<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. __)*
THE FOOTHILL GROUP. INC.
------------------------
(Name of Issuer)
Class A Common Stock, no par value
----------------------------------
(Title of Class of Securities)
345109 20 1
-----------
(CUSIP Number)
Stanley S. Stroup
Executive Vice President and General Counsel
Norwest Corporation
Norwest Center, Sixth and Marquette
Minneapolis, Minnesota 55479-1026
612-667-8858
(Name, Address and Telephone Number of Person Authorized to Receive Notices and
Communications)
May 15, 1995
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [_].
Check the following box if a fee is being paid with this statement [X]. (A fee
is not required only if the reporting person: (1) has a previous statement on
file reporting beneficial ownership of more than five percent of the class of
securities described in Item 1; and (2) has filed no amendment subsequent
thereto reporting beneficial ownership of five percent or less of such class.
See Rule 13d-7.)
Note: Six copies of this statement, including all exhibits, should be filed with
the Commission. See Rule 13d-1(a) for other parties to whom copies are to be
sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
<PAGE>
CUSIP NO. 381346 10 5 SCHEDULE 13D
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1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Norwest Corporation
Tax Identification No. 41-0449260
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions) (a) [_]
(b) [_]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS (See Instructions)
WC
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS
2(d) or 2(E) [_]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
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7 SOLE VOTING POWER
NUMBER OF
4,556,641
SHARES
-----------------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY
EACH -----------------------------------------------------------
9 SOLE DISPOSITIVE POWER
REPORTING
4,556,641
PERSON
-----------------------------------------------------------
WITH 10 SHARED DISPOSITIVE POWER
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
4,556,641
--------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
(See Instructions) [_]
--------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
21.8%
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14 TYPE OF REPORTING PERSON (See Instructions)
CO
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<PAGE>
SCHEDULE 13D
relating to the
Class A Common Stock, No Par Value,
of
The Foothill Group, Inc.
Item 1. Security and Issuer
-------------------
The class of equity securities to which this Statement relates is the
Class A common stock, no par value, ("Foothill Common Stock") of The Foothill
Group, Inc. ("Foothill"), a Delaware corporation. The principal executive
offices of Foothill are located at 11111 Santa Monica Boulevard, Los Angeles,
California 90025.
Item 2. Identity and Background
-----------------------
This Statement is being filed by Norwest Corporation ("Norwest"), a
Delaware corporation. The principal executive offices of Norwest, from which
its principal business is carried out, are located at Norwest Center, Sixth and
Marquette, Minneapolis, Minnesota 55479-1000.
Norwest is a bank holding company registered under the Bank Holding
Company Act of 1956, as amended. Through its commercial bank subsidiaries,
Norwest conducts a general banking and trust business in the states of Arizona,
Colorado, Illinois, Indiana, Iowa, Minnesota, Montana, Nebraska, New Mexico,
North Dakota, Ohio, South Dakota, Texas, Wisconsin, and Wyoming. Norwest also
owns subsidiaries engaged in various businesses related to banking, principally
mortgage banking, equipment leasing, agricultural finance, commercial finance,
consumer finance, securities brokerage and underwriting, insurance agency
services, computer and data processing services, investment advisory services,
and venture capital investments.
The name, business address, present principal occupation and
citizenship of each director of Norwest are set forth on Schedule I hereto and
those of each executive officer of Norwest are set forth on Schedule II hereto.
During the past five years, neither Norwest nor, to the best of
knowledge of Norwest, any of its executive officers or directors has been
convicted in any criminal proceeding (excluding traffic violations or similar
misdemeanors) or has been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and, as a result of such
proceeding, is or was subject to a judgment, decree or final order enjoining
violations of, or prohibiting or mandating activities subject to, federal or
state securities laws or finding any violation with respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration
-------------------------------------------------
As more fully described in Item 6 of this Statement, Foothill has
granted to Norwest an option pursuant to which Norwest has the right, upon the
occurrence of certain events, to purchase from Foothill up to 4,156,641 shares
of Foothill Common Stock for $23.375 per share, subject to adjustment under
certain circumstances (the "Option"). If Norwest were to exercise the Option in
full, the funds required to purchase the shares of Foothill Common Stock
issuable upon such exercise would be approximately $97 million. It is currently
anticipated that such funds would be provided from Norwest's working capital.
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<PAGE>
Item 4. Purpose of Transaction
----------------------
On May 15, 1995, Foothill and Norwest entered into an Agreement and
Plan of Reorganization (the "Reorganization Agreement") providing for the merger
(the "Merger") of a wholly owned subsidiary of Norwest with and into Foothill,
with Foothill as the surviving corporation. The purpose of the Reorganization
Agreement is for Norwest to acquire Foothill.
Concurrently with their entering into the Reorganization Agreement,
Norwest and Foothill also entered into a Stock Option Agreement (the "Option
Agreement") pursuant to which Foothill granted to Norwest the Option. The
purpose of the Option Agreement is to increase the likelihood that the Merger
will be completed as contemplated by the Reorganization Agreement.
The principal provisions of the Reorganization Agreement and the Option
Agreement are summarized in Item 6 of this Statement and copies of the
Reorganization Agreement and the Option Agreement are filed herewith as Exhibits
1 and 2, respectively.
Except as set forth above, and except that until the completion of the
Merger Norwest may from time to time purchase in the open market shares of
Foothill Common Stock. Norwest has no plans or proposals with respect to
Foothill that relate to or would result in, prior to the completion of the
Merger, any of the actions specified in clauses (a) through (j) of Item 4 of
Schedule 13D. Upon the completion of the Merger, Foothill Common Stock will
cease to be publicly traded and Norwest will cause the registration of Foothill
Common Stock under the Act to be terminated.
Item 5. Interest in Securities of the Issuer
------------------------------------
(a)-(b) As a result of the Option Agreement and other holdings of
Foothill Common Stock, Norwest may, pursuant to Rule 13d-3(d)(1)(i) under the
Exchange Act, be deemed to own beneficially 4,556,641 shares of Foothill Common
Stock, constituting approximately 21.8% of the shares of Foothill Common Stock
that would have been issued and outstanding if the Option had been exercised as
of May 24, 1995. If Norwest were to exercise the Option, it would have sole
power to vote and, subject to the terms of the Option Agreement, sole power to
direct the disposition of, the shares of Foothill Common Stock covered thereby.
To the best knowledge of Norwest, none of its directors or executive
officers beneficially owns any shares of Foothill Common Stock.
(c) In addition to the acquisition of the Option, Norwest has purchased
400,000 shares of Foothill Common Stock during the past 60 days. To the best
knowledge of Norwest, none of its directors or executive officers has effected
any transaction in shares of Foothill Common Stock during the past 60 days.
(d) Not applicable.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships With Respect
---------------------------------------------------------------------
to Securities of the Issuer
---------------------------
Upon consummation of the Merger and pursuant to the Reorganization
Agreement, each outstanding share (except for shares as to which dissenter's
rights are perfected) of Foothill Common Stock will be converted into .92 shares
of the common stock, par value $1 2/3 per share, of Norwest ("Norwest Common
Stock"), each outstanding share of preferred stock of Foothill will be converted
into 6.1333272 shares of Norwest Common Stock and each of certain shares of
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<PAGE>
Foothill Common Stock subject to certain unexercised options will be converted
into a number of shares of Norwest Common Stock determined in accordance with a
formula set forth in the Reorganization Agreement.
Consummation of the Merger is subject to certain other conditions,
including, but not limited to, (i) approval of the Reorganization Agreement by
the affirmative vote of the holders of at least a majority of the outstanding
shares of Foothill entitled to vote thereon, (ii) the receipt of all requisite
regulatory approvals without the imposition of any condition or requirement
relating to Foothill or any of its subsidiaries that, in the good faith judgment
of Norwest, is unreasonably burdensome to Norwest, (iii) the receipt of a letter
from Norwest's and Foothill's respective independent accountants to the effect
that the Merger qualifies for "pooling of interests" accounting treatment, and
(iv) the receipt by Foothill of a legal opinion to the effect that the Merger
will be treated for federal income tax purposes as a reorganization within the
meaning of Section 368 of the Internal Revenue Code of 1986, as amended. Either
Foothill or Norwest may terminate the Reorganization Agreement under certain
circumstances.
In the Reorganization Agreement, Foothill agrees that it will, through
its Board of Directors (the "Foothill Board"), except to the extent legally
advisable for the discharge of the fiduciary duties of such board, recommend
that its stockholders vote in favor of approval of the Reorganization Agreement.
Foothill also agrees that neither it nor any of its subsidiaries, nor any
director, officer, representative or agent thereof will, directly or indirectly,
solicit, authorize the solicitation of or, except to the extent legally
advisable for the discharge by the Foothill Board of its fiduciary duties, enter
into any discussions with any third party (other than Norwest) concerning any
proposal or offer to acquire in any manner an equity interest in or substantial
portion of the assets of Foothill or any of its subsidiaries, or to merge or
otherwise combine with Foothill or any of its subsidiaries.
The Option gives Norwest the right to purchase up to 4,156,641 shares
of Foothill Common Stock (the "Option Shares") at a price of $23.375 per share,
subject to adjustment under certain circumstances. Norwest may exercise the
Option at any time after the occurrence of a "Purchase Event." For purposes of
the Option Agreement, a "Purchase Event" occurs when (i) Foothill or any of its
subsidiaries, without Norwest's prior written consent, shall have entered into
an agreement to engage in an Acquisition Transaction with a party other than
Norwest or any of its subsidiaries or the Foothill Board shall have recommended
that the stockholders of Foothill approve an Acquisition Transaction with a
third party, (ii) any party other than Norwest or any of its subsidiaries shall
have commenced or shall have filed a registration statement under the Securities
Act of 1933, as amended, (the "Securities Act") with respect to, a tender offer
or exchange offer to purchase any shares of Foothill Common Stock such that,
upon consummation of such offer, such person would own or control 20% or more of
the then outstanding shares of Foothill Common Stock; (iii) after a proposal is
made by a third party to Foothill or its stockholders to engage in an
Acquisition Transaction, Foothill shall have breached any covenant or obligation
in the Reorganization Agreement and such breach would entitle Norwest to
terminate the Reorganization Agreement or the Foothill Board does not recommend
that the stockholders of Foothill approve the Reorganization Agreement or the
holders of Foothill Common Stock shall not have approved the Reorganization
Agreement at the stockholders meeting held for the purpose of voting on the
Reorganization Agreement (the "Special Meeting"), the Special Meeting shall not
have been held or shall have been canceled prior to termination of the
Reorganization Agreement or the Foothill Board shall have withdrawn or modified,
in a manner adverse to Norwest, its recommendation with respect to the
Reorganization Agreement; or (iv) the Foothill Board does not recommend in the
proxy statement prepared for the Special Meeting that the holders of Foothill
Common Stock approve and adopt the Reorganization Agreement, or shall have
withdrawn, modified or amended such recommendation in any respect materially
adverse to Norwest.
-5-
<PAGE>
"Acquisition Transaction" means (x) merger or consolidation, or any similar
transaction involving Foothill or any of its subsidiaries, (y) a purchase, lease
or other acquisition of all or substantially all of the assets of Foothill or
any of its subsidiaries or (z) a purchase or other acquisition, other than in
connection with an internal merger or consolidation, of securities representing
20% or more of the voting power of Foothill or any of its subsidiaries.
The Option Agreement will terminate at the earliest to occur of (i)
11:59 p.m. Delaware time on the day on which a Certificate of Merger relating to
the Merger is filed with the Secretary of State of the State of Delaware, (ii)
12 months after the first occurrence of a Purchase Event, (iii) termination of
the Reorganization Agreement prior to the occurrence of a Purchase Event, other
than if Norwest shall have terminated the Reorganization Agreement (a) due to
Foothill's failure to perform or observe in all material respects its covenants
and agreements in the Reorganization Agreement or (b) because the Foothill Board
shall not have recommend in the proxy statement for the Special Meeting that the
holders of Foothill Common Stock approve the Reorganization Agreement or, if
after so recommending, the Foothill Board shall have withdrawn, modified or
amended such recommnedation in any respect materially adverse to Norwest or (iv)
12 months after the termination of the Reorganization Agreement by Norwest for
either of the reasons enumerated in clause (iii) of this sentence.
Under the Bank Holding Company Act of 1956, Norwest may not acquire 5%
or more of the outstanding shares of Foothill without the prior approval of the
Board of Governors of the Federal Reserve System. Certain other regulatory
approvals may also be required before any acquisition under the Option Agreement
could be completed.
The Option may not be assigned by Norwest or by Foothill to any other
party without the express written consent of the other party to the Option
Agreement, except that Norwest may assign the Option Agreement to a wholly owned
subsidiary of Norwest. After a Purchase Event, Foothill shall, at the request
of Norwest made within three years of a Purchase Event (on behalf of itself or
any subsequent holder) prepare, file promptly (subject to certain exceptions)
and keep current a registration statement under the Securities Act covering any
shares issued or issuable pursuant to the Option and shall use its best efforts
to cause such registration statement to become effective, and to remain current
and effective for up to 180 days in order to facilitate the sale or disposition
of any shares of Foothill Common Stock issued upon total or partial exercise of
the Option (the "Option Shares"). Upon the occurrence of a Repurchase Event
prior to termination of the Option, subject to certain exceptions, at the
request of Norwest, Foothill will be obligated to repurchase the Option and any
Option Shares theretofore purchased pursuant to the Option at prices determined
in accordance with the provisions of the Option Agreement, which may include the
reimbursement by Foothill of fees and expenses incurred by Norwest in connection
with the Merger. In the event that Norwest exercises the repurchase rights
described above, Foothill will thereafter be required to pay the portion of the
repurchase price that Foothill is not then prohibited from so paying under
applicable law and regulation or as a consequence of administrative policy.
"Repurchase Event" means (i) the acquisition of beneficial ownersship (as
defined in the Act) by any person of 50% of the then outstanding shares of
Foothill Common Stock or (ii) the consummation of an Acquisition Transaction
(except that, in the case of a purchase or other acquisition of the voting power
of Foothill or any of its subsidiaries, the percentage shall be 50% or more).
In the event that prior to termination of the Option, Foothill enters
into an agreement (i) to consolidate with or merge into any party, other than
Norwest or any of its subsidiaries, and shall not be the continuing or surviving
corporation of such consolidation or merger, (ii) to permit any party, other
than Norwest or any of its subsidiaries, to merge into Foothill and Foothill
shall be the surviving corporation, but, in connection with such merger, the
then outstanding of Foothill
-6-
<PAGE>
Common Stock are changed into or exchanged for stock or other securities of any
other party or cash or any other property, or the then outstanding shares of
Foothill Common Stock will after such merger represent less than 50% of the
outstanding shares and share equivalents of the merged company; or (iii) to sell
or otherwise transfer all or substantially all of its or any material
subsidiary's assets to any party, other than Norwest or any of its subsidiaries,
then the agreement governing such transaction must make proper provision so that
the Option, upon consummation of such transaction, will be converted into, or
exchanged for, an option (a "Substitute Option"), at the election of Norwest, of
either (x) the acquiring corporation or (y) any party that controls the
acquiring corporation. The Substitute Option will be exercisable for shares of
the Substitute Option issuer's common stock in such number and at such exercise
price as determined by the Option Agreement and will otherwise have the same
terms as the Option to the extent permitted by law.
To the best of Foothill's and Norwest's knowledge, no Purchase Event
has occurred as of the date hereof.
The Option Agreement is intended to increase the likelihood that the
Merger will be consummated in accordance with the terms of the Reorganization
Agreement and may discourage persons from proposing a competing offer to acquire
Foothill, even if such offer involves a higher price per share of Foothill
Common Stock than the consideration contemplated by the Reorganization
Agreement. The existence of the Option could significantly increase the cost to
a potential acquiror of acquiring Foothill compared to its cost had Foothill not
entered into the Option Agreement. Foothill believes that the exercise of the
Option would likely prohibit any acquiror from accounting for an acquisition of,
or merger with, Foothill using the pooling-of-interests accounting method for a
period of up to two years. This could discourage or preclude an acquisition of
Foothill by other organizations.
The preceding summary of certain provisions of the Reorganization
Agreement and the Option Agreement is not intended to be complete and is
qualified in its entirety by reference to the full text of such agreements,
copies of which are filed herewith as Exhibits 1 and 2, respectively, and are
incorporated herein by reference.
Except as set forth herein, neither Norwest nor, to the best knowledge
of Norwest, any of its directors or executive officers, has any contracts,
arrangements, understandings or relationships (legal or otherwise) with any
person with respect to any securities of Foothill, including, but not limited
to, transfer or voting of any securities of Foothill, finder's fees, joint
ventures, loan or option arrangements, puts or calls, guarantees of profits,
division of profits or loss, or the giving or withholding of proxies.
Item 7. Material to be Filed as Exhibits
--------------------------------
(1) Agreement and Plan of Reorganization dated as of May 15,
1995, by and between Foothill Group, Inc. and Norwest Corporation.
(2) Stock Option Agreement, dated as of May 15, 1995, between
Norwest Corporation and Foothill Group, Inc.
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<PAGE>
SIGNATURE
---------
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
NORWEST CORPORATION
By: /s/ Laurel A. Holschuh
----------------------
Laurel A. Holschuh
Senior Vice President and Secretary
Dated: May 24, 1995
Attention: Intentional misstatements or omissions of fact constitute
Federal criminal violations (see 18 U.S.C. 1001).
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<PAGE>
SCHEDULE I
DIRECTORS OF NORWEST CORPORATION
The names, business addresses and present principal occupations or
employments of the directors of Norwest Corporation are set forth below. All
directors listed below are citizens of the United States.
David A. Christensen; 205 East Sixth Street, Sioux Falls, South Dakota
57117; President and Chief Executive Officer and Director; Raven Industries,
Inc.
Gerald J. Ford, 200 Crescent Court, Suite 1350, Dallas, Texas 75201;
Chairman of the Board, Chief Executive Officer and Director of First Nationwide
Bank, a Federal Savings Bank
Pierson M. Grieve; 370 Wabasha Street, St. Paul, Minnesota 55102;
Chairman and Director; Ecolab Inc.
Charles M. Harper; 1301 Avenue of the Americas, New York, New York
10019; Chairman and Chief Executive Officer and Director; RJR Nabisco Holdings
Corp.
William A. Hodder; 1400 West 94th Street, Minneapolis, Minnesota
55431; Chairman and Chief Executive Officer and Director; Donaldson Company,
Inc.
Lloyd P. Johnson; Norwest Center, Sixth and Marquette, Minneapolis,
Minnesota 55479; Retired Chairman of the Board and Director; Norwest
Corporation
Reatha Clark King; Number One General Mills Boulevard, Minneapolis,
Minnesota 55426; President and Executive Director; General Mills Foundation
Richard M. Kovacevich; Norwest Center, Sixth and Marquette,
Minneapolis, Minnesota 55479; President and Chief Executive Officer and
Director; Norwest Corporation
Richard S. Levitt; 3141 Dean Court, Suite 1201, Minneapolis, Minnesota
55416; Chairman of the Board and Director; Nellis Corporation, Rockville,
Maryland
Richard D. McCormick; 7800 East Orchard Road, Suite 200, Englewood,
Colorado 80111; Chairman and Chief Executive Officer and Director; U S
WEST, Inc.
Cynthia H. Milligan; 6200 North 56th Street, Lincoln, Nebraska 68504;
President and Chief Executive Officer; Cynthia H. Milligan & Associates
Ian M. Rolland, 1300 South Clinton Street, Fort Wayne, Indiana 46801;
Chairman and Chief Executive Officer and Director, Lincoln National Corporation
and Lincoln National Life Insurance Company
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<PAGE>
Stephen E. Watson; 700 On The Mall, 9th Floor, Minneapolis, Minnesota
55402; President and Director; Dayton Hudson Corporation.
Michael W. Wright; 11840 Valley View Road, Eden Prairie, Minnesota
55344; Chairman, President and Chief Executive Officer and Director;
SUPERVALU INC.
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<PAGE>
SCHEDULE II
EXECUTIVE OFFICERS OF NORWEST CORPORATION
The names and present principal occupations or employments of the
executive officers of Norwest Corporation are set forth below. Each executive
officer's business address is Norwest Corporation, Norwest Center, Sixth and
Marquette, Minneapolis, Minnesota 55479-1000. Each occupation set forth
opposite an individual's name refers to Norwest Corporation. All officers
listed below are citizens of the United States.
<TABLE>
<CAPTION>
Name Present Principal Occupation or Employment
---- ------------------------------------------
<S> <C>
Richard M. Kovacevich Chairman, President and Chief Executive Officer
Leslie S. Biller Executive Vice President (South Central Banking)
James R. Campbell Executive Vice President (Twin Cities Banking)
C. Webb Edwards Executive Vice President and Chief Technology Officer
Kenneth R. Murray Executive Vice President (Western Banking)
William H. Queenan Executive Vice President (Chief Credit Officer)
Daniel A. Saklad Executive Vice President (North Central Banking)
Stanley S. Stroup Executive Vice President and General Counsel
John T. Thornton Executive Vice President and Chief Financial Officer
Thomas E. Emerson Senior Vice President, Chief Auditor and Chief Examiner
John E. Ganoe Senior Vice President (Strategic Planning and Acquisitions)
Michael A. Graf Senior Vice President and Controller
Stephen W. Hansen Senior Vice President (Human Resources)
Laurel A. Holschuh Senior Vice President and Secretary
Charles D. White Senior Vice President and Treasurer
</TABLE>
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<PAGE>
EXHIBIT INDEX
Exhibit Form of
Number Description Filing
------ ----------- ------------
1 Agreement and Plan of Reorganization dated Electronic
as of May 15, 1995, between Transmission
Foothill Group, Inc. and
Norwest Corporation.
2 Stock Option Agreement, dated as Electronic
of May 15, 1995, between Transmission
Norwest Corporation and
Foothill Group, Inc.
<PAGE>
EXHIBIT 1
AGREEMENT
AND
PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") entered into as
of the 15th day of May, 1995, by and between FOOTHILL GROUP, INC. ("Foothill"),
a Delaware corporation, and NORWEST CORPORATION ("Norwest"), a Delaware
corporation.
WHEREAS, the parties hereto desire to effect a reorganization whereby
a wholly-owned subsidiary of Norwest will merge with and into Foothill (the
"Merger") pursuant to an agreement and plan of merger (the "Merger Agreement")
in substantially the form attached hereto as Exhibit A, which provides, among
other things, for the conversion and exchange of the shares of Series A Common
Stock of Foothill, no par value ("Foothill Common Stock"), including, subject to
the terms and conditions set forth herein, options convertible into shares of
Foothill Common Stock and Foothill Series A convertible Preferred Stock, $1.00
par value per share ("Preferred Stock") outstanding immediately prior to the
time the Merger becomes effective in accordance with the provisions of the
Merger Agreement into shares of voting Common Stock of Norwest of the par value
of $1-2/3 per share ("Norwest Common Stock"),
NOW, THEREFORE, to effect such reorganization and in consideration of
the premises and the mutual covenants and agreements contained herein, the
parties hereto do hereby represent, warrant, covenant and agree as follows:
1. Basic Plan of Reorganization
(a) Merger. Subject to the terms and conditions contained herein, a
------
wholly-owned subsidiary of Norwest (the "Merger Co.") will be merged by
statutory merger with and into Foothill pursuant to the Merger Agreement, with
Foothill as the surviving corporation and the separate existence of Merger Co.
shall thereupon cease, in which merger (i) each share of Foothill Common Stock
outstanding immediately prior to the Effective Time of the Merger (as defined
below) (other than shares as to which statutory dissenters' appraisal rights
have been exercised) shall, by virtue of the Merger and without any action on
the part of the holder thereof, be converted into and exchanged for .920 fully
paid and nonassessable shares of Norwest Common Stock, (ii) each share of the
Preferred Stock of Foothill issued and outstanding immediately prior to the
Effective Time of the Merger (other than shares of Preferred Stock held in
Foothill's treasury) shall, by virtue of the Merger and without any action on
the part of the holder thereof, be converted into and exchanged for 6.1333272
fully paid and nonassessable shares of Norwest Common Stock, (iii) the shares of
Foothill Common Stock subject to each unexercised Option (as defined in
paragraph 4(o) of the Reorganization Agreement)
<PAGE>
having an exercise price that is less than the "Fair Market Value" (as defined
below) per share of Foothill Common Stock and whose holder shall have entered
into an agreement with Foothill pursuant to paragraph 4(o) hereof (the "Option
Shares"), shall be converted into and exchanged for that number of fully paid
and nonassessable shares of Norwest Common Stock determined as follows: (A) by
dividing (1) the aggregate Fair Market Value of the Option Shares less the
aggregate exercise price thereof by (2) the Fair Market Value of one share of
Foothill Common Stock, and then (B) multiplying the number obtained as the
result of such division by .920., and (iv) all shares of Foothill Common Stock
owed by Foothill or any subsidiary thereof, or by Norwest, or Merger Co. shall
be canceled. Each share of Merger Co. common stock shall be converted into and
exchanged by virtue of the Merger into shares of the surviving corporation. For
purposes of clause (iii), the term "Fair Market Value" with respect to Foothill
Common Stock shall mean the per share price of Foothill Common Stock as reported
by the consolidated tape of the New York Stock Exchange for the trading day
immediately preceding the "Closing Date" (as that term is defined in the
Reorganization Agreement).
(b) Norwest Common Stock Adjustments. If, between the date hereof
--------------------------------
and the Effective Time of the Merger, shares of Norwest Common Stock shall be
changed into a different number of shares or a different class of shares by
reason of any reclassification, recapitalization, split-up, combination,
exchange of shares or readjustment, or if a stock dividend thereon shall be
declared with a record date within such period (a "Common Stock Adjustment"),
then the number of shares of Norwest Common Stock into which a share of Foothill
Common Stock or Preferred Stock or Option Shares shall be converted pursuant to
subparagraph (a), above, will be appropriately and proportionately adjusted so
that the number of such shares of Norwest Common Stock into which a share of
Foothill Common Stock or Preferred Stock or Option Shares shall be converted
will equal the number of shares of Norwest Common Stock which holders of shares
of Foothill Common Stock or Preferred Stock or Option Shares would have received
pursuant to such Common Stock Adjustment had the record date therefor been
immediately following the Effective Time of the Merger.
(c) Fractional Shares. No fractional shares of Norwest Common Stock
-----------------
and no certificates or scrip certificates therefor shall be issued for exchange
of certificates representing Foothill Comon Stock or Preferred Stock or Option
Shares pursuant to Section 1(a) to represent any such fractional interest, and
any holder thereof shall be paid upon such surrender an amount of cash (without
interest) in an amount equal to the product obtained by multiplying the
fractional share interest to which such holder is entitled by the average of the
closing prices of a share of Norwest Common Stock as reported by the
consolidated tape of the New York Stock Exchange for each of the five (5)
trading days ending on the day immediately preceding the meeting of shareholders
required by paragraph 4(c) of this Agreement.
(d) Mechanics of Closing Merger. Subject to the terms and conditions
---------------------------
set forth herein, the Merger Agreement shall be executed and it or Articles of
Merger or a Certificate of Merger shall be filed with the Secretary of State of
the State of Delaware
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<PAGE>
within ten (10) business days following the satisfaction or waiver of all
conditions precedent set forth in Sections 6 and 7 of this Agreement or on such
other date as may be agreed to by the parties (the "Closing Date"). Each of the
parties agrees to use its best efforts to cause the Merger to be completed as
soon as practicable after the receipt of final regulatory approval of the Merger
and the expiration of all required waiting periods. The time that the filing
referred to in the first sentence of this paragraph is made is herein referred
to as the "Time of Filing". The day on which such filing is made and accepted is
herein referred to as the "Effective Date of the Merger". The "Effective Time of
the Merger" shall be 11:59 p.m. Delaware time on the Effective Date of the
Merger. At the Effective Time of the Merger on the Effective Date of the Merger,
the separate existence of Merger Co. shall cease and Merger Co. will be merged
with and into Foothill pursuant to the Merger Agreement.
Each of Norwest, Merger Co. and Foothill shall provide all reasonable
assistance to, and shall cooperate with each other to bring about the
consummation of the Merger as soon as possible in accordance with and subject to
the terms of this Agreement. Norwest shall cause Merger Co. to perform all
covenants and obligations required to be performed by it in connection with this
Agreement and the Merger Agreement.
The closing of the transactions contemplated by this Agreement and the
Merger Agreement (the "Closing") shall take place on the Closing Date at the
offices of Norwest, Norwest Center, Sixth and Marquette, Minneapolis, Minnesota.
2. Representations and Warranties of Foothill. Foothill represents
and warrants to Norwest as follows:
(a) Organization and Authority. Foothill is a corporation duly
--------------------------
organized, validly existing and in good standing under the laws of the State of
Delaware, is duly qualified to do business and are in good standing in all
jurisdictions where its ownership or leasing of property or the conduct of its
business requires it to be so qualified and failure to be so qualified would
have a material adverse effect on Foothill and its subsidiaries taken as a whole
and Foothill has the corporate power and authority to own its properties and
assets and to carry on its business as it is now being conducted. Foothill has
furnished Norwest true and correct copies of its articles of incorporation and
by-laws, as amended.
(b) Foothill's Subsidiaries. Schedule 2(b) sets forth a complete and
-----------------------
correct list of all of Foothill's direct and indirect subsidiaries and
partnerships of which Foothill is a general partner as of the date hereof
(individually a "Foothill Subsidiary" and collectively the "Foothill
Subsidiaries"), all shares of the outstanding capital stock or voting securities
of each of which, except as set forth on Schedule 2(b), are owned directly or
indirectly by Foothill. No equity security of any Foothill Subsidiary is or may
be required to be issued by reason of any option, warrant, scrip, preemptive
right, right to subscribe to, call or commitment of any character whatsoever
relating to, or security or right convertible into, shares of any capital stock
of such subsidiary, and there are no contracts, commitments, understandings or
arrangements by which any Foothill Subsidiary is bound to issue
-3-
<PAGE>
additional shares of its capital stock, or any option, warrant or right to
purchase or acquire any additional shares of its capital stock. Subject to the
Delaware General Corporation Law, all of such shares so owned by Foothill are
fully paid and nonassessable and are owned by it free and clear of any lien,
claim, charge, option, encumbrance or agreement with respect thereto. Each
Foothill Subsidiary is a corporation or partnership duly organized, validly
existing, duly qualified to do business and in good standing under the laws of
its jurisdiction of incorporation or organization, and has corporate power and
authority to own or lease its properties and assets and to carry on its business
as it is now being conducted. Except for Foothill Partners, L.P. ("FPI") and
Foothill Partners, II. ("FPII") (collectively, the "Partnerships") and except as
set forth on Schedule 2(b), Foothill does not own beneficially, directly or
indirectly, more than 5% of any class of equity securities or similar interests
of any corporation, bank, business trust, association or similar organization,
and is not, directly or indirectly, a partner in any partnership or party to any
joint venture. Schedule 2(b) sets forth the partnership interests of the
Partnerships owned by Foothill.
(c) Capitalization. The authorized capital stock of Foothill
--------------
consists of 22,000,000 shares of Common Stock, no par value, 1,000,000 shares of
Preferred Stock, $1.00 par value, of which as of the close of business on March
31, 1995, 16,705,594 shares of Foothill Common Stock and 100,000 shares of
Preferred Stock were issued and outstanding and no shares were held in the
treasury. The maximum number of shares of Foothill Common Stock (assuming for
this purpose that phantom shares and other share-equivalents constitute Foothill
Common Stock) that would be outstanding as of the Effective Date of the Merger
if all options, warrants, conversion rights and other rights with respect
thereto, except the option to purchase Foothill Common Stock granted pursuant to
the Stock Option Agreement dated the date hereof between Foothill and Norwest
(the "Stock Option Agreement"), were exercised is 17,843,359. All of the
outstanding shares of capital stock of Foothill have been duly and validly
authorized and issued and are fully paid and nonassessable. Except as set forth
in Schedule 2(c) and except for the option granted pursuant to the Stock Option
Agreement, there are no outstanding subscriptions, contracts, conversion
privileges, options, warrants, calls, preemptive rights or other rights
obligating Foothill or any Foothill Subsidiary to issue, sell or otherwise
dispose of, or to purchase, redeem or otherwise acquire, any shares of capital
stock of Foothill or any Foothill Subsidiary. Except as set forth on Schedule
2(c) hereof, since December 31, 1994, no shares of Foothill capital stock have
been purchased, redeemed or otherwise acquired, directly or indirectly, by
Foothill or any Foothill Subsidiary and no dividends or other distributions have
been declared, set aside, made or paid to the shareholders of Foothill.
As of the date of this Agreement, there are no cumulated and unpaid
dividends with respect to the Preferred Stock. The Conversion Price, as defined
in Paragraph F of the Certificate of Designation, Voting Powers, Preferences,
Rights, Qualifications, Limitations and Restrictions of the Preferred Stock (the
"Foothill Certificate of Designation"), has not been adjusted and the Conversion
Price for each share of Preferred
-4-
<PAGE>
Stock, as defined in Paragraph F of the Certificate of Designation is 6.66666
per share of Preferred Stock.
(d) Authorization. Foothill has the corporate power and authority to
-------------
enter into this Agreement and the Merger Agreement and, subject to any required
approvals of its shareholders, to carry out its obligations hereunder and
thereunder. The execution, delivery and performance of this Agreement and the
Merger Agreement by Foothill and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by the Board of
Directors of Foothill. Subject to such approvals of shareholders and of
government agencies and other governing boards having regulatory authority over
Foothill as may be required by statute or regulation, this Agreement and the
Merger Agreement are valid and binding obligations of Foothill enforceable
against Foothill in accordance with their respective terms, except as
enforceability may be limited by bankruptcy, insolvency or other similar laws
affecting the enforcement of creditors' rights and the availability of equitable
remedies, including specific performance.
Except as set forth on Schedule 2(d), neither the execution, delivery
and performance by Foothill of this Agreement or the Merger Agreement, nor the
consummation of the transactions contemplated hereby and thereby, nor compliance
by Foothill with any of the provisions hereof or thereof, will (i) violate,
conflict with, or result in a breach of any provision of, or constitute a
default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination of, or accelerate the
performance required by, or result in a right of termination or acceleration of,
or result in the creation of, any lien, security interest, charge or encumbrance
upon any of the properties or assets of Foothill or any Foothill Subsidiary
under any of the terms, conditions or provisions of (x) its certificate of
incorporation or by-laws or (y) any material note, bond, mortgage, indenture,
deed of trust, license, lease, agreement or other instrument or obligation to
which Foothill or any Foothill Subsidiary is a party or by which it may be
bound, or to which Foothill or any Foothill Subsidiary or any of the properties
or assets of Foothill or any Foothill Subsidiary may be subject, or (ii) subject
to compliance with the statutes and regulations referred to in the next
paragraph, to the best knowledge of Foothill, violate any judgment, ruling,
order, writ, injunction, decree, statute, rule or regulation applicable to
Foothill or any Foothill Subsidiary or any of their respective properties or
assets.
Other than in connection or in compliance with the provisions of the
Securities Act of 1933 and the rules and regulations thereunder (the "Securities
Act"), the Securities Exchange Act of 1934 and the rules and regulations
thereunder (the "Exchange Act"), the securities or blue sky laws of the various
states, the Investment Advisors Act of 1940, as amended (the "IAA") or filings,
consents, reviews, authorizations, approvals or exemptions required to be made
with the New York and Chicago Stock Exchange or under the Bank Holding Company
Act of 1956, as amended (the "BHC Act") or the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 (the "HSR Act"), and filings required to effect the
Merger under Delaware law, no notice to, filing with, exemption or review by, or
authorization, consent or approval of, any public body or authority is necessary
for
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<PAGE>
the consummation by Foothill of the transactions contemplated by this Agreement
and the Merger Agreement.
(e) Foothill Financial Statements. The consolidated balance sheets
-----------------------------
of Foothill and its consolidated subsidiaries as of December 31, 1994 and 1993
and related consolidated statements of income, shareholders' equity and cash
flows for the three years ended December 31, 1994, together with the notes
thereto, certified by Ernst & Young and included in Foothill's Annual Report on
Form 10-K for the fiscal year ended December 31, 1994 (the "Foothill 10-K") as
filed with the Securities and Exchange Commission (the "SEC"), and the unaudited
consolidated statements of financial condition of Foothill and its consolidated
subsidiaries as of March 31, 1995 and the related unaudited consolidated
statements of income, shareholders' equity and cash flows for the three months
then ended included in Foothill's Quarterly Report on Form 10-Q for the fiscal
quarter ended March 31, 1995 as filed with the SEC (collectively, the "Foothill
Financial Statements"), have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis (except as may be indicated
therein or in the notes thereto) and present fairly (subject, in the case of
financial statements for interim periods, to normal recurring adjustments) the
consolidated financial position of Foothill and its consolidated subsidiaries as
of the dates thereof and the consolidated results of operations and cash flows
of Foothill and its consolidated subsidiaries for the periods then ended.
(f) Reports. Since December 31, 1990, Foothill and each Foothill
-------
Subsidiary has filed all reports, registrations and statements, together with
any required amendments thereto, that it was required to file with (i) the SEC,
including, but not limited to, Forms 10-K, Forms 10-Q and proxy statements and
other filings required under the IAA, and (ii) any applicable state securities
authorities. All such reports and statements filed with any such regulatory
body or authority are collectively referred to herein as the "Foothill Reports".
As of their respective dates, the Foothill Reports complied in all material
respects with all the rules and regulations promulgated by the SEC applicable to
such Foothills Reports and applicable state securities authorities, as the case
may be, and did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. Copies of all the Foothill Reports have been made
available to Norwest by Foothill.
(g) Properties and Leases. Except as may be reflected in the
---------------------
Foothill Financial Statements and except for any lien for current taxes not yet
delinquent, Foothill and each Foothill Subsidiary have good title free and clear
of any material liens, claims, charges, options, encumbrances or similar
restrictions to all the real and personal property reflected in Foothill's
consolidated balance sheet as of December 31, 1994 included in Foothill's Annual
Report on Form 10-K for the period then ended, and all real and personal
property acquired since such date, except such real and personal property as has
been disposed of in the ordinary course of business. All leases of real
property and all other leases material to Foothill or any Foothill Subsidiary
pursuant to which Foothill or such Foothill Subsidiary, as lessee, leases real
or personal property, which leases are described on Schedule 2(g),
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<PAGE>
are valid and effective in accordance with their respective terms, and there is
not, under any such lease, any material existing default by Foothill or such
Foothill Subsidiary or any event which, with notice or lapse of time or both,
would constitute such a material default.
(h) Taxes. Each of Foothill and the Foothill Subsidiaries has filed
-----
all federal, state, county, local and foreign tax returns, including information
returns, required to be filed by it, and paid or has set up an adequate reserve
for the payment of all taxes owed by it required to be paid in respect of the
periods covered by such returns, including those with respect to income,
withholding, social security, unemployment, workers compensation, franchise, ad
valorem, premium, excise and sales taxes, and no taxes shown on such returns to
be owed by it or assessments received by it are delinquent. The federal income
tax returns of Foothill and the Foothill Subsidiaries for the fiscal year ended
December 31, 1990, and for all fiscal years prior thereto, are for the purposes
of routine audit by the Internal Revenue Service closed because of the statute
of limitations, and no claims for additional taxes for such fiscal years are
pending. Except only as set forth on Schedule 2(h), (i) neither Foothill nor
any Foothill Subsidiary is a party to any pending action or proceeding, nor is
any such action or proceeding threatened by any governmental authority, for the
assessment or collection of taxes, interest, penalties, assessments or
deficiencies and (ii) no issue has been raised by any federal, state, local or
foreign taxing authority in connection with an audit or examination of the tax
returns, business or properties of Foothill or any Foothill Subsidiary which has
not been settled, resolved and fully satisfied. Each of Foothill and the
Foothill Subsidiaries has paid all taxes owed or which it is required to
withhold from amounts owing to employees, creditors or other third parties. The
consolidated balance sheet as of March 31, 1995, referred to in paragraph 2(e)
hereof, includes, in accordance with generally accepted accounting principles,
adequate provision for all accrued but unpaid federal, state, county, local and
foreign taxes, interest, penalties, assessments or deficiencies of Foothill and
the Foothill Subsidiaries with respect to all periods through the date thereof.
(i) Absence of Certain Changes. Except as contemplated in this
--------------------------
Agreement, the Merger Agreement, and the Stock Option Agreement, since December
31, 1994 there has been no change in the business, financial condition or
results of operations of Foothill or any Foothill Subsidiary, which has had, or
may reasonably be expected to have, a material adverse effect on the business,
financial condition or results of operations of Foothill and the Foothill
Subsidiaries taken as a whole.
(j) Commitments and Contracts. Except as disclosed in Foothill
-------------------------
Reports or as set forth on Schedule 2(j), and except for commitments and
contracts authorized or required to be entered into between the date hereof and
the closing date neither Foothill nor any Foothill Subsidiary is a party or
subject to any of the following (whether written or oral, express or implied):
(i) any employment contract or understanding (including any
understandings or obligations with respect to severance or termination
pay liabilities or fringe benefits) with any present or former
officer, director, employee
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<PAGE>
or consultant (other than those which are terminable at will by
Foothill or such Foothill Subsidiary);
(ii) any plan, contract or understanding providing for any
bonus, pension, option, deferred compensation, retirement payment,
profit sharing or similar arrangement with respect to any present or
former officer, director, employee or consultant;
(iii) any labor contract or agreement with any labor union;
(iv) any contract not made in the ordinary course of
business containing covenants which limit the ability of Foothill or
any Foothill Subsidiary to compete in any line of business or with any
person or which involve any restriction of the geographical area in
which, or method by which, Foothill or any Foothill Subsidiary may
carry on its business (other than as may be required by law or
applicable regulatory authorities);
(v) any other contract or agreement which is a "material
contract" within the meaning of Item 601(b)(10) of Regulation S-K; or
(vi) any lease with annual rental payments aggregating
$150,000 or more.
(k) Litigation and Other Proceedings. Foothill has furnished
--------------------------------
Norwest copies of (i) all attorney responses to the request of the independent
auditors for Foothill with respect to loss contingencies as of December 31, 1994
in connection with the Foothill financial statements included in the Foothill
10-K, and (ii) a written list of legal and regulatory proceedings filed against
Foothill or any Foothill Subsidiary since said date. Neither Foothill nor any
Foothill Subsidiary is a party to any pending or, to the best knowledge of any
senior officer of Foothill, after diligent inquiry, threatened, claim, action,
suit, investigation or proceeding, or is subject to any order, judgment or
decree, except for matters which, in the aggregate, will not have, or cannot
reasonably be expected to have, a material adverse effect on the business,
financial condition or results of operations of Foothill and the Foothill
Subsidiaries taken as a whole.
(l) Insurance. Foothill and each Foothill Subsidiary is presently
---------
insured, and during each of the past five calendar years (or during such lesser
period of time as Foothill has owned such Foothill Subsidiary) has been insured,
for reasonable amounts against such risks as companies engaged in a similar
business would, in accordance with good business practice, customarily be
insured and has maintained all insurance required by applicable law and
regulation.
(m) Compliance with Laws. Foothill and each Foothill Subsidiary have
--------------------
complied with all applicable federal, state or local laws, statutes and
ordinances, and any applicable rule, regulation or order thereunder, except for
possible violations which individually or in the aggregate do not and would not
have a material adverse effect on Foothill and the
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<PAGE>
Foothill Subsidiaries taken as a whole. Foothill and each Foothill Subsidiary
has all permits, licenses, authorizations, orders and approvals of, and has made
all filings, applications and registrations with, federal, state, local or
foreign governmental or regulatory bodies that are required in order to permit
it to own or lease its properties and assets and to carry on its business as
presently conducted and that are material to the business of Foothill and the
Foothill Subsidiaries taken as a whole; all such permits, licenses, certificates
of authority, orders and approvals are in full force and effect and, to the best
knowledge of Foothill, no suspension or cancellation of any of them is
threatened; and all such filings, applications and registrations are current.
The conduct by Foothill and each Foothill Subsidiary of its business and the
condition and use of its properties does not violate or infringe, in any respect
material to the business of Foothill and the Foothill Subsidiaries taken as a
whole, any applicable domestic (federal, state or local) or foreign law,
statute, ordinance, license or regulation, including but not limited to state
usury laws. To the best of Foothill's knowledge, neither Foothill nor any
Foothill Subsidiary is in default under any order, license, regulation or demand
of any federal, state, municipal or other governmental agency or with respect to
any order, writ, injunction or decree of any court. Except for statutory or
regulatory restrictions of general application and except as set forth on
Schedule 2(m), no federal, state, municipal or other governmental authority has
placed any restriction on the business or properties of Foothill or any Foothill
Subsidiary which reasonably could be expected to have a material adverse effect
on the business or properties of Foothill and the Foothill Subsidiaries taken as
a whole. Neither Foothill nor any Foothill Subsidiary is subject to any cease
and desist order, written agreement or memorandum of understanding with, or a
party to any commitment letter or similar undertaking to, or is subject to any
order or directive by, or is a recipient of any extraordinary supervisory letter
from, or has adopted any continuing board resolutions at the request of, federal
or state governmental authorities charged with the supervision or regulation of
thrifts or savings and loan or thrift holding companies or engaged in the
insurance of bank deposits with respect to Pacific Crest Capital, Inc. or
Pacific Crest Investment and Loan (formerly known as Foothill Thrift and Loan).
(n) Labor. No work stoppage involving Foothill or any Foothill
-----
Subsidiary is pending or, to the best knowledge of any senior officer of
Foothill, after diligent inquiry, threatened. Neither Foothill nor any Foothill
Subsidiary is involved in, or threatened with or affected by, any labor dispute,
arbitration, lawsuit or administrative proceeding which could materially and
adversely affect the business of Foothill and the Foothill Subsidiaries taken as
a whole. Employees of Foothill and the Foothill Subsidiaries are not represented
by any labor union nor are any collective bargaining agreements otherwise in
effect with respect to such employees.
(o) Material Interests of Certain Persons. Except as set forth in
-------------------------------------
the Foothill Reports, to the best knowledge of Foothill, no officer or director
of Foothill or any Foothill Subsidiary, or any "associate" (as such term is
defined in Rule l4a-1 under the Exchange Act) of any such officer or director,
has any interest in any material contract or property (real or personal),
tangible or intangible, used in or pertaining to the business of Foothill or any
Foothill Subsidiary.
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<PAGE>
(p) Foothill Benefit Plans.
----------------------
(i) The only "employee benefit plans" within the meaning of
Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), for which Foothill or any Foothill Subsidiary
acts as the plan sponsor as defined in ERISA Section 3(16)(B), and
with respect to which any liability under ERISA or otherwise exists or
may be incurred by Foothill or any Foothill Subsidiary are those set
forth on Schedule 2(p) (the "Plans"). No Plan is a "multi-employer
plan" within the meaning of Section 3(37) of ERISA.
(ii) Each Plan is and has been in all material respects
operated and administered in accordance with its provisions and
applicable law. Except as set forth on Schedule 2(p), Foothill or the
Foothill subsidiaries have received favorable determination letters
from the Internal Revenue Service under the provisions of the Tax
Equity and Fiscal Responsibility Act ("TEFRA"), the Deficit Reduction
Act ("DEFRA") and the Retirement Equity Act ("REA") for each of the
Plans to which the qualification requirements of Section 401(a) of the
Internal Revenue Code of 1986, as amended (the "Code"), apply.
Foothill does not know of the existence of a fact which is likely to
have an adverse effect on the qualified status of any plan within the
meaning of Section 401(a) of the Code or that its related trust is not
exempt from taxation under Section 501(a) of the Code.
(iii) The present value of all benefits vested and all
benefits accrued under each Plan which is subject to Title IV of ERISA
did not, in each case, as determined for purposes of reporting on
Schedule B to the Annual Report on Form 5500 of each such Plan as of
the end of the most recent Plan year exceed the value of the assets of
the Plan allocable to such vested or accrued benefits.
(iv) Except as disclosed in Schedule 2(p), and to the best
knowledge of Foothill, no Plan or any trust created thereunder, nor
any trustee, fiduciary or administrator thereof, has engaged in a
"prohibited transaction", as such term is defined in Section 4975 of
the Code or Section 406 of ERISA or violated any of the fiduciary
standards under Part 4 of Title I of ERISA which could subject, to the
best knowledge of Foothill, such Plan or trust, or any trustee,
fiduciary or administrator thereof, or any party dealing with any such
Plan or trust, to the tax or penalty on prohibited transactions
imposed by said Section 4975 or would result in material liability to
Foothill and the Foothill Subsidiaries taken as a whole.
(v) No Plan which is subject to Title IV of ERISA or any
trust created thereunder has been terminated, nor have there been any
"reportable events" as that term is defined in Section 4043 of ERISA,
with respect to any Plan, other than those events which may result
from the transactions contemplated by this Agreement and the Merger
Agreement.
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<PAGE>
(vi) No Plan or any trust created thereunder has incurred
any "accumulated funding deficiency", as such term is defined in
Section 412 of the Code (whether or not waived), since the effective
date of ERISA.
(vii) Except as disclosed in Schedule 2(p), neither the
execution and delivery of this Agreement and the Merger Agreement nor
the consummation of the transactions contemplated hereby and thereby
will (i) result in any material payment (including, without
limitation, severance, unemployment compensation, golden parachute or
otherwise) becoming due to any director or employee or former employee
of Foothill or any Foothill Subsidiary under any Plan or otherwise,
(ii) materially increase any benefits otherwise payable under any Plan
or (iii) result in the acceleration of the time of payment or vesting
of any such benefits to any material extent.
(q) Proxy Statement, etc. None of the information regarding
--------------------
Foothill and the Foothill Subsidiaries supplied or to be supplied by Foothill to
Norwest for inclusion in (i) a Registration Statement on Form S-4 to be filed
with the SEC by Norwest for the purpose of registering the shares of Norwest
Common Stock to be exchanged for shares of Foothill Common Stock pursuant to the
provisions of the Merger Agreement (the "Registration Statement"), (ii) the
proxy statement to be mailed to Foothill's shareholders in connection with the
meeting to be called to consider the Merger (the "Proxy Statement") and (iii)
any other documents to be filed with the SEC or any regulatory authority in
connection with the transactions contemplated hereby or by the Merger Agreement
will, at the respective times such documents are filed with the SEC or any
regulatory authority and, in the case of the Registration Statement, when it
becomes effective and, with respect to the Proxy Statement, when mailed, be
false or misleading with respect to any material fact, or omit to state any
material fact necessary in order to make the statements therein not misleading
or, in the case of the Proxy Statement or any amendment thereof or supplement
thereto, at the time of the meeting of shareholders referred to in paragraph
4(c), be false or misleading with respect to any material fact, or omit to state
any material fact necessary to correct any statement in any earlier
communication with respect to the solicitation of any proxy for such meeting.
All documents which Foothill and the Foothill Subsidiaries are responsible for
filing with the SEC and any other regulatory authority in connection with the
Merger will comply as to form in all material respects with the provisions of
applicable law.
(r) Registration Obligations. Except as set forth on Schedule 2(r),
------------------------
neither Foothill nor any Foothill Subsidiary is under any obligation, contingent
or otherwise, which will survive the Merger by reason of any agreement to
register any of its securities under the Securities Act.
(s) Brokers and Finders. Except as set forth on Schedule 2(s),
-------------------
neither Foothill nor any Foothill Subsidiary nor any of their respective
officers, directors or employees has employed any broker or finder or incurred
any liability for any financial advisory fees, brokerage fees, commissions or
finder's fees, and no broker or finder has acted directly or
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<PAGE>
indirectly for Foothill or any Foothill Subsidiary in connection with this
Agreement and the Merger Agreement or the transactions contemplated hereby and
thereby.
(t) Fiduciary Activities. Foothill and each Foothill Subsidiary has
--------------------
properly administered in all respects material and which could reasonably be
expected to be material to the financial condition of Foothill and the Foothill
Subsidiaries taken as a whole all accounts for which it acts as a fiduciary,
including but not limited to accounts for which it serves as a trustee, agent,
custodian, personal representative, guardian, conservator or investment advisor,
in accordance with the terms of the governing documents and applicable state and
federal law and regulation and common law. Neither Foothill, any Foothill
Subsidiary, nor, to the knowledge of the senior officers of Foothill, after
diligent inquiry, any director, officer or employee of Foothill or any Foothill
Subsidiary has committed any breach of trust with respect to any such fiduciary
account which is material to or could reasonably be expected to be material to
the financial condition of Foothill and the Foothill Subsidiaries taken as a
whole, and the accountings for each such fiduciary account are true and correct
in all material respects and accurately reflect the assets of such fiduciary
account.
(u) No Defaults. Neither Foothill nor any Foothill Subsidiary is
-----------
in default, nor has any event occurred which, with the passage of time or the
giving of notice, or both, would constitute a default, under any material
agreement, indenture, loan agreement or other instrument to which it is a party
or by which it or any of its assets is bound or to which any of its assets is
subject, the result of which has had or could reasonably be expected to have a
material adverse effect upon Foothill and the Foothill Subsidiaries, taken as a
whole. To the best of Foothill's knowledge, all parties with whom Foothill or
any Foothill Subsidiary has material leases, agreements or contracts or who owe
to Foothill or any Foothill Subsidiary material obligations other than with
respect to those arising in the ordinary course of the lending business of the
Foothill Subsidiaries are in compliance therewith in all material respects.
(v) Environmental Liability. There is no legal, administrative, or
-----------------------
other proceeding, or action of any nature seeking to impose, or that could
result in the imposition of, on Foothill or any Foothill Subsidiary, any
liability relating to the release of hazardous substances as defined under any
local, state or federal environmental statute, regulation or ordinance
including, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, pending or to the best of
Foothill's knowledge, threatened against Foothill or any Foothill Subsidiary the
result of which has had or could reasonably be expected to have a material
adverse effect upon Foothill and Foothill's Subsidiaries taken as a whole; to
the best of Foothill's knowledge there is no reasonable basis for any such
proceeding, claim or action; and to the best knowledge of any senior officer of
Foothill, after diligent inquiry, neither Foothill nor any Foothill Subsidiary
is subject to any agreement, order, judgment, or decree by or with any court,
governmental authority or third party imposing any such environmental liability.
Foothill has provided Norwest with copies of all environmental assessments,
reports,
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studies and other related information in its possession with respect to each
owned facility and each non-residential OREO property.
(w) Antitakeover Provisions Not Applicable. The provisions of
--------------------------------------
Section 203 of the Delaware General Corporation Law as they relate to Foothill
do not and will not apply to the Stock Option Agreement, this Agreement, the
Merger or the transactions contemplated hereby or thereby.
(x) Registered Investment Advisor. Foothill is a registered
-----------------------------
investment advisor under the IAA.
(y) Registered Investment Company. Neither Foothill, nor either of
-----------------------------
the Partnerships, is an "investment company" within the meaning of Section 3(a)
of the Investment Company Act of 1940, as amended (the "1940 Act"), by virtue of
one or more exclusions therefrom provided for in the 1940 Act, and specifically
with respect to each of the Partnerships, by virtue of the exclusion from such
definition provided for under Section 3(c)(1) of the 1940 Act for an issuer
whose outstanding securities are "beneficially owned" (determined pursuant to
Section 3(c)(1) of the 1940 Act) by not more than 100 persons and who does not
presently propose to make a public offering of its securities; and to the extent
Foothill or either of the Partnerships may be deemed to be an investment company
under the 1940 Act, they are each exempt from registration under the 1940 Act
pursuant to one or more exemptions from such registration provided for under the
1940 Act.
3. Representations and Warranties of Norwest. Norwest represents and
warrants to Foothill as follows:
(a) Organization and Authority. Norwest is a corporation duly
--------------------------
organized, validly existing and in good standing under the laws of the State of
Delaware, is duly qualified to do business and is in good standing in all
jurisdictions where its ownership or leasing of property or the conduct of its
business requires it to be so qualified and failure to be so qualified would
have a material adverse effect on Norwest and its subsidiaries taken as a whole
and has corporate power and authority to own its properties and assets and to
carry on its business as it is now being conducted. Norwest has furnished to
Foothill true copies of its Certificate of Incorporation and By-laws. Norwest is
registered as a bank holding company with the Board of Governors of the Federal
Reserve System (the "Federal Reserve Board") under the BHC Act.
(b) Norwest Subsidiaries. Schedule 3(b) sets forth a complete and
--------------------
correct list as of December 31, 1994, of Norwest's Significant Subsidiaries (as
defined in Regulation S-X promulgated by the SEC) (individually a "Norwest
Subsidiary" and collectively the "Norwest Subsidiaries"), all shares of the
outstanding capital stock of each of which, except as set forth in Schedule
3(b), are owned directly or indirectly by Norwest. No equity security of any
Norwest Subsidiary is or may be required to be issued to any person or entity
other than Norwest by reason of any option, warrant, scrip, right to subscribe
to,
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<PAGE>
call or commitment of any character whatsoever relating to, or security or right
convertible into, shares of any capital stock of such subsidiary, and there are
no contracts, commitments, understandings or arrangements by which any Norwest
Subsidiary is bound to issue additional shares of its capital stock, or options,
warrants or rights to purchase or acquire any additional shares of its capital
stock. Subject to 12 U.S.C. (S) 55 (1982), all of such shares so owned by
Norwest are fully paid and nonassessable and are owned by it free and clear of
any lien, claim, charge, option, encumbrance or agreement with respect thereto.
Each Norwest Subsidiary is a corporation or national banking association duly
organized, validly existing, duly qualified to do business and in good standing
under the laws of its jurisdiction of incorporation, and has corporate power and
authority to own or lease its properties and assets and to carry on its business
as it is now being conducted.
(c) Norwest Capitalization. The authorized capital stock of
----------------------
Norwest consists of (i) 5,000,000 shares of Preferred Stock, without par value,
of which as of the close of business on December 31, 1994, 1,127,125 shares of
10.24% Cumulative Preferred Stock at $100 stated value, 980,000 shares of
Cumulative Tracking Preferred Stock, and 1,143,675 shares of Cumulative
Convertible Preferred Stock, Series B, at $200 stated value and 14,265 shares of
ESOP Cumulative Convertible Preferred Stock, at $1,000 stated value were
outstanding, (ii) 500,000,000 shares of Common Stock, $1-2/3 par value, of which
as of the close of business on December 31, 1994, 309,144,857 shares were
outstanding and 13,939,617 shares were held in the treasury, and (iii) 4,000,000
shares of Preference Stock, no par value, of which as of the close of business
on April 30, 1995, no shares were outstanding.
(d) Authorization. Norwest has the corporate power and authority
-------------
to enter into this Agreement and to carry out its obligations hereunder. The
execution, delivery and performance of this Agreement by Norwest and the
consummation of the transactions contemplated hereby have been duly authorized
by the Board of Directors of Norwest. No approval or consent by the stockholders
of Norwest is necessary for the execution and delivery of this Agreement and the
Merger Agreement and the consummation of the transactions contemplated hereby
and thereby. The shares of Norwest Common Stock to be issued in the Merger when
issued as contemplated by this Agreement, will be legally and validly issued,
fully paid, and nonassessable. Subject to such approvals of government agencies
and other governing boards having regulatory authority over Norwest as may be
required by statute or regulation, this Agreement is a valid and binding
obligation of Norwest enforceable against Norwest in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency or other
similar laws affecting the enforcement of creditors' rights and the availability
of equitable remedies, including specific performance.
Neither the execution, delivery and performance by Norwest of this
Agreement or the Merger Agreement, nor the consummation of the transactions
contemplated hereby and thereby, nor compliance by Norwest with any of the
provisions hereof or thereof, will (i) violate, conflict with, or result in a
breach of any provision of, or constitute a default (or an event which, with
notice or lapse of time or both, would constitute a default) under,
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<PAGE>
or result in the termination of, or accelerate the performance required by, or
result in a right of termination or acceleration of, or result in the creation
of, any lien, security interest, charge or encumbrance upon any of the
properties or assets of Norwest or any Norwest Subsidiary under any of the
terms, conditions or provisions of (x) its certificate of incorporation or by-
laws or (y) any material note, bond, mortgage, indenture, deed of trust,
license, lease, agreement or other instrument or obligation to which Norwest or
any Norwest Subsidiary is a party or by which it may be bound, or to which
Norwest or any Norwest Subsidiary or any of the properties or assets of Norwest
or any Norwest Subsidiary may be subject, or (ii) subject to compliance with the
statutes and regulations referred to in the next paragraph, to the best
knowledge of Norwest, violate any judgment, ruling, order, writ, injunction,
decree, statute, rule or regulation applicable to Norwest or any Norwest
Subsidiary or any of their respective properties or assets.
Other than in connection with or in compliance with the provisions of
the Securities Act, the Exchange Act, the securities or blue sky laws of the
various states, the IAA, or filings, consents, reviews, authorizations,
approvals or exemptions required to be made with the New York and Chicago Stock
Exchanges or under the BHC Act or the HSR Act, and filings required to effect
the Merger under Delaware law, no notice to, filing with, exemption or review
by, or authorization, consent or approval of, any public body or authority is
necessary for the consummation by Norwest of the transactions contemplated by
this Agreement and the Merger Agreement.
(e) Norwest Financial Statements. The consolidated balance sheets
----------------------------
of Norwest and Norwest's subsidiaries as of December 31, 1994 and 1993 and
related consolidated statements of income, stockholders' equity and cash flows
for the three years ended December 31, 1994, together with the notes thereto,
certified by KPMG Peat Marwick, L.L.P. and included in Norwest's Annual Report
on Form 10-K for the fiscal year ended December 31, 1994 (the "Norwest 10-K") as
filed with the SEC, and the unaudited consolidated balance sheets of Norwest and
its subsidiaries as of March 31, 1995 and the related unaudited consolidated
statements of income and cash flows for the three months then ended included in
Norwest's Quarterly Report on Form 10-Q for the fiscal quarter ended March 31,
1995, as filed with the SEC (collectively, the "Norwest Financial Statements"),
have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis and present fairly (subject, in the case of
financial statements for interim periods, to normal recurring adjustments) the
consolidated financial position of Norwest and its subsidiaries at the dates and
the consolidated results of operations, changes in financial position and cash
flows of Norwest and its subsidiaries for the periods stated therein.
(f) Reports. Since December 31, 1990, Norwest and each Norwest
-------
Subsidiary has filed all reports, registrations and statements, together with
any required amendments thereto, that it was required to file with (i) the SEC,
including, but not limited to, Forms 10-K, Forms 10-Q and proxy statements, (ii)
the Federal Reserve Board, (iii) the Federal Deposit Insurance Corporation (the
"FDIC"), (iv) the United States Comptroller of the Currency (the "Comptroller")
and (v) any applicable state securities or banking authorities.
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<PAGE>
All such reports and statements filed with any such regulatory body or authority
are collectively referred to herein as the "Norwest Reports". As of their
respective dates, the Norwest Reports complied in all material respects with all
the rules and regulations promulgated by the SEC, the Federal Reserve Board, the
FDIC, the Comptroller and any applicable state securities or banking
authorities, as the case may be, and did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
(g) Properties and Leases. Except as may be reflected in the Norwest
---------------------
Financial Statements and except for any lien for current taxes not yet
delinquent, Norwest and each Norwest Subsidiary has good title free and clear of
any material liens, claims, charges, options, encumbrances or similar
restrictions to all the real and personal property reflected in Norwest's
consolidated balance sheet as of December 31, 1994 included in Norwest's Annual
Report on Form 10-K for the period then ended, and all real and personal
property acquired since such date, except such real and personal property has
been disposed of in the ordinary course of business. All leases of real
property and all other leases material to Norwest or any Norwest Subsidiary
pursuant to which Norwest or such Norwest Subsidiary, as lessee, leases real or
personal property, are valid and effective in accordance with their respective
terms, and there is not, under any such lease, any material existing default by
Norwest or such Norwest Subsidiary or any event which, with notice or lapse of
time or both, would constitute such a material default. Substantially all
Norwest's and each Norwest Subsidiary's buildings and equipment in regular use
have been well maintained and are in good and serviceable condition, reasonable
wear and tear excepted.
(h) Taxes. Each of Norwest and the Norwest Subsidiaries has filed
-----
all material federal, state, county, local and foreign tax returns, including
information returns, required to be filed by it, and paid or made adequate
provision for the payment of all taxes owed by it, including those with respect
to income, withholding, social security, unemployment, workers compensation,
franchise, ad valorem, premium, excise and sales taxes, and no taxes shown on
such returns to be owed by it or assessments received by it are delinquent. The
federal income tax returns of Norwest and the Norwest Subsidiaries for the
fiscal year ended December 31, 1979, and for all fiscal years prior thereto, are
for the purposes of routine audit by the Internal Revenue Service closed because
of the statute of limitations, and no claims for additional taxes for such
fiscal years are pending. Except only as set forth on Schedule 3(h), (i)
neither Norwest nor any Norwest Subsidiary is a party to any pending action or
proceeding, nor to Norwest's knowledge is any such action or proceeding
threatened by any governmental authority, for the assessment or collection of
taxes, interest, penalties, assessments or deficiencies which could reasonably
be expected to have any material adverse effect on Norwest and its subsidiaries
taken as a whole, and (ii) no issue has been raised by any federal, state, local
or foreign taxing authority in connection with an audit or examination of the
tax returns, business or properties of Norwest or any Norwest Subsidiary which
has not been settled, resolved and fully satisfied, or adequately reserved for.
Each of Norwest and the Norwest Subsidiaries has
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<PAGE>
paid all taxes owed or which it is required to withhold from amounts owing to
employees, creditors or other third parties.
(i) Absence of Certain Changes. Since December 31, 1994, there has
--------------------------
been no change in the business, financial condition or results of operations of
Norwest or any Norwest Subsidiary which has had, or may reasonably be expected
to have, a material adverse effect on the business, financial condition or
results of operations of Norwest and its subsidiaries taken as a whole.
(j) Commitments and Contracts. Except as set forth on Schedule 3(j),
-------------------------
as of December 31, 1994 neither Norwest nor any Norwest Subsidiary is a party or
subject to any of the following (whether written or oral, express or implied):
(i) any labor contract or agreement with any labor union;
(ii) any contract not made in the ordinary course of business
containing covenants which materially limit the ability of Norwest or
any Norwest Subsidiary to compete in any line of business or with any
person or which involve any material restriction of the geographical
area in which, or method by which, Norwest or any Norwest Subsidiary
may carry on its business (other than as may be required by law or
applicable regulatory authorities);
(iii) any other contract or agreement which is a "material
contract" within the meaning of Item 601(b)(10) of Regulation S-K.
(k) Litigation and Other Proceedings. Neither Norwest nor any
--------------------------------
Norwest Subsidiary is a party to any pending or, to the best knowledge of
Norwest, threatened, claim, action, suit, investigation or proceeding, or is
subject to any order, judgment or decree, except for matters which, in the
aggregate, will not have, or cannot reasonably be expected to have, a material
adverse effect on the business, financial condition or results of operations of
Norwest and its subsidiaries taken as a whole.
(l) Insurance. Norwest and each Norwest Subsidiary is presently
---------
insured or self insured, and during each of the past five calendar years (or
during such lesser period of time as Norwest has owned such Norwest Subsidiary)
has been insured or self-insured, against such risks as companies engaged in a
similar business would, in accordance with good business practice, customarily
be insured and has maintained all insurance required by applicable law and
regulation.
(m) Compliance with Laws. Norwest and each Norwest Subsidiary has
--------------------
all permits, licenses, authorizations, orders and approvals of, and has made all
filings, applications and registrations with, federal, state, local or foreign
governmental or regulatory bodies that are required in order to permit it to own
or lease its properties or assets and to carry on its business as presently
conducted and that are material to the business of Norwest and the Norwest
Subsidiaries, taken as a whole; all such permits,
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<PAGE>
licenses, certificates of authority, orders and approvals are in full force and
effect, and to the best knowledge of Norwest, no suspension or cancellation of
any of them is threatened; and all such filings, applications and registrations
are current. The conduct by Norwest and each Norwest Subsidiary of its business
and the condition and use of its properties does not violate or infringe, in any
respect material to Norwest and the Norwest Subsidiaries taken as a whole,
business, any applicable domestic (federal, state or local) or foreign law,
statute, ordinance, license or regulation. To the best of Norwest's knowledge,
neither Norwest nor any Norwest Subsidiary is in default under any order,
license, regulation or demand of any federal, state, municipal or other
governmental agency or with respect to any order, writ, injunction or decree of
any court. Except for statutory or regulatory restrictions of general
application, no federal, state, municipal or other governmental authority has
placed any restrictions on the business or properties of Norwest or any Norwest
Subsidiary which reasonably could be expected to have a material adverse effect
on the business or properties of Norwest and its subsidiaries taken as a whole.
(n) Labor. No work stoppage involving Norwest or any Norwest
-----
Subsidiary is pending or, to the best knowledge of Norwest, threatened. Neither
Norwest nor any Norwest Subsidiary is involved in, or threatened with or
affected by, any labor dispute, arbitration, lawsuit or administrative
proceeding which could materially and adversely affect the business of Norwest
or such Norwest Subsidiary. Except as set forth on Schedule 3(j), employees of
Norwest and the Norwest Subsidiaries are not represented by any labor union nor
are any collective bargaining agreements otherwise in effect with respect to
such employees.
(o) Norwest Benefit Plans.
---------------------
(i) As of September 1, 1994, the only "employee benefit
plans" within the meaning of Section 3(3) of ERISA for which Norwest
or any Norwest Subsidiary acts as plan sponsor as defined in ERISA
Section 3(16)(B) with respect to which any liability under ERISA or
otherwise exists or may be incurred by Norwest or any Norwest
Subsidiary are those set forth on Schedule 3(o) (the "Norwest Plans").
No Norwest Plan is a "multi-employer plan" within the meaning of
Section 3(37) of ERISA.
(ii) Each Norwest Plan is and has been in all material
respects operated and administered in accordance with its provisions
and applicable law. Except as set forth on Schedule 3(o), Norwest or
the Norwest Subsidiaries have received favorable determination letters
from the Internal Revenue Service under the provisions of TEFRA, DEFRA
and REA for each of the Norwest Plans to which the qualification
requirements of Section 401(a) of the Code apply. Norwest knows of no
reason that any Norwest Plan which is subject to the qualification
provisions of Section 401(a) of the Code is not "qualified" within the
meaning of Section 401(a) of the Code and that each related trust is
not exempt from taxation under Section 501(a) of the Code, except that
any such Norwest Plan may not
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<PAGE>
have been amended to comply with TRA and other recent legislation and
regulations, although each such Norwest Plan is within the remedial
amendment period during which retroactive amendment may be made.
(iii) The present value of all benefits vested and all
benefits accrued under each Norwest Plan which is subject to Title IV
of ERISA did not, in each case, as determined for purposes of
reporting on Schedule B to the Annual Report on Form 5500 of each such
Norwest Plan as of the end of the most recent Plan year, exceed the
value of the assets of the Norwest Plans allocable to such vested or
accrued benefits.
(iv) Except as set forth on Schedule 3(o), and to the best
knowledge of Norwest, no Norwest Plan or any trust created thereunder,
nor any trustee, fiduciary or administrator thereof, has engaged in a
"prohibited transaction", as such term is defined in Section 4975 of
the Code or Section 406 of ERISA or violated fiduciary standards under
Part 4 of Title I of ERISA, which could subject, to the best knowledge
of Norwest, such Norwest Plan or trust, or any trustee, fiduciary or
administrator thereof, or any party dealing with any such Norwest Plan
or trust, to the tax or penalty on prohibited transactions imposed by
said Section 4975 or would result in material liability to Norwest and
its subsidiaries taken as a whole.
(v) Except as set forth on Schedule 3(o), no Norwest Plan
which is subject to Title IV of ERISA or any trust created thereunder
has been terminated, nor have there been any "reportable events" as
that term is defined in Section 4043 of ERISA with respect to any
Norwest Plan, other than those events which may result from the
transactions contemplated by this Agreement and the Merger Agreement.
(vi) No Norwest Plan or any trust created thereunder has
incurred any "accumulated funding deficiency", as such term is defined
in Section 412 of the Code (whether or not waived), during the last
five Norwest Plan years which would result in a material liability.
(vii) Neither the execution and delivery of this Agreement
and the Merger Agreement nor the consummation of the transactions
contemplated hereby and thereby will (i) result in any material
payment (including, without limitation, severance, unemployment
compensation, golden parachute or otherwise) becoming due to any
director or employee or former employee of Norwest under any Norwest
Plan or otherwise, (ii) materially increase any benefits otherwise
payable under any Norwest Plan or (iii) result in the acceleration of
the time of payment or vesting of any such benefits to any material
extent.
(p) Registration Statement, etc. None of the information regarding
---------------------------
Norwest and its subsidiaries supplied or to be supplied by Norwest for inclusion
in (i) the Registration
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<PAGE>
Statement, (ii) the Proxy Statement, or (iii) any other documents to be filed
with the SEC or any regulatory authority in connection with the transactions
contemplated hereby or by the Merger Agreement will, at the respective times
such documents are filed with the SEC or any regulatory authority and, in the
case of the Registration Statement, when it becomes effective and, with respect
to the Proxy Statement, when mailed, be false or misleading with respect to any
material fact, or omit to state any material fact necessary in order to make the
statements therein not misleading or, in the case of the Proxy Statement or any
amendment thereof or supplement thereto, at the time of the meeting of
shareholders referred to in paragraph 4(c), be false or misleading with respect
to any material fact, or omit to state any material fact necessary to correct
any statement in any earlier communication with respect to the solicitation of
any proxy for such meeting. All documents which Norwest and the Norwest
Subsidiaries are responsible for filing with the SEC and any other regulatory
authority in connection with the Merger will comply as to form in all material
respects with the provisions of applicable law.
(q) Brokers and Finders. Neither Norwest nor any Norwest Subsidiary
-------------------
nor any of their respective officers, directors or employees has employed any
broker or finder or incurred any liability for any financial advisory fees,
brokerage fees, commissions or finder's fees, and no broker or finder has acted
directly or indirectly for Norwest or any Norwest Subsidiary in connection with
this Agreement and the Merger Agreement or the transactions contemplated hereby
and thereby.
(r) No Defaults. Neither Norwest nor any Norwest Subsidiary is in
-----------
default, nor has any event occurred which, with the passage of time or the
giving of notice, or both, would constitute a default under any material
agreement, indenture, loan agreement or other instrument to which it is a party
or by which it or any of its assets is bound or to which any of its assets is
subject, the result of which has had or could reasonably be expected to have a
material adverse effect upon Norwest and its subsidiaries taken as a whole. To
the best of Norwest's knowledge, all parties with whom Norwest or any Norwest
Subsidiary has material leases, agreements or contracts or who owe to Norwest or
any Norwest Subsidiary material obligations other than with respect to those
arising in the ordinary course of the banking business of the Norwest
Subsidiaries are in compliance therewith in all material respects.
(s) Environmental Liability. There is no legal, administrative, or
-----------------------
other proceeding, claim, or action of any nature seeking to impose, or that
could result in the imposition, on Norwest or any Norwest Subsidiary of any
liability relating to the release of hazardous substances as defined under any
local, state or federal environmental statute, regulation or ordinance
including, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, pending or to the best of
Norwest's knowledge, threatened against Norwest or any Norwest Subsidiary, the
result of which has had or could reasonably be expected to have a material
adverse effect upon Norwest and its subsidiaries taken as a whole; to the best
of Norwest's knowledge there is no reasonable basis for any such proceeding,
claim or action; and to the best of Norwest's knowledge neither Norwest nor any
Norwest Subsidiary is subject to any agreement,
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<PAGE>
order, judgment, or decree by or with any court, governmental authority or third
party imposing any such environmental liability.
(t) Merger Co. As of the Closing Date, Merger Co. will be a
---------
corporation duly organized, validly existing, duly qualified to do business and
in good standing under the laws of its jurisdiction of incorporation, and will
have corporate power and authority to own or lease its properties and assets and
to carry on its business and enter into and perform its obligations under the
Merger Agreement, and the execution and delivery by Merger Co. of the Merger
Agreement shall have been duly authorized by the Board of Directors and
shareholders of Merger Co.
(u) Operations of Foothill. Subject to any changes authorized,
----------------------
required or contemplated by this Agreement, or as disclosed by Norwest to
Foothill, Norwest does not have any current plans following the Effective Time
to (i) materially change the operations, nature of business or location of
operations of Foothill as conducted immediately prior to the Effective Time,
(ii) cause Foothill to sell, transfer or otherwise dispose of all or
substantially all of its assets, except for dispositions made in the ordinary
course of business, (iii) liquidate Foothill, (iv) merge Foothill with or into
another corporation, including Norwest or its affiliates, (v) sell, distribute,
or otherwise dispose of the common stock of Foothill owned by Norwest, or (vi)
issue additional shares of stock, (or rights to acquire shares of stock) of
Foothill that would result in Norwest losing control of Foothill within the
meaning of Section 368(c) of the Code.
4. Covenants of Foothill. Foothill covenants and agrees with Norwest
as follows:
(a) Except as otherwise permitted or required by this Agreement, from
the date hereof until the Effective Time of the Merger, Foothill shall, and
shall cause each Foothill Subsidiary to: (i) maintain its corporate existence in
good standing; (ii) maintain the general character of its business and conduct
its business in its ordinary and usual manner; (iii) extend credit in accordance
with existing lending policies, except that Foothill and each Foothill
Subsidiary (other than the Partnerships) shall not, without the prior written
consent of Norwest, make any new loan or, except for the loans set forth on
Schedule 4(a)(iii), modify, restructure or renew any existing loan (except
pursuant to commitments made prior to the date of this Agreement) to any
borrower if the amount of the resulting loan, when aggregated with all other
loans or extensions of credit to such person, would be in excess of $20,000,000;
(iv) maintain proper business and accounting records in accordance with
generally accepted principles; (v) maintain its properties in good repair and
condition, ordinary wear and tear excepted; (vi) maintain in all material
respects presently existing insurance coverage; (vii) use its best efforts to
preserve its business organization intact, to keep the services of its present
principal employees and to preserve its good will and the good will of its
suppliers, customers and others having business relationships with it; (viii)
use its best efforts to obtain any approvals or consents required to maintain
existing material leases and other material contracts in effect following the
Merger; (ix) comply in all material respects with all laws, regulations,
ordinances, codes,
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<PAGE>
orders, licenses and permits applicable to the properties and operations of
Foothill and each Foothill Subsidiary the non-compliance with which reasonably
could be expected to have a material adverse effect on Foothill and the Foothill
Subsidiaries taken as a whole; and (x) permit Norwest and its representatives
(including KPMG Peat Marwick, L.L.P.) to examine its and its subsidiaries books,
records and properties and to interview officers, employees and agents at all
reasonable times when it is open for business. No such examination by Norwest or
its representatives either before or after the date of this Agreement shall in
any way affect, diminish or terminate any of the representations, warranties or
covenants of Foothill herein expressed.
(b) Except as otherwise contemplated or required by this Agreement,
from the date hereof until the Effective Time of the Merger, Foothill and each
Foothill Subsidiary (other than the Partnerships, except with respect to (i),
(iii), (iv) or (xiv)) will not (without the prior written consent of Norwest):
(i) amend or otherwise change its articles of incorporation or association or
by-laws or Partnership Agreements; (ii) issue or sell or authorize for issuance
or sale, or grant any options, stock appreciation rights, warrants or awards or
make other agreements with respect to the issuance or sale or conversion of, any
shares of its capital stock, phantom shares or other share-equivalents, or any
other of its securities, except that Foothill may issue shares of Foothill
Common Stock upon the exercise of the option granted under the Stock Option
Agreement or upon the exercise of outstanding stock options described in
Schedule 4(b); (iii) authorize or incur any long-term debt, except as required
in the normal course of its business and, in the case of the Partnerships, as
required or authorized by the FPI and FPII partnership agreements; (iv)
mortgage, pledge or subject to lien or other encumbrance any of its properties,
except in the ordinary course of business and, in the case of the Partnerships,
as required or authorized by the FPI and FPII partnership agreements; (v) enter
into any material agreement, contract or commitment in excess of $200,000 except
lending transactions in the ordinary course of business and in accordance with
policies and procedures in effect on the date hereof; (vi) make any equity
security investments except investments required to be made by the "Co-Investor"
provisions of the FPI and FPII partnership agreements ; (vii) amend or terminate
any Plan except as required by law; (viii) make any contributions to any Plan
except as required by the terms of such Plan in effect as of the date hereof;
(ix) except with respect to the payment prior to the closing date of cash
dividends paid on a quarterly basis in accordance with past practices (including
up to a $.08 per share dividend for Foothill's 1995 second quarter record date
and up to $.10 per share for third and fourth quarter record date dividends and
first quarter 1996 record date dividends of up to $.12 per share) and except for
quarterly cash dividends of no more than $2.70 per share of Preferred Stock,
pursuant to the Certificate of Designation, Voting Powers, Preferences, Rights,
Qualifications, Limitations and Restrictions of the Preferred Stock, declare,
set aside, make or pay any dividend or other distribution with respect to its
capital stock and except for any dividend declared by a subsidiary's Board of
Directors in accordance with applicable law and regulation; provided that the
dividends otherwise permitted to be paid hereunder may not be declared and paid
in any particular quarter if the Closing of the Merger occurs in such quarter
and former shareholders of Foothill would become shareholders of record of
Norwest for the purposes of qualifying for the quarterly
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Norwest dividend payable to shareholders of Norwest Common Stock for such
quarter; (x) redeem, purchase or otherwise acquire, directly or indirectly, any
of the capital stock of Foothill; (xi) except for increases of salaries in the
ordinary course of business consistent with past practice, and except for the
payment to participants in Foothill's Stock Purchase Plan of up to $8.00 per
share of Foothill Common Stock allocated to such participant as of the earliest
to occur of the Closing Date or September 30, 1995 upon termination of such
plan, increase in any manner the compensation or fringe benefits of, or pay any
benefit not required by any Plan or agreement as in effect as of the date of
this Agreement (including, without limitation, the granting of stock options,
stock appreciation rights, warrants, or awards to any director, officer, or
employee); (xii) enter into or modify any contract, agreement, commitment or
arrangement providing for the payment to or indemnification of any director,
officer, employee or consultant of Foothill or any Foothill Subsidiary of
compensation or benefits, except for the entering into of employment agreements
in substantially the form of Exhibit C2 with the persons listed on Exhibit C1;
(xiii) sell or otherwise dispose of any shares of the capital stock of any
Foothill Subsidiary or sell or otherwise dispose of Foothill's partnership
interest in the Partnerships; (xiv) sell or otherwise dispose of any of its
assets or properties, other than in the ordinary course of business, and, in the
case of the Partnerships, as required or authorized by the FPI and FPII
partnership agreements; (xv) take any action that is intended or may reasonably
be expected to result in any of its representations and warranties set forth in
this Agreement being or becoming untrue in any material respect at any time
prior to the Effective Time of the Merger, or in any of the conditions to the
Merger set forth in Section 7 not being satisfied, or in a violation of any
provision of this Agreement, except, in every case, as may be required by
applicable law; and (xvi) become a general partner in any partnership (except
for the Partnerships).
(c) The Board of Directors of Foothill will duly call, and will cause
to be held not later than the later of thirty (30) calendar days or twenty-five
(25) business days following the effective date of the Registration Statement
referred to in paragraph 5(c) hereof, a meeting of its shareholders and will
direct that this Agreement and the Merger Agreement be submitted to a vote at
such meeting. The Board of Directors of Foothill will cause proper notice of
such meeting to be given to its shareholders in compliance with the Delaware
General Corporation Law and other applicable law and regulation. The Board of
Directors of Foothill will recommend the affirmative vote in favor of approval
of this Agreement and the Merger Agreement, and use its best efforts to solicit
from its shareholders proxies in favor thereof, provided, however, that if the
Board of Directors determine in good faith based on the advice of Foothill's
outside counsel that failure to take such action would result in a breach of its
fiduciary duties and is legally advisable as determined by Foothill's Board of
Directors after consultation with Foothill's outside counsel, then in such case,
the Board of Directors may amend or withdraw its recommendation regarding the
Merger and withhold soliciting proxies in favor thereof.
(d) Foothill will furnish or cause to be furnished to Norwest all the
information concerning Foothill and its subsidiaries required for inclusion in
the Registration Statement referred to in paragraph 5(c) hereof, or any
statement or application made by Norwest to
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any governmental body in connection with the transactions contemplated by this
Agreement. Any financial statement for any fiscal year provided under this
paragraph must include the audit opinion and the consent of Ernst & Young to use
such opinion in such Registration Statement.
(e) Foothill will take all necessary corporate and other action and
use its best efforts to obtain all approvals of regulatory authorities, consents
and other approvals required of Foothill to carry out the transactions
contemplated by this Agreement and will cooperate with Norwest to obtain all
such approvals and consents required of Norwest.
(f) Foothill will deliver to Norwest at the Closing all opinions,
certificates and other documents required to be delivered by it at the Closing.
(g) Foothill will hold in confidence all documents and information
concerning Norwest and its subsidiaries furnished to Foothill and its
representatives in connection with the transactions contemplated by this
Agreement and will not release or disclose such information to any other person,
except as required by law and except to Foothill's outside professional advisers
in connection with this Agreement, with the same undertaking from such
professional advisers. If the transactions contemplated by this Agreement shall
not be consummated, such confidence shall be maintained and such information
shall not be used in competition with Norwest (except to the extent that such
information can be shown to be previously known to Foothill, in the public
domain, or later acquired by Foothill from other legitimate sources) and, upon
request, all such documents, any copies thereof and extracts therefrom shall
immediately thereafter be returned to Norwest.
(h) Neither Foothill, nor any Foothill Subsidiary, nor any director,
officer, representative or agent thereof, will, directly or indirectly, (i)
solicit, authorize the solicitation of, or (ii), except to the extent, based on
the advice of counsel, legally advisable by the Board of Directors in the
discharge of their fiduciary duties under applicable law, enter into any
discussions with any corporation, partnership, person or other entity or group
(other than Norwest) concerning any offer or possible offer (A) to purchase any
shares of common stock, any option or warrant to purchase any shares of common
stock, any securities convertible into any shares of such common stock, or any
other equity security of Foothill or any Foothill Subsidiary, (B) to make a
tender or exchange offer for any shares of such common stock or other equity
security, (C) to purchase, lease or otherwise acquire the assets of Foothill or
any Foothill Subsidiary except in the ordinary course of business, or (D) to
merge, consolidate or otherwise combine with Foothill or any Foothill
Subsidiary. If any corporation, partnership, person or other entity or group
makes an offer or inquiry to Foothill or any Foothill Subsidiary concerning any
of the foregoing, Foothill or such Foothill Subsidiary will promptly disclose
such offer or inquiry, including the terms thereof, to Norwest.
(i) Foothill shall consult with Norwest as to the form and substance
of any proposed press release or other proposed public disclosure of matters
related to this Agreement or any of the transactions contemplated hereby.
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(j) Foothill and each Foothill Subsidiary will take all action
necessary or required (i) to terminate or amend, if requested by Norwest, all
qualified pension and welfare benefit plans and all non-qualified benefit plans
and compensation arrangements as of the Effective Date of the Merger, (ii) to
amend the Plans to comply with the provisions of the TRA and regulations
thereunder and other applicable law, and (iii) to submit application to the
Internal Revenue Service for a favorable determination letter for each of the
Plans which is subject to the qualification requirements of Section 401(a) of
the Code prior to the Effective Date of the Merger.
(k) Neither Foothill nor any Foothill Subsidiary shall take any
action which with respect to Foothill would disqualify the Merger as a "pooling
of interests" for accounting purposes.
(l) Foothill shall use its best efforts to obtain and deliver at
least 32 days prior to the Effective Date of the Merger signed representations
substantially in the form attached hereto as Exhibit B to Norwest by each
executive officer, director or shareholder of Foothill who may reasonably be
deemed an "affiliate" of Foothill within the meaning of such term as used in
Rule 145 under the Securities Act.
(m) Foothill shall establish such additional accruals and reserves as
may be necessary to conform Foothill's accounting and credit loss reserve
practices and methods to those of Norwest and Norwest's plans with respect to
the conduct of Foothill's business following the Merger and to provide for the
costs and expenses relating to the consummation by Foothill of the Merger and
the other transactions contemplated by this Agreement.
(n) Foothill shall obtain, at its sole expense, Phase I environmental
assessments for each facility and each non-residential OREO property. Oral
reports of such environmental assessments shall be delivered to Norwest no later
than four (4) weeks and written reports shall be delivered to Norwest no later
than eight (8) weeks from the date of this Agreement. Foothill shall obtain, at
its sole expense, Phase II environmental assessments for properties identified
by Norwest on the basis of the results of such Phase I environmental
assessments.
(o) Foothill shall take all action necessary to terminate Foothill's
1978 Amended and Restated Stock Option Plan (the "Option Plan") and 1990
Performance and Equity Incentive Plan ("Incentive Plan") to provide for the
acceleration of the vesting rights of the options ("Options") issued thereunder
to permit such Options to be immediately exercisable and to provide for the
termination of any unexercised Options prior to the Effective Time of the Merger
and shall obtain the written consent or acknowledgment of the holders of such
Options to such termination in exchange for (i) the acceleration of such Options
in accordance with the terms of the Option Plan and Incentive Plan and (ii) the
exchange of such Options for shares of Norwest Common Stock as set forth in
paragraph 1(a)(iii).
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(p) Foothill shall use its best efforts to obtain any required
consents required to be given by the general and limited partners of FPI and
FPII to the Merger and as may be necessary or required in order to conform the
activities of FPI and FPII to those permissible for bank holding companies and
their subsidiaries under the BHC Act and other applicable banking laws and
regulations and to such conditions and requirements imposed in the approvals
contemplated under paragraphs 6(e) and 7(e).
(q) Foothill agrees, if requested by Norwest, to cancel or, in the
alternative, to transfer to Foothill's employees in exchange for payment to
Foothill of the policy premiums paid by Foothill, the split dollar insurance
policies maintained by Foothill on its employees.
(r) Foothill shall use its best efforts to cause the employees listed
on Exhibit C1 to execute the Employment and Non-Competition Agreements
substantially in the form of Exhibit C2 hereof prior to the Closing Date.
(s) Foothill shall take all action necessary to terminate Foothill's
Director's Pension Plan and Executive Supplement Retirement Plan as of no later
than the Effective Time of Merger.
(t) Foothill shall take all action necessary to terminate Foothill's
Stock Purchase Plan as of no later than the earliest to occur of the Effective
Time of the Merger or September 30, 1995 and distribute to the participants
therein the amount contributed by such participants to such plan from January 1,
1995 to the date of termination, plus the amount referred to in paragraph
4(b)(xi).
(u) Foothill shall execute and deliver the Merger Agreement prior to
the Closing Date.
(v) Subject to the terms and conditions herein provided, Foothill
agrees to use all reasonable efforts to take, or cause to be taken, all actions
and to do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement , the Merger Agreement and the Stock
Option Agreement, including using all reasonable efforts to obtain all necessary
waivers, consents and approvals, to effect all necessary registrations and
filings (including, but not limited to, filings under the BHC Act and HSR Act
and with all applicable governmental entities) and to lift any injunction or
other legal bar to the Merger (and, in such case, to proceed with the Merger as
expeditiously as possible) or the Stock Option Agreement.
(w) Foothill shall use its best efforts to terminate, effective prior
to the Closing Date, that certain Preferred Stock Purchase Agreement between
Foothill and Recovery Equity Investors, L.P. ("REI") dated May 10, 1991
("Preferred Stock Agreement") and
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that certain Registration Rights Agreement between Foothill and REI dated June
27, 1991 ("Registration Agreement").
5. Covenants of Norwest. Norwest covenants and agrees with Foothill
as follows:
(a) From the date hereof until the Effective Time of the Merger,
Norwest will maintain its corporate existence in good standing; conduct, and
cause the Norwest Subsidiaries to conduct, their respective businesses in
compliance with all material obligations and duties imposed on them by all laws,
governmental regulations, rules and ordinances, and judicial orders, judgments
and decrees applicable to Norwest or the Norwest Subsidiaries, their businesses
or their properties; maintain all books and records of it and the Norwest
Subsidiaries, including all financial statements, in accordance with the
accounting principles and practices consistent with those used for the Norwest
Financial Statements, except for changes in such principles and practices
required under generally accepted accounting principles.
(b) Norwest will furnish to Foothill all the information concerning
Norwest required for inclusion in a proxy statement or statements to be sent to
the shareholders of Foothill, or in any statement or application made by
Foothill to any governmental body in connection with the transactions
contemplated by this Agreement.
(c) As promptly as practicable after the execution of this Agreement,
Norwest will prepare, with the assistance of Foothill, as appropriate
(including, but not limited to preparation by Foothill and its counsel of
applicable disclosure in the registration Statement relating to Foothill) and
file with the SEC a registration statement on Form S-4 (the "Registration
Statement") together with the Prospectus/Proxy Statement to be included therein
under the Securities Act and any other applicable documents, relating to the
shares of Norwest Common Stock to be delivered to the shareholders of Foothill
pursuant to the Merger Agreement. Each of Norwest (and Foothill) shall use its
best efforts to respond promptly as is practicable to comments from the SEC, if
any and will use its best efforts to cause the Registration Statement to become
effective. At the time the Registration Statement becomes effective, the
Registration Statement will comply in all material respects with the provisions
of the Securities Act and the published rules and regulations thereunder, and
will not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not false or misleading, and at the time of mailing thereof to the
Foothill shareholders, at the time of the Foothill shareholders' meeting
referred to in paragraph 4(c) hereof and at the Effective Time of the Merger the
prospectus included as part of the Registration Statement, as amended or
supplemented by any amendment or supplement filed by Norwest (hereinafter the
"Prospectus"), will not contain any untrue statement of a material fact or omit
to state any material fact necessary to make the statements therein not false or
misleading; provided, however, that none of the provisions of this subparagraph
-------- -------
shall apply to statements in or omissions from the Registration Statement or the
Prospectus made in reliance upon and in conformity with information furnished by
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Foothill or any Foothill subsidiary for use in the Registration Statement or the
Prospectus. Each of Norwest and Foothill will notify the other promptly as is
practicable of the receipt of any comments from the SEC or its staff and of any
request by the SEC or its staff for amendments or supplements to the S-4 or
Prospectus/Proxy Statement or for additional information and will supply the
other with copies of all correspondence with the SEC or its staff with respect
to the S-4 or the Prospectus/Proxy Statement. Whenever any event occurs which
should be set forth in an amendment or supplement to the S-4 or the
Prospectus/Proxy Statement, Norwest or Foothill, as the case may be, shall
promptly inform the other of such occurrence and cooperate in filing with the
SEC or its staff, and/or mailing to stockholders of Foothill, of such amendment
or supplement.
(d) Norwest will file all documents required to be filed to list the
Norwest Common Stock to be issued pursuant to the Merger Agreement on the New
York Stock Exchange and the Chicago Stock Exchange and use its best efforts to
effect said listings.
(e) The shares of Norwest Common Stock to be issued by Norwest to the
shareholders of Foothill pursuant to this Agreement and the Merger Agreem ent
will, upon such issuance and delivery to said shareholders pursuant to the
Merger Agreement, be duly authorized, validly issued, fully paid and
nonassessable. The shares of Norwest Common Stock to be delivered to the
shareholders of Foothill pursuant to the Merger Agreement are and will be free
of any preemptive rights of the stockholders of Norwest.
(f) Norwest will file all documents required to obtain, prior to the
Effective Time of the Merger, all necessary Blue Sky permits and approvals, if
any, required to carry out the transactions contemplated by this Agreement, will
pay all expenses incident thereto and will use its best efforts to obtain such
permits and approvals.
(g) Norwest will take all necessary corporate and other action and
file all documents required to obtain and will use its best efforts to obtain
all approvals of regulatory authorities, consents and approvals required of it
to carry out the transactions contemplated by this Agreement and will cooperate
with Foothill to obtain all such approval and consents required by Foothill.
Norwest will respond as promptly as practicable to any inquiries received from
any regulatory agency.
(h) Norwest will hold in confidence all documents and information
concerning Foothill and Foothill's Subsidiaries furnished to it and its
representatives in connection with the transactions contemplated by this
Agreement and will not release or disclose such information to any other person,
except as required by law and except to its outside professional advisers in
connection with this Agreement, with the same undertaking from such professional
advisers. If the transactions contemplated by this Agreement shall not be
consummated, such confidence shall be maintained and such information shall not
be used in competition with Foothill (except to the extent that such information
can be shown to be previously known to Norwest, in the public domain, or later
acquired by Norwest from other legitimate sources) and, upon request, all such
documents, copies thereof or extracts therefrom shall immediately thereafter be
returned to Foothill.
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(i) Norwest will file any documents or agreements required to be
filed in connection with the Merger under the Delaware General Corporation Law.
(j) Norwest will deliver to Foothill at the Closing all opinions,
certificates and other documents required to be delivered by it at the Closing.
(k) Norwest shall consult with Foothill as to the form and substance
of any proposed press release or other proposed public disclosure of matters
related to this Agreement or any of the transactions contemplated hereby.
(l) Norwest shall give Foothill written notice of receipt of the
regulatory approvals referred to in paragraph 7(e).
(m) Neither Norwest nor any Norwest Subsidiary shall take any action
which with respect to Norwest would disqualify the Merger as a "pooling of
interests" for accounting purposes.
(n) For a period not exceeding fifteen (15) days prior to the Closing
Date, Norwest will permit Foothill and its representatives to examine its books,
records and properties and interview officers, employees and agents of Norwest
at all reasonable times when it is open for business. No such examination by
Foothill or its representatives shall in any way affect, diminish or terminate
any of the representations, warranties or covenants of Norwest herein expressed.
(o) Subject to the terms and conditions herein provided, Norwest
agrees to use all reasonable efforts to take, or cause to be taken, all actions
and to do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement , the Merger Agreement and the Stock
Option Agreement, including using all reasonable efforts to obtain all necessary
waivers, consents and approvals, to effect all necessary registrations and
filings (including, but not limited to, filings under the BHC Act and HSR Act
and with all applicable governmental entities) and to lift any injunction or
other legal bar to the Merger (and, in such case, to proceed with the Merger as
expeditiously as possible) or the Stock Option Agreement.
(p) Merger Co. shall execute and deliver the Merger Agreement prior
to the Closing Date.
(q) From and after the Effective Time of Merger: (i) Norwest shall
indemnify, defend and hold harmless the officers, directors and employees of
Foothill and the Foothill Subsidiaries (the "Indemnified Parties") against all
losses, expenses, claims, damages or liabilities arising out of the transactions
contemplated by this Agreement to the fullest extent permitted or required under
Foothill's or a Foothill Subsidiary's Certificate of Incorporation or Articles
of Incorporation and By-laws as in effect as of the Effective
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Time of the Merger; and (ii) Norwest shall ensure that all rights to
indemnification and all limitations of liability existing in favor of an
Indemnified Party in Foothill's Certificate of Incorporation or By-laws or
similar governing documents of any Foothill Subsidiary, as applicable in the
particular case and as in effect on the date hereof, shall, with respect to
claims arising from facts or events that occurred before the Effective Time of
the Merger, survive the Merger and shall continue in full force and effect.
Nothing contained in this paragraph 5(q) shall be deemed to preclude the
liquidation, consolidation or merger of Foothill or any Foothill Subsidiary, in
which case all of such rights to indemnification and limitations on liability
shall be deemed to so survive and continue as contractual rights notwithstanding
any such liquidation or consolidation or merger. Notwithstanding anything to the
contrary contained in this paragraph 5(q), nothing contained herein shall
require Norwest or Foothill to indemnify any person who was a director or
officer of Foothill or any Foothill Subsidiary to a greater extent than Foothill
or any Foothill Subsidiary is, as of the date of this Agreement, required to
indemnify any such person.
(r) With respect to the persons listed on Schedule 5(r) hereof and
who currently hold Options which constitute "Incentive Stock Options" for
purposes of the Code ("ISO"), which Options as a result of the transactions
contemplated by this Agreement will not be treated as ISO's by virtue of
(S)422(d) of the Code, Norwest agrees to grant to such person non-qualified
options to acquire Norwest Common Stock pursuant and subject to the terms and
conditions of the Norwest Corporation 1985 Long-Term Incentive Compensation
Plan. Said Norwest options will be granted at the first meeting of the Human
Resources Committee of the Norwest Board of Directors following the Closing and
shall be determined pursuant to the following formula (rounded up to the next
nearest whole share):
.11(G)
-------------- = X
.36 (FMV)
Where (i) G = the amount of the compensation income for federal income
tax purposes resulting from the exchange or exercise of such
ISO's;
(ii) FMV = the fair market value of Norwest Common Stock at the
time of grant; and
(iii) x = the total number of Norwest options to be granted.
6. Conditions Precedent to Obligation of Foothill. The obligation of
Foothill to effect the Merger shall be subject to the satisfaction at or before
the Time of Filing of the following further conditions, which may be waived in
whole or in part in writing by Foothill:
(a) Except as they may be affected by transactions contemplated
hereby and except to the extent such representations and warranties are by their
express provisions
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made as of a specified date and except for activities or transactions after the
date of this Agreement made in the ordinary course of business and not expressly
prohibited by this Agreement, the representations and warranties contained in
paragraph 3 hereof shall be true and correct in all respects material. For
purposes of this section, "material" shall mean that the untruth or
incorrectness of such representation or warranty would cause a material adverse
effect on the business, financial condition or assets of Norwest and the Norwest
Subsidiaries taken as a whole.
(b) Norwest shall have, or shall have caused to be, performed and
observed in all material respects all covenants, agreements and conditions
hereof to be performed or observed by it and Merger Co. at or before the Time of
Filing.
(c) Foothill shall have received a favorable certificate, dated as of
the Effective Date of the Merger, signed by the Chairman, the President or any
Executive Vice President or Senior Vice President and by the Secretary or
Assistant Secretary of Norwest, as to the matters set forth in subparagraphs (a)
and (b) of this paragraph 6.
(d) This Agreement and the Merger Agreement shall have been approved
by the affirmative vote of the holders of the percentage of the outstanding
shares of Foothill required for approval of a plan of merger in accordance with
the provisions of Foothill's Certificate of Incorporation and the Delaware
General Corporation Law.
(e) Norwest shall have received approval by the Federal Reserve Board
and by such other governmental agencies as may be required by law of the
transactions contemplated by this Agreement and the Merger Agreement and all
waiting and appeal periods prescribed by applicable law or regulation shall have
expired.
(f) No court or governmental authority of competent jurisdiction
shall have issued an order restraining, enjoining or otherwise prohibiting the
consummation of the transactions contemplated by this Agreement.
(g) The shares of Norwest Common Stock to be delivered to the
stockholders of Foothill pursuant to this Agreement and the Merger Agreement
shall have been authorized for listing on the New York Stock Exchange and the
Chicago Stock Exchange.
(h) Foothill shall have received an opinion, dated the Closing Date,
of counsel to Foothill, substantially to the effect that, for federal income tax
purposes: (i) the Merger will constitute a reorganization within the meaning of
Sections 368(a)(1)(A) and 368(a)(2)(E) of the Code; (ii) no gain or loss will be
recognized by the holders of Foothill Common Stock or Preferred Stock upon the
conversion of their shares into Norwest Common Stock pursuant to the terms of
the Merger (except to the extent cash is received in lieu of fractional shares);
(iii) the tax basis of the shares of Norwest Common Stock received by the
shareholders of Foothill on the conversion of the Foothill Common Stock and
Preferred Stock pursuant to the Merger will be the same as the basis of Foothill
Common Stock or Preferred Stock converted (less any portion of such basis
allocable to
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any fractional interest in any shares of Foothill Common Stock or Preferred
Stock); and (iv) the holding period of the shares of Norwest Common Stock into
which the Foothill Common Stock and Preferred Stock are converted will include
the holding period of the Foothill Common Stock or Preferred Stock, provided
such shares of Foothill Common Stock or Preferred Stock were held as a capital
asset as of the Effective Time of the Merger.
(i) The Registration Statement (as amended or supplemented) shall
have become effective under the Securities Act and shall not be subject to any
stop order, and no action, suit, proceeding or investigation by the SEC to
suspend the effectiveness of the Registration Statement shall have been
initiated and be continuing, or have been threatened and be unresolved. Norwest
shall have received all state securities law or blue sky authorizations
necessary to carry out the transactions contemplated by this Agreement.
(j) Merger Co. shall have executed and delivered the Merger
Agreement.
(k) Norwest and each Norwest Subsidiary shall have obtained any and
all material permits, authorizations, consents, waivers and approvals required
for the lawful consummation by it of the Merger.
(l) Foothill shall have received the opinion of Norwest's counsel
dated the Closing Date in form and substance reasonably satisfactory to Foothill
to the effect that (i) Norwest is duly organized and existing under the laws of
the State of Delaware and (ii) all necessary corporate action on the part of
Norwest has been taken to authorize the issuance of the shares of Norwest Common
Stock in connection with the Merger, and when issued as described in the
Registration Statement, such shares will be legally and validly issued, fully
paid, and nonassessable.
7. Conditions Precedent to Obligation of Norwest. The obligation of
Norwest to effect the Merger shall be subject to the satisfaction at or before
the Time of Filing of the following conditions, which may be waived in writing
by Norwest:
(a) Except as they may be affected by transactions contemplated
hereby and except to the extent such representations and warranties are by their
express provisions made as of a specified date and except for activities or
transactions or events occurring after the date of this Agreement made in the
ordinary course of business and not expressly prohibited by this Agreement, the
representations and warranties contained in paragraph 2 hereof shall be true and
correct in all respects material to Foothill and the Foothill Subsidiaries taken
as a whole as if made at the Time of Filing. For purposes of this section,
"material" shall mean that the untruth or incorrectness of such representation
or warranty would cause a material adverse effect on the business, financial
condition or results of operation of Foothill and the Foothill Subsidiaries
taken as a whole.
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(b) Foothill shall have, or shall have caused to be, performed and
observed in all material respects all covenants, agreements and conditions
hereof to be performed or observed by it at or before the Time of Filing.
(c) This Agreement and the Merger Agreement shall have been approved
by the affirmative vote of the holders of the percentage of the outstanding
shares of Foothill required for approval of a plan of merger in accordance with
the provisions of Foothill's Certificate of Incorporation and the Delaware
General Corporation Law.
(d) Norwest shall have received a favorable certificate dated as of
the Effective Date of the Merger signed by the Chairman or President and by the
Secretary or Assistant Secretary of Foothill, as to the matters set forth in
subparagraphs (a) through (c) of this paragraph 7.
(e) Norwest shall have received approval by all governmental agencies
as may be required by law of the transactions contemplated by this Agreement and
the Merger Agreement and all waiting and appeal periods prescribed by applicable
law or regulation shall have expired. No approvals, licenses or consents granted
by any regulatory authority shall contain any condition or requirement relating
to Foothill or any Foothill Subsidiary that, in the good faith judgment of
Norwest, is unreasonably burdensome to Norwest. For purposes of the foregoing,
"unreasonably burdensome" shall mean any condition which could reasonably be
expected to have a material adverse effect on the business, financial condition,
capital requirementsor results of operation (including, with respect to
Foothill, Foothill's operating plans) of Norwest or the Norwest Subsidiaries
taken as a whole or Foothill or the Foothill Subsidiaries taken as a whole or
which would result in the inability of Foothill to continue to act as an
investment advisor to the Partnerships or requiring divestiture by Foothill of
any or all of its general partnership interest in the Partnerships or the
liquidation or dissolution of the Partnerships.
(f) Foothill and each Foothill Subsidiary shall have obtained any and
all material consents or waivers from other parties to loan agreements, leases
or other contracts material to Foothill's or such subsidiary's business required
for the consummation of the Merger, and Foothill and each Foothill Subsidiary
shall have obtained any and all material permits, authorizations, consents,
waivers and approvals required for the lawful consummation by it of the Merger.
(g) No court or governmental authority of competent jurisdiction
shall have issued an order restraining, enjoining or otherwise prohibiting the
consummation of the transactions contemplated by this Agreement.
(h) The Merger shall qualify as a "pooling of interests" for
accounting purposes and Norwest shall have received from KPMG Peat Marwick,
L.L.P. and Ernst & Young opinions to that effect.
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(i) At any time since the date hereof the total number of shares of
Foothill Common Stock outstanding and subject to issuance upon exercise
(assuming for this purpose that phantom shares, if any, and other share-
equivalents constitute Foothill Common Stock) of all warrants, options,
conversion rights, phantom shares, if any, or other share-equivalents, other
than any option held by Norwest, shall not have exceeded 17,843,359.
(j) The Registration Statement (as amended or supplemented) shall
have become effective under the Securities Act and shall not be subject to any
stop order, and no action, suit, proceeding or investigation by the SEC to
suspend the effectiveness of the Registration Statement shall have been
initiated and be continuing, or have been threatened or be unresolved. Norwest
shall have received all state securities law or blue sky authorizations
necessary to carry out the transactions contemplated by this Agreement.
(k) Norwest shall have received from the Chief Executive Officer and
Chief Financial Officer of Foothill a letter, dated as of the effective date of
the Registration Statement and updated through the date of Closing, in form and
substance reasonably satisfactory to Norwest, to the effect that:
(i) the interim quarterly financial statements of Foothill
included or incorporated by reference in the Registration Statement
are prepared in accordance with generally accepted accounting
principles applied on a basis consistent with the audited financial
statements of Foothill;
(ii) the amounts reported in the interim quarterly financial
statements of Foothill agree with the general ledger of Foothill;
(iii) the annual and quarterly financial statements of
Foothill and the Foothill Subsidiaries included in, or incorporated by
reference in, the Registration Statement comply as to form in all
material respects with the applicable accounting requirements of the
Securities Act and the published rules and regulations thereunder;
(iv) from March 31, 1995 (or, if later, since the date of
the most recent unaudited consolidated financial statements of
Foothill and the Foothill Subsidiaries as may be included in the
Registration Statement) to the last day of the month immediately
preceding the effective date of the Registration Statement or the last
day of the month immediately preceding the Closing, there are no
increases in long-term debt, changes in the capital stock or decreases
in stockholders' equity of Foothill and the Foothill Subsidiaries,
except in each case for changes, increases or decreases which the
Registration Statement discloses have occurred or may occur or which
are described in such letters. For the same period, there have been no
decreases in consolidated net interest income, consolidated net
interest income after provision for credit losses, consolidated
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<PAGE>
income before income taxes, consolidated net income and net income per
share amounts of Foothill and the Foothill Subsidiaries, or in income
before equity in undistributed income of subsidiaries, in each case as
compared with the comparable period of the preceding year, except in
each case for changes, increases or decreases which the Registration
Statement discloses have occurred or may occur or which are described
in such letters;
(v) they have reviewed certain amounts, percentages,
numbers of shares and financial information which are derived from the
general accounting records of Foothill and the Foothill Subsidiaries,
which appear in the Registration Statement under the certain captions
to be specified by Norwest, and have compared certain of such amounts,
percentages, numbers and financial information with the accounting
records of Foothill and the Foothill Subsidiaries and have found them
to be in agreement with financial records and analyses prepared by
Foothill included in the annual and quarterly financial statements,
except as disclosed in such letters.
(l) Notice shall not have been received by Foothill relating to, or
any senior officer of Foothill, after diligent inquiry, shall become aware of, a
basis for any proceeding, claim or action of any nature seeking to impose, or
that could result in the imposition on Foothill or any Foothill Subsidiary of,
any liability relating to the release of hazardous substances as defined under
any local, state or federal environmental statute, regulation or ordinance
including, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 as amended, which has had or could
reasonably be expected to have a material adverse effect upon Foothill and its
subsidiaries taken as a whole.
(m) Since March 31, 1995, no change shall have occurred and no
circumstances shall exist which has had or might reasonably be expected to have
a material adverse effect on the financial condition, results of operations or
business of Foothill and the Foothill Subsidiaries taken as a whole.
(n) Foothill shall have obtained all necessary or required consents
of the general and limited partners of FPI and FPII to the Merger and to the
matters referred to in paragraph 4(p).
(o) Foothill shall have terminated the Option Plan and Incentive Plan
and all outstanding Options shall have exercised or terminated as required in
paragraph 4(o).
(p) Foothill shall have terminated Foothill's Directors Pension Plan
and Executive Supplement Retirement Plan effective as of no later than the
Effective Time of Merger.
(q) The persons listed on Exhibit C1 shall have entered into the
Employment and Non-Competition Agreements in substantially the form of Exhibit
C2 hereto.
(r) Foothill shall have executed and delivered the Merger Agreement.
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(s) The Foothill Stock Purchase Plan shall have been terminated as
provided in paragraph 4(t).
(t) Norwest shall have received an opinion of counsel to Foothill
dated the Closing Date, in form and substance reasonably satisfactory to Norwest
to the effect that (i) Foothill is duly organized and existing under the State
of Delaware and (ii) that the execution, delivery and performance of the
Agreement and the Merger Agreement has been duly and validly authorized by all
necessary corporate action.
(u) The Preferred Stock Agreement and Registration Agreement shall
have been terminated.
8. Employee Benefit Plans. Each person who is an employee of
Foothill or any Foothill Subsidiary as of the Effective Date of the Merger
("Foothill Employees") shall be eligible for participation in the employee
welfare and retirement plans of Norwest, as in effect from time to time, as
follows:
(a) Employee Welfare Benefit Plans. Each Foothill employee shall be
-------------------------------
eligible for participation in the employee welfare benefit plans of Norwest
listed below subject to any eligibility requirements applicable to such plans
(but not subject to any pre-existing conditions exclusions except for the
Norwest Long Term Care Plan) and shall enter each plan not later than the first
day of the calendar quarter which begins at least 32 days after the Effective
Date of the Merger:
Medical Plan
Dental Plan
Vision Plan
Short Term Disability Plan
Long Term Disability Plan
Long Term Care Plan
Flexible Benefits Plan
Basic Group Life Insurance Plan
Group Universal Life Insurance Plan
Dependent Group Life Insurance Plan
Business Travel Accident Insurance Plan
Accidental Death and Dismemberment Plan
Severance Pay Plan
Vacation Program
For the purpose of determining each Foothill Employee's benefit for the year in
which the Merger occurs under the Norwest vacation program, vacation taken by an
Foothill Employee in the year in which the Merger occurs will be deducted from
the total Norwest benefit. Each Foothill Employee will be credited under the
Norwest Medical Plan for the amount of any deductible already satisfied under
Foothill's Plan prior to Closing. After the
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<PAGE>
Effective Date of the Merger, Foothill Employees will be subject to Norwest's
Vacation Program in accordance with the terms of that Program, with full credit
for years of past service to Foothill and the Foothill Subsidiaries. For
purposes of the Short Term Disability Plan and Severance Policy, Foothill
Employees will receive full credit for years of past service with Foothill and
the Foothill Subsidiaries.
Foothill Employees shall not be entitled to past service credit with regard to
retiree medical benefits.
(b) Employee Retirement Benefit Plans.
----------------------------------
Each Foothill Employee shall be eligible for participation in the Norwest
Savings-Investment Plan (the "SIP"), subject to any eligibility requirements
applicable to the SIP (with full credit for years of past service to Foothill
and the Foothill Subsidiaries for the purpose of satisfying any eligibility and
vesting periods applicable to the SIP), and shall enter the SIP not later than
the first day of the calendar quarter which begins at least 32 days after the
Effective Date of the Merger.
Each Foothill Employee shall be eligible for participation, as a new employee,
in the Norwest Pension Plan under the terms thereof.
9. Termination of Agreement.
(a) This Agreement may be terminated at any time prior to the Time of
Filing:
(i) by mutual written consent of the parties hereto;
(ii) by either of the parties hereto upon written notice to
the other party if the Merger shall not have been consummated by March
31, 1996 unless such failure of consummation shall be due to the
failure of the party seeking to terminate to perform or observe in all
material respects the covenants and agreements hereof to be performed
or observed by such party;
(iii) by Foothill or Norwest upon written notice to the other
party if any court or governmental authority of competent jurisdiction
shall have issued a final order restraining, enjoining or otherwise
prohibiting the consummation of the transactions contemplated by this
Agreementor;
(iv) by Norwest, if the Board of Directors of Foothill does
not publicly recommend in the Proxy Statement that the holders of the
Foothill Common Stock approve and adopt this Agreement, or if after
recommending in the Proxy Statement that stockholders approve and
adopt this Agreement, the Board of Directors of Foothill shall have
withdrawn, modified or amended such recommendation in any respect
materially adverse to Norwest.
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<PAGE>
(b) In the event of termination of this Agreement by either Norwest
or Foothill as provided in paragraph (a), this Agreement shall forthwith become
void and have no effect except that (i) termination of this Agreement under this
paragraph 9 shall not release, or be construed as so releasing, Foothill from
any liability or damage to Norwest arising out of Foothill's willful and
material breach of the warranties and representations made by it, or willful and
material failure in performance of any of its covenants, agreements, duties or
obligations arising hereunder, (ii) the obligations under paragraphs 4(g), 5(h)
and 10 shall survive such termination; and (iii) in the event that this
Agreement shall have been terminated by Foothill pursuant to paragraph 9(a)(ii)
because of the failure of Norwest to perform or observe in all material respects
the covenants and agreements to be performed by Norwest or such other willful
action that results in a material breach of the warranties and representations
made by Norwest, or willful and material failure in performance of any of
Norwest's covenants, agreements, duties or obligations arising hereunder, and
all of the conditions to consummation of the Merger set forth in Section 7 have
been satisfied or, with respect to conditions relating to the delivery of
officers' certificates and opinions, would have been satisfied had the Closing
actually occurred, Norwest agrees, at the request of Foothill, to purchase
Foothill Senior Subordinated Debt in an amount and pursuant to the terms and
conditions of that certain Funding Agreement of even date herewith between
Norwest and Foothill and Foothill Capital Corporation ("Funding Agreement")
which purchase shall be in lieu of liquidated damages and in full and complete
satisfaction of any further liability of Norwest for any claims, damages or
losses incurred or alleged to have been incurred by Foothill by virtue of or
arising out of such termination.
10. Expenses. All expenses in connection with this Agreement and the
transactions contemplated hereby, including without limitation legal and
accounting fees, incurred by Foothill and Foothill Subsidiaries shall be borne
by Foothill, and all such expenses incurred by Norwest shall be borne by
Norwest.
11. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns, but shall not be assignable by either party hereto without the prior
written consent of the other party hereto.
12. Third Party Beneficiaries. Each party hereto intends that this
Agreement shall not benefit or create any right or cause of action in or on
behalf of any person other than the parties hereto.
13. Notices. Any notice or other communication provided for herein
or given hereunder to a party hereto shall be in writing and shall be delivered
in person or shall be mailed by first class registered or certified mail,
postage prepaid, addressed as follows:
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If to Norwest:
Norwest Corporation
Sixth and Marquette
Minneapolis, Minnesota 55479-1026
Attention: Secretary
If to Foothill:
The Foothill Group, Inc.
11111 Santa Monica Boulevard
15th Floor
Los Angeles, CA 90025
Attention: Henry Jordan, Chief Financial Officer
With a copy to:
Buchalter, Nemer, Fields & Younger
601 South Figueroa Street
Los Angeles, CA 90017
Attention: Mark A. Bonenfant
or to such other address with respect to a party as such party shall notify the
other in writing as above provided.
14. Complete Agreement. This Agreement, the Merger Agreement, the
Stock Option Agreement and the Funding Agreement contain the complete agreement
between the parties hereto with respect to the Merger and other transactions
contemplated hereby and supersede all prior agreements and understandings
between the parties hereto with respect thereto.
15. Captions. The captions contained in this Agreement are for
convenience of reference only and do not form a part of this Agreement.
16. Waiver and Other Action. Either party hereto may, by a signed
writing, give any consent, take any action pursuant to paragraph 9 hereof or
otherwise, or waive any inaccuracies in the representations and warranties by
the other party and compliance by the other party with any of the covenants and
conditions herein.
17. Amendment. At any time before the Time of Filing, the parties
hereto, by action taken by their respective Boards of Directors or pursuant to
authority delegated by their respective Boards of Directors, may amend this
Agreement; provided, however, that no amendment after approval by the
shareholders of Foothill shall be made which changes
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<PAGE>
in a manner adverse to such shareholders the consideration to be provided to
said shareholders pursuant to this Agreement and the Merger Agreement.
18. Governing Law. This Agreement shall be construed and enforced in
accordance with the laws of the State of Delaware.
19. Non-Survival of Representations and Warranties. No
representation or warranty contained in the Agreement or the Merger Agreement
shall survive the Merger or except as set forth in paragraph 9(b), the
termination of this Agreement. Paragraph 10 shall survive the Merger.
20. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
constitute but one instrument.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
NORWEST CORPORATION FOOTHILL GROUP, INC.
By: /s/ James R. Campbell By: /s/ Jon L. Gevirtz
------------------------ ---------------------------
Its: Executive Vice President Its: Chairman of the Board and
------------------------ -------------------------
Chief Executive Officer
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EXHIBIT 2
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of the 15th day of May, 1995 (this
"Agreement"), between Norwest Corporation, a Delaware corporation ("Grantee"),
and Foothill Group, Inc., a Delaware corporation ("Issuer").
WITNESSETH:
WHEREAS, Grantee and Issuer are entering into an Agreement and Plan of
Reorganization, dated as of the 15th day of May, 1995 (the "Plan"), which is
being executed by the parties hereto simultaneously with the execution of this
Agreement;
WHEREAS, as a condition and inducement to Grantee's entering into the
Plan and in consideration therefor, Issuer has agreed to grant Grantee the
Option (as defined below); and
WHEREAS, capitalized terms used herein shall have the same meanings
given them in the Plan;
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements set forth herein and in the Plan, the parties hereto
agree as follows:
SECTION 1. Issuer hereby grants to Grantee an unconditional,
irrevocable option (the "Option") to purchase, subject to the terms hereof, up
to 4,156,641 fully paid and nonassessable shares of Series A Common Stock, no
par value ("Common Stock"), of Issuer at a price per share equal to $23.375 per
share (the "Initial Price"); provided, however, that in the event Issuer issues
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or agrees to issue (other than pursuant to options to issue Common Stock in
effect as of the date hereof) any shares of Common Stock at a price less than
the Initial Price (as adjusted pursuant to Section 5(b)), such price shall be
equal to such lesser price (such price, as adjusted as hereinafter provided, the
"Option Price"). The number of shares of Common Stock that may be received upon
the exercise of the Option and the Option Price are subject to adjustment as
herein set forth.
SECTION 2. (a) Grantee may exercise the Option, in whole or part, at
any time and from time to time following the occurrence of a Purchase Event (as
defined below); provided that the Option shall terminate and be of no further
force and effect upon the earliest to occur of (i) the time immediately prior to
the Effective Time, (ii) 12 months after the first occurrence of a Purchase
Event, (iii) termination of the Plan in accordance with the terms thereof prior
to the occurrence of a Purchase Event (other than a termination of the Plan by
Grantee pursuant to paragraph 9 (a) (ii) due to the failure of
<PAGE>
Issuer to perform or observe in all material respects the covenants and
agreements to be performed or observed by Issuer or pursuant to paragraph 9(a)
(iv) thereof), or (iv) 12 months after the termination of the Plan by Grantee
pursuant to paragraph 9(a) (ii) due to the failure of Issuer to perform or
observe in all material respects the covenants and agreements to be performed or
observed by Issuer or pursuant to paragraph 9 (a) (iv) thereof. The events
described in clauses (i) - (iv) in the preceding sentence are hereinafter
collectively referred to as an "Exercise Termination Event."
(b) The term "Purchase Event" shall mean any of the following events
or transactions occurring after the date hereof:
(i) Issuer or any of its subsidiaries (each an "Issuer Subsidiary")
without having received Grantee's prior written consent, shall have entered
into an agreement to engage in an Acquisition Transaction (as defined
below) with any person (the term "person" for purposes of this Agreement
having the meaning assigned thereto in Sections 3 (a) (9) and 13 (d) (3) of
the Securities Exchange Act of 1934 and the rules and regulations
thereunder (the "Securities Exchange Act"), and the rules and regulations
thereunder) other than Grantee or any of its subsidiaries (each a "Grantee
Subsidiary") or the Board of Directors of Issuer shall have recommended
that the shareholders of Issuer approve or accept any Acquisition
Transaction with any person other than Grantee or any Grantee Subsidiary.
For purposes of this Agreement, "Acquisition Transaction" shall mean (x) a
merger or consolidation, or any similar transaction, involving Issuer or
any of Issuer's subsidiaries, (y) a purchase, lease or other acquisition of
all or substantially all of the assets of Issuer or any subsidiary or (z) a
purchase or other acquisition (including by way of merger, consolidation,
share exchange or otherwise) of securities representing 20% or more of the
voting power of Issuer or any Issuer Subsidiary; provided that the term
"Acquisition Transaction" does not include any internal merger or
consolidation involving only Issuer and/or Issuer Subsidiaries;
(ii) Any person other than Grantee or any Grantee Subsidiary shall
have commenced (as such term is defined in Rule 14d-2 under the Exchange
Act) or shall have filed a registration statement under the Securities Act
of 1933, as amended (the "Securities Act"), with respect to, a tender offer
or exchange offer to purchase any shares of Issuer Common Stock such that,
upon consummation of such offer, such person would own or control 20% or
more of the then outstanding shares of Issuer Common Stock (such an offer
being referred to herein as a "Tender Offer" or an "Exchange Offer",
respectively)); or
(iii) After a proposal is made by a third party to Issuer or its
shareholders to engage in an Acquisition Transaction, Issuer shall have
breached any covenant or obligation contained in the Plan and such breach
would entitle Grantee to terminate the Plan or the Board of Directors of
Issuer does not recommend that the stockholders of Issuer approve the Plan
or the holders of Issuer Common Stock shall not have approved the Plan at
the meeting of such
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<PAGE>
stockholders held for the purpose of voting on the Plan, such meeting shall
not have been held or shall have been cancelled prior to termination of the
Plan or Issuer's Board of Directors shall have withdrawn or modified in a
manner adverse to Grantee the recommendation of Issuer's Board of Directors
with respect to the Plan; or
(iv) If the Board of Directors of Issuer does not publicly recommend
in the Proxy Statement that the holders of the Issuer Common Stock approve
and adopt the Plan, or shall have withdrawn, modified or amended such
recommendation in any respect materially adverse to Grantee.
(c) Issuer shall notify Grantee promptly in writing of the occurrence
of any Purchase Event; provided, however, that the giving of such notice by
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Issuer shall not be a condition to the right of Grantee to exercise the Option.
(d) In the event that Grantee is entitled to and wishes to exercise
the Option, it shall send to Issuer a written notice (the "Option Notice" and
the date of which being hereinafter referred to as the "Notice Date") specifying
(i) the total number of shares of Common Stock it will purchase pursuant to such
exercise and (ii) a period of time (that shall not be less than three business
days nor more than thirty business days) running from the Notice Date (the
"Closing Date") and a place at which the closing of such purchase shall take
place; provided, that, if prior notification to or approval of the Federal
-------- ----
Reserve Board or any other Governmental Authority is required in connection with
such purchase (each, a "Notification" or an "Approval," as the case may be), (a)
Grantee shall promptly file the required notice or application for approval
("Notice/Application"), (b) Grantee shall expeditiously process the
Notice/Application and (c) for the purpose of determining the Closing Date
pursuant to clause (ii) of this sentence, the period of time that otherwise
would run from the Notice Date shall instead run from the later of (x) in
connection with any Notification, the date on which any required notification
periods have expired or been terminated and (y) in connection with any Approval,
the date on which such approval has been obtained and any requisite waiting
period or periods shall have expired. For purposes of Section 2(a), any
exercise of the Option shall be deemed to occur on the Notice Date relating
thereto. On or prior to the Closing Date, Grantee shall have the right to
revoke its exercise of the Option in the event that the transaction constituting
a Purchase Event that gives rise to such right to exercise shall not have been
consummated.
(e) At the closing referred to in Section 2(d), Grantee shall pay to
Issuer the aggregate purchase price for the shares of Common Stock specified in
the Option Notice in immediately available funds by wire transfer to a bank
account designated by Issuer; provided, however, that failure or refusal of
-------- -------
Issuer to designate such a bank account shall not preclude Grantee from
exercising the Option.
(f) At such closing, simultaneously with the delivery of immediately
available funds as provided in Section 2(e), Issuer shall deliver to Grantee a
certificate or certificates representing the number of shares of Common Stock
specified in the Option
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<PAGE>
Notice and, if the Option should be exercised in part only, a new Option
evidencing the rights of Grantee thereof to purchase the balance of the shares
of Common Stock purchasable hereunder.
(g) Certificates for Common Stock delivered at a closing hereunder
shall be endorsed with a restrictive legend substantially as follows:
The transfer of the shares represented by this certificate is
subject to resale restrictions arising under the Securities
Act of 1933, as amended, and to certain provisions of an
agreement between Norwest Corporation and Foothill Group, Inc.
("Issuer") dated as of the _____ day of ___________, 1995. A
copy of such agreement is on file at the principal office of
Issuer and will be provided to the holder hereof without
charge upon receipt by Issuer of a written request therefor.
It is understood and agreed that: (i) the reference to the resale restrictions
of the Securities Act in the above legend shall be removed by delivery of
substitute certificate(s) without such reference if Grantee shall have delivered
to Issuer a copy of a letter from the staff of the Securities and Exchange
Commission (the "SEC"), or an opinion of counsel, in form and substance
satisfactory to Issuer, to the effect that such legend is not required for
purposes of the Securities Act; (ii) the reference to the provisions of this
Agreement in the above legend shall be removed by delivery of substitute
certificate(s) without such reference if the shares have been sold or
transferred in compliance with the provisions of this Agreement and under
circumstances that do not require the retention of such reference; and (iii) the
legend shall be removed in its entirety if the conditions in the preceding
clauses (i) and (ii) are both satisfied. In addition, such certificates shall
bear any other legend as may be required by law.
(h) Upon the giving by Grantee to Issuer of an Option Notice and the
tender of the applicable purchase price in immediately available funds on the
Closing Date, Grantee shall be deemed to be the holder of record of the number
of shares of Common Stock specified in the Option Notice, notwithstanding that
the stock transfer books of Issuer shall then be closed or that certificates
representing such shares of Common Stock shall not then actually be delivered to
Grantee. Issuer shall pay all expenses and any and all United States federal,
state and local taxes and other charges that may be payable in connection with
the preparation, issue and delivery of stock certificates under this Section 2
in the name of Grantee.
SECTION 3. Issuer agrees: (i) that it shall at all times until the
termination of this Agreement have reserved for issuance upon the exercise of
the Option
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<PAGE>
that number of authorized and reserved shares of Common Stock equal to the
maximum number of shares of Common Stock at any time and from time to time
issuable hereunder, all of which shares will, upon issuance pursuant hereto, be
duly authorized, validly issued, fully paid, nonassessable, and delivered free
and clear of all claims, liens, encumbrances and security interests and not
subject to any preemptive rights; (ii) that it will not, by amendment of its
certificate of incorporation or through reorganization, consolidation, merger,
dissolution or sale of assets, or by any other voluntary act, avoid or seek to
avoid the observance or performance of any of the covenants, stipulations or
conditions to be observed or performed hereunder by Issuer; (iii) promptly to
take all action as may from time to time be required (including (x) complying
with all premerger notification, reporting and waiting period requirements
specified in 15 U.S.C. (S) 18a and regulations promulgated thereunder and (y) in
the event, under the Bank Holding Company Act of 1956, as amended ("BHC Act"),
or any other federal or state banking law, prior approval of or notice to the
Federal Reserve Board or to any other Governmental Authority is necessary before
the Option may be exercised, cooperating with Grantee in preparing such
applications or notices and providing such information to each such Governmental
Authority as it may require) in order to permit Grantee to exercise the Option
and Issuer duly and effectively to issue shares of Common Stock pursuant hereto;
and (iv) to take all action provided herein to protect the rights of Grantee
against dilution.
SECTION 4. This Agreement (and the Option granted hereby) are
exchangeable, without expense, at the option of Grantee, upon presentation and
surrender of this Agreement at the principal office of Issuer, for other
agreements providing for Options of different denominations entitling the holder
thereof to purchase, on the same terms and subject to the same conditions as are
set forth herein, in the aggregate the same number of shares of Common Stock
purchasable hereunder. The terms "Agreement" and "Option" as used herein
include any agreements and related options for which this Agreement (and the
Option granted hereby) may be exchanged. Upon receipt by Issuer of evidence
reasonably satisfactory to it of the loss, theft, destruction or mutilation of
this Agreement and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement if mutilated, Issuer will execute and deliver a new Agreement of like
tenor and date. Any such new Agreement executed and delivered shall constitute
an additional contractual obligation on the part of Issuer, whether or not the
Agreement so lost, stolen, destroyed or mutilated shall at any time be
enforceable by anyone.
SECTION 5. The number of shares of Common Stock purchasable upon the
exercise of the Option shall be subject to adjustment from time to time as
follows:
(a) In the event of any change in the Common Stock by reason of stock
dividends, split-ups, mergers, recapitalizations, combinations,
subdivisions, conversions, exchanges of shares or the like, the type and
number of shares of Common Stock purchasable upon exercise hereof shall be
appropriately adjusted and proper provision shall be made so that, in the
event that any additional shares of Common Stock are to be issued or
otherwise to become outstanding as a result
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<PAGE>
of any such change (other than pursuant to an exercise of the Option), the
number of shares of Common Stock that remain subject to the Option shall be
increased so that, after such issuance and together with shares of Common
Stock previously issued pursuant to the exercise of the Option (as adjusted
on account of any of the foregoing changes in the Common Stock), it equals
18.89% of the number of shares of Common Stock then issued and outstanding.
(b) Whenever the number of shares of Common Stock purchasable upon
exercise hereof is adjusted as provided in this Section 5, the Option Price
shall be adjusted by multiplying the Option Price by a fraction, the
numerator of which shall be equal to the number of shares of Common Stock
purchasable prior to the adjustment and the denominator of which shall be
equal to the number of shares of Common Stock purchasable after the
adjustment.
SECTION 6. (a) Upon the occurrence of a Purchase Event that occurs
prior to an Exercise Termination Event, Issuer shall, at the request of Grantee
made within three years of a Purchase Event (whether on its own behalf or on
behalf of any subsequent holder of the Option (or part thereof) or any of the
shares of Common Stock issued pursuant hereto), promptly prepare, file and keep
current a registration statement under the Securities Act covering any shares
issued and issuable pursuant to the Option and shall use its best efforts to
cause such registration statement to become effective, and to remain current and
effective for a period not in excess of 180 days from the day such registration
statement first becomes effective, in order to permit the sale or other
disposition of any shares of Common Stock issued upon total or partial exercise
of the Option ("Option Shares") in accordance with any plan of disposition
requested by Grantee; provided, however, that Issuer may postpone filing a
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registration statement relating to a registration request by Grantee under this
Section 6 for a period of time (not in excess of 30 days) if in its judgment
such filing would require the disclosure of material information that Issuer has
a bona fide business purpose for preserving as confidential. Grantee shall have
---- ----
the right to demand two such registrations. The foregoing notwithstanding, if,
at the time of any request by Grantee for registration of Option Shares as
provided above, Issuer is in the process of registration with respect to an
underwritten public offering of shares of Common Stock, and if in the good faith
judgment of the managing underwriter or managing underwriters, or, if none, the
sole underwriter or underwriters, of such offering the offering or inclusion of
the Option Shares would interfere materially with the successful marketing of
the shares of Common Stock offered by Issuer, the number of Option Shares
otherwise to be covered in the registration statement contemplated hereby may be
reduced; provided, however, that after any such required reduction the number of
-------- -------
Option Shares to be included in such offering for the account of Grantee shall
constitute at least 33 1/3% of the total number of shares of Grantee and Issuer
covered in such registration statement; provided further, however, that if such
-------- ------- -------
reduction occurs, then Issuer shall file a registration statement for the
balance as promptly as practicable thereafter as to which no reduction pursuant
to this Section 6(a) shall be permitted or occur and the Grantee shall
thereafter be entitled to one additional registration statement. Grantee shall
provide all information reasonably requested by
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Issuer for inclusion in any registration statement to be filed hereunder. In
connection with any such registration, Issuer and Grantee shall provide each
other with representations, warranties, indemnities and other agreements
customarily given in connection with such registration. If requested by Grantee
in connection with such registration, Issuer and Grantee shall become a party to
any underwriting agreement relating to the sale of such shares, but only to the
extent of obligating themselves in respect of representations, warranties,
indemnities and other agreements customarily included in such underwriting
agreements. Notwithstanding the foregoing, if Grantee revokes any exercise
notice or fails to exercise any Option with respect to any exercise notice
pursuant to Section 2(e), Issuer shall not be obligated to continue any
registration process with respect to the sale of Option Shares issuable upon the
exercise of such Option and Grantee shall not be deemed to have demanded
registration of Option Shares.
(b) In the event that Grantee requests Issuer to file a registration
statement following the failure to obtain any approval required to exercise the
Option as described in Section 9, the closing of the sale or other disposition
of the Common Stock or other securities pursuant to such registration statement
shall occur substantially simultaneously with the exercise of the Option.
SECTION 7. (a) Upon the occurrence of a "Repurchase Event" (as
defined in Section 7(e) below) that occurs prior to an Exercise Termination
Event, (i) at the request (the date of such request being the "Option Repurchase
Request Date") of Grantee, Issuer shall repurchase the Option from Grantee at a
price (the "Option Repurchase Price") equal to the amount by which (A) the
market/offer price (as defined below) exceeds (B) the Option Price, multiplied
by the number of shares for which the Option may then be exercised, plus (C) the
amount of the documented expenses incurred by Grantee in connection with the
Plan and the transactions contemplated thereby, including reasonable accounting
and legal fees and (ii) at the request (the date of such request being the
"Option Share Repurchase Request Date") of the owner of Option Shares from time
to time (the "Owner"), Issuer shall repurchase such number of the Option Shares
from the Owner as the Owner shall designate at a price (the "Option Share
Repurchase Price") equal to the market/offer price multiplied by the number of
Option Shares so designated. The term "market/offer price" shall mean the
highest of (i) the price per share of Common Stock at which a tender offer or
exchange offer therefor has been made after the date hereof and on or prior to
the Option Repurchase Request Date or the Option Share Repurchase Request Date,
as the case may be, (ii) the price per share of Common Stock paid or to be paid
by any third party pursuant to an agreement with Issuer (whether by way of a
merger, consolidation or otherwise), (iii) the highest last sale price for
shares of Common Stock within the 360-day period ending on the Option Repurchase
Request Date or the Option Share Repurchase Request Date, as the case may be,
which is reported by The Wall Street Journal or, if not reported thereby,
-----------------------
another authoritative source, (iv) in the event of a sale of all or
substantially all of Issuer's assets, the sum of the price paid in such sale for
such assets and the current market value of the remaining assets of Issuer as
determined by a nationally recognized independent investment banking firm
selected by Grantee or the Owner, as the case may be, divided by the number of
shares of
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Common Stock of Issuer outstanding at the time of such sale. In determining the
market/offer price, the value of consideration other than cash shall be the
value determined by a nationally recognized independent investment banking firm
selected by Grantee or the Owner, as the case may be, whose determination shall
be conclusive and binding on all parties.
(b) Grantee or the Owner, as the case may be, may exercise its right
to require Issuer to repurchase the Option and/or any Option Shares pursuant to
this Section 7 by surrendering for such purpose to Issuer, at its principal
office, a copy of this Agreement or certificates for Option Shares, as
applicable, accompanied by a written notice or notices stating that Grantee or
the Owner, as the case may be, elects to require Issuer to repurchase the Option
and/or the Option Shares in accordance with the provisions of this Section 7.
As promptly as practicable, and in any event within five business days after the
surrender of the Option and/or certificates representing Option Shares and the
receipt of such notice or notices relating thereto, Issuer shall deliver or
cause to be delivered to Grantee the Option Repurchase Price to the Owner the
Option Share Repurchase Price or the portion thereof that Issuer is not then
prohibited from so delivering under applicable law and regulation or as a
consequence of administrative policy.
(c) Issuer hereby undertakes to use its best efforts to obtain all
required regulatory and legal approvals and to file any required notices as
promptly as practicable in order to accomplish any repurchase contemplated by
this Section 7. Nonetheless, to the extent that Issuer is prohibited under
applicable law or regulation, or as a consequence of administrative policy, from
repurchasing any Option and/or any Option Shares in full, Issuer shall promptly
so notify Grantee and/or the Owner and thereafter deliver or cause to be
delivered, from time to time, to Grantee and/or the Owner, as appropriate, the
portion of the Option Repurchase Price and the Option Share Repurchase Price,
respectively, that it is no longer prohibited from delivering, within five
business days after the date on which Issuer is no longer so prohibited;
provided, however, that if Issuer at any time after delivery of a notice of
-------- -------
repurchase pursuant to Section 7(b) is prohibited under applicable law or
regulation, or as a consequence of administrative policy, from delivering to
Grantee and/or the Owner, as appropriate, the Option Repurchase Price or the
Option Share Repurchase Price, respectively, in full, Grantee or the Owner, as
appropriate, may revoke its notice of repurchase of the Option or the Option
Shares either in whole or in part whereupon, in the case of a revocation in
part, Issuer shall promptly (i) deliver to Grantee and/or the Owner, as
appropriate, that portion of the Option Purchase Price or the Option Share
Repurchase Price that Issuer is not prohibited from delivering after taking into
account any such revocation and (ii) deliver, as appropriate, either (A) to
Grantee, a new Agreement evidencing the right of Grantee to purchase that number
of shares of Common Stock equal to the number of shares of Common Stock
purchasable immediately prior to the delivery of the notice of repurchase less
than the number of shares of Common Stock covered by the portion of the Option
repurchased or (B) to the Owner, a certificate for the number of Option Shares
covered by the revocation.
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<PAGE>
(d) Issuer shall not enter into any agreement with any party (other
than Grantee or a Grantee Subsidiary) for an Acquisition Transaction unless the
other party thereto assumes all the obligations of Issuer pursuant to this
Section 7 in the event that Grantee or the Owner elects, in its sole discretion,
to require such other party to perform such obligations.
(e) The term "Repurchase Event" shall mean (i) any person (other than
Grantee or a Grantee Subsidiary) shall have acquired "Beneficial Ownership," as
that term has the meaning set forth in Section 13(d) of the Securities Exchange
Act, of 50% or more of the then outstanding shares of Common Stock of Foothill,
or (ii) the consummation of an Acquisition Transaction, except that the
percentage referred to in clause (z) of Section 2(b)(i) shall be 50%.
SECTION 8. (a) In the event that prior to an Exercise Termination
Event, Issuer shall enter into an agreement (i) to consolidate or merge with any
person, other than Grantee or a Grantee Subsidiary, and shall not be the
continuing or surviving corporation of such consolidation or merger, (ii) to
permit any person, other than Grantee or a Grantee Subsidiary, to merge into
Issuer and Issuer shall be the continuing or surviving corporation, but, in
connection with such merger, the then outstanding shares of Common Stock shall
be changed into or exchanged for stock or other securities of any other person
or cash or any other property or the then outstanding shares of Common Stock
shall after such merger represent less than 50% of the outstanding shares and
share equivalents of the merged company, or (iii) to sell or otherwise transfer
all or substantially all of its or any Material Subsidiary's assets to any
person, other than Grantee or a Grantee Subsidiary, then, and in each such case,
the agreement governing such transaction shall make proper provision so that the
Option shall, upon the consummation of such transaction and upon the terms and
conditions set forth herein, be converted into, or exchanged for, an option (the
"Substitute Option"), at the election of Grantee, of either (x) the Acquiring
Corporation (as defined below) or (y) any person that controls the Acquiring
Corporation (the Acquiring Corporation and any such controlling person being
hereinafter referred to as the "Substitute Option Issuer").
(b) The Substitute Option shall be exercisable for such number of
shares of the Substitute Common Stock (as is hereinafter defined) as is equal to
the market/offer price (as defined in Section 7) multiplied by the number of
shares of the Issuer Common Stock for which the Option was theretofore
exercisable, divided by the Average Price (as is hereinafter defined). The
exercise price of the Substitute Option per share of the Substitute Common Stock
(the "Substitute Purchase Price") shall then be equal to the Option Price
multiplied by a fraction in which the numerator is the number of shares of the
Issuer Common Stock for which the Option was theretofore exercisable and the
denominator is the number of shares for which the Substitute Option is
exercisable.
(c) The Substitute Option shall otherwise have the same terms as the
Option, provided that if the terms of the Substitute Option cannot, for legal
--------
reasons, be the same as the Option, such terms shall be as similar as possible
and in no event less
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<PAGE>
advantageous to Grantee, provided further that the terms of the Substitute
-------- -------
Option shall include (by way of example and not limitation) provisions for the
repurchase of the Substitute Option and Substitute Common Stock by the
Substitute Option Issuer on the same terms and conditions as provided in
Section 7.
(d) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean (i) the continuing or
surviving corporation of a consolidation or merger with Issuer (if other
than Issuer), (ii) Issuer in a merger in which Issuer is the continuing or
surviving person, and (iii) the transferee of all or any substantial part
of the Issuer's assets (or the assets of any Issuer subsidiary);
(ii) "Substitute Common Stock" shall mean the common stock issued
by the Substitute Option Issuer upon exercise of the Substitute Option; and
(iii) "Average Price" shall mean the average closing price of a
share of the Substitute Common Stock for the one year immediately preceding
the consolidation, merger or sale in question, but in no event higher than
the closing price of the shares of the Substitute Common Stock on the day
preceding such consolidation, merger or sale; provided that if Issuer is
the issuer of the Substitute Option, the Average Price shall be computed
with respect to a share of common stock issued by Issuer, the person
merging into Issuer or by any company which controls or is controlled by
such merging person, as Grantee may elect.
(e) In no event, pursuant to any of the foregoing paragraphs, shall
the Substitute Option be exerciseable for more than 18.89% of the aggregate of
the shares of the Substitute Common Stock outstanding immediately prior to the
issuance of the Substitute Option. In the event that the Substitute Option
would be exercisable for more than 18.89% of the aggregate of the shares of
Substitute Common Stock but for this clause (e), the Substitute Option Issuer
shall make a cash payment to Grantee equal to the excess of (i) the value of the
Substitute Option without giving effect to the limitation in this clause (e)
over (ii) the value of the Substitute Option after giving effect to the
limitation in the clause (e). This difference in value shall be determined by a
nationally recognized investment banking firm selected by Grantee and the
Substitute Option Issuer.
SECTION 9. Notwithstanding Sections 2, 6 and 7, if Grantee has given
the notice referred to in one or more of such Sections, the exercise of the
rights specified in any such Section shall be extended (a) if the exercise of
such rights requires obtaining regulatory approvals (including any required
waiting periods) to the extent necessary to obtain all regulatory approvals for
the exercise of such rights, and (b) to the extent necessary to avoid liability
under Section 16(b) of the Securities Exchange Act by reason of such exercise;
provided that in no event shall any closing date occur more than 18 months after
--------
the related Notice Date, and, if the closing date shall not have occurred within
such period due to the failure to obtain any required approval by the Federal
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Reserve Board or any other Governmental Authority despite the best efforts of
Issuer or the Substitute Option Issuer, as the case may be, to obtain such
approvals, the exercise of the Option shall be deemed to have been rescinded as
of the related Notice Date. In the event (a) Grantee receives official notice
that an approval of the Federal Reserve Board or any other Governmental
Authority required for the purchase and sale of the Option Shares will not be
issued or granted or (b) a closing date has not occurred within 18 months after
the related Notice Date due to the failure to obtain any such required approval,
Grantee shall be entitled to exercise the Option in connection with the resale
of the Option Shares pursuant to a registration statement as provided in Section
6. Nothing contained in this Agreement shall restrict Grantee from specifying
alternative means of exercising rights pursuant to Sections 2, 6 or 7 hereof in
the event that the exercising of any such rights shall not have occurred due to
the failure to obtain any required approval referred to in this Section 9.
SECTION 10. Issuer hereby represents and warrants to Grantee as
follows:
(a) Issuer has the requisite corporate power and authority to execute
and deliver this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly approved by the Board of
Directors of Issuer and no other corporate proceedings on the part of Issuer are
necessary to authorize this Agreement or to consummate the transactions so
contemplated. This Agreement has been duly executed and delivered by, and
constitutes a valid and binding obligation of, Issuer, enforceable against
Issuer in accordance with its terms, except as enforceability thereof may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium and
other similar laws affecting the enforcement of creditors' rights generally and
except that the availability of the equitable remedy of specific performance or
injunctive relief is subject to the discretion of the court before which any
proceeding may be brought; and
(b) Issuer has taken all necessary corporate action to authorize and
reserve and to permit it to issue, and at all times from the date hereof through
the termination of this Agreement in accordance with its terms will have
reserved for issuance upon the exercise or the Option, that number of shares of
Common Stock equal to the maximum number of shares of Common Stock at any time
and from time to time issuable hereunder, at all such shares, upon issuance
pursuant hereto, will be duly authorized, validly issued, fully paid, non-
assessable, and will be delivered free and clear of all claims, liens,
encumbrances and security interests and not subject to any preemptive rights.
SECTION 11. (a) Neither of the parties hereto may assign any of its
rights or delegate any of its obligations under this Agreement or the Option
created hereunder to any other person without the express written consent of the
other party, except that Grantee may assign this Agreement to a wholly owned
subsidiary of Grantee and Grantee may assign its rights hereunder in whole or in
part after the occurrence of a Preliminary Purchase Event.
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<PAGE>
(b) Any assignment of rights of Grantee to any permitted assignee of
Grantee hereunder shall bear the restrictive legend at the beginning thereof
substantially as follows:
The transfer of the option represented by this assignment and the
related option agreement is subject to resale restrictions
arising under the Securities Act of 1933, as amended, and to
certain provisions of an agreement between Norwest Corporation
and Foothill Group, Inc. ("Issuer"), dated as of the _____ day of
_____________, 1995. A copy of such agreement is on file at the
principal office of Issuer and will be provided to any permitted
assignee of the Option without change upon receipt by Issuer of a
written request therefor.
It is understood and agreed that (i) the reference to the resale restrictions of
the Securities Act in the above legend shall be removed by delivery of
substitute assignments without such reference if Grantee shall have delivered to
Issuer a copy of a letter from the staff of the SEC, or an opinion of counsel,
in form and substance satisfactory to Issuer, to the effect that such legend is
not required for purposes of the Securities Act; (ii) the reference to the
provisions of this Agreement in the above legend shall be removed by delivery of
substitute assignments without such reference if the Option has been sold or
transferred in compliance with the provisions of this Agreement and under
circumstances that do not require the retention of such reference; and (iii) the
legend shall be removed in its entirety if the conditions in the preceding
clauses (i) and (ii) are both satisfied. In addition, such assignments shall
bear any other legend as may be required by law.
SECTION 12. Each of Grantee and Issuer will use its reasonable
efforts to make all filings with, and to obtain consents of, all third parties
and Governmental Authorities necessary to the consummation of the transactions
contemplated by this Agreement, including, without limitation, if necessary,
applying to the Federal Reserve Board under the BHC Act for approval to acquire
the shares issuable hereunder.
SECTION 13. The parties hereto acknowledge that damages would be an
inadequate remedy for a breach of this Agreement by either party hereto and that
the obligations of the parties shall hereto be enforceable by either party
hereto through injunctive or other equitable relief. Both parties further agree
to waive any requirement for the securing or posting of any bond in connection
with the obtaining of any such equitable relief and that this provision is
without prejudice to any other rights that the parties hereto may have for any
failure to perform this Agreement.
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<PAGE>
SECTION 14. If any term, provision, covenant or restriction contained
in this Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions and covenants and restrictions contained in this Agreement
shall remain in full force and effect, and shall in no way be affected, impaired
or invalidated. If for any reason such court or regulatory agency determines
that Grantee is not permitted to acquire, or Issuer is not permitted to
repurchase pursuant to Section 7, the full number of shares of Common Stock
provided in Section 1(a) (as adjusted pursuant hereto), it is the express
intention of Issuer to allow Grantee to acquire or to require Issuer to
repurchase such lesser number of shares as may be permissible, without any
amendment or modification hereof.
SECTION 15. All notices, requests, claims, demands and other
communications hereunder shall be deemed to have been duly given when delivered
in person, by cable, telegram, telecopy or telex, or by registered or certified
mail (postage prepaid, return receipt requested) at the respective addresses of
the parties set forth in the Plan.
SECTION 16. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware.
SECTION 17. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement and shall be effective at the time
of execution.
SECTION 18. Except as otherwise expressly provided herein, each of
the parties hereto shall bear and pay all costs and expenses incurred by it or
on its behalf in connection with the transactions contemplated hereunder,
including fees and expenses of its own financial consultants, investment
bankers, accountants and counsel.
SECTION 19. Except as otherwise expressly provided herein or in the
Plan, this Agreement contains the entire agreement between the parties with
respect to the transactions contemplated hereunder and supersedes all prior
arrangements or understandings with respect thereof, written or oral. The terms
and conditions of this Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and permitted assigns.
Nothing in this Agreement, expressed or implied, is intended to confer upon any
party, other than the parties hereto, and their respective successors except as
assigns, any rights, remedies, obligations or liabilities under or by reason of
this Agreement, except as expressly provided herein.
SECTION 20. Capitalized terms used in this Agreement and not defined
herein but defined in the Plan shall have the meanings assigned thereto in the
Plan.
SECTION 21. Nothing contained in this Agreement shall be deemed to
authorize Issuer or Grantee to breach any provision of the Plan.
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SECTION 22. In the event that any selection or determination is to be
made by Grantee or the Owner hereunder and at the time of such selection or
determination there is more than one Grantee or Owner, such selection shall be
made by a majority in interest of such Grantee or Owners.
SECTION 23. In the event of any exercise of the option by Grantee,
Issuer and such Grantee shall execute and deliver all other documents and
instruments and take all other action that may be reasonably necessary in order
to consummate the transactions provided for by such exercise.
SECTION 24. Except to the extent Grantee exercises the Option,
Grantee shall have no rights to vote or receive dividends or have any other
rights as a shareholder with respect to shares of Common Stock covered hereby.
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IN WITNESS WHEREOF, each of the parties has caused this Stock Option
Agreement to be executed on its behalf by their officers thereunto duly
authorized, all as of the date first above written.
NORWEST CORPORATION
By: /s/ James R. Campbell
----------------------------
Name: James R. Campbell
Title: Executive Vice President
FOOTHILL GROUP, INC.
By: /s/ Jon L. Gevirtz
----------------------------
Name: Jon L. Gevirtz
Title: Chairman of the Board and
Chief Executive Officer
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