINANCIAL INFORMATION
 
WELLS FARGO AND WACHOVIA
 
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
 
The following unaudited pro forma condensed combined financial information and explanatory notes show the impact on the historical financial positions and results of operations of Wells Fargo & Company (Wells Fargo) and Wachovia Corporation (Wachovia) of the merger (Merger) involving Wells Fargo and Wachovia under the purchase method of accounting. Under the purchase method of accounting, the assets and liabilities of Wachovia will be recorded by Wells Fargo at their respective fair values as of the date the Merger is completed. The unaudited pro forma condensed combined financial information combines the historical financial information of Wells Fargo and Wachovia as of and for the nine months ended September 30, 2008, and for the year ended December 31, 2007. The unaudited pro forma condensed combined balance sheet as of September 30, 2008, assumes the Merger was completed on that date. The unaudited pro forma condensed combined statements of income give effect to the Merger as if the Merger had been completed at the beginning of the earliest period presented.
 
The Merger, which is expected to be completed in the fourth quarter of 2008, provides for the exchange of 0.1991 shares of Wells Fargo common stock for each share of outstanding Wachovia common stock. Each outstanding share of each series of Wachovia preferred stock will be converted into a share of a corresponding series of Wells Fargo preferred stock having terms substantially identical to that series of Wachovia preferred stock. At September 30, 2008, Wells Fargo had three pending acquisitions (exclusive of the Merger) with total assets of approximately $1.6 billion, and it is expected that approximately 5.9 million common shares will be issued upon consummation of these acquisitions. The unaudited pro forma condensed combined information does not give effect to these other pending acquisitions as they are not material to the unaudited pro forma condensed combined financial information, either individually or in the aggregate. In connection with the Merger, Wachovia issued preferred stock to Wells Fargo representing 39.9 percent of the voting power of Wachovia common stock. The unaudited pro forma condensed combined financial information does not give effect to this issuance.
 
The unaudited pro forma condensed combined financial information has been derived from and should be read in conjunction with:
 
  •  Wells Fargo’s historical unaudited financial statements as of and for the nine months ended September 30, 2008 included in Wells Fargo’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2008;
 
  •  Wells Fargo’s historical audited financial statements as of and for the year ended December 31, 2007 included in Wells Fargo’s Annual Report on Form 10-K for the year ended December 31, 2007;
 
  •  Wachovia’s historical unaudited financial statements as of and for the nine months ended September 30, 2008 included in Wachovia’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2008; and
 
  •  Wachovia’s historical audited financial statements as of and for the year ended December 31, 2007 included in Wachovia’s Annual Report on Form 10-K for the year ended December 31, 2007;
 
Wachovia’s historical unaudited financial statements as of and for the nine months ended September 30, 2008 and Wachovia’s historical audited financial statements as of and for the year ended December 31, 2007 are included as Exhibit 99.2 to Wells Fargo’s Current Report on Form 8-K filed October 30, 2008.
 
The unaudited pro forma condensed combined financial information is presented for illustrative purposes only and does not necessarily indicate the financial results of the combined companies had the companies actually been combined at the beginning of each period presented. The adjustments included in these unaudited pro forma condensed financial statements are preliminary and may be revised. The unaudited pro forma condensed combined financial information also does not consider any potential impacts of current market conditions on revenues, potential revenue enhancements, anticipated cost savings and expense


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efficiencies, or asset dispositions, among other factors. Further, as explained in more detail in the accompanying notes to the unaudited pro forma condensed combined financial information, the pro forma allocation of purchase price reflected in the unaudited pro forma condensed combined financial information is subject to adjustment and may vary significantly from the actual purchase price allocation that will be recorded at the time the Merger is completed.


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WELLS FARGO AND WACHOVIA
 
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
September 30, 2008
 
                                         
                            Pro forma
 
    Wells Fargo     Wachovia     Adjustments           Wells Fargo  
    (In millions)  
 
ASSETS
Cash and due from banks
  $ 12,861     $ 22,233     $             $ 35,094  
Federal funds sold, securities purchased under resale agreements and other short-term investments
    8,093       12,187                     20,280  
Trading assets
    9,097       56,000                     65,097  
Securities available for sale
    86,882       107,693       (294 )     A       194,281  
Mortgages held for sale
    18,739       2,491                     21,230  
Loans held for sale
    635       6,756                     7,391  
Loans
    411,049       482,373       (50,607 )     B       842,815  
Allowance for loan losses
    (7,865 )     (15,351 )     10,372       C       (12,844 )
                                         
Net loans
    403,184       467,022       (40,235 )             829,971  
                                         
Mortgage servicing rights:
                                       
Measured at fair value (residential MSRs)
    19,184       628                     19,812  
Amortized
    433       938                     1,371  
Premises and equipment, net
    5,054       7,031       538       D       12,623  
Goodwill
    13,520       18,353       (3,845 )     E       28,028  
Other assets
    44,679       63,046       13,327       F       121,052  
                                         
Total assets
  $ 622,361     $ 764,378     $ (30,509 )           $ 1,356,230  
                                         
 
LIABILITIES
Noninterest-bearing deposits
  $ 89,446     $ 55,752     $             $ 145,198  
Interest-bearing deposits
    264,128       363,088       1,769       G       628,985  
                                         
Total deposits
    353,574       418,840       1,769               774,183  
Short-term borrowings
    85,187       67,867                     153,054  
Accrued expenses and other liabilities
    29,293       44,318       (2,294 )     H       71,317  
Long-term debt
    107,350       183,350       (4,184 )     I       286,516  
                                         
Total liabilities
    575,404       714,375       (4,709 )             1,285,070  
                                         
 
STOCKHOLDERS’ EQUITY
Preferred stock
    625       9,825       (294 )     A       10,156  
Common stock
    5,788       7,124       (6,415 )     J       6,497  
Additional paid-in capital
    8,348       59,883       (45,920 )     J       22,311  
Retained earnings
    40,853       (22,465 )     22,465       J       40,853  
Cumulative other comprehensive income (loss)
    (2,783 )     (4,364 )     4,364       J       (2,783 )
Treasury stock
    (5,207 )                         (5,207 )
Unearned ESOP shares
    (667 )                         (667 )
                                         
Total stockholders’ equity(1)
    46,957       50,003       (25,800 )             71,160  
                                         
Total liabilities and stockholders’ equity
  $ 622,361     $ 764,378     $ (30,509 )           $ 1,356,230  
                                         
 
 
(1) Total stockholders’ equity does not reflect $25 billion in securities issued to the United States Treasury Department on October 28, 2008. See note 7.
 
See accompanying notes to unaudited pro forma condensed combined financial statements.


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WELLS FARGO AND WACHOVIA
 
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
Nine Months Ended September 30, 2008
 
                                         
                            Pro forma
 
    Wells Fargo     Wachovia     Adjustments           Wells Fargo  
    (In millions, except per share amounts)  
 
INTEREST INCOME
                                       
Trading assets
  $ 126     $ 1,508     $             $ 1,634  
Securities available for sale
    3,753       4,547       873       K       9,173  
Mortgages held for sale
    1,211       151                     1,362  
Loans held for sale
    34       365                     399  
Loans
    20,906       20,220       2,628       L       43,754  
Other interest income
    140       1,434                     1,574  
                                         
Total interest income
    26,170       28,225       3,501               57,896  
                                         
INTEREST EXPENSE
                                       
Deposits
    3,676       7,348                     11,024  
Short-term borrowings
    1,274       1,330                     2,604  
Long-term debt
    2,801       5,514       826       N       9,141  
                                         
Total interest expense
    7,751       14,192       826               22,769  
                                         
NET INTEREST INCOME
    18,419       14,033       2,675               35,127  
Provision for credit losses
    7,535       15,027       (10,372 )     O       12,190  
                                         
Net interest income (loss) after provision for credit losses
    10,884       (994 )     13,047               22,937  
                                         
NONINTEREST INCOME
                                       
Service charges on deposit accounts
    2,387       2,102                     4,489  
Trust and investment fees
    2,263       7,253                     9,516  
Card fees
    1,747       513                     2,260  
Other fees
    1,562       815                     2,377  
Mortgage banking
    2,720       213                     2,933  
Operating leases
    365       174                     539  
Insurance
    1,493       239                     1,732  
Net gains (losses) on debt securities available for sale
    316       (2,991 )                   (2,675 )
Net gains (losses) from equity investments
    (148 )     272                     124  
Other
    1,277       (1,915 )                   (638 )
                                         
Total noninterest income
    13,982       6,675                     20,657  
                                         
NONINTEREST EXPENSE
                                       
Salaries
    6,092       4,543                     10,635  
Incentive compensation
    2,005       4,293                     6,298  
Employee benefits
    1,666       1,348                     3,014  
Equipment
    955       879                     1,834  
Net occupancy
    1,201       1,137                     2,338  
Operating leases
    308       86                     394  
Goodwill impairment
          24,846       (24,846 )     P        
Intangible amortization
    139       296       1,337       Q       1,772  
Other
    4,473       6,374                     10,847  
                                         
Total noninterest expense
    16,839       43,802       (23,509 )             37,132  
                                         
INCOME (LOSS) BEFORE INCOME TAX EXPENSE (BENEFIT)
    8,027       (38,121 )     36,556               6,462  
Income tax expense (benefit)
    2,638       (4,844 )     3,879       R       1,673  
                                         
NET INCOME (LOSS)
  $ 5,389     $ (33,277 )   $ 32,677             $ 4,789  
Dividends on preferred stock
          427                     427  
                                         
NET INCOME (LOSS) AVAILABLE TO COMMON STOCKHOLDERS
  $ 5,389     $ (33,704 )   $ 32,677             $ 4,362  
                                         
EARNINGS PER COMMON SHARE
  $ 1.63     $ (16.28 )                   $ 1.17  
DILUTED EARNINGS PER COMMON SHARE
  $ 1.62     $ (16.28 )                   $ 1.17  
DIVIDENDS DECLARED PER COMMON SHARE
  $ 0.96     $ 1.07                     $ 0.96  
Average common shares outstanding
    3,309.6       2,070.5       (1,658.3 )             3,721.8  
Diluted average common shares outstanding
    3,323.4       2,080.0       (1,665.9 )             3,737.5  
 
See accompanying notes to unaudited pro forma condensed combined financial statements.


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Table of Contents

WELLS FARGO AND WACHOVIA
 
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
Year Ended December 31, 2007
 
                                         
                            Pro forma
 
    Wells Fargo     Wachovia     Adjustments           Wells Fargo  
    (In millions, except per share amounts)  
 
INTEREST INCOME
                                       
Trading assets
  $ 173     $ 2,062     $             $ 2,235  
Securities available for sale
    3,451       6,097       1,455       K       11,003  
Mortgages held for sale
    2,150       240                     2,390  
Loans held for sale
    70       1,023                     1,093  
Loans
    29,040       29,995       5,255       L       64,290  
Other interest income
    293       2,814                     3,107  
                                         
Total interest income
    35,177       42,231       6,710               84,118  
                                         
INTEREST EXPENSE
                                       
Deposits
    8,152       12,961       (1,767 )     M       19,346  
Short-term borrowings
    1,245       2,849                     4,094  
Long-term debt
    4,806       8,291       1,376       N       14,473  
                                         
Total interest expense
    14,203       24,101       (391 )             37,913  
                                         
NET INTEREST INCOME
    20,974       18,130       7,101               46,205  
Provision for credit losses
    4,939       2,261                     7,200  
                                         
Net interest income after provision for credit losses
    16,035       15,869       7,101               39,005  
                                         
NONINTEREST INCOME
                                       
Service charges on deposit accounts
    3,050       2,686                     5,736  
Trust and investment fees
    3,149       8,367                     11,516  
Card fees
    2,136       581                     2,717  
Other fees
    2,292       1,075                     3,367  
Mortgage banking
    3,133       141                     3,274  
Operating leases
    703       245                     948  
Insurance
    1,530       447                     1,977  
Net gains (losses) on debt securities available for sale
    209       (278 )                   (69 )
Net gains from equity investments
    734       759                     1,493  
Other
    1,480       (726 )                   754  
                                         
Total noninterest income
    18,416       13,297                     31,713  
                                         
NONINTEREST EXPENSE
                                       
Salaries
    7,762       5,652                     13,414  
Incentive compensation
    3,284       4,876                     8,160  
Employee benefits
    2,322       1,662                     3,984  
Equipment
    1,294       1,098                     2,392  
Net occupancy
    1,545       1,343                     2,888  
Operating leases
    561       135                     696  
Intangible amortization
    158       424       1,980       Q       2,562  
Other
    5,898       5,203                     11,101  
                                         
Total noninterest expense
    22,824       20,393       1,980               45,197  
                                         
INCOME BEFORE INCOME TAX EXPENSE
    11,627       8,773       5,121               25,521  
Income tax expense
    3,570       2,461       1,855       R       7,886  
                                         
NET INCOME
  $ 8,057     $ 6,312     $ 3,266             $ 17,635  
Dividends on preferred stock
                               
                                         
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS
  $ 8,057     $ 6,312     $ 3,266             $ 17,635  
                                         
EARNINGS PER COMMON SHARE
  $ 2.41     $ 3.31                     $ 4.73  
DILUTED EARNINGS PER COMMON SHARE
  $ 2.38     $ 3.26                     $ 4.68  
DIVIDENDS DECLARED PER COMMON SHARE
  $ 1.18     $ 2.40                     $ 1.18  
Average common shares outstanding
    3,348.5       1,907.2       (1,527.5 )             3,728.2  
Diluted average common shares outstanding
    3,382.8       1,934.2       (1,549.2 )             3,767.8  
 
See accompanying notes to unaudited pro forma condensed combined financial statements.


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WELLS FARGO AND WACHOVIA

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
As of and for the Nine Months Ended September 30, 2008, and for the
Year Ended December 31, 2007
 
Note 1:   Basis of Presentation
 
The unaudited pro forma condensed combined financial information has been prepared using the purchase method of accounting, giving effect to the merger involving Wells Fargo & Company (Wells Fargo) and Wachovia Corporation (Wachovia) (Merger) as if it had occurred as of the beginning of the earliest period presented. The unaudited pro forma condensed combined financial information is presented for illustrative purposes only and is not necessarily indicative of the results of operations or financial position had the Merger been consummated at the beginning of the period presented, nor is it necessarily indicative of the results of operations in future periods or the future financial position of the combined entities. Certain historical financial information has been reclassified to conform to the current presentation. The Merger, which is expected to be completed in the fourth quarter of 2008, provides for issuance of 0.1991 shares of Wells Fargo common stock for each share of outstanding Wachovia common stock, and is subject to Wachovia shareholder approval. Each outstanding share of each series of Wachovia preferred stock will be converted into a share of a corresponding series of Wells Fargo preferred stock having terms substantially identical to that series of Wachovia preferred stock. At September 30, 2008, Wells Fargo had three pending acquisitions (exclusive of the Merger) with total assets of approximately $1.6 billion, and it is expected that approximately 5.9 million common shares will be issued upon consummation of these acquisitions. The unaudited pro forma information does not give effect to these other pending acquisitions as they are not material to the unaudited pro forma condensed combined financial information, either individually or in the aggregate. In connection with the Merger, Wachovia issued preferred stock to Wells Fargo representing 39.9 percent of the voting power of Wachovia common stock. The unaudited pro forma condensed combined financial information does not give effect to this issuance.
 
The unaudited pro forma condensed combined financial information includes preliminary estimated adjustments to record assets and liabilities of Wachovia at their respective fair values and represents management’s estimates based on available information. The pro forma adjustments included herein are subject to updates as additional information becomes available and as additional analyses are performed. The final allocation of the purchase price will be determined after the Merger is completed and after completion of thorough analyses to determine the fair value of Wachovia’s tangible and identifiable intangible assets and liabilities as of the date the Merger is completed. Increases or decreases in the estimated fair values of the net assets, commitments, executory contracts, and other items of Wachovia as compared with the information shown in the unaudited pro forma condensed combined financial information may change the amount of the purchase price allocated to goodwill and other assets and liabilities and may impact the statement of income due to adjustments in yield and/or amortization of the adjusted assets or liabilities. Any changes to Wachovia’s stockholders’ equity including results of operations from October 1, 2008, through the date the Merger is completed will also change the amount of goodwill recorded.
 
Of total estimated Merger-related charges of $7.9 billion ($5.0 billion after tax), the unaudited pro forma condensed combined balance sheet includes a preliminary estimate of the exit and termination costs of $3.1 billion ($2.0 billion after tax) that will be recorded in purchase accounting. The preliminary estimates of Merger-related charges expected to be incurred to combine the operations of Wells Fargo and Wachovia will result from actions taken with respect to both Wells Fargo and Wachovia operations, facilities and employees. The charges will be recorded based on the nature and timing of these integration actions. Accordingly, the unaudited pro forma condensed combined statements of income do not include the impact of these charges. In addition, the impairment to goodwill that Wachovia recorded for the nine months ended September 30, 2008 has been excluded from income because no goodwill impairment is assumed had the companies combined at the beginning of the earliest period presented.
 
The unaudited pro forma condensed combined financial statements assume that the Merger will close in fourth quarter 2008. However, if the Merger is consummated on or after January 1, 2009, the Merger will be


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WELLS FARGO AND WACHOVIA
 
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION — (Continued)
As of and for the Nine Months Ended September 30, 2008, and for the
Year Ended December 31, 2007
 
accounted for under Statement of Financial Accounting Standards (revised 2007), Business Combinations (SFAS 141R). SFAS 141R would require that the purchase price be determined based on Wells Fargo’s closing stock price on the date the Merger is consummated, that the loan portfolio consisting of both impaired loans, as defined, and nonimpaired loans, be recorded at fair value, with no carry-over of the allowance for credit losses, and that contingent assets and liabilities be recorded at fair value. Further, SFAS 141R would require that Merger-related exit and termination costs be recorded to expense as incurred.
 
Note 2:   Accounting Policies and Financial Statement Classifications
 
The accounting policies of both Wells Fargo and Wachovia are in the process of being reviewed in detail. Upon completion of such review, conforming adjustments or financial statement reclassifications may be determined. Aside from Wells Fargo’s investment in preferred securities issued by Wachovia, as further discussed below in Note 5, transactions between Wells Fargo and Wachovia are not material in relation to the unaudited pro forma condensed combined financial information.
 
Note 3:   Merger Related Charges
 
In connection with the Merger, the plan to integrate Wells Fargo’s and Wachovia’s operations is still being developed. The total integration costs have been preliminarily estimated to be approximately $7.9 billion ($5.0 billion after tax). The specific details of these plans will continue to be refined over the next several months. Currently, our merger integration team is assessing the two companies’ operations, including information systems, premises, equipment, benefit plans, supply chain methodologies, service contracts and personnel to determine optimum strategies to realize cost savings. Our merger integration decisions will impact certain existing Wachovia facilities (both leased and owned), information systems, supplier contracts and costs associated with the involuntary termination of personnel. Additionally, as part of our formulation of the merger integration plan, certain actions regarding existing Wells Fargo information systems, premises, equipment, benefit plans, supply chain methodologies, supplier contracts and involuntary termination of personnel may be taken. To the extent there are costs associated with these actions, the costs will be recorded based on the nature and timing of these integration actions. We expect that such decisions will be completed after the Merger. The estimated non-recurring charge consists of the following:
 
         
    (in billions)  
 
Costs associated with systems integration, operations and customer conversions
  $ 4.2  
Employee-related expense
    1.8  
Branch and administrative site consolidations, name change and signage
    1.9  
         
      7.9  
Income tax benefit
    (2.9 )
         
Total estimated non-recurring charges
  $ 5.0  
         
 
Note 4:   Estimated Annual Cost Savings
 
The unaudited pro forma condensed combined financial information does not reflect any benefit expected from revenue enhancements or derived from potential cost savings related to the Merger. Although management anticipates revenue enhancements and annual cost savings of approximately $5.0 billion before taxes that will result from the Merger, there can be no assurance these items will be achieved.


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WELLS FARGO AND WACHOVIA
 
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION — (Continued)
As of and for the Nine Months Ended September 30, 2008, and for the
Year Ended December 31, 2007
 
Note 5:   Pro Forma Adjustments
 
The following pro forma adjustments have been reflected in the unaudited pro forma condensed combined financial information. All adjustments are based on current assumptions and valuations which are subject to change.
 
Balance Sheet Adjustments
 
A Securities available for sale and preferred securities were adjusted by $0.3 billion to reflect Wells Fargo’s investment in preferred securities of Wachovia that will be eliminated in consolidation.
 
B Loans were adjusted by $50.6 billion, to recognize $39.2 billion of credit losses related to impaired loans under AICPA Statement of Position 03-3, Accounting for Certain Loans or Debt Securities Acquired in a Transfer (SOP 03-3), and to adjust all loans by $11.4 billion to reflect current interest rates and spreads and reverse prior purchase accounting adjustments recorded by Wachovia.
 
C Allowance for loan losses was adjusted by $10.4 billion, to reflect the reduction of Wachovia’s existing allowance for loan losses for loans subject to SOP 03-3 life of loan write downs.
 
D Premises and equipment were adjusted by $0.5 billion to reflect fair value adjustments for real property.
 
E Goodwill was adjusted by $3.8 billion to reflect the write off of Wachovia’s historical goodwill of $18.3 billion and establish new goodwill of $14.5 billion estimated as the result of the Merger.
 
F Other assets were adjusted by $13.3 billion consisting of increases in identifiable intangibles of $10.9 billion for estimated core deposit and other relationship intangibles, including intangibles for retail brokerage and asset management, and deferred tax assets of $13.0 billion. Offsetting these increases are fair value adjustments of $4.4 billion and the Wells Fargo net deferred tax liability reclassification of $6.2 billion.
 
G Interest-bearing deposits were adjusted by $1.8 billion to reflect current interest rates and spreads and to reverse prior purchase accounting adjustments recorded by Wachovia.
 
H Other liabilities were adjusted by $2.3 billion, primarily to record estimated exit reserves offset by a reclassification of Wells Fargo’s net deferred tax liability of $6.2 billion to other assets.
 
I Long term debt was adjusted by $4.2 billion to reflect current interest rates and spreads.
 
J Historical stockholders’ equity of Wachovia has been eliminated and consolidated stockholders’ equity has been adjusted to reflect Wells Fargo’s capitalization of Wachovia.
 
Income Statement Adjustments
 
K Interest income from securities available for sale has been adjusted to estimate the accretion of discount on the par value of securities in excess of fair value.
 
L Interest income from loans has been adjusted to estimate the accretion of the purchase accounting adjustment related to current interest rates.
 
M Interest expense from deposits for 2007 has been adjusted to estimate the amortization of the purchase accounting adjustment related to current interest rates.
 
N Interest expense from long-term debt has been adjusted to estimate the accretion of the purchase accounting adjustment related to current interest rates.


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WELLS FARGO AND WACHOVIA
 
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION — (Continued)
As of and for the Nine Months Ended September 30, 2008, and for the
Year Ended December 31, 2007
 
O Provision for credit losses for 2008 has been adjusted to reflect the reduction of Wachovia’s existing allowance for loan losses by $10.4 billion related to impaired loans.
 
P Goodwill impairment of $24.8 billion recorded by Wachovia in 2008 has been eliminated as the impairment is assumed to have not been recognized had the companies combined at the earliest period presented.
 
Q Intangible amortization expense has been adjusted to estimate the amortization of incremental identifiable intangible assets recognized.
 
R Income tax expense reflects adjustment to consolidated effective tax rate of 25.9% and 30.9% for 2008 and 2007, respectively.
 
Note 6:   Pro Forma Earnings Per Share
 
The pro forma combined earnings and diluted earnings per share for the respective periods presented are based on the combined weighted average number of common and diluted potential common shares of Wells Fargo and Wachovia. The number of weighted average common shares, including all diluted potential common shares, reflects the exchange of 0.1991 shares of Wells Fargo common stock for each share of Wachovia stock. Amounts used in the determination of the pro forma basic and diluted earnings per share are as follows:
 
                 
    For the
    For The
 
    Nine Months Ended
    Year Ended
 
    September 30,
    December 31,
 
    2008     2007  
    (In millions, except per share amounts)  
 
Pro forma net income
  $ 4,789     $ 17,635  
Less: Preferred stock dividends
    427        
                 
Income available to common stockholders
  $ 4,362     $ 17,635  
                 
EARNINGS PER COMMON SHARE
               
Average common shares outstanding
    3,721.8       3,728.2  
                 
Per share
  $ 1.17     $ 4.73  
                 
DILUTED EARNINGS PER COMMON SHARE
               
Average common shares outstanding
    3,721.8       3,728.2  
Add: Stock options
    14.2       38.4  
Restricted share rights
    1.5       1.2  
                 
Diluted average common shares outstanding
    3,737.5       3,767.8  
                 
Per share
  $ 1.17     $ 4.68  
                 
 
At September 30, 2008 and December 31, 2007, options to purchase 197.4 million and 20.3 million shares, respectively, were outstanding but not included in the calculation of diluted earnings per common share because the exercise price was higher than the market price (antidilutive).
 
Note 7:   Capital Issuance
 
Effective October 28, 2008, at the request of the United States Treasury Department (Treasury), Wells Fargo issued $25 billion of securities to the Treasury, consisting of preferred stock and common stock warrants, all of which are classified as Tier I capital for regulatory purposes.


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WELLS FARGO AND WACHOVIA
 
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION — (Continued)
As of and for the Nine Months Ended September 30, 2008, and for the
Year Ended December 31, 2007
 
Note 8:   Preliminary Purchase Accounting Allocation
 
The unaudited pro forma condensed combined financial information reflects the issuance of approximately 430 million shares of Wells Fargo common stock totaling approximately $14.7 billion. Each outstanding share of each series of Wachovia preferred stock will be converted into one share of a corresponding series of Wells Fargo preferred stock having terms substantially identical to that series of Wachovia preferred stock. The Merger will be accounted for using the purchase method of accounting; accordingly Wells Fargo’s cost to acquire Wachovia will be allocated to the assets (including identifiable intangible assets) and liabilities of Wachovia at their respective estimated fair values as of the Merger date. Accordingly, the pro forma purchase price was preliminarily allocated to the assets acquired and the liabilities assumed based on their estimated fair values as summarized in the following table:
 
                 
    September 30, 2008  
    (in billions, except per share amount)  
 
Pro Forma purchase price
               
Wachovia common stock and equivalents(1)
    2.161          
Exchange ratio
    0.1991          
                 
Total shares of Wells Fargo stock exchanged
    0.430          
Purchase price per share of Wells Fargo common stock(2)
  $ 34.13          
                 
            $ 14.7  
Wachovia preferred stock converted to Wells Fargo preferred stock
            9.8  
                 
Total pro forma purchase price
            24.5  
                 
Preliminary allocation of the pro forma purchase price
               
Wachovia stockholders’ equity
            50.0  
Wachovia goodwill and intangible assets
            (20.2 )
Adjustments to reflect assets acquired and liabilities assumed at fair value:
               
Loans, net
            (40.2 )
Premises and equipment, net
            0.5  
Intangible assets
            12.8  
Other assets
            (4.3 )
Deposits
            (1.8 )
Accrued expenses and other liabilities (exit, termination and other liabilities)
            (4.0 )
Long-term debt
            4.2  
Deferred taxes
            13.0  
                 
Fair value of net assets acquired
            10.0  
                 
Preliminary pro forma goodwill resulting from the Merger
          $ 14.5  
                 
 
 
(1) Includes 24 million shares of restricted stock.
 
(2) The value of Wells Fargo common stock was determined by averaging the closing price of Wells Fargo common stock for the five trading days during the period October 1, 2008 through October 7, 2008.


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RISK FACTORS
 
Before deciding whether to vote for approval of the plan of merger contained in the merger agreement, you should carefully consider the following risk factors, in addition to the other information contained or incorporated by reference in this document, including the matters addressed under the heading “Forward-Looking Statements” beginning on page [•] and the discussion under “Risk Factors” in each company’s Annual Report on Form 10-K for the year ended December 31, 2007, as such discussion may be amended or updated in the company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2008 and in other reports filed by the Company with the Securities and Exchange Commission (SEC) after the date of this document. See “Where You Can Find More Information” on page [•].
 
The Wells Fargo share price may fluctuate prior to the completion of the merger.
 
Upon completion of the merger, each share of Wachovia common stock will be converted into merger consideration consisting of 0.1991 of a share of Wells Fargo common stock. Any change in the price of Wells Fargo common stock prior to completion of the merger will affect the dollar value of the merger consideration that Wachovia common shareholders will receive upon completion of the merger. Changes in the price of Wells Fargo common stock could result from a variety of factors, including general market and economic conditions, changes in Wells Fargo’s business, operations and prospects, and regulatory considerations.
 
The merger is subject to the receipt of consents and approvals from regulatory authorities that may impose conditions that could have an adverse effect on Wells Fargo or, if not obtained, could prevent completion of the merger.
 
Before the merger may be completed, various approvals and consents must be obtained from regulatory entities. These regulators may impose conditions on the completion of the merger or require changes to the terms of the merger. Any such conditions or changes could have the effect of delaying completion of the merger or imposing additional costs on or limiting the revenues of Wells Fargo following the merger.
 
A number of the regulatory approvals and consents required in connection with the merger have been obtained. The waiting period applicable to the merger under the HSR Act was terminated on October 10, 2008. The Federal Reserve approved the merger on October 12, 2008.
 
Either Wachovia or Wells Fargo may terminate the merger agreement if the merger has not been completed by October 3, 2009, unless the failure of the merger to be completed has resulted from the failure of the party seeking to terminate the merger agreement to perform its obligations.
 
The merger agreement limits Wachovia’s ability to seek alternative transactions to the merger.
 
The merger agreement prohibits Wachovia and its directors, officers, representatives and agents from soliciting, authorizing the solicitation of or, subject to certain exceptions, entering into discussions with any third party regarding alternative acquisition proposals. The prohibition limits Wachovia’s ability to seek offers that may be superior from a financial point of view from other possible acquirers. In addition, pursuant to the share exchange agreement, as of the record date for the special meeting Wells Fargo held 10 shares of Series M Preferred Stock that vote as a single class with Wachovia’s common stock representing 39.9% of the total voting power of holders of Wachovia capital stock entitled to vote, and also held [•]% of Wachovia’s common stock, representing (together with the Series M Preferred Stock) [•]% of the total voting power of holders of Wachovia capital stock entitled to vote at the special meeting, which could make it more difficult for a third party to acquire Wachovia prior to completion of the merger or termination of the merger agreement.
 
Certain of Wachovia’s executive officers and directors have additional interests in the merger.
 
Certain of Wachovia’s executive officers and directors have interests in the merger as individuals that are different from, or in addition to, the interests of Wachovia shareholders generally. See “The Proposed Merger — Interests of Certain Wachovia Directors and Executive Officers in the Merger” on page [•]. The


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Wachovia board of directors was aware of these interests and considered them, among other matters, in approving the merger agreement and the transactions contemplated by the merger agreement.
 
The value of Wells Fargo capital stock could be adversely affected to the extent Wells Fargo fails to realize the expected benefits of the merger.
 
The merger will involve the integration of the businesses of Wachovia and Wells Fargo. It is possible that the integration process could result in the loss of key Wachovia employees, the disruption of Wachovia’s ongoing business or inconsistencies in standards, controls, procedures and policies that adversely affect Wachovia’s ability to maintain relationships with customers and employees. As with any financial institution merger, there also may be disruptions that cause Wachovia to lose customers or cause customers to take deposits out of Wachovia’s banks.
 
The market price of Wells Fargo capital stock may be affected by factors different from those affecting Wachovia capital stock.
 
Upon completion of the merger, holders of Wachovia common stock and preferred stock will become holders of Wells Fargo common stock and preferred stock. Some of Wells Fargo’s current businesses and markets differ from those of Wachovia and, accordingly, the financial results and condition of Wells Fargo after the merger may be affected by factors different from those currently affecting the financial results and condition of Wachovia. For information about the businesses of Wells Fargo and Wachovia and some factors to consider in connection with those businesses, see each company’s Annual Report on Form 10-K for the year ended December 31, 2007, as such information and factors may be updated in each company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2008 and in other reports filed by each company with the SEC after the date of this document. See “Where You Can Find More Information” on page [•].
 
The shares of Wells Fargo common stock to be received by Wachovia shareholders as a result of the merger will have different rights than the shares of Wachovia common stock.
 
The rights associated with Wachovia common stock are different from the rights associated with Wells Fargo common stock. See the section of this proxy statement-prospectus entitled “Comparison of Shareholder Rights” on Page [•] for a discussion of the different rights associated with Wells Fargo common stock.
 
Current disruption and volatility in global financial markets might continue and governments may take measures to intervene.
 
Over the last year global financial markets have experienced extraordinary disruption and volatility following adverse changes in the global credit markets. Governments have taken highly significant measures in response to such events, including enactment of the Emergency Economic Stabilization Act of 2008, or EESA, in the United States. Such dislocation and instability, and potential government responses thereto, may continue before and after completion of the merger and could negatively impact the operations of Wachovia and Wells Fargo and the value of the Wells Fargo capital stock you receive in the merger.


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FORWARD-LOOKING STATEMENTS
 
This document, including information incorporated by reference, may contain, among other things, certain forward-looking statements, with respect to each of Wachovia, Wells Fargo and the combined company following the merger, as well as the goals, plans, objectives, intentions, expectations, financial condition, results of operations, future performance and business of Wachovia or Wells Fargo, including, without limitation, (i) statements relating to the benefits of the merger, and (ii) statements preceded by, followed by or that include the words “may”, “could”, “should”, “would”, “believe”, “anticipate”, “estimate”, “expect”, “intend”, “plan”, “projects”, “outlook” or similar expressions.
 
Do not unduly rely on forward-looking statements. They are expectations about the future and are not guarantees. Forward-looking statements speak only as of the date of the document in which they are made, are based upon the current beliefs and expectations of Wachovia’s and/or Wells Fargo’s management and are subject to significant risks and uncertainties that are subject to change based on various factors (many of which are beyond Wachovia’s and Wells Fargo’s control). Actual results may differ from those set forth in the forward-looking statements. Neither Wells Fargo nor Wachovia undertakes to update forward-looking statements to reflect changes that occur after that date.
 
The following factors, among others, could cause Wachovia’s or Wells Fargo’s financial performance to differ materially from that expressed in such forward-looking statements: (1) the risk that the businesses of Wachovia and/or Wells Fargo in connection with the merger will not be integrated successfully or such integration may be more difficult, time-consuming or costly than expected; (2) the risk that expected revenue synergies and cost savings from the merger may not be fully realized or realized within the expected time frame; (3) the risk that revenues following the merger may be lower than expected; (4) deposit attrition, operating costs, customer loss and business disruption before and/or following the merger, including, without limitation, difficulties in maintaining relationships with employees, may be greater than expected; (5) any inability to obtain required governmental approvals of the merger on the proposed terms and schedule; (6) any failure of Wachovia’s shareholders to vote in favor of the proposal to approve the plan of merger contained in the merger agreement; (7) the risk that the strength of the United States economy in general and the strength of the local economies in which Wachovia and/or Wells Fargo conducts operations may be different than expected resulting in, among other things, a deterioration in credit quality or a reduced demand for credit, including the resultant effect on Wachovia’s and/or Wells Fargo’s loan portfolio and allowance for loan losses; (8) the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Federal Reserve; (9) the extent and duration of continued, potential or actual litigation; (10) inflation, interest rate, market and monetary fluctuations; (11) adverse conditions in the stock market, the public debt market and other capital markets (including changes in interest rate conditions) in the general economy and the impact of such conditions, and governmental response, on Wachovia’s brokerage and capital markets activities; (12) the timely development of competitive new products and services by Wachovia or Wells Fargo and the acceptance of these products and services by new and existing customers; (13) the willingness of customers to accept third party products marketed by Wachovia or Wells Fargo; (14) the willingness of customers to substitute competitors’ products and services for Wachovia’s or Wells Fargo’s products and services and vice versa; (15) the impact of changes in financial services’ laws and regulations (including laws concerning taxes, banking, securities and insurance); (16) technological changes; (17) changes in consumer spending and saving habits; (18) the effect of corporate restructurings, acquisitions and/or dispositions, including, without limitation, the merger, and the actual restructuring and other expenses related thereto, and the failure to achieve the expected revenue growth and/or expense savings from such corporate restructurings, acquisitions and/or dispositions; (19) the growth and profitability of Wachovia’s and/or Wells Fargo’s non-interest or fee income being less than expected; (20) unanticipated regulatory or judicial proceedings or rulings; (21) the impact of changes in accounting principles; (22) adverse changes in financial performance and/or condition of Wachovia’s and/or Wells Fargo’s borrowers which could impact repayment of such borrowers’ outstanding loans; (23) the impact on Wachovia and/or Wells Fargo’s businesses, as well as on the risks set forth above, of various domestic or international military or terrorist activities or conflicts; (24) the satisfaction or waiver of the conditions to complete the merger; and (25) Wachovia’s and/or Wells Fargo’s success at managing the risks involved in the foregoing.
 
Additional factors are described in “Risk Factors” beginning on page [•]. Other factors are discussed in Wells Fargo’s and Wachovia’s reports filed with the SEC, including under “Risk Factors” in their respective Annual Reports on Form 10-K for the year ended December 31, 2007, as such discussion may be updated in each company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2008 and in other reports filed by each company with the SEC after the date of this document. See “Where You Can Find More Information” on page [•].


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THE WACHOVIA SHAREHOLDER MEETING
 
This section contains information for Wachovia shareholders about the special meeting that Wachovia has called to allow its shareholders to consider and approve the proposal to approve the plan of merger contained in the merger agreement. Wachovia is mailing this document to its shareholders on or about [•], 2008. Together with this document, Wachovia is sending a notice of the special meeting and a form of proxy that our board of directors is soliciting for use at the special meeting and at any adjournments or postponements of the special meeting.
 
Time, Date and Place
 
The Wachovia special meeting of shareholders is scheduled to be held on [•], 2008 at [     ], local time, at [•].
 
Matters to be Considered:
 
At the Wachovia special meeting, Wachovia shareholders will be asked:
 
  •  to consider and vote upon a proposal to approve the plan of merger contained in the merger agreement; and
 
  •  to consider and vote upon a proposal to adjourn or postpone the meeting to a later date, if necessary or appropriate, in order to solicit additional proxies in favor of the proposal to approve the plan of merger contained in the merger agreement.
 
At this time, the Wachovia board of directors is unaware of any matters, other than set forth above, that may be presented for action at the special meeting. If other matters are properly presented, however, the persons named as proxies will vote in accordance with their judgment with respect to such matters.
 
Shares Outstanding and Entitled to Vote; Record Date
 
The close of business on [•], 2008 has been fixed by the Wachovia board of directors as the record date for the determination of holders of Wachovia common stock and the Series M Preferred Stock entitled to notice of, and to vote at, the special meeting and any adjournment or postponement of the meeting. At the close of business on the record date, there were [•] shares of Wachovia common stock outstanding and entitled to vote held by [•] holders of record. Each share of Wachovia common stock entitles the holder to one vote at the special meeting on all matters properly presented at the meeting. Pursuant to the share exchange agreement, as of the record date for the special meeting Wells Fargo held 10 shares of the Series M Preferred Stock of Wachovia that vote as a single class with Wachovia’s common stock, representing 39.9% of the total voting power of holders of Wachovia capital stock entitled to vote at the special meeting. In addition, as of the record date for the special meeting, Wells Fargo also held [•] shares of Wachovia common stock, representing (together with the Series M Preferred Stock) [•]% of the total voting power of holders of Wachovia capital stock entitled to vote at the special meeting. Wells Fargo has informed Wachovia that it intends to vote these shares in favor of approval of the plan of merger contained in the merger agreement at the special meeting.
 
How to Vote Your Shares
 
Wachovia shareholders of record may vote by mail, by the telephone, through the Internet or by attending the special meeting and voting in person. If you choose to vote by mail, simply complete the enclosed proxy card, date and sign it, and return it in the postage paid envelope provided.
 
If you are a shareholder of record, you may use the Internet to transmit your vote up until [•], on [•], 2008. Visit [•] and have your proxy card in hand when you access the website and follow the instructions to obtain your records and to create an electronic voting instruction form.
 
If you are a shareholder of record, you may call [•] and use any touch-tone telephone to transmit your vote up until [•], on [•], 2008. Have your proxy card in hand when you call and then follow the instructions.


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Please note that although there is no charge to you for voting by telephone or electronically through the Internet, there may be costs associated with electronic access such as usage charges for Internet service providers and telephone companies. Wachovia will not pay for these costs; they are solely your responsibility.
 
If your shares are held in the name of a bank, broker or other holder of record, you must provide instructions to the broker or nominee as to how your shares should be voted. Brokers do not have the discretion to vote on the proposals and will only vote at the direction of the underlying beneficial owners of the shares of Wachovia common stock. Accordingly, if you do not instruct your broker to vote your shares, your broker will not have the discretion to vote your shares. Your broker or nominee will usually provide you with the appropriate instruction forms at the time you receive this proxy statement-prospectus. If you own your shares in this manner, you cannot vote in person at the special meeting unless you receive a proxy to do so from the broker or the nominee, and you bring that proxy to the special meeting. Also, please note that if the holder of record of your shares is a broker, bank or other nominee and you wish to vote those shares at the meeting, you must bring a letter from the broker, bank or other nominee confirming that you are the beneficial owner of the shares.
 
If you have any shares in Wachovia’s Dividend Reinvestment and Stock Purchase Plan, the enclosed proxy card represents the number of shares you had in that plan on the record date for the special meeting, as well as the number of shares directly registered in your name on the record date.
 
Revocability of Proxies
 
Any Wachovia shareholder of record executing a proxy may revoke it at any time before it is voted by:
 
  •  delivering prior to the special meeting a written notice of revocation addressed to the Corporate Secretary, Wachovia Corporation, 301 South College Street, Charlotte, North Carolina 28288;
 
  •  submitting prior to the special meeting a properly executed new proxy with a later date; or
 
  •  attending the special meeting and voting in person.
 
Attendance at the special meeting will not, by itself, constitute revocation of a proxy. If you have instructed a broker to vote your shares, you must follow the directions you receive from your broker in order to change or revoke your vote.
 
Each proxy returned (and not revoked) will be voted in accordance with the instructions indicated thereon. If you return your proxy but no instructions are indicated, your shares will be voted in favor of the relevant proposal; provided, however, that if you vote against the proposal to approve the plan of merger contained in the merger agreement, and do not provide instruction on voting for the adjournment or postponement proposal, your shares will not be voted in favor of adjourning or postponing the meeting to solicit additional votes on the proposal to approve the plan of merger contained in the merger agreement.
 
Vote Required
 
A quorum, consisting of a majority of the votes entitled to be cast on the plan of merger consisting of all outstanding shares of Wachovia common stock and the Series M Preferred Stock, voting together as a single class, must be present in person or by proxy before any action may be taken at the special meeting. Abstentions will be treated as shares that are present for purposes of determining the presence of a quorum.
 
The affirmative vote of the holders of a majority of the votes entitled to be cast on the plan of merger consisting of all outstanding shares of Wachovia common stock and the Series M Preferred Stock, voting together as a single class, is necessary to approve the plan of merger contained in the merger agreement. The failure to vote, either by proxy or in person, will have the same effect as a vote against the proposal to approve the plan of merger contained in the merger agreement. Shares which abstain from voting as to a particular matter will not be voted in favor of such matters.
 
Brokers cannot vote the shares that they hold beneficially either for or against the proposal to approve the plan of merger contained in the merger agreement or the proposal to approve the adjournment or postponement


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of the special meeting, if necessary or appropriate, to solicit additional proxies to approve the plan of merger contained in the merger agreement without specific instructions from the person who beneficially owns the shares, so-called “broker non-votes.” Therefore, if your shares are held by a broker and you do not give your broker instructions on how to vote your shares, this will have the same effect as voting against the proposal to approve the plan of merger contained in the merger agreement.
 
As of the record date, the directors and executive officers of Wachovia owned approximately [•]% of the outstanding shares of Wachovia common stock entitled to vote at the special meeting, or approximately [•]% of the voting power of the outstanding Wachovia capital stock entitled to vote at the special meeting including the Series M Preferred Stock. All of the members of the Wachovia board of directors have indicated their intention as of [•], 2008 to vote the shares of Wachovia common stock they own (or have the power to vote or direct the vote) as of the record date (if any) in favor of the proposal to approve the plan of merger contained in the merger agreement.
 
As of the close of business on the record date for the special meeting, Wells Fargo held 10 shares of Series M Preferred Stock of Wachovia that votes as a single class with Wachovia’s common stock, representing 39.9% of the total voting power of holders of Wachovia capital stock entitled to vote, and also held [•] shares of Wachovia common stock, representing (together with the Series M Preferred Stock) [•]% of the total voting power of holders of Wachovia capital stock entitled to vote at the special meeting. Wells Fargo has informed Wachovia that it intends to vote these shares in favor of the proposal to approve the plan of merger contained in the merger agreement. If Wells Fargo does vote such Series M Preferred Stock and Wachovia common stock in favor of the proposal to approve the plan of merger contained in the merger agreement, the merger agreement will be approved if approximately [•]% of the voting power of the other outstanding shares of Wachovia capital stock entitled to vote at the special meeting also vote in favor of the proposal to approve the plan of merger contained in the merger agreement.
 
Solicitation of Proxies
 
Wachovia and Wells Fargo will share equally the costs of mailing this proxy statement-prospectus to Wachovia’s shareholders, and Wachovia will pay all other costs incurred by it in connection with the solicitation of proxies from its shareholders on behalf of its board of directors. In addition to solicitation by mail, the directors, officers and regular employees of Wachovia and its subsidiaries may solicit proxies from shareholders in person or by telephone, telegram, facsimile or other electronic methods without compensation other than reimbursement for their actual expenses.
 
Arrangements also will be made with custodians, nominees and fiduciaries for the forwarding of solicitation material to the beneficial owners of stock held of record by such persons, and Wachovia will reimburse such custodians, nominees and fiduciaries for their reasonable out-of-pocket expenses in connection therewith.
 
Wachovia has retained Georgeson Inc., a professional proxy solicitation firm, to assist it in the solicitation of proxies. The fee payable to such firm in connection with the proxy solicitation is $[•] plus reimbursement for reasonable out-of-pocket expenses.
 
Delivery of Proxy Materials
 
To reduce the expenses of delivering duplicate proxy materials to our shareholders, we are relying upon SEC rules that permit us to deliver only one proxy statement-prospectus to multiple shareholders who share an address unless we received contrary instructions from any shareholder at that address. If you share an address with another shareholder and have received only one proxy statement-prospectus, you may write or call us as specified below to request a separate copy of this document and we will promptly send it to you at no cost to you. For future meetings, if you hold shares directly registered in your own name, you may request separate copies of our proxy materials, or request that we send only one set of these materials to you if you are receiving multiple copies, by contacting us at: Investor Relations, Wachovia Corporation, 301 South College Street, Charlotte, North Carolina 28288-0206, or by telephoning us at (704) 374-6782. If your shares are held in the name of a bank, broker, or other nominee and you wish to receive separate copies of our proxy


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materials, or request that they send only one set of these materials to you if you are receiving multiple copies, please contact the bank, broker or other nominee.
 
Recommendation of the Wachovia Board of Directors
 
The Wachovia board of directors has unanimously adopted the plan of merger contained in the merger agreement and the transactions contemplated by the merger agreement. Based on Wachovia’s reasons for the merger described in this document, the Wachovia board of directors believes that the merger is in the best interests of Wachovia and its shareholders. Accordingly, the Wachovia board of directors unanimously recommends that Wachovia shareholders vote “FOR” approval of the plan of merger contained in the merger agreement and the adjournment proposal.


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THE MERGER
 
The following discussion provides material information about the merger. The discussion may not have all the information that is important to you, and it is qualified in its entirety by reference to the appendices to this document, including the merger agreement attached as Appendix A. We urge you to carefully read this entire document, including the appendices, for a more complete understanding of the merger.
 
Merger Structure
 
In the merger, Wachovia will merge with and into Wells Fargo. Wells Fargo will be the surviving corporation in the merger. Each share of Wachovia common stock outstanding at the time of the merger will be automatically converted into 0.1991 of a share of Wells Fargo common stock.
 
Merger Consideration
 
For Shares of Wachovia Common Stock.  The merger agreement provides that, at the completion of the merger, each share of Wachovia common stock outstanding immediately before the merger will be converted into 0.1991 of a share of Wells Fargo common stock. We sometimes refer to the number of shares of Wells Fargo common stock to be exchanged for each share of Wachovia common stock as the “exchange ratio.” If the number of shares of common stock of Wells Fargo changes before the merger is completed because of a reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split, or other similar event, then an appropriate and proportionate adjustment will be made to the number of shares of Wells Fargo common stock into which each share of Wachovia common stock will be converted.
 
If the total number of shares of Wells Fargo common stock to be received in the merger by a Wachovia shareholder does not equal a whole number, the shareholder will receive cash instead of the fractional share. The amount of cash will equal the fractional share amount multiplied by the average, rounded to the nearest one ten thousandth, of the closing sale prices of Wells Fargo common stock on the New York Stock Exchange as reported by The Wall Street Journal for the five trading days immediately preceding the date of the completion of the merger.
 
For Wachovia Stock Options and Other Equity-Based Awards.  The merger agreement also provides that, at the completion of the merger, each option to purchase Wachovia common stock and each other equity-based award of Wachovia that is then outstanding will be converted automatically into an option or other equity-based award of or on shares of Wells Fargo common stock, generally subject to the same terms and conditions that applied to the Wachovia option or other equity-based award. The number of Wachovia common shares subject to these stock options and other equity-based awards, and the exercise price of the stock options, will be adjusted based on the exchange ratio of 0.1991.
 
For Shares of Wachovia Preferred Stock.  Shares of preferred stock issued by Wachovia’s subsidiaries will remain issued and outstanding following completion of the merger, and the terms of those preferred shares will generally be unaffected by the merger. Except with respect to the Series M Preferred Stock, holders of Wachovia preferred stock, depositary shares or preferred stock issued by Wachovia’s subsidiaries are not entitled to vote on the merger or at the special meeting.
 
Upon completion of the merger, (i) each Dividend Equalization Preferred Share, no par value, of Wachovia, referred to as Wachovia DEP Shares, issued and outstanding immediately prior to completion of the merger will be automatically converted into one one-thousandth of a Wells Fargo Dividend Equalization Preferred Share, no par value, referred to as Wells Fargo DEP Shares, (ii) each share of Wachovia Class A Preferred Stock, Series G, no par value, referred to as Wachovia Preferred Stock Series G, issued and outstanding immediately prior to completion of the merger will be automatically converted into one one-hundredth of a share of Wells Fargo Class A Preferred Stock, Series G, no par value, referred to as the Wells Fargo Preferred Stock Series G, (iii) each share of Wachovia Class A Preferred Stock, Series H, no par value, referred to as Wachovia Preferred Stock Series H, issued and outstanding immediately prior to completion of the merger will be automatically converted into one one-hundredth of a share of Wells Fargo Class A Preferred Stock, Series H, no par value, referred to as the Wells Fargo Preferred Stock Series H, (iv) each share of Wachovia Class A Preferred Stock, Series I, no par value, referred to as Wachovia Preferred Stock Series I,


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issued and outstanding immediately prior to completion of the merger will be automatically converted into one share of Wells Fargo Class A Preferred Stock, Series I, no par value, referred to as the Wells Fargo Preferred Stock Series I, (v) each share of Wachovia Preferred Stock Series J, no par value, referred to as Wachovia Preferred Stock Series J, issued and outstanding immediately prior to completion of the merger will be automatically converted into one share of Wells Fargo 8.00% Non-Cumulative Perpetual Class A Preferred Stock, Series J, no par value, referred to as the Wells Fargo Preferred Stock Series J, (vi) each share of Wachovia Fixed-to-Floating Rate Non-Cumulative Perpetual Class A Preferred Stock, Series K, no par value, referred to as Wachovia Preferred Stock Series K, issued and outstanding immediately prior to completion of the merger will be automatically converted into one share of Wells Fargo, Fixed-to-Floating Rate Non-Cumulative Perpetual Class A Preferred Stock, Series K, no par value, referred to as the Wells Fargo Preferred Stock Series K, (vii) each share of Wachovia 7.50% Non-Cumulative Perpetual Convertible Class A Preferred Stock, Series L, no par value, referred to as Wachovia Preferred Stock Series L, issued and outstanding immediately prior to the completion of the merger will be automatically converted into one share of Wells Fargo 7.50% Non-Cumulative Perpetual Convertible Class A Preferred Stock, Series L, no par value, referred to as the Wells Fargo Preferred Stock Series L and (viii) each share of Wachovia Series M, Class A Preferred Stock, no par value, issued and outstanding immediately prior to the completion of the merger will be automatically converted into one share of Wells Fargo Series M, Class A Preferred Stock, no par value, referred to as the Wells Fargo Preferred Stock Series M. As of the date of this proxy statement-prospectus, no shares of Wachovia Preferred Stock Series G, Wachovia Preferred Stock Series H or Wachovia Preferred Stock Series I are issued.
 
The terms of each share of the Wells Fargo Preferred Stock Series I, Wells Fargo Preferred Stock Series J, Wells Fargo Preferred Stock Series K, Wells Fargo Preferred Stock Series L and Wells Fargo Preferred Stock Series M will be substantially identical to the terms of one share of the corresponding series of Wachovia Class A Preferred Stock. The terms of each one one-thousandth of a Wells Fargo DEP Share will be substantially identical to the terms of one Wachovia DEP Share. The terms of each one one-hundredth of a share of Wells Fargo Preferred Stock Series G and one one-hundredth of a share of Wells Fargo Preferred Stock Series H will be substantially identical to the terms of one share of Wachovia Preferred Stock Series G and Wachovia Preferred Stock Series H, respectively. We sometimes refer to the Wells Fargo DEP Shares, Wells Fargo Preferred Stock Series G, Wells Fargo Preferred Stock Series H, Wells Fargo Preferred Stock Series I, Wells Fargo Preferred Stock Series J, Wells Fargo Preferred Stock Series K and Wells Fargo Preferred Stock Series L collectively as the “New Wells Fargo Preferred Stock.” Any shares of Wachovia preferred stock as to which preferred shareholders have perfected their dissenters’ rights pursuant to North Carolina law will not be exchanged for New Wells Fargo Preferred Stock.
 
Each outstanding share of the Wachovia Preferred Stock Series J is presently represented by depositary shares that are listed on the New York Stock Exchange and represent a one-fortieth interest in a share of Wachovia Preferred Stock Series J. Upon completion of the merger, Wells Fargo will assume the obligations of Wachovia under the Deposit Agreement, dated as of December 21, 2007, between Wachovia, U.S. Bank, National Association as depositary, and the holders from time to time of depositary shares. Wells Fargo will instruct U.S. Bank, referred to as the Depositary, as depositary under the deposit agreement, referred to as the Series J Deposit Agreement, to treat the shares of New Wells Fargo Preferred Stock received by it in exchange for shares of Wachovia Preferred Stock Series J as newly deposited securities under the Series J Deposit Agreement. In accordance with the terms of the Series J Deposit Agreement, the Wachovia depositary shares will thereafter represent the shares of the Wells Fargo Preferred Stock Series J. Such depositary shares will continue to be listed on the New York Stock Exchange upon completion of the merger under a new name and traded under a new symbol.
 
Holders of Wachovia preferred stock (except for the Series M Preferred Stock issued to Wells Fargo (which represents 39.9% of the total voting power of holders of Wachovia capital stock entitled to vote)) and Wachovia depositary shares are not entitled to vote on the plan of merger contained in the merger agreement or the proposal to approve the adjournment or postponement of the special meeting, if necessary or appropriate, in order to solicit additional proxies in favor of the proposal to approve the plan of merger contained in the merger agreement.


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Background of the Merger
 
Wachovia’s strategy has been to build a diversified financial services company providing a wide range of financial products and services to an expanded customer base. To accomplish this objective, over the last two decades Wachovia acquired nearly 100 banks, thrifts and broker-dealers to become a leading banking franchise in the eastern, southern and western United States, as well as a nationwide retail securities brokerage business. In 2006, at a time when Wachovia’s market cap was approximately $86 billion, in furtherance of Wachovia’s objectives of expanding its banking franchise to the California markets and gaining market share in U.S. residential mortgage lending, Wachovia acquired Golden West Financial Corporation of Oakland, California for approximately $25.5 billion. Golden West added significant size to Wachovia’s then-small California retail banking presence and also added approximately $120 billion of residential mortgages to Wachovia’s balance sheet, which at the time had assets of about $553 billion. Substantially all of the Golden West mortgage portfolio has consisted of a product, referred to as “option ARMs” or adjustable rate mortgages with monthly payment options. The credit quality of this portfolio has deteriorated significantly in the current mortgage crisis.
 
In the spring of 2007, the U.S. housing market began experiencing increases in sub-prime home loan delinquencies and declines in housing values. Throughout the remainder of 2007, in accordance with the mark-to-market valuations required by United States generally accepted accounting principles, these declining asset values created valuation losses in certain types of securities that Wachovia held on its balance sheet, including sub-prime residential mortgage-backed securities (RMBS) and collateralized debt obligations whose underlying collateral contained sub-prime RMBS (CDOs). In addition, Wachovia began to increase its loan loss provision in response to generally deteriorating credit conditions, including in the Golden West mortgage portfolio. In the fourth quarter of 2007, Wachovia reported net income of $51 million, compared to net income of $2.3 billion in the fourth quarter of 2006.
 
Economic conditions, and in particular the housing market, continued to deteriorate in the first quarter of 2008. In light of the worsening outlook for housing prices, changing borrower behavior and mark-to-market valuation losses on Wachovia’s RMBS, CDOs and leveraged lending portfolios, Wachovia reported a loss in the first quarter of 2008 of $707 million, compared with earnings of $2.3 billion in the first quarter of 2007. In response to these developments and to create a stronger capital cushion for future credit losses, Wachovia sold $8.05 billion of common and preferred stock in mid-April 2008 and announced a 41% reduction in its quarterly common stock dividend.
 
Issues relating to Wachovia’s declining financial condition, including continuing credit deterioration in the Golden West mortgage portfolio and other elements of its loan portfolio, continued mark-to-market valuation losses on securities positions, and a series of other negative results that included $314 million of losses in Wachovia’s bank-owned life insurance portfolio, a $144 million regulatory settlement related to Wachovia acting as payment processor for telemarketers, and a charge of $975 million related to certain “sale-in, lease-out” leasing transactions and other factors, preceded an announcement on June 2, 2008, that Wachovia had terminated its Chief Executive Officer, G. Kennedy Thompson. Wachovia’s board of directors appointed its Chairman, Lanty L. Smith, as interim Chief Executive Officer while it searched for a permanent replacement. On July 9, Wachovia named Robert K. Steel as its Chief Executive Officer and President.
 
On July 22, 2008, Wachovia reported a second quarter loss of $9.1 billion, including $6.1 billion related to goodwill impairment, and a $5.6 billion loan loss provision, reflecting continuing worsened housing and economic conditions and anticipated future losses on its loan portfolio, primarily in the Golden West mortgage portfolio. At that time, Wachovia also further reduced its quarterly common stock dividend by 86% to $0.05 per share and announced a series of measures, including balance sheet adjustments, expense reductions and the possible sale of non-core assets, intended to preserve capital and enhance liquidity to secure Wachovia’s future as an independent company in light of weakening economic conditions. Wachovia pursued these initiatives aggressively — by early September, Wachovia had begun the planned elimination of close to 10,000 employee positions and Wachovia was on track for a $20 billion reduction in securities and loan balances by the end of 2008. Toward the end of July, Wachovia also announced that its Chief Financial Officer and Chief Risk Officer would be replaced. In addition, on August 15, Wachovia announced that it had been successful in reaching a global settlement with state and federal securities regulators requiring Wachovia to repurchase approximately


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$8.5 billion in auction rate securities, at an expense to Wachovia of $775 million (which was subsequently revised to $997 million).
 
In the first half of September 2008, a series of unexpected and unprecedented events occurred in rapid succession in the financial services industry that increased the uncertainty and stress in the financial markets. These events included the conservatorship of Fannie Mae and Freddie Mac on Sunday, September 7, 2008, the bankruptcy of Lehman Brothers Holdings and the acquisition of Merrill Lynch by Bank of America announced on Monday, September 15, 2008, and growing concerns about the viability of American International Group, which later culminated in a transaction in which the Federal Reserve acquired most of AIG’s equity.
 
These events created significant turmoil as the markets and market participants affected by such events, including Wachovia, began absorbing the enormity of their consequences in the days following the September 15 announcements regarding Lehman Brothers and Merrill Lynch. The resulting degradation in the credit markets which raised the costs of borrowing, together with the deteriorating condition of the U.S. economy and housing market, market perceptions, and rating agencies’ outlooks, led Wachovia to intensify an analysis of potential strategic options. Wachovia’s Chairman, Lanty L. Smith, scheduled a telephonic Wachovia board meeting on September 16, 2008, so that management could review these events with the board and their anticipated effect on Wachovia, including the effect on Wachovia’s strategic decision-making. At that meeting, management described Wachovia’s operations in the current financial environment and discussed the following possible strategic options: (1) exclusively pursue the strategy announced in July for preserving and protecting capital and liquidity by continuing to reduce risks and expenses and consider possible disposition of non-core assets (i.e., “stay-the-course”); (2) sell certain core assets and/or businesses; (3) raise $10 to $15 billion of capital; (4) a combination of (2) and (3); (5) an investment in Wachovia by a large strategic investor in an amount of between 20-40% of Wachovia’s voting equity; and (6) a combination with another financial services company. Acknowledging a preference for Wachovia to remain an independent company, which was achievable under options 1-4, the board and management determined to pursue seriously options 2, 3 and 4 but also determined that current conditions made it prudent to remain open to and begin exploration of options 5 and 6 as well.
 
In furtherance of these initiatives, Wachovia engaged Perella Weinberg and, later, Goldman Sachs for financial and strategic advice on Wachovia’s options and the law firms of Sullivan & Cromwell LLP and Simpson Thacher & Bartlett LLP to provide legal counsel for strategic alternatives. These advisors began developing the documentation necessary to raise capital. In addition, Wachovia created and populated an electronic data room to facilitate due diligence activities by potential investors and/or combination partners. As it began pursuing all five possible alternatives, Wachovia and a potential combination partner initiated contact on September 17 about a possible merger-of-equals transaction and entered confidentiality agreements and began conducting due diligence analyses on each other on September 18. Wachovia and the potential partner also discussed transaction structure and management issues.
 
Also during that week, Wachovia’s senior management received three separate unsolicited calls from Vikram Pandit, the Chief Executive Officer of Citigroup Inc. and two other Citigroup senior executives indicating interest in pursuing discussions regarding a possible combination with Wachovia. Mr. Pandit placed yet another call to Mr. Steel the following week on September 22, 2008, to reiterate Citigroup’s interest.
 
Wachovia also held telephonic meetings of its board of directors on September 18 and September 19 at which management briefed the board on developments regarding consideration of the various alternatives.
 
On September 20, 2008, Wachovia received a telephone call from U.S. government officials encouraging Wachovia to engage in discussions with another financial institution for the purpose of that institution acquiring Wachovia. Wachovia entered into a confidentiality agreement with this financial institution on September 21 and representatives of Wachovia traveled to New York to begin due diligence and substantive discussions regarding a possible acquisition of Wachovia on a highly accelerated time schedule. By early evening on September 21, Wachovia and this potential acquirer determined not to proceed with a transaction. A primary factor in the decision was the potential acquirer’s desire for a financial backstop from the federal government with regard to Wachovia’s loan portfolio, which federal regulators did not then agree to provide.


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At a telephonic meeting of its board of directors in the afternoon of September 21, management and Wachovia’s legal and financial advisors updated the board on the status of discussions with both of the potential merger partners and the ongoing due diligence matters. By late evening on September 21, negotiations with both of the potential merger partners with which Wachovia had conducted negotiations over the weekend had ended and management provided a status report to the Wachovia board of directors in a telephonic meeting on September 22.
 
In addition to the discussions regarding the potential mergers, throughout the weekend of September 20-21, Wachovia continued to explore the other alternatives involving a capital raise, asset sales and a large investment by a strategic investor of 20-40% of Wachovia’s equity. In connection with the former alternative, the market rebound by September 19, which followed the Administration’s announcement at the end of the week of several economic rescue initiatives (its $700 billion economic stabilization proposal, the temporary guarantee of money market funds against losses up to $50 billion, and the availability of $180 billion in currency swaps), produced a more attractive environment for a capital raise and Wachovia intensified its efforts toward this alternative. Wachovia engaged in preliminary discussions with potential private investors during the period of September 19-21 in preparation for a possible public offering that would have followed a private placement to a single or small number of private investors during the week of September 22; Wachovia’s legal and financial advisors prepared drafts of documentation toward that end.
 
In connection with the alternative involving a large investment by a strategic investor, Wachovia signed a confidentiality agreement with another global financial institution on September 18, 2008. This financial institution began conducting due diligence on Wachovia on September 18, initially indicating to Wachovia that it could be interested in purchasing between 20 — 40% of Wachovia’s equity; however, discussions between that institution and Wachovia never progressed beyond the exploratory stages. Wachovia continued to pursue actively the alternative strategy of raising capital and selling assets.
 
On September 20, Mr. Steel had a brief conversation with Richard Kovacevich, Chairman of Wells Fargo, about engaging in discussions regarding a possible transaction. Mr. Steel and representatives of Perella Weinberg, Wachovia’s advisors, had two additional follow-up conversations with Mr. Kovacevich to make arrangements for due diligence work and encourage him to consider the opportunity on an accelerated basis.
 
Market conditions for financial institutions deteriorated precipitously the week beginning September 22, 2008. On September 21, Morgan Stanley and Goldman Sachs announced that they had been approved to convert to bank holding companies regulated by the Federal Reserve. The Administration’s economic stabilization proposal encountered difficulty in Congress and the breadth of the Federal Reserve’s assistance to AIG became evident when details were announced on September 23. On September 24, Mr. Steel attempted to contact Citigroup’s CEO, Vikram Pandit for the purpose of communicating that Wachovia was prepared to respond to Citigroup’s invitation to discuss a possible combination. Mr. Pandit was traveling and unable to speak to Mr. Steel until early in the morning of September 26, when Mr. Steel promptly responded to a 4:27 a.m. email from Mr. Pandit suggesting that he was available.
 
On Thursday, September 25, the Office of Thrift Supervision announced the seizure of the largest savings bank in the United States, Washington Mutual Bank, FSB, and the subsequent placement of Washington Mutual Bank into FDIC receivership, followed by a sale to JPMorgan Chase for approximately $1.9 billion. In that transaction, JPMorgan Chase did not assume any equity or debt securities of the holding company for Washington Mutual Bank or the senior and subordinated debt of Washington Mutual Bank itself. In addition, on September 25, the tentative agreement in the U.S. Congress regarding the Administration’s economic stabilization proposal had collapsed in talks that evening at the White House.
 
The combination of the seizure of Washington Mutual Bank and the collapse of Congressional agreement regarding the Administration’s economic stabilization proposal preceded a sharp downward turn in the financial markets. The cost to insure Wachovia debt as evidenced by credit default swap spreads increased substantially from Thursday, September 25 to Friday, September 26. On Friday, September 26, there was significant downward pressure on Wachovia’s common stock price and deposit base, and as the day progressed, liquidity pressure intensified as financial institutions began declining to conduct normal financing transactions with Wachovia. On that day, after briefing national rating agencies, Wachovia was informed that


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the rating agencies were likely to take negative ratings action in the very near future. In light of the deteriorating market conditions during the week of September 22, Wachovia believed it was no longer in a position to engage in the public offering and private placement transactions to raise capital that had been considered as an alternative. Liquidity continued to decline and by the end of September 26, Wachovia’s management was concerned that, without accessing the Federal Reserve’s discount borrowing window, Wachovia’s banking subsidiaries would not be able to fund normal banking activities on Monday, September 29. Wachovia had been regularly reviewing its liquidity situation with the Federal Reserve and the OCC, who on that day remained on site.
 
Wachovia held a telephonic board of directors meeting on Friday, September 26 during which management advised the board of directors of the status of Wachovia’s liquidity situation, the status of the various strategic alternatives, including that the capital raising alternative was no longer a viable option, and the status of discussions with regulatory authorities about Wachovia’s financial condition. Management also advised the board of directors that management had begun discussions with Citigroup and Wells Fargo regarding a possible merger and that Wachovia intended to pursue both during the weekend of September 27-28. Management informed the board of directors that if a combination with another partner could not be arranged by Monday, September 29, the FDIC would place Wachovia’s bank subsidiaries in receivership.
 
Wachovia entered into separate confidentiality agreements with Citigroup and Wells Fargo on September 26, related to the possible acquisition of Wachovia. Wachovia representatives traveled to New York for the weekend of September 27-28 and engaged in due diligence discussions and negotiations with Citigroup and Wells Fargo. Wachovia communicated to both parties the need to announce a merger transaction by Monday morning, September 29. Citigroup communicated to Wachovia that it was not willing to acquire Wachovia itself, but only its bank subsidiaries and further that it was not able to proceed with any transaction without government assistance in the form of a loss-sharing arrangement. Although Wachovia explained its concerns that the remaining parts of Wachovia might not, after such a proposed Citigroup transaction, be viable or solvent on their own, Citigroup indicated that it was only prepared to negotiate for the purchase of the bank subsidiaries.
 
On Saturday, September 27, and in an early morning meeting on September 28, Mr. Kovacevich, the Chairman of Wells Fargo, told Mr. Steel that Wells Fargo was considering an offer to purchase all of Wachovia in a stock-for-stock transaction, pending completion of due diligence activities. Mr. Kovacevich commented that Wells Fargo was working on a transaction that would not require government assistance and that he believed Wells Fargo could meet the Monday morning timetable.
 
On September 28, Wachovia’s counsel transmitted a draft of a merger agreement to counsel for Wells Fargo. Mr. Steel and Mr. Kovacevich held ongoing discussions throughout the day regarding the status of the due diligence. In the afternoon, Mr. Kovacevich indicated that he was concerned that the compressed timeframe Wachovia requested would not enable Wells Fargo to complete the due diligence it believed necessary and prudent and at approximately 7:00 p.m., Mr. Kovacevich informed Mr. Steel that Wells Fargo was not prepared on this timetable to offer to acquire Wachovia along the lines previously discussed. That evening, representatives of Wells Fargo proposed to, and discussed with, representatives of the FDIC and other federal bank regulators a possible transaction between Wells Fargo and Wachovia that would include a loss-sharing agreement with the FDIC whereby Wells Fargo’s exposure to losses would be limited with respect to specified Wachovia assets it would not have had an opportunity to review in depth.
 
Shortly after Mr. Steel spoke to Mr. Kovacevich, Sheila Bair, the Chairman of the FDIC, contacted Mr. Steel and advised him that the FDIC understood that Wachovia would be unable to find a merger partner that could accomplish a combination without government assistance. Chairman Bair confirmed that, in the FDIC’s view, the Wachovia situation posed systemic risk to the banking system and for the first time indicated that the FDIC intended to take unprecedented action by exercising its powers under Section 13 of the Federal Deposit Insurance Act to effect an “open bank assisted transaction” with another financial institution, which would be selected by the FDIC through a bidding process to be conducted over the next several hours.
 
Wachovia held a telephonic meeting of its board of directors at approximately 9:00 p.m. on September 28 to advise the board of the current situation and the FDIC’s position. Legal counsel discussed with the board


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matters regarding its fiduciary duties relative to shareholders and, in the existing context, creditors. Management indicated that it likely would need to re-convene the board in several hours for the purpose of considering an agreement with the purchaser selected by the FDIC.
 
At approximately 12:30 a.m. on Monday, September 29, Wachovia and its financial and legal advisors proposed an alternative transaction to the FDIC for its consideration. Wachovia proposed that it receive FDIC assistance in the form of loss-sharing on a designated loan portfolio, as well as granting the FDIC equity ownership in Wachovia and raising approximately $10 billion in capital in a public offering. Wachovia urged the FDIC to accept this proposal, believing it involved significantly less risk to the FDIC fund than the transaction it understood Citigroup to be proposing, and, based on the state of preparation for the capital raising transaction that Wachovia had considered the prior week, indicated that it was prepared to move very quickly to implement it.
 
During the evening and early morning hours, Wells Fargo had further conversations with representatives of the FDIC concerning the terms of a proposed acquisition of Wachovia by Wells Fargo, including the terms on which open-bank assistance might be provided by the FDIC.
 
At approximately 4:00 a.m. on Monday, September 29, Chairman Bair informed Mr. Steel that the FDIC had determined that Citigroup would acquire Wachovia’s banking subsidiaries, that Wachovia should proceed to negotiate terms with Citigroup, which Wachovia understood were to be signed by Citigroup, Wachovia and the FDIC, and that there would be an announcement before the start of business that day. Several hours earlier, Citigroup had delivered what was styled a draft agreement-in-principle to Wachovia, which reflected Citigroup’s proposal.
 
Citigroup’s proposed agreement-in-principle, which by its terms was not binding on any of the parties, provided that Citigroup would acquire the stock of Wachovia’s banking subsidiaries and other mutually agreed assets for $2.16 billion in cash and/or stock at Citigroup’s election and the assumption of approximately $53.2 billion of Wachovia’s senior and subordinated debt. Under this structure, Wachovia would attempt to continue as an ongoing business concern with its principal businesses being the Wachovia Securities retail brokerage business and the Evergreen mutual fund business. Among other material terms, the terms associated with separating the Wachovia businesses in connection with a transaction, and supporting and funding those businesses remaining with Wachovia after a transaction, were left unspecified and subject to negotiation. The FDIC would provide Citigroup with loss protection on a $312 billion loan portfolio to be identified by Citigroup, on which Citigroup would absorb the first $30 billion of losses and additionally absorb up to $4 billion a year of losses for the first three years. The non-binding agreement-in-principle also indicated that if definitive agreements were reached they would provide that, in the event the resulting transaction was not consummated, Citigroup would have an option to purchase selected Wachovia branches in California, Florida and New Jersey at fair market value. The non-binding agreement-in-principle was subject to the negotiation and execution of definitive transaction documentation, as well as Wachovia board of directors and shareholder approval. Efforts by Wachovia to negotiate a number of material terms of the Citigroup proposal and Wachovia’s request that Citigroup purchase Wachovia in its entirety, were rejected by Citigroup. The non-binding agreement-in-principle also indicated that Citigroup would have exclusivity for seven days from announcement.
 
Wachovia held a telephonic board of directors meeting at 6:30 a.m. on Monday, September 29 to advise the board of the events that had developed during the night. Legal counsel to Wachovia described the terms of the non-binding agreement-in-principle. Management informed the board that it was faced with two options: (1) execute the agreement-in-principle with Citigroup and the FDIC or (2) have the FDIC place Wachovia’s banking subsidiaries into receivership, which likely would require Wachovia Corporation to file a bankruptcy petition soon thereafter. Perella Weinberg and Goldman Sachs both indicated that, based on the circumstances, and subject to conducting due diligence, completing their financial analysis and reviewing definitive documentation, and provided that the definitive terms thereof were consistent with the agreement-in-principle, they believed they would be able to render an opinion that the consideration to be received in the Citigroup proposed transaction was fair, from a financial point of view, to Wachovia. The Wachovia board of directors voted in favor of proceeding with Citigroup.


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Following the board of directors meeting, Citigroup provided Wachovia with what it described as the execution copy of the non-binding agreement-in-principle and also sent Wachovia a letter agreement containing certain exclusivity covenants. In addition to the agreement-in-principle, Citigroup instructed Wachovia to sign the letter agreement shortly after receiving it, rejecting Wachovia’s few suggested changes, including a suggestion that there be a provision requiring both parties to negotiate in good faith. Faced with Citigroup’s unwillingness to consider changes and the views of the regulators, Wachovia executed both the non-binding agreement-in-principle and the letter agreement.
 
On the afternoon of September 30, Citigroup delivered a draft acquisition agreement and other related agreements to Wachovia, and the parties proceeded to have discussions regarding the terms of that agreement and the other agreements contemplated by the non-binding agreement-in-principle. Because the transaction contemplated by the agreement-in-principle involved separating Wachovia’s banking businesses from Wachovia Corporation itself and the other functionally and operationally integrated businesses within Wachovia, the negotiations involved very complex issues. On several occasions, Wachovia urged that Citigroup reconsider the structure and acquire all of Wachovia to avoid the complexity inherent in the contemplated transaction and uncertainty about whether the remaining businesses in Wachovia would be viable, on-going concerns. After hearing these concerns, Citigroup indicated that it would pay an additional $2.16 billion in Citigroup common stock. In exchange for purchasing certain additional assets that had not been contemplated by the agreement-in-principle, Citigroup also indicated it would provide additional Citigroup shares to permit Wachovia to make a tender offer deeply discounted from par value for Wachovia’s outstanding preferred stock.
 
As the negotiations proceeded, however, the requirement to separate Wachovia’s businesses continued to raise difficult issues, often involving potential great cost and risk to Wachovia, as well as the fundamental question of the viability and solvency of Wachovia after the transaction. Wachovia also expressed concern that the Citigroup draft agreement and Citigroup’s position on certain issues were inconsistent with the non-binding agreement-in-principle. Nevertheless, on Wednesday, October 1, Citigroup insisted that the parties be prepared to execute the definitive agreements no later than Friday, October 3 in order for Citigroup to commence a $10 billion capital raise that was contemplated in the non-binding agreement-in-principle. However, as of the evening of Thursday, October 2, it had become apparent that there were a number of significant substantive issues of disagreement between the negotiating teams of Citigroup and Wachovia, involving potentially billions of dollars in exposure to the remaining Wachovia entity.
 
On Thursday, October 2, Wells Fargo had discussions internally and with its legal counsel, Wachtell, Lipton, Rosen & Katz, and its financial advisor, JPMorgan Securities, regarding Wachovia and the announcement about Wachovia and Citigroup. Noting that the announcement of Citigroup’s plans for Wachovia indicated that a definitive agreement had yet to be negotiated and that there had been no subsequent disclosure of such an agreement or indeed of all the details of the announced proposal, Wells Fargo and its advisors discussed the possibility of submitting a bid for Wachovia. Wells Fargo executives reviewed information regarding Wachovia and analyzed the financial implications of a potential transaction. Based on these discussions, and with the benefit of additional time to assess its diligence findings from the preceding weekend, Wells Fargo determined that an offer to acquire all of Wachovia in an unassisted stock-for-stock merger transaction could be undertaken on terms that were both likely to be more attractive to Wachovia and its shareholders than the terms of the Citigroup proposal, as they were understood, and that presented acceptable economics and risk levels to Wells Fargo. Wells Fargo also informed representatives of federal banking regulators concerning its thinking and its renewed consideration of a proposal and indicated that its revised proposal would involve an acquisition of all of Wachovia and would not require FDIC assistance.
 
In the evening of October 2, the Wells Fargo board of directors met, together with management and Wells Fargo’s legal and financial advisors, to consider the proposed transaction with Wachovia. Following extensive discussion the Wells Fargo board unanimously approved the proposed merger with Wachovia and directed management to execute a merger agreement and deliver it to representatives of Wachovia.
 
At approximately 7:15 p.m. on October 2, Mr. Steel received a telephone call from Chairman Bair of the FDIC, who asked if Mr. Steel had heard from Mr. Kovacevich. Mr. Steel answered that he had not spoken to Mr. Kovacevich since the initiation of negotiations with Citigroup, other than a very brief congratulatory phone


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call from Mr. Kovacevich regarding the Citigroup transaction on the morning of September 29. Chairman Bair advised Mr. Steel that it was her understanding that Mr. Kovacevich would be calling Mr. Steel to propose a merger transaction that would result in Wachovia shareholders receiving $7.00 per share of Wells Fargo common stock for each share of Wachovia common stock and encouraged Mr. Steel to give serious consideration to that offer. At Mr. Steel’s request, Chairman Bair next telephoned Jane Sherburne, Wachovia’s General Counsel, and provided additional details of the proposed Wells Fargo transaction, including that it would not require any government assistance, and indicating that it appeared that the Wells Fargo transaction was superior to the Citigroup transaction from the perspectives of both Wachovia and the government. Ms. Sherburne advised Chairman Bair that unless Wachovia had a signed merger agreement from Wells Fargo that had been approved by the Wells Fargo board, it would not consider this proposal. Chairman Bair indicated she would provide Mr. Kovacevich that information and subsequently reported to Ms. Sherburne that she had done so and that Mr. Kovacevich indicated a signed, Wells Fargo board-approved merger agreement would be forthcoming.
 
At approximately 9:00 p.m. on October 2, Mr. Steel received a telephone call from Mr. Kovacevich that he would be sending a signed, Wells Fargo board-approved merger agreement to Mr. Steel. Mr. Kovacevich informed Mr. Steel that, in view of the significance of the proposal to Wells Fargo, Wells Fargo intended to disclose its proposal publicly the following morning. Mr. Steel received that signed agreement in an e-mail at 9:04 p.m. The e-mail contained a letter outlining Wells Fargo’s proposal, which involved a stock-for-stock merger with consideration valued, based on Wells Fargo’s closing price that day, at $7.00 per Wachovia common share. The signed merger agreement also attached to the email was, with one substantive exception, in the form that had been provided to Wells Fargo by Wachovia the preceding weekend, on September 28. Wachovia promptly called a meeting of its board of directors at 11:00 p.m. on October 2.
 
At the Wachovia board meeting, Wachovia’s management updated the board of directors on the status of the Citigroup negotiations and the existence of significant unresolved issues. Wachovia’s management expressed serious doubts about the viability of Wachovia under the structure and terms proposed by Citigroup as they had evolved during negotiations from what had been set forth in the non-binding agreement-in-principle. Mr. Steel briefed the board on communications with Chairman Bair and Mr. Kovacevich, including that Wells Fargo would disclose its proposal publicly the following morning whether or not Wachovia acted on it that evening. Wachovia’s legal counsel provided advice to the board of directors regarding its duties in the face of the Wells Fargo proposal and the Citigroup transaction and exclusivity letter, as well as other relevant considerations. Wachovia’s board was advised that Wells Fargo’s proposal stated that its willingness to proceed with the proposed merger agreement was contingent upon it receiving a substantial voting interest via the share exchange agreement that would not be subject to prior shareholder approval in order to provide assurances to the market regarding the completion of Wachovia’s acquisition by Wells Fargo and a resulting mitigation in the uncertainty and instability then faced by Wachovia. Legal counsel described the terms of the Wells Fargo merger agreement and the conditions to closing, which included clauses regarding the receipt of regulatory and shareholder approval and the share exchange agreement and its effect on receiving shareholder approval, but excluded a “material adverse change” clause.
 
Wachovia management and members of the board of directors expressed the view that the Wells Fargo merger proposal appeared to be substantially superior to the Citigroup proposal in a number of ways, including value to Wachovia shareholders and certainty of completion due to a signed, definitive transaction agreement with minimal conditionality. Perella Weinberg and Goldman Sachs both indicated that, based on the circumstances and subject to completion of due diligence and final financial analysis and review of definitive documentation, they expected that they would be able to render an opinion that the exchange ratio pursuant to the Wells Fargo merger proposal was fair, from a financial point of view, to Wachovia shareholders (other than Wells Fargo and its affiliates). Management informed the board that it believed that, unless an agreement was signed by the end of the day on October 3, the FDIC was prepared to place Wachovia’s banking subsidiaries in receivership over the coming weekend.
 
After extensive questions, discussion and consideration by the board of directors, on motion duly made and seconded, the Wachovia board resolved unanimously that the Wells Fargo merger agreement and the merger are advisable for, fair to and in the best interest of Wachovia shareholders and voted unanimously to


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approve and adopt the merger agreement and the merger and recommend that Wachovia shareholders approve the plan of merger contained in the merger agreement, subject to receipt of the fairness opinions from Perella Weinberg and Goldman Sachs. Early in the morning on October 3, Perella Weinberg and Goldman Sachs orally delivered their opinions that, as of that date, and based upon and subject to the factors, limitations and assumptions to be set forth in their respective written opinions, as well as the extraordinary circumstances facing Wachovia to be described therein, the exchange ratio pursuant to the Wells Fargo merger agreement was fair, from a financial point of view, to the holders of Wachovia common stock (other than Wells Fargo and its affiliates). The opinions of Goldman Sachs and Perella Weinberg were subsequently confirmed in writing. For more information, see “Opinions of Wachovia’s Financial Advisors”, beginning on page   .
 
Immediately following the board of directors meeting, which concluded after midnight, the Audit Committee of Wachovia’s board of directors met and determined that the delay necessary to secure Wachovia shareholder approval otherwise required by the general rules of the New York Stock Exchange prior to consummation of the transactions contemplated by the share exchange agreement would seriously jeopardize the financial viability of Wachovia. The Audit Committee expressly approved Wachovia’s decision not to seek shareholder approval for the issuance and sale of Series M Preferred Stock to Wells Fargo pursuant to the share exchange agreement in reliance on an exception contained in the New York Stock Exchange rules. The Audit Committee members were present during the board discussions described in the preceding paragraph and had the benefit of those discussions in making the determination regarding Wachovia’s financial viability.
 
Following receipt of the oral fairness opinions, Mr. Steel executed the merger agreement and, with Ms. Sherburne, telephoned both Mr. Kovacevich and Chairman Bair to inform them of the Wachovia board approval and execution of the merger agreement. Thereafter, Mr. Steel, Ms. Sherburne, and Chairman Bair next telephoned Vikram Pandit, Chief Executive Officer for Citigroup, to inform him that Wachovia had entered into the merger agreement with Wells Fargo. Mr. Pandit indicated he believed Wachovia was in breach of the exclusivity covenants and appealed to Chairman Bair to consider the effect of this development on systemic issues unrelated to Wachovia.
 
At approximately 7:00 a.m. on October 3, Wells Fargo and Wachovia issued a joint news release announcing the merger agreement.
 
Wachovia’s Reasons for the Merger and Recommendation of the Wachovia Board
 
By unanimous vote after careful consideration, the Wachovia board of directors determined that the merger agreement and the transactions contemplated by the merger agreement were advisable and in the best interests of Wachovia and its shareholders and adopted the merger agreement and the transactions contemplated by the merger agreement, including the merger. Accordingly, Wachovia’s board unanimously recommends that Wachovia shareholders vote “FOR” approval of the plan of merger contained in the merger agreement and the transactions contemplated by the merger agreement at the Wachovia special meeting.
 
In reaching its decision to recommend the merger agreement and the merger to Wachovia shareholders, Wachovia’s board took into account the current and recent stresses on Wachovia’s liquidity. It concluded that Wells Fargo and Wachovia have a unique strategic fit and that the merger provides an opportunity for enhanced financial performance and shareholder value.
 
In concluding that the merger is in the best interests of Wachovia and its shareholders, Wachovia’s board considered, among other things, the following factors that supported the decision to approve the merger:
 
  •  Wachovia’s and Wells Fargo’s strategic business, operations, financial condition, asset quality, earnings and prospects. In reviewing these factors, Wachovia’s board concluded that Wells Fargo’s business and operations complement those of Wachovia, that Wells Fargo’s financial condition and asset quality are very sound, and that Wells Fargo’s earnings and prospects should result in the combined company having superior future earnings and prospects compared to Wachovia’s earnings and prospects on a stand-alone basis.


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  •  Wells Fargo’s strong balance sheet, asset quality and risk management have allowed it to operate through the 2007-2008 financial crisis with relatively less negative impact than most large U.S. financial institutions.
 
  •  The benefits of the Wells Fargo transaction, in contrast to the agreement-in-principle with Citigroup, regarding:
 
  •  The exchange ratio provided substantially greater value to Wachovia’s common shareholders than the Citigroup proposal.
 
  •  Wells Fargo’s willingness to acquire all of Wachovia, thereby protecting Wachovia’s preferred shareholders, general creditors, retirees and employees, was superior to Citigroup’s proposal to acquire only portions of Wachovia and thereby place these constituents at risk.
 
  •  The assumption of all of Wachovia’s preferred stock and debt by Wells Fargo, and Wells Fargo’s higher debt rating, provided greater protection to Wachovia’s debt holders.
 
  •  In light of Wells Fargo’s stated intention to announce publicly its offer for Wachovia on October 3, the likelihood that Wachovia shareholders would not vote in favor of the Citigroup proposal, even if a definitive agreement were reached with Citigroup.
 
  •  The Wells Fargo proposal does not entail splitting apart the integrated businesses of Wachovia, providing for greater future earnings prospects for the combined company.
 
  •  The remaining issues of disagreement with Citigroup as of October 2, 2008, including the possibility of not being able to obtain a solvency opinion for Wachovia at closing.
 
  •  The conditionality of the purchase agreement proposed by Citigroup, as compared to the minimal conditionality of the Wells Fargo agreement, including its absence of a material adverse change clause as a closing condition.
 
  •  The likelihood that the FDIC would place Wachovia’s banking subsidiaries into receivership if a transaction were not announced on October 3.
 
  •  The uncertainty regarding the impact of the Citigroup transaction on the Wachovia Securities joint venture.
 
  •  The considerable contingent liabilities related to acquired assets and subsidiaries that Citigroup proposed to be left with Wachovia.
 
  •  The Wells Fargo merger agreement did not require government assistance.
 
  •  Several government agencies were aware of the Wells Fargo proposal before it was made to Wachovia.
 
  •  The board’s understanding of the financial treatment expected to apply to the merger, including accounting, tax, and regulatory capital.
 
  •  The opinions of Perella Weinberg and Goldman Sachs, as described above, as to the fairness, from a financial point of view, of the exchange ratio pursuant to the merger agreement to Wachovia’s shareholders (other than Wells Fargo and its affiliates).
 
  •  The exchange ratio is fixed and will not fluctuate, as is customary in transactions of this type in the financial services industry.
 
  •  The information presented to the board about the closing conditions and the Share Exchange Agreement, which are designed to enhance the probability that the merger will be consummated. In addition, information presented about the likelihood of receiving regulatory approval and the small amount of likely regulatory divestitures.
 
  •  Wells Fargo’s desire to have Wachovia representation on its board of directors.


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  •  The strength of Wells Fargo’s capital condition and its willingness to provide interim liquidity to Wachovia pending completion of the merger. In addition, Wells Fargo’s credit rating will be a substantial strength for the combined company in terms of funding and liquidity.
 
  •  The likelihood that Wells Fargo would successfully complete the capital raising it proposed in connection with the merger.
 
In addition, Wachovia’s board considered the following factors that potentially created risks if the board decided to approve the merger agreement:
 
  •  The substantial likelihood that Citigroup would pursue litigation.
 
  •  Wells Fargo’s plan to raise capital in connection with the merger in view of the difficult conditions in the financial markets.
 
  •  The potential impact of the Wells Fargo merger announcement on employees, including in light of the announcement earlier in the week of the agreement-in-principle with Citigroup.
 
Wachovia’s board concluded that the anticipated benefits of combining with Wells Fargo were highly likely to outweigh substantially the preceding risks.
 
Although each member of Wachovia’s board individually considered these and other factors, the board did not collectively assign any specific or relative weights to the factors considered and did not make any determination with respect to any individual factor. The board collectively made its determination with respect to the merger based on the conclusion reached by its members, in light of the factors that each of them considered appropriate, that the merger is in the best interests of Wachovia and its shareholders.
 
Wachovia’s board of directors realized there can be no assurance about future results, including results expected or considered in the factors listed above. However, the board concluded the potential positive factors outweighed the potential risks of completing the merger.
 
It should be noted that this explanation of the Wachovia board’s reasoning and other information presented in this section is forward-looking in nature and, therefore, should be read in light of the factors discussed under the heading “Forward-Looking Statements”.
 
For the reasons set forth above, the Wachovia board of directors determined that the merger, the merger agreement and the transactions contemplated by the merger agreement are advisable and in the best interests of Wachovia and its shareholders, and adopted the plan of merger contained in the merger agreement. The Wachovia board of directors unanimously recommends that the Wachovia shareholders vote “FOR” approval of the plan of merger contained in the merger agreement.
 
Wells Fargo’s Reasons for the Merger
 
Wells Fargo’s reasons for entering into the merger agreement include:
 
  •  its knowledge of the current and prospective environment in which Wells Fargo and Wachovia operate, including economic and market conditions;
 
  •  its assessment of Wachovia’s businesses, prospects, franchises, core earnings generation ability, assets and liabilities and its view of the attractive growth and demographic characteristics of Wachovia’s existing markets and businesses;
 
  •  the review by the Wells Fargo board of directors with its advisors of the structure of the merger and the financial and other terms of the merger and share exchange agreement;
 
  •  the expectation that the complementary nature of the respective customer bases, geographic footprints, business products and skills of Wells Fargo and Wachovia may result in substantial opportunities to distribute products and services throughout North America to a broader customer base and across businesses and to enhance the capabilities of both companies, including the expected benefits from adding a banking franchise in areas where Wells Fargo currently operates non-banking businesses;


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  •  the fact that the combined company will have a significantly enhanced presence in 39 U.S. States, including leading deposit franchises in many of those states and in many of the nation’s 20 largest Metropolitan Statistical Areas;
 
  •  Wells Fargo’s view of the value inherent in Wachovia’s banking, brokerage and asset management businesses, including its strong customer service and community-oriented culture and the capabilities of its employees;
 
  •  the unique opportunity presented by the chance to acquire a franchise of Wachovia’s quality, size and scope, its assessment of the pro forma capital position, financial condition and results of operations of the combined company, and the expectation that the transaction will exceed Wells Fargo’s internal rate of return goal and be accretive to Wells Fargo’s earnings per common share by 2011;
 
  •  the potential expense saving opportunities currently estimated by Wells Fargo’s management to be approximately $5 billion per year on a pre-tax basis when fully realized, as well as the possibility of potential incremental revenue opportunities;
 
  •  the historical and current market prices of Wells Fargo common stock and Wachovia common stock; and
 
  •  Wells Fargo’s track record of integrating acquisitions of banks and other financial companies and its understanding of the opportunities and risks presented by an acquisition of a company with the size and other characteristics of Wachovia.
 
Opinions of Wachovia’s Financial Advisors
 
Opinion of Goldman Sachs
 
On October 3, 2008, Goldman Sachs orally advised a representative of the board of directors of Wachovia of Goldman Sachs’ opinion that, as of that date, and based upon and subject to the factors, limitations and assumptions to be set forth in the written opinion, as well as the extraordinary circumstances facing Wachovia to be described in the written opinion, the exchange ratio of 0.1991 of a share of Wells Fargo common stock to be received in respect of each share of Wachovia common stock pursuant to the merger agreement was fair from a financial point of view to the holders of Wachovia common stock other than Wells Fargo and its affiliates.
 
The full text of the subsequently delivered written opinion of Goldman Sachs, dated October 3, 2008, which sets forth the assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion, is attached to this document as Appendix B. The opinion of Goldman Sachs was provided for the information and assistance of the board of directors of Wachovia in connection with its consideration of the merger and does not constitute a recommendation as to how any holder of shares of Wachovia common stock should vote or otherwise act with respect to the merger or any other matter.
 
In connection with rendering the opinion described above and performing its financial analysis, Goldman Sachs reviewed, among other things:
 
1. the merger agreement;
 
2. annual reports to stockholders and annual reports on Form 10-K of Wachovia and Wells Fargo for the five fiscal years ended December 31, 2007;
 
3. certain interim reports to stockholders and quarterly reports on Form 10-Q of Wachovia and Wells Fargo;
 
4. certain other communications from Wachovia and Wells Fargo to their respective stockholders and certain publicly available research analyst reports for Wachovia and Wells Fargo;
 
5. certain internal financial analyses and forecasts for Wachovia prepared by Wachovia’s management;


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6. estimates by Wachovia’s management as to Wachovia’s liquidity, as well as certain analyses prepared by Wachovia’s management with respect to Wachovia’s leverage and capital adequacy; and
 
7. publicly announced credit ratings of Wachovia and spreads applicable to credit default swaps relating to the debt of Wachovia and of certain other institutions that Goldman Sachs believed to be generally relevant.
 
Goldman Sachs also held discussions with members of the senior management of Wachovia regarding their assessment of the rationale for the merger, the past and current business operations, financial condition and future prospects of Wachovia and the fair market value of certain key asset categories of Wachovia. In addition, Goldman Sachs reviewed the reported price and trading activity for shares of Wachovia common stock and Wells Fargo common stock, compared certain financial and stock market information for Wachovia and Wells Fargo with similar information for certain other companies the securities of which are publicly traded and performed such other studies and analyses, and considered such other factors, as it considered appropriate.
 
Goldman Sachs was informed by members of Wachovia’s management that Wachovia had considerable exposure to risks related to the deteriorating credit performance and declining values of a significant portion of the loan and mortgage portfolios and related assets of Wachovia and its subsidiaries, and that the business and prospects of Wachovia (including its ability to operate as a going concern on a stand-alone basis) were severely and negatively affected as a result thereof, as well as due to the crisis in the capital markets, the extraordinary economic and financial environment then prevailing and the deteriorating financial condition of Wachovia.
 
In particular, Goldman Sachs was informed by Wachovia that:
 
  •  Wachovia’s liquidity position was severely strained due in large part to declining customer and counterparty confidence, and that Wachovia may have had insufficient unrestricted cash on hand to meet its needs in the near term;
 
  •  Wachovia and its principal operating subsidiaries had a limited amount of unencumbered assets available as collateral for any financings that Wachovia may have sought to obtain on an immediate basis;
 
  •  as a result of general market conditions and matters specific to Wachovia’s financial condition, Wachovia would not at the time have been able to raise capital through the capital markets in amounts sufficient for its needs, and this difficulty was expected to continue for the foreseeable future;
 
  •  the United States banking regulators had not offered financial assistance to Wachovia on a stand-alone basis to adequately address the financial situation of Wachovia, including its immediate and long term liquidity needs;
 
  •  Wachovia projected substantial losses for the remainder of fiscal year 2008 and for fiscal year 2009, which would put significant strain on Wachovia’s ability to maintain its capital position in the near term in light of difficulties Wachovia faced in seeking financings and accessing the capital markets;
 
  •  the downgrades of Wachovia’s credit ratings that Wachovia’s management expected to be announced by Moody’s Investors Service and Standard & Poor’s, which remained imminent absent a transaction (such as the merger) that would provide Wachovia with sources of substantial ongoing liquidity and funding or that would relieve Wachovia of the need for such liquidity and funding, would further negatively affect customer and counterparty confidence in Wachovia, and Wachovia’s liquidity and access to the capital markets; and
 
  •  absent immediately entering into a definitive transaction (such as the merger) that would provide Wachovia with sources of substantial ongoing liquidity and funding or that would relieve Wachovia of the need for such liquidity and funding, Wachovia and its subsidiaries would face intervention by the United States federal banking regulators and/or be required to seek protection under applicable bankruptcy laws.


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Goldman Sachs was further advised by Wachovia that, as a result of the foregoing, Wachovia and its board of directors were faced with a rapidly narrowing set of alternatives, which, at the time, were limited to a transaction such as the merger or intervention by the United States federal banking regulators. Accordingly, Goldman Sachs also considered recent instances where concerns regarding the liquidity of a bank or financial institution triggered a rapid deterioration of the institution’s financial condition, necessitating government intervention or bankruptcy protection, and as a result of which the common equity holders of the institution were likely to receive substantially diminished value, if any at all, for their equity. In light of the facts and circumstances, Goldman Sachs also assumed, without independent verification, that if Wachovia’s banking assets were taken over by the United States federal banking regulators and Wachovia’s non-banking assets liquidated under applicable bankruptcy laws, holders of Wachovia common stock would likely receive no material value.
 
For purposes of rendering its opinion, Goldman Sachs relied upon and assumed, without assuming any responsibility for independent verification, the accuracy and completeness of all of the financial, legal, regulatory, tax, accounting and other information provided to, discussed with or reviewed by it. Goldman Sachs did not receive from Wells Fargo forecasts of its future financial performance, and it was advised by Wachovia’s management that the currently available forecasts for Wachovia no longer reflected Wachovia’s best estimates of its future financial performance, as a result of the circumstances of Wachovia at the time, as described above. With the consent of Wachovia’s board of directors, (i) Goldman Sachs’ diligence of Wells Fargo was limited to publicly available information, including publicly available estimates of certain research analysts covering Wells Fargo, and did not include discussions with management or representatives of Wells Fargo or other diligence that Goldman Sachs would customarily conduct in connection with preparing a fairness opinion, (ii) Goldman Sachs relied upon the publicly available estimates for Wells Fargo described above and did not rely upon any financial forecasts relating to Wachovia, and (iii) Goldman Sachs did not perform certain analyses that it customarily would have prepared for Wachovia in connection with a fairness opinion because such analyses were not meaningful as a result of the extraordinary circumstances of Wachovia described in this discussion. Goldman Sachs assumed with the consent of Wachovia’s board of directors that the publicly available estimates for Wells Fargo described above reflected the best currently available estimates and judgments of the management of Wachovia with respect to Wells Fargo’s future financial performance. Goldman Sachs also assumed that the merger would be consummated in accordance with the terms set forth in the merger agreement without any waiver or amendment of, or delay in the fulfillment of, any terms or conditions set forth in the merger agreement or any subsequent development related to the merger, including, without limitation, any litigation resulting from Wachovia having entered into the merger, that would have an adverse effect on Wachovia or Wells Fargo or on the expected benefits of the merger in any way meaningful to its analysis. Goldman Sachs’ opinion does not address any legal, regulatory, tax or accounting matters, as to which matters it understood that Wachovia received such advice as it deemed necessary from qualified professionals. Goldman Sachs is not an expert in the evaluation of loan and mortgage portfolios or in assessing the adequacy of allowances for losses with respect thereto, and accordingly, it did not evaluate the same with respect to Wachovia or Wells Fargo and assumed, with Wachovia’s consent, that Wells Fargo’s allowances for such losses were adequate to cover all such losses. In addition, Goldman Sachs did not review individual credit files nor did it make an independent evaluation or appraisal of the assets and liabilities (including any contingent, derivative or off-balance-sheet assets and liabilities) of Wachovia or Wells Fargo or any of their respective subsidiaries, and it was not furnished with any such evaluation or appraisal. In addition, Goldman Sachs did not evaluate the solvency or fair value of any party to the merger agreement under any state or federal laws relating to bankruptcy, insolvency or similar matters. Goldman Sachs did not express any opinion as to the value of any asset of Wachovia, whether at current market prices or in the future. It noted however, that under the ownership of a company with adequate liquidity and capital, such as Wells Fargo, the value of Wachovia and its subsidiaries could substantially improve, resulting in significant returns to Wells Fargo if the merger is consummated.
 
The opinion of Goldman Sachs did not address the underlying business decision of Wachovia to engage in the merger, or the relative merits of the merger as compared to any other strategic alternative that may have been available to Wachovia under the circumstances. The opinion of Goldman Sachs addressed only the fairness from a financial point of view to the holders of Wachovia common stock (other than Wells Fargo and


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its affiliates), as of the date thereof, of the exchange ratio. Goldman Sachs did not express any view on, and its opinion did not address, any other term or aspect of the merger agreement or the transaction contemplated thereby, including, without limitation, (i) the fairness of the transaction to, or any consideration received in connection therewith by, the holders of any other class of securities, creditors or other constituencies of Wachovia or Wells Fargo or (ii) the fairness of the amount or nature of any compensation to be paid or payable to any of the officers, directors or employees of Wachovia or Wells Fargo, or class of such persons in connection with the merger, whether relative to the 0.1991 of a share of Wells Fargo common stock to be paid for each share of Wachovia common stock pursuant to the merger agreement or otherwise. Goldman Sachs did not express any opinion as to the prices at which shares of Wachovia common stock or shares of Wells Fargo common stock would trade at any time. The opinion of Goldman Sachs was necessarily based on economic, monetary, market and other conditions as in effect on, and the information made available to it as of, the date thereof, including the ongoing crisis in the capital markets, the condition of the mortgage market and the extraordinary financial and economic environment at the time and the related uncertainty regarding the extent and duration of those conditions. Goldman Sachs assumed no responsibility for updating, revising or reaffirming its opinion based on circumstances, developments or events occurring after the date thereof. In addition, with the consent of Wachovia’s board of directors, in arriving at its opinion, Goldman Sachs did not consider or evaluate the Emergency Economic Stabilization Act of 2008 or any plans then existing for a program sponsored by the United States Federal Government to provide support to financial institutions by purchasing distressed mortgage-related assets, or any impact of any such legislation, plans or programs on Wachovia, Wells Fargo or the economic environment. The opinion of Goldman Sachs was approved by a fairness committee of Goldman Sachs.
 
The following is a summary of the material financial analyses conducted by Goldman Sachs in connection with rendering its opinion. These analyses were not presented to the board of directors of Wachovia. The following summary does not purport to be a complete description of the financial analyses performed by Goldman Sachs, nor does the order of the analyses described herein represent relative importance or weight given them. Some of the summaries of the financial analyses include information presented in tabular format. The tables must be read together with the full text of each summary and alone are not a complete description of the financial analyses. Except as otherwise noted, the following quantitative information, to the extent that it is based on market data, is based on market data as it existed on or before October 3, 2008, and is not necessarily indicative of current market conditions.
 
Goldman Sachs’ review of Wachovia’s credit default swap spread trends, projected losses on Wachovia’s portfolio of payment option mortgages and associated loan loss provisions and estimates of Wachovia’s liquidity, in each case, as described below, supported the view that financial analyses that Goldman Sachs customarily would have prepared in connection with a fairness opinion were not meaningful as a result of the extraordinary circumstances of Wachovia.
 
Comparative Credit Default Swap Spread Trends
 
Goldman Sachs reviewed the annual spreads applicable to five year credit default swaps with respect to the debt of Wachovia and selected financial institutions that it generally believed to be relevant. Although none of the selected financial institutions is directly comparable to Wachovia, each had operations that, for purposes of Goldman Sachs’ review, could be considered similar to Wachovia. The applicable spreads with respect to such credit defaults swaps as of the respective dates set forth below are as follows:
 
                                         
    Basis Points
Financial Institution
  01/02/2007   07/02/2007   01/02/2008   09/25/2008   09/26/2008
 
Wachovia
    12       16       106       670       1,500  
Wells Fargo
    7       12       61       115       139  
Citigroup Inc. 
    8       14       69       204       276  
Bank of America Corporation
    8       13       45       133       142  
U.S. Bancorp
    8       16       45       125       125  
Washington Mutual, Inc. 
    21       41       389       8,109       NA  


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Goldman Sachs noted that as of the close of business on September 26, 2008, the last business day prior to the announcement of a potential transaction involving Wachovia, the applicable annual spread for Wachovia’s five year credit default swap was 1,500 basis points, which, Goldman Sachs believed, reflected the public markets’ concerns about Wachovia’s financial condition and supported the information provided by Wachovia’s management about Wachovia’s liquidity and capital position.
 
Projected Losses on Pick-A-Payment Mortgage Portfolio
 
Goldman Sachs also reviewed projections, obtained from publicly available investor materials and Wachovia’s management, for losses on Wachovia’s $122 billion portfolio of payment option mortgages referred to as Pick-a-Payment mortgages. Such projections are summarized below:
 
                     
        April 4,
  July 14,
  September 24-25,
Date of Projection
      2008   2008   2008
        ($ billions, except for percentages)
 
Projected Lifetime Loss
          7-8%   12%   22%
Projected Annual Provisions
    2008     $3.2-3.8   $8.7   $12.5
      2009     $2.4-2.8   $5.6   $11.2
      2010     NA   NA   $2.8
 
Goldman Sachs noted the rapid increase in expected loan losses since April 2008, and considered the impact of such losses and associated loan loss provisions on the net tangible book value of Wachovia, as well as the possibility of higher projected losses in the future in view of the prevailing economic conditions and the severe displacement in the market for such assets. Goldman Sachs also noted that the extent of such projected losses exceeded publicly available estimates of research analysts, and could therefore result in a further decline in the trading price of Wachovia common stock.
 
Liquidity Review
 
Goldman Sachs noted the estimates of Wachovia’s management with respect to Wachovia’s liquidity and recent trends relating to outflow of Wachovia’s net core interest bearing deposits. According to such estimates, the extent of Wachovia’s excess liquidity (treasury bills or overnight maturities) was $10 billion as of September 26, 2008, as compared to $30 billion as of September 1, 2008. At the same time, based on estimates of Wachovia’s management, Wachovia experienced net outflow of $17 billion of core interest bearing deposits since July 14, 2008, including an outflow of $8 billion in the two weeks preceding September 26, 2008. Goldman Sachs considered the rapid decline in the extent of Wachovia’s liquidity, as well as Wachovia’s management’s view that Wachovia faced a severe liquidity risk, potentially further aggravated by downgrades of Wachovia’s credit ratings expected in the absence of a transaction (such as the merger) that would provide Wachovia with sources of substantial ongoing liquidity and funding or that would relieve Wachovia of the need for such liquidity and funding.
 
Comparative Analysis of Wells Fargo Trading Multiples
 
Goldman Sachs also reviewed certain historical trading multiples of Wells Fargo common stock in relation to the corresponding median trading multiples for selected national banks and regional banks:
 
                                                         
    Annual Average Price/
  Oct 2, 2008 Price/
    Current Year Estimated Earnings   Estimated Earnings
    2005   2006   2007   2008YTD   2008E   2009E   2010E
 
Wells Fargo
    13.4 x     13.7 x     12.8 x     12.5 x     16.7 x     15.0 x     11.9 x
National Banks(1) Median
    11.7       11.9       11.3       12.4       16.1       13.4       9.6  
Regional Banks(2) Median
    13.0       13.0       12.2       11.2       14.6       12.7       8.4  
 


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    Annual Average Price/
   
    Tangible Book Value   Oct 2, 2008 Price/
    2005   2006   2007   2008YTD   Tangible Book
 
Wells Fargo
    3.7 x     3.7 x     3.4 x     2.8 x     3.5 x
National Banks(1) Median
    3.4       3.5       3.2       2.1       2.6  
Regional Banks(2) Median
    2.9       2.9       2.8       1.6       1.6  
 
 
(1) National Banks include Bank of America, JPMorgan Chase, Citigroup and US Bancorp.
 
(2) Regional Banks include PNC, Capital One, BB&T, SunTrust, M&T Bank, Regions, Fifth Third, National City, KeyCorp and Comerica.
 
The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. Selecting portions of the analyses or of the summary set forth above, without considering the analyses as a whole and the circumstances described above, could create an incomplete view of the processes underlying Goldman Sachs’ opinion. In arriving at its fairness determination, Goldman Sachs considered the circumstances described above and the results of all of its relevant analyses and did not attribute any particular weight to any factor or analysis considered by it. Rather, Goldman Sachs made its determination as to fairness on the basis of its experience and professional judgment after considering such circumstances and the results of all of its relevant analyses. No company or transaction used in Goldman Sachs’ analyses is directly comparable to Wachovia, Wells Fargo or the merger.
 
As described above, the opinion of Goldman Sachs to the Wachovia board of directors was one of many factors taken into consideration by the Wachovia board of directors in making its determination to approve the merger agreement. The foregoing summary does not purport to be a complete description of the analyses performed by Goldman Sachs in connection with its fairness opinion and is qualified in its entirety by reference to the written opinion of Goldman Sachs attached as Appendix B to this proxy statement-prospectus.
 
Wachovia selected Goldman Sachs as its financial advisor because it is an internationally recognized investment banking firm that has substantial experience relevant to the merger. Pursuant to engagement letters dated September 28, 2008 and October 1, 2008, Wachovia and Wachovia Bank retained Goldman Sachs to act as their financial advisor in connection with the possible sale of all or a portion of Wachovia or Wachovia Bank. Pursuant to the terms of the engagement letters, Wachovia has agreed to pay Goldman Sachs a transaction fee of $25 million for its services in connection with the merger, of which $20 million is contingent upon consummation of the merger, to reimburse Goldman Sachs’ expenses incurred in connection with its engagement and to indemnify Goldman Sachs and related persons against various liabilities, including certain liabilities under the federal securities laws.
 
Goldman Sachs and its affiliates are engaged in investment banking and financial advisory services, securities trading, investment management, principal investment, financial planning, benefits counseling, risk management, hedging, financing, brokerage activities and other financial and non-financial activities and services for various persons and entities. In the ordinary course of these activities and services, Goldman Sachs and its affiliates may at any time make or hold long or short positions and investments, as well as actively trade or effect transactions, in the equity, debt and other securities (or related derivative securities) and financial instruments (including bank loans and other obligations) of Wachovia, Wells Fargo and any of their respective affiliates or any currency or commodity that may be involved in the transaction contemplated by the merger agreement for their own account and for the accounts of their customers. Goldman Sachs has acted as financial advisor to Wachovia in connection with, and has participated in certain of the negotiations on or prior to (but not after) September 28, 2008 with Wells Fargo. In addition, Goldman Sachs has provided certain investment banking and other financial services to Wachovia and its affiliates from time to time, including having (i) acted as advisor to Wachovia and its affiliates in connection with various of their respective mortgage securitizations from 2005 to 2006; (ii) acted as co-lead manager for the offering of preferred stock of Wachovia in January 2006; (iii) acted as financial advisor to Wachovia in connection with its acquisition of Westcorp in March 2006; (iv) acted as joint bookrunner for the concurrent offerings of common stock and

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Series L Non-Cumulative Perpetual Convertible Class A preferred stock of Wachovia in April 2008; and (v) provided financial advisory services to Wachovia since June 2008. In addition, Goldman Sachs has provided certain investment banking and other financial services to Wells Fargo and its affiliates from time to time, including having acted as (i) advisor to Wells Fargo and its affiliates in connection with various of their respective investment grade debt issuances from 2004 to 2008; (ii) counterparty to various derivatives transactions entered into by Wells Fargo in 2006; (iii) joint bookrunner for the offering of preferred stock of an affiliate of Wells Fargo in January 2007 and (iv) joint bookrunner for the offering of preferred stock of Wells Fargo in September 2008. Goldman Sachs also may provide investment banking and other financial services to Wachovia, Wells Fargo and their respective affiliates in the future. In connection with the above-described services Goldman Sachs has received, and may receive, compensation.
 
Opinion of Perella Weinberg
 
On October 3, 2008, Perella Weinberg orally advised a representative of the board of directors of Wachovia of Perella Weinberg’s opinion that, as of that date, and based upon and subject to the factors, limitations and assumptions to be set forth in the written opinion, as well as the extraordinary circumstances facing Wachovia to be described in the written opinion, the exchange ratio of 0.1991 of a share of Wells Fargo common stock to be received in respect of each share of Wachovia common stock pursuant to the merger agreement was fair from a financial point of view to the holders of Wachovia common stock other than Wells Fargo and its affiliates.
 
The full text of the subsequently delivered written opinion of Perella Weinberg, dated October 3, 2008, which sets forth the assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion, is attached to this document as Appendix C. The opinion of Perella Weinberg was provided for the information and assistance of the board of directors of Wachovia in connection with its consideration of the merger and does not constitute a recommendation as to how any holder of shares of Wachovia common stock should vote or otherwise act with respect to the merger or any other matter.
 
For purposes of its opinion, Perella Weinberg, among other things:
 
1. reviewed certain publicly available financial statements and other business and financial information with respect to Wachovia and Wells Fargo, including research analyst reports;
 
2. reviewed certain internal financial statements, analyses and forecasts, and other financial and operating data relating to the business of Wachovia, in each case prepared by Wachovia’s management;
 
3. discussed the past and current operations, financial condition and future prospects of Wachovia with senior executives of Wachovia;
 
4. reviewed estimates by Wachovia’s management as to Wachovia’s liquidity, as well as certain analyses prepared by Wachovia’s management with respect to Wachovia’s leverage and capital adequacy;
 
5. discussed the fair market value of certain types of key asset categories of Wachovia with senior executives of Wachovia;
 
6. reviewed publicly announced credit ratings of Wachovia and spreads applicable to credit default swaps relating to the debt of Wachovia and of certain other institutions that Perella Weinberg believed to be generally relevant;
 
7. held discussions with members of the senior management of Wachovia regarding their assessment of the rationale for the merger;
 
8. compared the financial performance of Wachovia and of Wells Fargo with that of certain publicly-traded companies which it believed to be generally relevant;
 
9. reviewed the reported price and trading activity for shares of Wachovia and Wells Fargo common stock, and compared such price and trading activity for shares of Wachovia and Wells Fargo common stock


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with that of securities of certain publicly-traded companies which Perella Weinberg believed to be generally relevant;
 
10. reviewed the merger agreement; and
 
11. conducted such other financial studies, analyses and investigations, and considered such other factors, as Perella Weinberg deemed appropriate.
 
Perella Weinberg was informed by members of Wachovia’s management that Wachovia had considerable exposure to risks related to the deteriorating credit performance and declining values of a significant portion of the loan and mortgage portfolios and related assets of Wachovia and its subsidiaries, and that the business and prospects of Wachovia (including its ability to operate as a going concern on a stand-alone basis) were severely and negatively affected as a result thereof, as well as due to the crisis in the capital markets, the extraordinary economic and financial environment then prevailing and the deteriorating financial condition of Wachovia.
 
In particular, Perella Weinberg was informed by Wachovia that:
 
  •  Wachovia’s liquidity position was severely strained due in large part to declining customer and counterparty confidence, and that Wachovia may have had insufficient unrestricted cash on hand to meet its needs in the near term;
 
  •  Wachovia and its principal operating subsidiaries had a limited amount of unencumbered assets available as collateral for any financings that Wachovia may have sought to obtain on an immediate basis;
 
  •  as a result of general market conditions and matters specific to Wachovia’s financial condition, Wachovia would not at the time have been able to raise capital through the capital markets in amounts sufficient for its needs, and this difficulty was expected to continue for the foreseeable future;
 
  •  the United States banking regulators had not offered financial assistance to Wachovia on a stand-alone basis to adequately address the financial situation of Wachovia, including its immediate and long-term liquidity needs;
 
  •  Wachovia projected substantial losses for the remainder of fiscal year 2008 and for fiscal year 2009, which would put significant strain on Wachovia’s ability to maintain its capital position in the near term in light of difficulties Wachovia faced in seeking financings and accessing the capital markets;
 
  •  downgrades of Wachovia’s credit ratings that Wachovia’s management expected to be announced by Moody’s Investors Service and Standard & Poor’s, which remained imminent absent a transaction (such as the merger) that would provide Wachovia with sources of substantial ongoing liquidity and funding or that would relieve Wachovia of the need for such liquidity and funding would further negatively affect customer and counterparty confidence in Wachovia, and Wachovia’s liquidity and access to the capital markets; and
 
  •  absent immediately entering into a definitive transaction (such as the merger) that would provide Wachovia with sources of substantial ongoing liquidity and funding or that would relieve Wachovia of the need for such liquidity and funding, Wachovia and its subsidiaries would face intervention by the United States federal banking regulators and/or be required to seek protection under applicable bankruptcy laws.
 
Perella Weinberg was further advised by Wachovia that, as a result of the foregoing, Wachovia and its Board of Directors were faced with a rapidly narrowing set of alternatives, which, at the time, were limited to a transaction such as the merger or intervention by the United States federal banking regulators. Accordingly, Perella Weinberg also considered recent instances where concerns regarding the liquidity of a bank or financial institution triggered a rapid deterioration of the institution’s financial condition, necessitating government intervention or bankruptcy protection, and as a result of which the common equity holders of the institution were likely to receive substantially diminished value, if any at all, for their equity. In light of the facts and circumstances, Perella Weinberg also assumed, without independent verification, that if Wachovia’s banking


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assets were taken over by the United States federal banking regulators and Wachovia’s non-banking assets liquidated under applicable bankruptcy laws, holders of Wachovia common stock would likely receive no material value.
 
In arriving at its opinion, Perella Weinberg assumed and relied upon, without independent verification, the accuracy and completeness of the financial and other information supplied or otherwise made available to it (including information that is available from generally recognized public sources) for purposes of its opinion and further assumed that the information furnished by the management of Wachovia for purposes of its analysis did not contain any material omissions or misstatements of material fact. Perella Weinberg did not receive from Wells Fargo forecasts of its future financial performance, and it was advised by Wachovia’s management that the currently available forecasts for Wachovia no longer reflected Wachovia’s best estimates of its future financial performance, as a result of the current circumstances of Wachovia described hereinabove. With the consent of Wachovia’s board of directors, (i) Perella Weinberg’s diligence of Wells Fargo was limited to publicly available information, including publicly available estimates of certain research analysts covering Wells Fargo, and did not include discussions with management or representatives of Wells Fargo or other diligence that it would customarily conduct in connection with preparing a fairness opinion, (ii) Perella Weinberg relied upon the publicly available estimates for Wells Fargo described above and did not rely upon any financial forecasts relating to Wachovia, and (iii) Perella Weinberg did not perform certain analyses that Perella Weinberg customarily would have prepared for Wachovia in connection with a fairness opinion because such analyses were not meaningful as a result of the extraordinary circumstances of Wachovia described in this discussion. Perella Weinberg assumed with the consent of Wachovia’s board of directors that the publicly available estimates for Wells Fargo described above reflected the best currently available estimates and judgments of the management of Wachovia with respect to Wells Fargo’s future financial performance. In arriving at its opinion, Perella Weinberg did not review individual credit files nor did it make any independent valuation or appraisal of the assets and liabilities (including any contingent, derivative or off-balance-sheet assets and liabilities) of Wachovia or Wells Fargo or any of their respective subsidiaries, and it was not furnished with any such valuations or appraisals. Perella Weinberg is not an expert in the valuation of loan or mortgage portfolios or securities relating to loan or mortgage portfolios, or allowances for losses with respect thereto, and accordingly, did not evaluate the same with respect to Wachovia or Wells Fargo, and assumed, with the consent of Wachovia’s board of directors, that Wells Fargo’s allowances for such losses were adequate to cover all such losses. In addition, Perella Weinberg did not evaluate the solvency or fair value of any party to the merger agreement under any state or federal laws relating to bankruptcy, insolvency or similar matters. Perella Weinberg did not express any opinion as to the value of any asset of Wachovia, whether at current market prices or in the future. However, it noted that under the ownership of a company with adequate liquidity and capital, such as Wells Fargo, the value of Wachovia and its subsidiaries could substantially improve, resulting in significant returns to Wells Fargo if the merger is consummated.
 
Perella Weinberg’s opinion addressed only the fairness from a financial point of view to the holders of Wachovia common stock, excluding Wells Fargo and its affiliates, as of the date thereof, of the exchange ratio. Perella Weinberg was not asked to, and it did not, offer any opinion as to any other term of the merger agreement or the form or structure of the merger or the likely timeframe in which the merger will be consummated. Perella Weinberg did not participate in negotiations with respect to the terms of the merger and related transactions. In addition, it expressed no opinion as to the fairness of the amount or nature of any compensation to be received by any officers, directors or employees of any parties to the merger, or any class of such persons, whether relative to the exchange ratio or otherwise. Perella Weinberg assumed that the merger would be consummated as described in the merger agreement, and that all governmental, regulatory or other consents and approvals necessary for the consummation of the merger would be obtained without any adverse effect on Wachovia or Wells Fargo or on the expected benefits of the merger in any way meaningful to its analysis. Perella Weinberg’s opinion did not address the underlying business decision of Wachovia to enter into the merger or the relative merits of the merger as compared to any other strategic alternative that may have been available to Wachovia under the circumstances, nor did it address any legal, tax, regulatory or accounting matters, as to which matters it understood that Wachovia received such advice as it deemed necessary from qualified professionals. Perella Weinberg relied as to all legal matters relevant to rendering its


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opinion upon advice of counsel. Perella Weinberg was not authorized to solicit, and it did not solicit, on a widespread basis indications of interest in a transaction with Wachovia from any party.
 
Perella Weinberg expressed no opinion as to the fairness of the merger or any consideration to holders of any class of securities, other than to holders of Wachovia common stock (excluding Wells Fargo and its affiliates), or as to the fairness of the merger or any consideration to creditors or other constituencies of Wachovia or Wells Fargo. Perella Weinberg did not express any opinion as to the prices at which shares of Wachovia or Wells Fargo common stock would trade at any time. Perella Weinberg’s opinion was based on financial, economic, market and other conditions as in effect on, and the information made available to it as of, the date thereof, including the ongoing crisis in the capital markets, the condition of the mortgage market, and the extraordinary financial and economic environment at the time and the related uncertainty regarding the extent and duration of those conditions. Subsequent developments, including, without limitation, any litigation resulting from Wachovia having entered into the merger agreement, may affect Perella Weinberg’s opinion, and it does not have any obligation to update, revise or reaffirm its opinion. With the consent of Wachovia’s board of directors, in arriving at its opinion, Perella Weinberg did not consider or evaluate the Emergency Economic Stabilization Act of 2008 or any plans then existing for a program sponsored by the United States Federal Government to provide support to financial institutions by purchasing distressed mortgage-related assets, or any impact of any such legislation, plans or programs on Wachovia, Wells Fargo or the economic environment.
 
The following is a summary of the material financial analyses conducted by Perella Weinberg in connection with rendering its opinion. These analyses were not presented to the board of directors of Wachovia. The following summary does not purport to be a complete description of the financial analyses performed by Perella Weinberg, nor does the order of the analyses described represent relative importance or weight given them. Some of the summaries of the financial analyses include information presented in tabular format. The tables must be read together with the full text of each summary and alone are not a complete description of the financial analyses. Except as otherwise noted, the following quantitative information, to the extent that it is based on market data, is based on market data as it existed on or before October 3, 2008, and is not necessarily indicative of current market conditions.
 
Perella Weinberg’s review of Wachovia’s credit default swap spread trends, certain historical bank failures resulting in government takeovers and the pro forma tangible book value of Wachovia, in each case, as described below, supported the view that financial analyses that Perella Weinberg customarily would have relied upon in connection with a fairness opinion were not meaningful as a result of the extraordinary circumstances of Wachovia. Customary valuation methodologies based on multiples of tangible book value and earnings per share were not meaningful in view of Wachovia’s negative pro forma tangible book value, as implied by the analysis described below, as well as its negative earnings per share outlook for the next 18 months, as estimated by Wachovia’s management.
 
Comparative Trends of Credit Default Swap Spreads
 
Perella Weinberg reviewed the annual spreads applicable to five year credit default swaps, referred to as CDSs, over the preceding one-year period with respect to the debt of Wachovia and selected financial institutions that Perella Weinberg generally believed to be relevant under the circumstances, although none of


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the selected financial institutions is directly comparable to Wachovia. The applicable spreads with respect to such credit default swaps as of the close of business on selected dates are as follows:
 
                                 
Financial Institution
  10/10/2007   03/14/2008   09/12/2008   09/26/2008
    Basis points
 
Wachovia
    35       281       395       1,370  
Bear Stearns
    73       727       133       137  
Merrill Lynch
    43       292       415       371  
Morgan Stanley
    43       297       253       770  
Goldman Sachs
    40       239       183       381  
Wells Fargo
    21       157       141       132  
JP Morgan Chase
    30       164       128       133  
 
Perella Weinberg noted that the applicable annual spread for CDSs with respect to the debt of Wachovia on September 26, 2008, the last business day prior to the announcement of a potential transaction involving Wachovia, was significantly higher than the applicable annual spread with respect to the debt of The Bear Stearns Companies, Inc. on March 14, 2008, the last business day prior to the announcement of the merger of the Bear Stearns with JP Morgan Chase & Co., and the applicable annual spread with respect to the debt of Merrill Lynch & Co., Inc. on September 12, 2008, the last business day prior to the announcement of the merger of Merrill Lynch with Bank of America Corporation, reflecting a high market expectation of default and supporting the information provided by Wachovia’s management about Wachovia’s liquidity and capital position.
 
Historical Bank Failures Resulting in Government Takeovers
 
Perella Weinberg also reviewed the largest failures of publicly-traded banking institutions over the last five years in which such institutions were taken over by United States Federal Government regulators, noting particularly, the related decline in the value of the common stock of such institutions. The table below summarizes such instances:
 
                                         
            Trading Price of
  Price on
  Decline In Value
        Total
  Common Stock
  Day After
  of Common
    Takeover
  Assets
  One Year Prior
  Takeover
  Stock
    Date   ($ millions)   ($)   ($)   ($)
 
Washington Mutual
    9/25/2008     $ 309,731     $ 35.40     $ 0.16       99.5 %
IndyMac
    7/11/2008       30,699       28.67       0.12       99.6  
NetBank
    9/28/2007       2,474       6.12       0.05       99.3  
Silver State Bank
    9/5/2008       1,957       18.36       0.08       99.6  
Integrity Bank
    8/29/2008       1,108       4.42       0.02       99.5  
                              Mean       99.5 %
                              Median       99.5 %
 
Tangible Book Value Analysis of Wachovia
 
Perella Weinberg calculated the pro forma tangible book value of Wachovia, based on Wachovia’s tangible book value as of June 30, 2008, as disclosed in Wachovia’s quarterly report on form 10-Q for the quarter ended June 30, 2008, and estimates provided by Wachovia’s management regarding mark-to-market or fair value adjustments as of the date of Perella Weinberg’s opinion that would likely be made to Wachovia’s loan portfolios in the context of a sale transaction. Such analysis yielded a negative pro forma tangible book value for Wachovia.
 
Analyses of Wells Fargo Common Stock and Value Implied by Exchange Ratio
 
In addition to reviewing the implied value of the exchange ratio in relation to the historical trading price of Wells Fargo common stock, Perella Weinberg conducted the following analyses with respect to the value of


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Wells Fargo common stock and the corresponding value implied by the exchange ratio, on the basis of publicly available information regarding Wells Fargo, certain historical trading multiples of Wells Fargo common stock and other trading multiples that Perella Weinberg considered appropriate having reviewed similar trading multiples of other companies that Perella Weinberg believed to be relevant:
 
                                 
            Implied Value
  Value Implied
            per Share of
  by Exchange
Metric
  Value   Multiple   Wells Fargo   Ratio (0.1991)
        Historical 3-
       
Historical Trading Multiples       Year Average
       
        Multiple        
 
Next Twelve Month Earnings Per Share Estimate (IBES Median)
  $ 2.31       12.4 x   $ 28.56     $ 5.69  
Book Value per Share
  $ 14.48       2.46 x   $ 35.62     $ 7.09  
Tangible Book Value per Share
  $ 10.31       2.69 x   $ 27.73     $ 5.52  
 
                                 
Public Market Comparables
  Selected Multiples
 
2009 Estimated Earnings Per Share*
  $ 2.35       13 .5x - 15.5x   $ 31.73 - 36.43     $ 6.32 - 7.25  
2010 Estimated Earnings Per Share*
  $ 2.95       11 .0x - 13.0x   $ 32.45 - 38.35     $ 6.46 - 7.64  
Book Value per Share
  $ 14.48       2 .0x - 3.0x   $ 28.96 - 43.44     $ 5.77 - 8.65  
Tangible Book Value per Share
  $ 10.31       2 .5x - 3.0x   $ 25.78 - 30.93     $ 5.13 - 6.16  
Total Deposits Premium
  $ 339,124MM       20 .0% - 30.0%   $ 30.83 - 41.08     $ 6.14 - 8.18  
 
* 2009 and 2010 estimated earnings per share are based on median IBES estimates.
 
Perella Weinberg also conducted an illustrative discounted cash flow analysis with respect to the value of Wells Fargo common stock and the corresponding value implied by the exchange ratio, based on estimates for earnings per share of Wells Fargo common stock derived from publicly available equity research. Perella Weinberg used discount rates ranging from 10%-13%, reflecting estimates of Wells Fargo’s cost of equity, forecasts for Wells Fargo earnings per share based on median IBES estimates for the second half of 2008, 2009 and 2010, grown at the median IBES long-term growth rate of 8.5% thereafter, a target tier 1 capital ratio of 8.2% and terminal forward earnings multiples ranging from 10.0x to 14.0x applied to estimated 2014 earnings. This analysis resulted in a range of implied present value of $28 to $41 per share of Wells Fargo common stock, which translated to $5.57 to $8.16 per share of Wachovia common stock using the exchange ratio of 0.1991.
 
The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. Selecting portions of the analyses or of the summary set forth above, without considering the analyses as a whole and the circumstances described above, could create an incomplete view of the processes underlying Perella Weinberg’s opinion. In arriving at its fairness determination, Perella Weinberg considered the circumstances described above and the results of all of its relevant analyses and did not attribute any particular weight to any factor or analysis considered by it. Rather, Perella Weinberg made its determination as to fairness on the basis of its experience and professional judgment after considering such circumstances and the results of all of its relevant analyses. No company or transaction used in Perella Weinberg’s analyses is directly comparable to Wachovia, Wells Fargo or the merger.
 
As described above, the opinion of Perella Weinberg to the Wachovia board of directors was one of many factors taken into consideration by the Wachovia board of directors in making its determination to approve the merger agreement. The foregoing summary does not purport to be a complete description of the analyses performed by Perella Weinberg in connection with the fairness opinion and is qualified in its entirety by reference to the written opinion of Perella Weinberg attached as Appendix C to this proxy statement-prospectus.


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Perella Weinberg acted as financial advisor to the board of directors of Wachovia in connection with the merger, and pursuant to an engagement letter dated September 28, 2008, will receive fees for its services, of which $5 million was payable upon the execution of the merger agreement, and $20 million is contingent upon the closing of the merger. In addition, Wachovia has agreed to indemnify Perella Weinberg for certain liabilities and to reimburse Perella Weinberg for certain expenses arising out of its engagement. In the ordinary course of its business activities, Perella Weinberg or its affiliates may at any time hold long or short positions, and may trade or otherwise effect transactions, for their own account or the accounts of customers, in debt or equity or other securities (or related derivative securities) or financial instruments (including bank loans or other obligations) of Wachovia or Wells Fargo or any of their respective affiliates. Perella Weinberg also may provide investment banking and other financial services to Wachovia, Wells Fargo and their respective affiliates in the future, and may receive compensation in connection with such services.
 
Interests of Certain Wachovia Directors and Executive Officers in the Merger
 
Wachovia’s executive officers and directors have interests in the merger that are in addition to, and may be different from, the interests of Wachovia shareholders generally. The board of directors of Wachovia was aware of these different interests and considered them, among other matters, in adopting the plan of merger contained in the merger agreement and approving the transactions it contemplates. For purposes of the Wachovia agreements and plans described below, the completion of the transactions contemplated by the merger agreement will generally constitute a change in control.
 
Wachovia Stock Awards.  Employees, including executive officers, of Wachovia have received, from time to time, grants of stock options, restricted stock awards (RSAs) and restricted stock units (RSUs) under Wachovia’s applicable stock incentive plans. Under the terms of these plans, upon a change of control of Wachovia, unvested stock options, RSAs and RSUs (excluding certain performance-based RSAs) granted under the plan generally would vest and become exercisable following the change of control. The merger will constitute such a change in control of Wachovia. The merger agreement provides for the conversion of Wachovia stock options into stock options to purchase Wells Fargo common stock, as adjusted by the exchange ratio. As of the date of this proxy statement-prospectus, Wachovia’s 10 executive officers, excluding Robert K. Steel who is discussed below, in the aggregate held [•] unvested Wachovia stock options at a weighted average exercise price of $[•] per Wachovia share, which will vest upon completion of the merger. In addition, as of such date, such executive officers held [•] unvested RSAs, which will vest upon completion of the merger. These RSA amounts exclude the performance-based RSAs granted to Messrs. Steel, David K. Zwiener and Kenneth J. Phelan which are discussed below, and [•] performance-based RSAs which may or may not be forfeited following completion of the merger depending on whether the applicable 2008 performance goals are met. Non-employee directors of Wachovia have not received Wachovia stock options or RSAs. In connection with his service as interim Chief Executive Officer of Wachovia, Wachovia’s Chairman, Lanty L. Smith, was awarded 20,152 RSUs in June 2008, which will vest upon completion of the merger in accordance with the terms of the applicable stock incentive plan.
 
Wachovia Executive Officer Employment Agreements.  Wachovia has entered into employment agreements with all of its executive officers, excluding Robert K. Steel. The employment agreements generally provide for certain severance benefits in the event of a termination of the executive’s employment by Wachovia without “cause” (as defined in the agreements) or by the executive for “good reason” (as defined in the agreements) following a change in control. In the event of a qualifying termination as described above, the executives would be entitled to (i) a pro rata incentive award for the fiscal year in which the termination occurs, based on the greater of the highest incentive award paid during the three calendar years prior to termination and the executive’s then applicable target incentive award; (ii) an amount, payable in equal annual installments, equal to three times (two times in the case of employment agreements entered into after 2006) the executive’s annual base salary and the highest incentive award determined in accordance with (i) above; (iii) an amount, payable in equal annual installments, equal to three times (two times in the case of employment agreements entered into after 2006) the highest matching contribution made by Wachovia for the executive’s benefit in Wachovia’s 401(k) savings plan and savings restoration plan for the preceding five years


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(three years in the case of employment agreements entered into after 2006); (iv) continued medical, dental and life insurance benefits for the executive and executive’s family members for the remainder of the executive’s life; (v) continued participation in Wachovia’s fringe benefit and perquisite plans or programs in which the executive participated immediately prior to termination for three years (two years in the case of employment agreements entered into after 2006); and (vi) outplacement services in accordance with Wachovia’s policies generally applicable to involuntarily terminated employees. The severance payments, including any applicable gross-up payments, owed to each executive that entered into an employment agreement with Wachovia after 2006 are subject to the limits imposed by the employment agreement pursuant to Wachovia’s severance policy, which limits the total amount of severance to be paid to any executive to 2.99 times the sum of the executive’s base salary and annual cash incentive award. Assuming that the merger is completed on December 31, 2008 and all Wachovia executive officers who have employment agreements experience a qualifying termination of employment immediately thereafter, the 10 executive officers as a group would be entitled to receive an aggregate amount of $[•], as severance payments (representing payment for items (i), (ii) and (iii) described above, as limited pursuant to Wachovia’s severance policy).
 
The employment agreements provide that each executive will be entitled to receive a gross-up payment equal to the amount of federal excise taxes owed by the executive in connection with a change in control of Wachovia, as a result of payments under the employment agreement or otherwise, pursuant to Section 4999 of the Internal Revenue Code (Code), (plus the applicable federal and state income, Federal Insurance Contributions Act (FICA), and excise taxes due on such gross-up payment) that are deemed to be “excess parachute payments” for federal income tax purposes.
 
Severance payments and benefits are conditioned on the executive’s execution of a release of claims against Wachovia, its affiliates and personnel. In addition, pursuant to their employment agreements, the executives are subject to an ongoing confidentiality obligation, post-employment non-competition and non-solicitation covenant. The post-employment non-competition covenant is not applicable following any termination after completion of the merger.
 
Pursuant to the terms of their employment agreements with Wachovia, Messrs. Zwiener and Phelan were granted, in the aggregate, [•] performance-based Wachovia RSAs that vest upon Wachovia common stock reaching certain price thresholds and their continued employment with Wachovia through October 15, 2011 and October 21, 2011, respectively. Following the change of control as a result of the merger, these performance-based RSAs will not vest until Wells Fargo common stock reaches certain price thresholds, ranging from $100.45 per share to $175.79 per share and their continued service requirement will lapse. These price thresholds must occur prior to October 15, 2014 and October 21, 2014, respectively, or the unvested RSAs will be forfeited.
 
Robert K. Steel Agreement.  Wachovia did not enter into an employment agreement with Mr. Steel upon his hiring in July 2008. Mr. Steel received 1,500,000 Wachovia stock options with an exercise price of $9.08 per Wachovia share and 1,990,089 performance-based Wachovia RSAs that vest upon Wachovia common stock reaching certain price thresholds and his continued employment with Wachovia through July 15, 2011. Following the change in control as a result of the merger, all of Mr. Steel’s stock options will vest and be converted into stock options to purchase shares of Wells Fargo common stock, as adjusted by the exchange ratio. In addition, following the change in control as a result of the merger, Mr. Steel’s performance-based RSAs will not vest until Wells Fargo common stock reaches certain price thresholds, ranging from $100.45 per share to $175.79 per share and his continued service requirement will lapse. These price thresholds must occur prior to July 15, 2014 or the unvested RSAs will be forfeited.
 
Mr. Steel is also entitled to receive a gross-up payment equal to the amount of federal excise taxes under Section 4999 of the Internal Revenue Code (plus the applicable federal and state income, FICA and excise taxes due on such gross-up payment) payable by him in conjunction with a change in control of Wachovia and such taxes become payable, as a result of payments under the stock award agreement or otherwise, and are deemed to be “excess parachute payments” for federal income tax purposes. The foregoing payments, if any, to Mr. Steel are subject to the limits imposed by Wachovia’s severance policy, which limits the total amount


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of severance benefits to be paid to any executive to 2.99 times the sum of the executive’s base salary and annual cash incentive award.
 
Other.  Wachovia is party to insurance bonus agreements with two of its executive officers, Stephen E. Cummings and Stanhope A. Kelly. Following the completion of the merger, Wachovia’s rights to terminate these agreements will become more limited. Annual bonus payments under these insurance bonus agreements are approximately $60,000 in the aggregate.
 
Wells Fargo Board Positions.  When the merger is completed, three current members of Wachovia’s board of directors will be appointed to Wells Fargo’s board of directors. Non-employee members of Wells Fargo’s board of directors who are added to Wells Fargo’s board of directors will receive customary fees from Wells Fargo for being a director in accordance with Wells Fargo’s current director compensation policy. As of the date of this proxy statement-prospectus, Wells Fargo and Wachovia have not identified the three members of Wachovia’s board of directors who will be appointed to Wells Fargo’s board of directors.
 
Indemnification and Insurance.  The merger agreement provides that, upon completion of the merger, Wells Fargo will, to the fullest extent permitted by law, indemnify, defend and hold harmless all present and former directors, officers and employees of Wachovia against all costs and liabilities arising out of actions or omissions occurring at or before the completion of the merger and will advance any expenses as incurred to the fullest extent permitted by law.
 
The merger agreement also provides that for a period of six years after the merger is completed, Wells Fargo will provide director’s and officer’s liability insurance for the present and former officers and directors of Wachovia with respect to claims arising from facts or events occurring before the merger is completed. This director’s and officer’s liability insurance will contain at least the same coverage and amounts, and terms and conditions no less advantageous, as Wachovia’s existing coverage.
 
Material U.S. Federal Income Tax Consequences
 
The following section is a summary of the anticipated material U.S. federal income tax consequences of the merger to U.S. holders (as defined below) of Wachovia common stock that exchange their shares of Wachovia common stock for shares of Wells Fargo common stock in the merger. This discussion addresses only those Wachovia shareholders that hold their Wachovia common stock as a capital asset within the meaning of Section 1221 of the Code and does not address all the U.S. federal income tax consequences that may be relevant to particular Wachovia shareholders in light of their individual circumstances or to Wachovia shareholders that are subject to special rules, such as:
 
  •  financial institutions,
 
  •  insurance companies,
 
  •  mutual funds,
 
  •  S corporations or other pass-through entities (or investors in S corporations or other pass-through entities),
 
  •  tax-exempt organizations,
 
  •  dealers in securities or currencies,
 
  •  traders in securities that elect to use a mark to market method of accounting,
 
  •  persons that hold Wachovia common stock as part of a straddle, hedge, constructive sale or conversion transaction,
 
  •  persons who are not U.S. holders (as defined below),
 
  •  persons who perfect appraisal rights, and
 
  •  shareholders who acquired their shares of Wachovia stock through the exercise of an employee stock option or otherwise as compensation.


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The following is based upon the Code, its legislative history, existing and proposed regulations under the Code and published rulings and decisions, all as currently in effect as of the date of this proxy statement-prospectus, and all of which are subject to change, possibly with retroactive effect. Tax considerations under state, local and foreign laws, or federal laws other than those pertaining to income tax, are not addressed in this document.
 
For purposes of this discussion, the term “U.S. holder” means a beneficial owner of Wachovia common stock that is for United States federal income tax purposes (i) an individual citizen or resident of the United States, (ii) a corporation, or entity treated as a corporation, organized in or under the laws of the United States or any state thereof or the District of Columbia, (iii) a trust that (x) is subject to (I) the primary supervision of a court within the United States and (II) the authority of one or more United States persons to control all substantial decisions of the trust or (y) has a valid election in effect under applicable Treasury Regulations to be treated as a United States person, or (iv) an estate that is subject to U.S. federal income tax on its income regardless of its source.
 
Determining the actual tax consequences of the merger to you may be complex. They will depend on your specific situation and on factors that are not within Wachovia’s or Wells Fargo’s control. You should consult with your own tax advisor regarding the tax consequences of the merger in your particular circumstances, including the applicability and effect of the alternative minimum tax and any state, local or foreign and other tax laws and of changes in those laws.
 
Tax Consequences of the Merger Generally.  The parties intend for the merger to qualify as a reorganization for United States federal income tax purposes. It is a condition to Wells Fargo’s obligation to complete the merger that Wells Fargo receive an opinion from Wachtell, Lipton, Rosen & Katz, dated the closing date of the merger, substantially to the effect that the merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Code. It is a condition to Wachovia’s obligation to complete the merger that Wachovia receive an opinion from Sullivan & Cromwell LLP, dated the closing date of the merger, substantially to the effect that the merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Code. These opinions will be based on representation letters provided by Wells Fargo and Wachovia and on customary factual assumptions. Neither of the opinions described above will be binding on the Internal Revenue Service. Wells Fargo and Wachovia have not sought and will not seek any ruling from the Internal Revenue Service regarding any matters relating to the merger, and as a result, there can be no assurance that the Internal Revenue Service will not assert, or that a court would not sustain, a position contrary to any of the conclusions set forth below.
 
Accordingly, if the merger qualifies as a “reorganization” within the meaning of Section 368(a) of the Code, upon exchanging your Wachovia common stock for Wells Fargo common stock, you generally will not recognize gain or loss, except with respect to cash received instead of fractional shares of Wells Fargo common stock (as discussed below). The aggregate tax basis in the shares of Wells Fargo common stock that you receive in the merger, including any fractional share interests deemed received and redeemed as described below, will equal your aggregate adjusted tax basis in the Wachovia common stock you surrender. Your holding period for the shares of Wells Fargo common stock that you receive in the merger (including a fractional share interest deemed received and sold as described below) will include your holding period for the shares of Wachovia common stock that you surrender in the exchange. If you acquired different blocks of Wachovia common shares at different times or at different prices, the Wells Fargo common stock you receive will be allocated pro rata to each block of Wachovia common stock, and the basis and holding period of each block of Wells Fargo common stock you receive will be determined on a block-for-block basis depending on the basis and holding period of the blocks of Wachovia common stock exchanged for such block of Wells Fargo common stock.
 
Cash Instead of a Fractional Share.  If you receive cash instead of a fractional share of Wells Fargo common stock, you will be treated as having received the fractional share of Wells Fargo common stock pursuant to the merger and then as having sold that fractional share of Wells Fargo common stock for cash. As a result, you generally will recognize gain or loss equal to the difference between the amount of cash received and the basis in your fractional share of Wells Fargo common stock as set forth above. This gain or loss


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generally will be capital gain or loss, and will be long-term capital gain or loss if, as of the effective date of the merger, the holding period for the shares (including the holding period of Wachovia common stock surrendered therefor) is greater than one year. Long-term capital gains of individuals are generally eligible for reduced rates of taxation. The deductibility of capital losses is subject to limitations.
 
Backup Withholding and Information Reporting.  Cash and property received in exchange for Wachovia common stock may, under certain circumstances, be subject to information reporting and backup withholding currently at a rate of 28%, unless the holder provides proof of an applicable exemption or furnishes its taxpayer identification number and otherwise complies with all applicable requirements of the backup withholding rules. Any amounts withheld from payments to a holder under the backup withholding rules are not additional tax and generally will be allowed as a refund or credit against the holder’s U.S. federal income tax liability, provided the required information is timely furnished to the Internal Revenue Service.
 
Dissenters’ or Appraisal Rights
 
Holders of Wachovia Common Stock.  Under North Carolina law, a holder of shares of a class or series of stock that is listed on a national securities exchange may not dissent from a merger in which a shareholder receives cash or shares which are also listed on a national securities exchange. Therefore, holders of Wachovia common stock are not entitled to appraisal or dissenters’ rights in connection with the merger because Wachovia’s common shares and Wells Fargo’s common shares are both listed on the New York Stock Exchange.
 
Holders of Wachovia Preferred Stock.  Holders of Wachovia preferred stock will have dissenters’ rights in connection with the merger with Wells Fargo, and therefore may elect to be paid in cash for such shareholder’s shares in accordance with the procedures set forth in Article 13 of the NCBCA. The depositary shares representing Wachovia Preferred Stock Series J are not a class or series of shares issued by Wachovia and thus dissenters’ rights under Article 13 of the NCBCA do not independently apply to the depositary shares. However, while it is not entirely clear under North Carolina law, Wachovia has agreed to treat each holder of currently outstanding depositary shares for Wachovia Preferred Stock Series J as a beneficial owner of the Wachovia Preferred Stock Series J represented thereby. Unless shares of the Wachovia Preferred Stock Series J are withdrawn from the depositary, the depositary, which is currently U.S. Bank National Association, is the holder of record of the shares of Wachovia Preferred Stock Series J. Accordingly, to exercise dissenters’ rights with respect to the Wachovia Preferred Stock Series J, holders of depositary shares will be required to follow the procedures described below for beneficial owners of preferred stock.
 
The following is a summary of the material terms of the statutory procedures to be followed by holders of Wachovia preferred stock in order to dissent from the merger and perfect dissenters’ rights under the NCBCA. In the following discussion, references to “Wachovia” with respect to actions taken or to be taken at any time following the effectiveness of the merger shall mean Wells Fargo as the surviving corporation of the merger. The following discussion is not a complete description of the law relating to dissenters’ rights available under North Carolina law and is qualified in its entirety by the full text of Article 13 of the NCBCA, which is reprinted in its entirety as Appendix D to this proxy statement-prospectus. If you wish to exercise dissenters’ rights, you should review carefully the following discussion and Appendix D. Wachovia urges you to consult a lawyer before electing or attempting to exercise these rights.
 
If the merger is completed, and you are a holder of Wachovia preferred stock who objects to the merger and who fully complies with Article 13 of the NCBCA, you will be entitled to demand and receive payment in cash of an amount equal to the fair value of your shares of Wachovia preferred stock. The amount you would receive in connection with the exercise of statutory dissenters’ rights would be the fair value of your preferred stock immediately before the merger completion date, excluding any appreciation or depreciation in anticipation of the merger unless exclusion would be inequitable.
 
Under Article 13 of the NCBCA, all holders of Wachovia preferred stock entitled to dissenters’ rights in the merger must be notified in the meeting notice relating to the merger that shareholders are entitled to assert dissenters’ rights. This joint proxy statement-prospectus constitutes that notice.


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If you are a holder of Wachovia preferred stock and desire to dissent and receive cash payment of the fair value of your Wachovia preferred stock, you must:
 
  •  deliver to Wachovia (and Wachovia must actually receive), prior to the shareholder vote on the proposal to approve the plan of merger contained in the merger agreement, a written notice of your intent to demand payment for your shares if the merger is completed; and
 
  •  not vote your Wachovia shares in favor of the approval of the plan of merger contained in the merger agreement and the merger (holders of Wachovia preferred stock, other than the Series M Preferred Stock issued to Wells Fargo, are not entitled to vote those shares on the approval of the plan of merger contained in the merger agreement).
 
If you do not satisfy both of those conditions and the merger is consummated, you will not be entitled to payment for your shares under the provisions of Article 13 of the NCBCA.
 
Except as described in the following sentence, the notice of intent to demand payment for your Wachovia preferred shares must be executed by the holder of record of shares of Wachovia preferred stock as to which dissenters’ rights are to be exercised. A beneficial owner who is not the holder of record may assert dissenters’ rights only if you (i) submit to Wachovia the record holder’s consent to the dissent not later than the time the beneficial holder asserts dissenters’ rights and (ii) dissent with respect to all shares of Wachovia preferred stock of which such person is the beneficial owner. A record owner, such as a broker or bank, who holds shares of Wachovia preferred stock as a nominee for others, may exercise dissenters’ rights with respect to the shares held for all or less than all beneficial owners of shares as to which it is the record owner, provided the record owner dissents with respect to all shares of Wachovia preferred stock beneficially owned by any one person. In this case, the demand notice submitted by the broker or bank, as record owner, must set forth the name and address of the beneficial owner on whose behalf the record holder asserts dissenters’ rights.
 
If the plan of merger contained in the merger agreement is approved by the required vote of holders of Wachovia’s capital stock, Wachovia will be required to mail by registered or certified mail, return receipt requested, a written dissenters’ notice to all holders of Wachovia preferred stock who have satisfied the requirements described above. The dissenters’ notice must be sent no later than 10 days after shareholder approval of the merger is obtained, and it must:
 
  •  state where the payment demand described below must be sent and where and when certificates for shares of preferred stock must be deposited;
 
  •  supply a form for demanding payment;
 
  •  set a date by which Wachovia must receive the payment demand (not fewer than 30 days nor more than 60 days after the dissenters’ notice is mailed);
 
  •  inform holders of uncertificated shares to what extent transfer of the shares will be restricted after the payment demand is received; and
 
  •  include a copy of Article 13 of the NCBCA.
 
A holder of Wachovia preferred stock who receives a dissenters’ notice must demand payment and deposit the shareholder’s Wachovia preferred stock certificates in accordance with the terms of the dissenters’ notice. A holder of Wachovia preferred stock who demands payment and deposits preferred stock certificates retains all other rights of a holder of Wachovia preferred stock until those rights are canceled or modified by the effectiveness of the merger. A holder of Wachovia preferred stock who does not demand payment or deposit its Wachovia preferred stock certificates where required, each by the date set forth in the dissenters’ notice, is not entitled to payment for its Wachovia preferred stock under Article 13 the NCBCA.
 
Wachovia may restrict the transfer of uncertificated preferred stock from the date the demand for payment is received until the merger is consummated or restrictions released due to Wachovia not merging within 60 days after the date set for demanding payment and depositing preferred stock certificates. The person asserting dissenters’ rights as to uncertificated preferred stock retains all other rights of a shareholder until these rights are cancelled or modified by the merger.


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As soon as the merger is completed or within 30 days after receipt of a payment demand from a dissenting holder of Wachovia preferred stock who has complied with the statutory requirements, whichever is later, Wachovia will pay the dissenter the amount that Wachovia estimates to be the fair value of the dissenting shareholder’s preferred stock, plus interest accrued to the date of payment. Wachovia’s payment will be accompanied by:
 
  •  Wachovia’s most recent available balance sheet, an income statement for that year, a statement of cash flows for that year and the latest available interim financial statements, if any;
 
  •  an explanation of the estimation of the fair value of the preferred stock;
 
  •  an explanation of how the interest was calculated;
 
  •  a statement of the dissenting shareholder’s right to demand payment of a different amount under Section 55-13-28 of the NCBCA; and
 
  •  a copy of Article 13 of the NCBCA.
 
If the merger is not consummated within 60 days after the date set for demanding payment and depositing stock certificates, Wachovia must return your deposited certificates and release the transfer restrictions imposed on uncertificated stock. If the merger is consummated after return of your deposited certificates or release of transfer restrictions, Wachovia must send you a new dissenters’ notice and repeat the payment demand procedure.
 
You may, however, notify Wachovia in writing of your own estimate of the fair value of your stock and amount of interest due, and demand payment of the excess of your estimate of the fair value of your stock over the amount previously paid by Wachovia if:
 
  •  you believe that the amount paid is less than the fair value of Wachovia preferred stock or that the interest is incorrectly calculated;
 
  •  Wachovia fails to make payment of its estimate of fair value to you within 30 days after receipt of a demand for payment; or
 
  •  the merger is not consummated, and Wachovia does not return your deposited certificates or release the transfer restrictions imposed on uncertificated stock within 60 days after the date set for demanding payment.
 
You waive the right to demand payment unless you notify Wachovia of your demand in writing within 30 days of Wachovia’s payment of its estimate of fair value or Wachovia’s failure to perform timely. If you fail to notify Wachovia of your demand within such 30-day period, you shall be deemed to have withdrawn your dissent and demand for payment.
 
If, within 60 days of Wachovia’s payment or a dissenting Wachovia preferred shareholder’s demand for payment of a different amount, whichever is earlier, the payment amount has not been settled, the dissenting holder of Wachovia preferred stock may file an action in the Superior Court Division of the North Carolina General Court of Justice requesting that the fair value of the dissenting shareholder’s Wachovia preferred stock and the accrued interest be determined. The dissenting holder of Wachovia preferred stock will not have the right to a jury trial. The court will have discretion to make all dissenting holders of Wachovia preferred stock whose demands remain unsettled parties to the proceeding.
 
If you do not commence the proceeding within such 60-day period, you will be deemed to have withdrawn the dissent and demand for payment. In such an appraisal proceeding, the court will determine all costs of the proceeding and assess the costs as it finds equitable. The proceeding is to be tried as in other civil actions; however, you will not have the right to a trial by jury. The court also may assess the fees and expenses of counsel and experts for the respective parties, in the amounts the court finds equitable, as follows:
 
  •  against Wachovia if the court finds that Wachovia did not substantially comply with the procedures for the exercise of dissenters’ rights prescribed by Article 13 of the NCBCA; or


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  •  against Wachovia or the dissenting preferred stock holders, if the court finds that the party against whom the fees and expenses are assessed acted arbitrarily, vexatiously or not in good faith.
 
If the court finds that the services of counsel for any dissenting preferred stock holder were of substantial benefit to other dissenting preferred stock holders and that the fees for those services should not be assessed against Wachovia, the court may award to the counsel reasonable fees to be paid out of the amounts awarded the dissenting preferred stock holders who were benefited.
 
In view of the complexity of these provisions and the requirement that they be strictly complied with, if you hold Wachovia preferred stock and are considering exercising your dissenters’ rights under the NCBCA, you should consult a lawyer promptly.
 
The NCBCA provides that the exercise of dissenters’ rights will be the exclusive method for a holder of Wachovia preferred stock to challenge the merger in the absence of a showing that the merger are either unlawful or fraudulent as to that preferred shareholder.
 
All written communications from shareholders with respect to the exercise of dissenters’ rights should be mailed to:
 
Wachovia Corporation
301 South College Street
Charlotte, North Carolina 28288-0630
Attention: Ross E. Jeffries, Jr., Senior Vice President and Deputy General Counsel
 
Wachovia recommends that such communications be sent by registered or certified mail, return receipt requested.
 
Not voting in favor of the proposal to approve and adopt the merger agreement (holders of Wachovia preferred stock (except for the Series M Preferred Stock issued to Wells Fargo) are not entitled to vote on the approval of the plan of merger contained in the merger agreement at the special meeting) is not sufficient to perfect your dissenters’ rights and receive the fair value of your Wachovia preferred stock, plus accrued interest. You must also comply with all other conditions set forth in Article 13 of the NCBCA, including the conditions relating to the separate written notice of intent to dissent to the merger, the separate written demand for payment of the fair value of your shares of Wachovia preferred stock, the deposit of your Wachovia preferred stock certificates, and the separate notification and demand for payment in excess of an initial payment made by Wachovia.
 
The summary set forth above does not purport to be a complete statement of the provisions of the NCBCA relating to the rights of dissenting shareholders and is qualified in its entirety by reference to the applicable sections of the NCBCA, which are included as Appendix D to this proxy statement-prospectus.
 
Regulatory Approvals
 
Completion of the merger is subject to prior receipt of all approvals and consents required to be obtained from applicable governmental and regulatory authorities to complete the merger. Wells Fargo and Wachovia have agreed to cooperate and use all reasonable best efforts to obtain all permits, consents, approvals and authorizations from any governmental or regulatory authority necessary to consummate the transactions contemplated by the merger agreement as promptly as practicable.
 
There can be no assurance that regulatory approvals will be obtained, that such approvals will be received on a timely basis, or that such approvals will not impose conditions or requirements that, individually or in the aggregate, would or could reasonably be expected to have a material adverse effect on the financial condition, results of operations, assets or business of Wells Fargo or Wachovia following completion of the merger.
 
Federal Reserve Approval.  The Federal Reserve must approve the merger before the merger can be completed. Federal Reserve approval is required because Wells Fargo is a bank holding company proposing to acquire another bank holding company, Wachovia.
 
The Federal Reserve Board approved the merger on October 12, 2008.


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The approval of an application means only that the regulatory criteria for approval have been satisfied or waived. It does not mean that the approving authority has determined that the consideration to be received by Wachovia shareholders is fair. Regulatory approval does not constitute an endorsement or recommendation of the merger.
 
Antitrust Approval.  The merger is subject to review by the DOJ or the FTC, to determine whether it complies with applicable antitrust law. Under the provisions of the HSR Act, and its related rules, the merger cannot be completed until both Wells Fargo and Wachovia file notification of the merger with the DOJ and the FTC and the specified waiting periods have expired or been terminated. Each of Wells Fargo and Wachovia filed, on October 7, 2008, its notification of the merger with the DOJ and the FTC. Early termination of the waiting period under the HSR Act was granted on October 10, 2008.
 
Other Applications and Notices.  Other applications and notices are being filed with various regulatory authorities and self-regulatory organizations in connection with the merger, including applications and notices in connection with the indirect change in control, as a result of the merger, of certain subsidiaries directly or indirectly owned by Wachovia.
 
Wells Fargo and Wachovia are not aware of any governmental approvals or compliance with banking laws and regulations that are required for the merger to become effective other than those described above. Wells Fargo and Wachovia intend to seek any other approval and to take any other action that may be required to complete the merger. There can be no assurance that any required approval or action can be obtained or taken prior to the meeting.
 
Stock Exchange Listing
 
The shares of Wells Fargo common stock to be issued in the merger will be listed on the New York Stock Exchange. The listing of the Wells Fargo common stock to be issued in the merger is a condition to Wachovia’s obligation to complete the merger. See “The Merger Agreement — Conditions to the Merger.”
 
Each outstanding share of Wachovia Series J Preferred Stock is represented by Wachovia depositary shares that are listed on the New York Stock Exchange and represent a one-fortieth interest in a share of Wachovia Series J Preferred Stock. Following the exchange of Wells Fargo Preferred Stock Series J for Wachovia Series J Preferred Stock upon completion of the merger under the Series J Deposit Agreement, these depositary shares will continue to be listed on the New York Stock Exchange under a new name and will be traded under a new symbol.
 
Accounting Treatment
 
Wells Fargo will account for the merger under the purchase method of accounting. Wells Fargo will record, at fair value, the acquired assets and assumed liabilities of Wachovia. To the extent the total purchase price exceeds the fair value of the assets acquired and liabilities assumed, Wells Fargo will record goodwill. Wells Fargo will include in its results of operations the results of Wachovia’s operations after the merger.
 
Litigation Related to the Merger
 
On October 4, 2008, Citigroup, Inc. (Citigroup) purported to commence an action of the Supreme Court in the State of New York, captioned Citigroup, Inc. v. Wachovia Corp., et al., naming as defendants Wachovia, Wells Fargo, and the directors of both companies (First State Action). The complaint alleged that Wachovia breached an exclusivity agreement with Citigroup, which by its terms was to expire on October 6, 2008, by entering into negotiations and an eventual acquisition agreement with Wells Fargo, and that Wells Fargo and the individual defendants had tortiously interfered with the same contract. The complaint sought an order enjoining defendants from further negotiating or consummating the merger, and specific enforcement of the exclusivity agreement, as well as $40 billion in punitive damages. On October 4, 2008, defendants removed the First State Action to the United States District Court for the Southern District of New York. At about the same time, however, Justice Ramos of the Supreme Court issued an Order to Show Cause and Temporary Restraining Order that did not grant the relief Citigroup sought but did extend the period of the exclusivity


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agreement until further order of the court, and set a hearing for the following Thursday. Citigroup then purported to dismiss the First State Action which had been removed to federal court by filing a notice of voluntary dismissal in federal court, and purported to refile a new, identically captioned complaint (Second State Action), making similar allegations but omitting certain portions of an earlier claim arising under a federal statute, Section 126(c) of the Emergency Economic Stabilization Act, just passed by Congress. Justice Ramos thereupon issued a second Order to Show Cause and Temporary Restraining Order that was substantively identical to his first order. On October 5, 2008, the Appellate Division of the New York Supreme Court vacated Justice Ramos’ second Order to Show Cause and Temporary Restraining Order, which had been issued the night before. On October 9, 2008, Citigroup issued a press release stating that Citigroup had ended its negotiations with Wells Fargo. The press release further stated that Citigroup would no longer seek to enjoin the merger, but would continue to seek compensatory and punitive damages against Wachovia and Wells Fargo in the Second State Action. Immediately after the press release was sent to both the federal and state courts by Citigroup’s counsel, defendants removed the Second State Action to the United States District Court for the Southern District of New York. On October 10, 2008, Citigroup moved to remand the removed action to State Court and purported to file a proposed amended complaint, adding allegations that Citigroup provided liquidity support and other services to Wachovia during the period between September 29, 2008 and October 2, 2008. The proposed amended complaint includes claims for breach of contract, tortious interference with contract, unjust enrichment, promissory estoppel, and quantum meruit. In the proposed amended complaint, Citigroup seeks $20 billion in compensatory damages, $20 billion in restitutionary and unjust enrichment damages, and $40 billion in punitive damages. On October 24, 2008, Wells Fargo and Wachovia submitted a brief in opposition to the motion to remand. The motion is still pending.
 
On October 4, 2008, Wachovia filed a complaint in the United States District Court for the Southern District of New York, captioned Wachovia Corp. v. Citigroup, Inc. The complaint seeks a declaration that the merger agreement is valid, proper, and not prohibited by the exclusivity agreement. Thereafter Wachovia filed a motion for preliminary injunction and/or for expedited trial on the merits together with supporting affidavits and legal memoranda. The motion is fully briefed and remains pending. On October 14, 2008, Wells Fargo filed a related complaint in the United States District Court for the Southern District of New York, captioned Wells Fargo v. Citigroup, Inc. The complaint seeks a declaration that the merger agreement is valid, proper, and not prohibited by the exclusivity agreement. Citigroup has moved to dismiss the complaint.
 
On October 5, 2008, two Wachovia shareholders filed an action against Citigroup in the Superior Court for the County of Mecklenburg in the State of North Carolina, captioned Mary Louise Guttmann v. Citigroup, Inc. The complaint sought a judgment declaring the exclusivity agreement between Citigroup and Wachovia to be unenforceable and an injunction restraining Citigroup from attempting to enforce the agreement. On October 10, 2008, following Citigroup’s announcement that it would no longer seek to enjoin the merger, the Guttman action was dismissed upon stipulation of all parties.
 
On October 8, 2008, a purported class action complaint captioned Irving Ehrenhaus v. John D. Baker, et al., was filed in the Superior Court for the County of Mecklenburg in the State of North Carolina. The complaint names as defendants Wachovia, Wells Fargo, and the directors of Wachovia. The complaint alleges that the Wachovia directors breached their fiduciary duties in approving the merger at an allegedly inadequate price, and that Wells Fargo aided and abetted the alleged breaches of fiduciary duty. The action seeks to enjoin the merger, or to recover compensatory or rescissory damages if the merger is consummated, as well as an award of attorneys’ fees and costs. Plaintiffs have asked the Court to order expedited discovery and to set a hearing date for a preliminary injunction motion to enjoin the shareholder vote and the closing of the transaction.


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THE MERGER AGREEMENT
 
The following describes certain aspects of the merger, including material provisions of the merger agreement. The following description of the merger agreement is subject to, and qualified in its entirety by reference to, the merger agreement, attached to this document as Appendix A and is incorporated by reference into this document. We urge you to read the merger agreement carefully and in its entirety, as it is the legal document governing this merger.
 
Terms of the Merger
 
Each of the Wachovia board of directors and the Wells Fargo board of directors has adopted the plan of merger contained in the merger agreement, which provides for the merger of Wachovia with and into Wells Fargo. Wells Fargo will be the surviving corporation in the merger. Each share of Wachovia common stock issued and outstanding immediately prior to the completion of the merger, except for specified shares of Wachovia common stock held by Wachovia and Wells Fargo, will be converted into 0.1991 of a share of Wells Fargo common stock. If the number of shares of common stock of Wells Fargo changes before the merger is completed because of a reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split, or other similar event, then an appropriate and proportionate adjustment will be made to the number of shares of Wells Fargo common stock into which each share of Wachovia common stock will be converted.
 
Wells Fargo will not issue any fractional shares of Wells Fargo common stock in the merger. Instead, a Wachovia shareholder who otherwise would have received a fraction of a share of Wells Fargo common stock will receive an amount in cash rounded to the nearest cent. This cash amount will be determined by multiplying the fraction of a share of Wells Fargo common stock to which the holder would otherwise be entitled by the average closing price of Wells Fargo common stock on the New York Stock Exchange over the five trading days immediately prior to the date on which the merger is completed.
 
At the effective time of the merger, Wells Fargo’s certificate of incorporation and Wells Fargo’s bylaws in effect immediately prior to the effective time will be the certificate of incorporation and bylaws, respectively, of the surviving corporation after completion of the merger until thereafter amended in accordance with their respective terms and applicable law. The merger agreement provides that Wells Fargo may change the structure of the merger provided that no such change will alter the amount or kind of merger consideration to be provided under the merger agreement or materially impede or delay completion of the merger.
 
Treatment of Wachovia Stock Options and Other Equity-Based Awards
 
Subject to applicable law, at the time of the merger, each option to purchase Wachovia common stock that is then outstanding and unexercised will be converted automatically into an option to buy Wells Fargo common stock, and Wells Fargo will assume each option to purchase Wachovia common stock subject to its terms except:
 
  •  the number of Wells Fargo shares purchasable upon exercise of each Wachovia option will equal the number of Wachovia shares subject to the Wachovia option multiplied by the exchange ratio, rounded down to the nearest whole share; and
 
  •  the per share exercise price of the converted Wells Fargo option will equal the per share exercise price of the Wachovia option divided by the exchange ratio, rounded up to the nearest cent.
 
At the time of the merger, other stock-based awards of Wachovia will be converted into a similar award of Wells Fargo with respect to Wells Fargo common stock generally on the same terms that applied to the Wachovia award except the number of shares of Wells Fargo common stock subject to the new Wells Fargo award will equal the number of shares of Wachovia common stock subject to the award multiplied by the exchange ratio, rounded down to the nearest whole share.


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Treatment of Wachovia Preferred Stock
 
Upon completion of the merger, (i) each Wachovia DEP Share issued and outstanding immediately prior to completion of the merger will be automatically converted into one one-thousandth of a Wells Fargo DEP Share, (ii) each share of Wachovia Preferred Stock Series G, issued and outstanding immediately prior to completion of the merger will be automatically converted into one one-hundredth of a share of Wells Fargo Preferred Stock Series G, (iii) each share of Wachovia Preferred Stock Series H, issued and outstanding immediately prior to completion of the merger will be automatically converted into one one-hundredth of a share of Wells Fargo Preferred Stock Series H, (iv) each share of Wachovia Preferred Stock Series I, issued and outstanding immediately prior to completion of the merger will be automatically converted into one share of Wells Fargo Preferred Stock Series I, (v) each share of Wachovia Preferred Stock Series J, issued and outstanding immediately prior to completion of the merger will be automatically converted into one share of Wells Fargo Preferred Stock Series J, (vi) each share of Wachovia Preferred Stock Series K, issued and outstanding immediately prior to completion of the merger will be automatically converted into one share of Wells Fargo Preferred Stock Series K, and (vii) each share Wachovia Preferred Stock Series L, issued and outstanding immediately prior to the completion of the merger will be automatically converted into one share of Wells Fargo Preferred Stock Series L.
 
The terms of each share of the Wells Fargo Preferred Stock Series I, Wells Fargo Preferred Stock Series J, Wells Fargo Preferred Stock Series K, Wells Fargo Preferred Stock Series L and Wells Fargo Preferred Stock Series M will be substantially identical to the terms of one share of the corresponding series of Wachovia Class A Preferred Stock. The terms of each one one-thousandth of a Wells Fargo DEP Share will be substantially identical to the terms of one Wachovia DEP Share. The terms of each one one-hundredth of a share of Wells Fargo Preferred Stock Series G and one one-hundredth of a share of Wells Fargo Preferred Stock Series H will be substantially identical to the terms of one share of Wachovia Preferred Stock Series G and Wachovia Preferred Stock Series H, respectively. Any shares of Wachovia preferred stock as to which preferred shareholders have perfected their dissenters’ rights pursuant to North Carolina law will not be exchanged for New Wells Fargo Preferred Stock.
 
Each outstanding share of Wachovia Preferred Stock Series J is presently represented by depositary shares that are listed on the New York Stock Exchange and that represent a 1/40th interest in a share of Wachovia Preferred Stock Series J. The Wells Fargo Preferred Stock Series J will also be represented by depositary shares and listed on the New York Stock Exchange.
 
Holders of Wachovia preferred stock (except for the Series M Preferred Stock issued to Wells Fargo (which represents 39.9% of the total voting power of holders of Wachovia capital stock entitled to vote)) and Wachovia depositary shares are not entitled to vote on the plan of merger contained in the merger agreement or at the special meeting or the proposal to approve the adjustment or postponement of the special meeting, if necessary or appropriate, to solicit additional proxies to approve the plan of merger contained in the merger agreement.
 
Closing and Effective Time of the Merger
 
The merger will be completed only if all of the following occur:
 
  •  the plan of merger contained in the merger agreement is approved by the requisite vote of Wachovia capital shareholders;
 
  •  Wachovia and Wells Fargo obtain required regulatory approvals from the Federal Reserve, under the HSR Act and any other required regulatory approvals the failure of which to obtain would reasonably be expected to have a material adverse effect on either Wachovia or Wells Fargo; and
 
  •  all other conditions to the merger discussed in this document and the merger agreement are either satisfied or waived.
 
The merger will become effective when a certificate of merger is filed with the Secretary of State of the State of Delaware. However, we may agree to a different time for completion of the merger and specify that


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time in the certificate of merger in accordance with Delaware law. In the merger agreement, we have agreed to cause the completion of the merger to occur no later than the third business day following the satisfaction or waiver (subject to applicable law) of the last to occur of the conditions specified in the merger agreement, or on another mutually agreed date.
 
Conversion of Shares; Exchange of Certificates
 
The conversion of Wachovia common stock into the merger consideration will occur automatically at the effective time of the merger. As soon as reasonably practicable after completion of the merger, the exchange agent will exchange certificates or direct registration statements representing or evidencing shares of Wachovia common stock for the merger consideration to be received pursuant to the terms of the merger agreement. Wells Fargo Bank, N.A. will be the exchange agent.
 
Letter of Transmittal.  As soon as reasonably practicable after the completion of the merger, the exchange agent will mail a letter of transmittal to each record holder of Wachovia common stock at the effective time of the merger. This mailing will contain instructions on how to surrender Wachovia common stock certificates in exchange for direct registration statements indicating book-entry ownership of Wells Fargo common stock and a check in the amount of cash to be paid instead of fractional shares. If a holder of a Wachovia common stock certificate makes a special request, however, the exchange agent will issue to the requesting holder a Wells Fargo stock certificate in lieu of book-entry shares. When you deliver your Wachovia stock certificates to the exchange agent along with a properly executed letter of transmittal and any other required documents, your Wachovia stock certificates will be cancelled and you will receive direct registration statements indicating book-entry ownership of Wells Fargo common stock, or, if requested, stock certificates representing the number of full shares of Wells Fargo common stock to which you are entitled under the merger agreement. You also will receive a cash payment for any fractional shares of Wells Fargo common stock that would have been otherwise issuable to you as a result of the merger.
 
Holders of Wachovia common stock should not submit their Wachovia stock certificates for exchange until they receive the transmittal instructions and a form of letter of transmittal from the exchange agent.
 
If a certificate for Wachovia common stock has been lost, stolen or destroyed, the exchange agent will issue the consideration properly payable under the merger agreement upon receipt of appropriate evidence as to that loss, theft or destruction and if reasonably required by Wells Fargo, the posting of a bond indemnifying Wells Fargo for any claim that may be made against Wells Fargo as a result of the lost, stolen or destroyed certificates. After completion of the merger, there will be no further transfers on the stock transfer books of Wachovia, except as required to settle trades executed prior to the completion of the merger.
 
Withholding.  The exchange agent will be entitled to deduct and withhold from the cash in lieu of fractional shares payable to any Wachovia shareholder the amounts the exchange agent is required to deduct and withhold under any applicable federal, state, local or foreign tax law. If the exchange agent withholds any amounts, these amounts will be treated for all purposes of the merger as having been paid to the shareholders from whom they were withheld.
 
Dividends and Distributions.  Until Wachovia common stock certificates are surrendered for exchange, any dividends or other distributions having a record date after the effective time of the merger with respect to the whole shares of Wells Fargo common stock into which shares of Wachovia common stock may have been converted will accrue but will not be paid. Wells Fargo will pay to former Wachovia shareholders any unpaid dividends or other distributions, without interest, only after they have duly surrendered their Wachovia stock certificates. For example, if the merger is completed before a December record date for a dividend declared on Wells Fargo common stock, Wachovia’s shareholders would be entitled to receive this dividend on shares of Wells Fargo common stock they receive in respect of their shares of Wachovia common stock and hold on the dividend record date, but would only receive this amount after they have surrendered their Wachovia stock certificates in accordance with the exchange instructions they will receive.


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Prior to the effective time of the merger, Wachovia and its subsidiaries may not, except with Wells Fargo’s prior written consent, declare or pay any dividend or distribution on its capital stock or repurchase any shares of its capital stock, other than:
 
  •  dividends paid by any wholly owned subsidiaries of Wachovia to Wachovia or to any of Wachovia’s wholly owned subsidiaries;
 
  •  regular quarterly dividends on Wachovia’s common stock at a rate no greater than the rate paid by Wachovia during the quarter ended September 30, 2008;
 
  •  required dividends on Wachovia’s or its subsidiaries’ preferred stock;
 
  •  required dividends on the common stock of any subsidiary that is a real estate investment trust; or
 
  •  the distribution of rights under the Wachovia shareholder rights plan in connection with transactions other than the merger.
 
Representations and Warranties
 
Generally.  The merger agreement contains representations and warranties of Wachovia and Wells Fargo relating to their respective businesses. The representations and warranties in the merger agreement do not survive the effective time of the merger.
 
The obligations of each party to complete the merger requires that each of the other party’s representations as to corporate authority and power, absence of violations of organizational documents and brokers’ fees (and Wells Fargo’s representations about its capitalization) must be true and correct in all material respects and, in the case of Wells Fargo’s obligations, the completion of the merger also requires that Wachovia’s representations as to the nonoccurrence of a bankruptcy or insolvency event must be true and correct in all respects and that specific representations regarding Wachovia’s capitalization be true and correct except to a de minimis extent.
 
Material Adverse Effects.  Certain of Wachovia’s representations and warranties are qualified to the extent inaccuracies would not result in a material adverse effect on Wachovia. However, the truth and accuracy of these representations are not conditions to Wells Fargo’s obligation to complete the merger. In addition, Wachovia has not represented or warranted that no material adverse effect will have occurred prior to the closing of the merger, and the nonoccurrence of a material adverse effect with respect to Wachovia is not a condition to Wells Fargo’s obligation to complete the merger. It is a condition to Wells Fargo’s obligation to complete the merger that Wachovia’s representation as to the nonoccurrence of a bankruptcy or insolvency event of Wachovia or any if its significant subsidiaries be true and correct in all respects.
 
Scope.  Each of Wells Fargo and Wachovia has made representations and warranties to the other regarding, among other things:
 
  •  corporate matters, including due organization and qualification;
 
  •  capitalization;
 
  •  authority relative to execution and delivery of the merger agreement and the absence of conflicts with, violations of, or breach under organizational documents, applicable law or other obligations as a result of the merger or entry into the merger agreement;
 
  •  required governmental and other regulatory filings and consents;
 
  •  the timely filing of reports with governmental entities;
 
  •  financial statements, internal controls and accountants;
 
  •  brokers’ fees payable in connection with the merger;
 
  •  compliance with applicable laws;


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  •  knowledge of ability to obtain timely regulatory approvals; and
 
  •  the accuracy of information supplied for inclusion in this document and other similar documents.
 
In addition, Wachovia has made other representations and warranties about itself to Wells Fargo as to:
 
  •  the nonoccurrence of any bankruptcy or insolvency event of Wachovia or any of its significant subsidiaries;
 
  •  the inapplicability of state takeover laws; and
 
  •  the receipt of opinions from its financial advisors.
 
The representations and warranties described above and included in the merger agreement were made by each of Wells Fargo and Wachovia to the other. These representations and warranties were made as of specific dates, may be subject to important qualifications and limitations agreed to by Wells Fargo and Wachovia in connection with negotiating the terms of the merger agreement, and may have been included in the merger agreement for the purpose of allocating risk between Wells Fargo and Wachovia rather than to establish matters as facts. The merger agreement is described in, and included as an appendix to, this document only to provide you with information regarding its terms and conditions, and not to provide any other factual information regarding Wachovia, Wells Fargo or their respective businesses. Accordingly, the representations and warranties and other provisions of the merger agreement should not be read alone, but instead should be read only in conjunction with the information provided elsewhere in this document and in the documents incorporated by reference into this document. See “Where You Can Find More Information” on page [•].
 
Covenants and Agreements
 
Each of Wachovia and Wells Fargo has undertaken covenants that place restrictions on it and its subsidiaries until the effective time of the merger. In general, each of Wells Fargo and Wachovia agreed to (1) conduct its business in the ordinary course in all material respects, (2) use commercially reasonable efforts to maintain and preserve intact its business organization and advantageous business relationships and (3) take no action that is intended to or would reasonably be expected to adversely affect or materially delay the ability of Wachovia or Wells Fargo to obtain any necessary regulatory approvals, perform its covenants or complete the merger. Wachovia also agrees that, with certain exceptions and except with Wells Fargo’s prior written consent, Wachovia will not, and will not permit any of its subsidiaries to, among other things, undertake the following extraordinary actions:
 
  •  with limited exceptions, including as provided under the share exchange agreement, either (1) issue or sell or otherwise permit to become outstanding, or dispose of or encumber or pledge, or authorize or propose the creation of, any additional shares of its stock or (2) permit any additional shares of its stock to become subject to new grants;
 
  •  make, declare, pay or set aside for payment any dividend on or in respect of, or declare or make any distribution on any shares of its stock (other than dividends from its wholly owned subsidiaries to it or another of its wholly owned subsidiaries, its regular quarterly dividend at the rate based on the preceding quarter, required preferred stock dividends, required dividends for real estate investment trust subsidiaries or the distribution of rights under Wachovia’s shareholder rights plan in connection with transactions other than the merger);
 
  •  adjust, split, combine, redeem, reclassify, purchase or otherwise acquire any shares of its stock (other than repurchases of common shares in the ordinary course of business to satisfy obligations under dividend reinvestment or employee benefit plans);
 
  •  sell, transfer, mortgage, encumber or otherwise dispose of or discontinue any of its assets, deposits, business or properties, except in the ordinary course of business and as would not be, together with other such transactions, material to Wachovia and its subsidiaries taken as a whole;
 
  •  with limited exceptions, acquire all or any portion of the assets, business, deposits or properties of any other entity except in the ordinary course of business and as would not be, together with other such


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  transactions, material to Wachovia and its subsidiaries taken as a whole and does not present a material risk that the completion of the merger will be materially delayed or that the required regulatory approvals will be more difficult to obtain;
 
  •  amend its restated articles of incorporation or bylaws or similar governing documents of any significant subsidiaries;
 
  •  implement or adopt any change in its accounting principles, practices or methods, other than as may be required by generally accepted accounting principles or applicable regulatory accounting requirements;
 
  •  except as required under applicable law or the terms of any Wachovia benefit plan, (1) increase the compensation or benefits of any current or former directors, officers, employees, consultants, independent contractors or other service providers, except for any increases in base salary of non-director and non-officer employees in the ordinary course of business consistent with past practice; (2) pay any current or former directors, officers, employees, consultants, independent contractors or other service providers any amounts not required by existing plans or agreements or increase any amounts payable to such persons; (3) become a party to, establish, amend, commence participation in, terminate or commit itself to the adoption of any stock option plan or other stock-based compensation plan, compensation, severance, pension, retirement, profit-sharing, welfare benefit, or other employee benefit plan or agreement or employment agreement with or for the benefit of any current or former directors, officers, employees, consultants, independent contractors or other service providers (or newly hired employees); (4) accelerate the vesting or lapsing of restrictions with respect to any stock-based compensation or other long-term incentive compensation under any of Wachovia’s employee benefit plans; (5) cause the funding of any rabbi trust or similar arrangement or take any action to fund or secure the payment of compensation or benefits under any Wachovia benefit plan; or (6) materially change any actuarial or other assumptions used to calculate funding obligations with respect to any Wachovia benefit plan or change the manner in which contributions to such plans are made or the basis on which such contributions are determined, except as may be required by applicable law or generally accepted accounting principles;
 
  •  take, or omit to take, any action that is reasonably likely to result in any of the conditions to the completion of the merger not being satisfied, except as may be required by applicable law, regulation or policies imposed by any governmental entity;
 
  •  incur or guarantee any indebtedness for borrowed money other than in the ordinary course of business; or
 
  •  agree to take or adopt any resolutions by the board of directors in support of any of the actions prohibited by the foregoing.
 
Wells Fargo agrees that, except with Wachovia’s prior written consent, Wells Fargo will not, among other things, undertake the following extraordinary actions:
 
  •  amend any governing documents of Wells Fargo or its significant subsidiaries in a manner that would adversely affect Wachovia or its shareholders or the transactions contemplated by the merger agreement;
 
  •  without limiting Wells Fargo’s ability to exercise its rights under the share exchange agreement and with respect to the Series M Preferred Stock, take, or omit to take, any action that is reasonably likely to result in any of the conditions to the merger failing to be satisfied, except as may be required by applicable law, regulation or policies imposed by any governmental entity; or
 
  •  agree to take or adopt any resolutions by the board of directors in support of any of the actions prohibited by the foregoing.
 
The merger agreement also contains covenants relating to the preparation of this document and the holding of the special meeting of Wachovia shareholders, access to information of the other company,


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authorization of listing of shares of Wells Fargo common stock on the New York Stock Exchange and public announcements with respect to the transactions contemplated by the merger agreement.
 
Reasonable Best Efforts of Wachovia to Obtain the Required Shareholder Vote
 
Wachovia has agreed to take all action necessary to convene a meeting of Wachovia shareholders as promptly as possible to consider and vote upon approval of the plan of merger contained in the merger agreement. The record date of the meeting will be determined with the prior approval of Wells Fargo and will be at least three business days after the closing of the transactions contemplated by the share exchange agreement (as described below). Wachovia’s board of directors will use its reasonable best efforts to obtain from Wachovia shareholders the requisite shareholder approval and adoption of the merger agreement, including by recommending that Wachovia shareholders approve the plan of merger contained in the merger agreement. However, if the Wachovia board of directors, after consultation with and based on the advice of counsel, determines in good faith that, because of a conflict of interest or other special circumstances, including the receipt of a Superior Proposal as described below, it would violate its fiduciary duties under applicable law by continuing to recommend the plan of merger contained in the merger agreement, then it may submit the plan of merger contained in the merger agreement to Wachovia shareholders without recommendation, in which event Wachovia’s board of directors may communicate the basis for its lack of a recommendation to the shareholders in the proxy statement to the extent required by law. However, the Wachovia board of directors may only withdraw their recommendation after giving Wells Fargo at least five business days to respond to any competing business combination proposal or other circumstances and then taking into account any amendment or modification to the merger agreement proposed by Wells Fargo.
 
Agreement Not to Solicit Other Offers
 
Wachovia also has agreed that it will not, and will cause its subsidiaries and their officers, directors, agents, advisors and affiliates not to:
 
  •  initiate, solicit, encourage or knowingly facilitate inquiries or proposals for any Acquisition Proposal (as defined below);
 
  •  engage in any negotiations concerning, or provide any confidential or nonpublic information or data to, or have any discussions with, any person relating to, any Acquisition Proposal; or
 
  •  waive any provision of or amend the terms of the Wachovia shareholder rights plan, in respect of an Acquisition Proposal.
 
However, Wachovia, its subsidiaries and their officers, directors, agents, advisors and affiliates may furnish nonpublic information and participate in negotiations or discussions with respect to an unsolicited Acquisition Proposal that the Wachovia board of directors concludes in good faith is reasonably likely to constitute or result in a Superior Proposal (as defined below) if (1) Wachovia has first entered into a confidentiality agreement with the party proposing the Acquisition Proposal on terms no less favorable to Wachovia than Wachovia’s confidentiality agreement with Wells Fargo, (2) Wachovia provides to Wells Fargo any nonpublic information disclosed with respect to the Acquisition Proposal and not previously provided to Wells Fargo and (3) the Wachovia board of directors concludes in good faith (and based on the advice of counsel) that failure to take such actions would more likely than not result in a violation of its fiduciary duties under applicable law.
 
Wachovia has agreed:
 
  •  to immediately cease or cause to be terminated any existing activities, discussions or negotiations with respect to any Acquisition Proposal, and to use reasonable best efforts to enforce any confidentiality or similar agreement relating to an Acquisition Proposal;
 
  •  to notify Wells Fargo promptly (within two business days) after it receives any Alternative Proposal and to provide Wells Fargo with relevant information regarding the Acquisition Proposal; and


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  •  to keep Wells Fargo apprised, on a current basis, of any related developments, discussions and negotiations with respect to such an Acquisition Proposal.
 
As used in the merger agreement, Acquisition Proposal means a tender or exchange offer, proposal for a merger, consolidation or other business combination involving Wachovia or any of its significant subsidiaries or any proposal or offer to acquire in any manner more than 15% of the voting power in, or more than 15% of the fair market value of the business, assets or deposits of, Wachovia or any of its significant subsidiaries, other than the transactions contemplated by the merger agreement.
 
As used in the merger agreement, Superior Proposal means a written tender or exchange offer, proposal for a merger, consolidation or other business combination involving Wachovia or any of its significant subsidiaries or any proposal or offer to acquire in any manner 100% of the voting power in, or 100% of the fair market value of the business, assets or deposits of, Wachovia or any of its significant subsidiaries, other than the transactions contemplated by the merger agreement if the Wachovia board of directors concludes in good faith that it is more favorable from a financial point of view to Wachovia shareholders than the merger, (1) after receiving the advice of its financial advisors, (2) after taking into account the likelihood of consummation of such transaction on its terms and (3) after taking into account all legal (with the advice of outside counsel), financial (including the financing terms of any such proposal), regulatory and other aspects of such proposal and any other relevant factors permitted under applicable law.
 
Employee Matters
 
Following completion of the merger, Wells Fargo has agreed to maintain employee benefit plans and compensation opportunities for employees of Wachovia and its subsidiaries (who are employed on the closing date of the merger) that are substantially comparable, in the aggregate, to those made available to similarly situated employees of Wells Fargo and its subsidiaries. This obligation will also be satisfied if Wells Fargo provides continued coverage to these employees under Wachovia’s and its subsidiaries’ existing plans and compensation programs. In addition, Wells Fargo has agreed, to the extent any Wachovia employee becomes eligible to participate in Wells Fargo benefit plans following the merger:
 
  •  to recognize each employee’s service with Wachovia prior to the completion of the merger for purposes of eligibility, participation, vesting and benefit accruals, in each case under the Wells Fargo plans to the same extent such service was recognized under comparable Wachovia plans prior to completion of the merger; except that such service will not be recognized (1) if it results in duplicate benefits for the same period of service and (2) for purposes of any plan under which similarly situated Wells Fargo employees do not receive credit for prior services.
 
  •  to use reasonable best efforts to waive any exclusion for pre-existing conditions or eligibility waiting periods under any Wells Fargo health, dental, vision or other welfare plans, to the extent such limitation would have been waived or satisfied under a corresponding Wachovia plan in which such employee participated immediately prior to completion of the merger, and to recognize any health, dental or vision expenses incurred in the year in which the merger closes (or, if later, the year in which such employee is first eligible to participate) for purposes of applicable deductible and annual out-of-pocket expense requirements under any health, dental or vision plan of Wells Fargo.
 
Wells Fargo has agreed to honor each employment agreement and change in control agreement to which Wachovia is a party and Wachovia’s obligations under each deferred compensation plan or arrangement to which it is a party in accordance with its terms (as may be amended or terminated with the prior written consent of Wells Fargo). Wells Fargo has the right to amend or terminate Wachovia benefit plans to the extent permitted under the terms of such plans, and has no obligation to continue the employment of any Wachovia employee for any period following the merger.
 
Indemnification and Insurance
 
The merger agreement provides that after the merger is completed, Wells Fargo will, to the fullest extent permitted under applicable law, indemnify and hold harmless, and provide advancement of expenses to (to the


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fullest extent permitted under applicable law provided the person provides an understanding to repay the expenses if the person is ultimately not entitled to indemnification), each present and former director, officer and employee of Wachovia and its subsidiaries from liabilities arising out of or pertaining to matters existing or occurring at or before the completion of the merger, including the transactions contemplated by the merger agreement and the share exchange agreement.
 
The merger agreement requires Wells Fargo to provide, for six years after the merger is completed, director’s and officer’s liability insurance for the benefit of present and former officers and directors of Wachovia or any of its subsidiaries with respect to claims against such directors and officers arising from facts or events occurring before completion of the merger, including the transactions contemplated by the merger agreement and the share exchange agreement, which insurance will contain at least the same coverage and amounts, and contain terms and conditions no less advantageous to such directors and officers as that coverage currently provided by Wachovia.
 
Conditions to the Merger
 
Wells Fargo’s and Wachovia’s respective obligations to complete the merger are subject to the fulfillment or waiver of the following conditions:
 
  •  approval of the plan of merger contained in the merger agreement by Wachovia’s shareholders;
 
  •  approval of the listing on the New York Stock Exchange of Wells Fargo capital stock to be issued in exchange for capital stock of Wachovia that is currently listed on the New York Stock Exchange, subject to official notice of issuance;
 
  •  effectiveness of the registration statement of which this document is a part with respect to the Wells Fargo capital stock to be issued in the merger under the Securities Act, and the absence of any stop order suspending such effectiveness or proceedings initiated or threatened by the SEC for that purpose;
 
  •  absence of any order, injunction or decree by any court or agency of competent jurisdiction or other law that prohibits or makes illegal completion of the transactions contemplated by the merger agreement;
 
  •  performance of the other party in all material respects of all obligations required to be performed by it under the merger agreement at or prior to the effective time of the merger;
 
  •  all regulatory approvals from the Federal Reserve, under the HSR Act and any other required regulatory approvals, the failure of which to obtain would reasonably be expected to have a material adverse effect on Wells Fargo or Wachovia, in each case required to complete the transactions contemplated by the merger agreement, including 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;
 
  •  receipt by Wells Fargo of an opinion from Wachtell, Lipton, Rosen & Katz, dated the closing date of the merger, substantially to the effect that the merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code; and
 
  •  receipt by Wachovia of an opinion from Sullivan & Cromwell LLP, dated the closing date of the merger, substantially to the effect that the merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code.
 
The obligations of each party to complete the merger require that each of the other party’s representations as to corporate authority and power, absence of violations of organizational documents and brokers’ fees (and Wells Fargo’s representations about its capitalization) must be true and correct in all material respects and, in the case of Wells Fargo’s obligations, the completion of the merger also requires that Wachovia’s representations as to the nonoccurrence of a bankruptcy or insolvency event must be true and correct in all respects and that specific representations regarding Wachovia’s capitalization be true and correct except to a de minimis extent.


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We cannot provide assurance as to when or if all of the conditions to the merger can or will be satisfied or waived by the appropriate party. As of the date of this document, we have no reason to believe that any of these conditions will not be satisfied.
 
Termination of the Merger Agreement
 
The merger agreement can be terminated at any time prior to completion of the merger by mutual consent if authorized by each of our boards of directors, or by either party in the following circumstances:
 
  •  if any of the required regulatory approvals are denied or completion of the merger has been prohibited or made illegal by a court or other governmental entity (and the denial or prohibition is final and nonappealable);
 
  •  if the merger has not been completed by October 3, 2009, unless the failure to complete the merger by that date is due to the terminating party’s failure to abide by the merger agreement;
 
  •  if there is a breach by the other party that would cause the failure of conditions to the terminating party’s obligation to close described above, unless the breach is capable of being, and is, cured within 60 days of notice of the breach; or
 
  •  if approval of the plan of merger contained in merger agreement by Wachovia’s shareholders has not been obtained at a meeting of Wachovia’s shareholders held for such purpose.
 
In addition, Wells Fargo may terminate the merger agreement:
 
  •  if Wachovia’s board of directors (1) submits the plan of merger to its shareholders without a recommendation for approval of the plan of merger contained in the merger agreement, or otherwise withdraws or materially and adversely modifies (or discloses its intention to withdraw or materially and adversely modify) its recommendation, or (2) recommends to its shareholders an Acquisition Proposal other than the merger with Wells Fargo as contemplated by the merger agreement; or
 
  •  if an order, injunction or decree issued by a governmental or self-regulatory entity that permanently enjoins or prohibits or makes illegal the issuance of shares of the Series M Preferred Stock to Wells Fargo or prevents Wells Fargo from voting such shares in favor of approving the plan of merger contained in the merger agreement at the special meeting becomes final and nonappealable.
 
Effect of Termination
 
If the merger agreement is terminated, it will become void, and there will be no liability on the part of Wells Fargo or Wachovia, except that (1) both Wells Fargo and Wachovia will remain liable for any knowing breach of the merger agreement and (2) designated provisions of the merger agreement will survive the termination, including those relating to payment of fees and expenses, the confidential treatment of information and publicity restrictions.
 
Expenses and Fees
 
In general, each of Wells Fargo and Wachovia will be responsible for all expenses incurred by it in connection with the negotiation and completion of the transactions contemplated by the merger agreement. However, the costs and expenses of printing and mailing this document, and all filing and other fees paid to the SEC in connection with the merger, will be borne equally by Wachovia and Wells Fargo and the costs of any filing under the HSR Act will be borne by Wells Fargo.
 
Amendment, Waiver and Extension of the Merger Agreement
 
Subject to applicable law, the parties may amend the merger agreement by action taken or authorized by their respective boards of directors or by written agreement. However, after any approval of the proposal to approve the plan of merger contained in the merger agreement by Wachovia’s shareholders, there may not be, without further approval of those shareholders, any amendment of the merger agreement that requires further approval of such shareholders under applicable law.


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At any time prior to completion of the merger, each of Wells Fargo and Wachovia, by action taken or authorized by their respective board of directors, to the extent legally allowed, may:
 
  •  extend the time for the performance of any of the obligations or other acts of the other party;
 
  •  waive any inaccuracies in the representations and warranties of the other party; or
 
  •  waive compliance by the other party with any of the other agreements or conditions contained in the merger agreement.
 
Share Exchange Agreement
 
On October 3, 2008, Wells Fargo and Wachovia, in connection with entering into the merger agreement, entered into a share exchange agreement, under which Wells Fargo agreed to purchase 10 newly issued shares of Wachovia Series M Preferred Stock, which vote together with Wachovia common stock as a single class and have voting rights equivalent to 39.9% of the total voting power of holders of Wachovia capital stock entitled to vote at the special meeting, in exchange for the issuance of 1,000 shares of Wells Fargo common stock to Wachovia.
 
Wells Fargo and Wachovia completed the transactions contemplated by the share exchange agreement on October 20, 2008.


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PRICE RANGE OF COMMON STOCK AND DIVIDENDS
 
Wells Fargo
 
Wells Fargo common stock is traded on the New York Stock Exchange under the symbol “WFC”. The following table shows the high and low reported intra-day sales prices per share of Wells Fargo common stock as reported by the New York Stock Exchange and the cash dividends declared per share:
 
                         
    Sales Price Per Share     Cash Dividends  
    High     Low     Per Share  
 
2006
                       
First Quarter
  $ 65.51     $ 60.26     $ 0.26  
Second Quarter
    69.71       63.80       0.54 (1)
Third Quarter(2)
    73.78       34.75       (1)
Fourth Quarter
    36.99       34.90       0.28  
2007
                       
First Quarter
  $ 36.64     $ 33.01     $ 0.28  
Second Quarter
    36.49       33.93       0.28  
Third Quarter
    37.99       32.66       0.31  
Fourth Quarter
    37.78       29.29       0.31  
2008
                       
First Quarter
  $ 34.56     $ 24.38     $ 0.31  
Second Quarter
    32.40       23.46       0.31  
Third Quarter
    44.75       20.46       0.34  
Fourth Quarter (through [•], 2008)
                 
 
 
(1) On April 25, 2006, Wells Fargo declared a cash dividend of $0.26 per share with a record date of May 5, 2006 and on June 27, 2006, Wells Fargo declared a cash dividend of $0.28 per share with a record date of August 4, 2006.
 
(2) Wells Fargo effected a two-for-one stock split in the form of a 100% stock dividend distributed on August 11, 2006.


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Wachovia
 
Wachovia common stock is traded on the New York Stock Exchange under the symbol “WB”. The following table shows the high and low reported intra-day sales prices per share of Wachovia common stock as reported by the New York Stock Exchange and the cash dividends declared per share:
 
                         
    Sales Price Per Share     Cash Dividends  
    High     Low     Per Share  
 
2006
                       
First Quarter
  $ 57.86     $ 50.85     $ 0.51  
Second Quarter
    60.04       51.27       0.51  
Third Quarter
    56.85       52.20       0.56  
Fourth Quarter
    57.67       53.09       0.56  
2007
                       
First Quarter
  $ 58.80     $ 53.39     $ 0.56  
Second Quarter
    56.90       50.84       0.56  
Third Quarter
    53.10       44.83       0.64  
Fourth Quarter
    45.02       36.69       0.64  
2008
                       
First Quarter
  $ 40.22     $ 23.77     $ 0.64  
Second Quarter
    31.20       14.70       0.375  
Third Quarter
    19.71       0.75       0.05  
Fourth Quarter (through [•] 2008)
                 
 
Past price performance is not necessarily indicative of likely future performance. Because market prices of Wells Fargo and Wachovia common stock will fluctuate, you are urged to obtain current market prices for shares of Wells Fargo and Wachovia common stock.


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Table of Contents

 
THE COMPANIES
 
Wells Fargo
 
Wells Fargo is a diversified financial services company organized under the laws of the state of Delaware and registered as a financial holding company and a bank holding company under the Bank Holding Company Act. Its businesses provide banking, insurance, investments, mortgages and consumer finance through stores, the Internet and other distribution channels across North America and elsewhere internationally. At September 30, 2008, Wells Fargo had assets of $622.4 billion, loans of $411.0 billion, deposits of $353.6 billion and stockholders’ equity of $47.0 billion. Based on assets, Wells Fargo was the seventh largest bank holding company in the United States. Wells Fargo common stock trades on the New York Stock Exchange under the symbol WFC.
 
Wells Fargo is a separate and distinct legal entity from its banking and other subsidiaries. Its principal source of funds to pay dividends on its capital stock and interest and principal on its debt is dividends from its subsidiaries. Various federal and state laws and regulations limit the amount of dividends Wells Fargo subsidiaries can pay to Wells Fargo without regulatory approval.
 
Wells Fargo expands its business in part by acquiring banking institutions and other companies that engage in activities that are financial in nature. Wells Fargo continues to explore opportunities to acquire banking and non-banking organizations as permitted for a financial holding company under the Bank Holding Company Act. It is not presently known whether, or on what terms, such discussions will result in future acquisitions. Wells Fargo policy is not to comment on such discussions or a possible acquisition until a definitive agreement with respect thereto has been signed.
 
Financial and other information about Wells Fargo is set forth in Wells Fargo’s Annual Report on Form 10-K for the year ended December 31, 2007. Information regarding the names, ages, positions and business backgrounds of the executive officers and directors of Wells Fargo, as well as additional information, including executive compensation, security ownership of certain beneficial owners and management, and certain relationships and related transactions, is set forth in or incorporated by reference into Wells Fargo’s Annual Report on Form 10-K for the year ended December 31, 2007, and Wells Fargo’s Proxy Statement for its 2008 Annual Meeting of Stockholders. See “Where You Can Find More Information” on page [•].
 
Information on the Internet website of Wells Fargo or any subsidiary of Wells Fargo is not part of this document, and you should not rely on that information in deciding how to vote on the proposal to approve the merger agreement.
 
Wells Fargo’s executive offices are located at 420 Montgomery Street, San Francisco, California 94163, and its telephone number is 1-866-878-5865.