<PAGE> 1
As filed with the Securities and Exchange Commission on January 26, 1994
Registration No. 33-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------
Form S-4
REGISTRATION STATEMENT
Under
The Securities Act of 1933
-------------------------
Norwest Corporation
(Exact name of registrant as specified in its charter)
-------------------------
Delaware (6711)
(State or other (Primary Standard Industrial 41-0449260
jurisdiction of Classification Code Number) (I.R.S. Employer
incorporation or Identification No.)
organization)
Norwest Center
Sixth and Marquette
Minneapolis, Minnesota 55479-1000
612-667-1234
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
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, including zip code, and telephone
number, including area code, of agent for service)
Copy to:
Steve R. Wagner
Assistant General Counsel
Norwest Financial, Inc.
206 Eighth Street
Des Moines, Iowa 50309
Approximate date of commencement of proposed sale of the securities to the
public: As soon as practicable after the effective date of the Registration
Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
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| | Proposed | Proposed |
| Amount | Maximum | Maximum |
Title of Securities | to be |Offering Price| Aggregate | Amount of
to be Registered | Registered | Per Share |Offering Price |Registration Fee
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<S> <C> <C> <C> <C>
Common Stock (par | 3,727,000 | N/A | $38,401,000(2) | $13,241.72
value $1 2/3 per | Shares | | |
share)(1)........ | | | |
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(1) Each share of the registrant's common stock includes one preferred stock
purchase right.
(2) Estimated solely for purposes of computing the registration fee, in
accordance with Rule 457(f)(2), based upon the book value, as of
September 30, 1993, of all shares of common stock to be acquired by the
registrant in the transactions described herein.
------------
The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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NORWEST CORPORATION
CROSS REFERENCE SHEET
Pursuant to Regulation S-K, Item 501(b)
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Form S-4 Item Proxy Statement-Prospectus Heading
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1. Forepart of Registration Statement
and Outside Front Cover Page of
Prospectus...................... Facing Page of Registration
Statement; Outside Front Cover
Page of Proxy
2. Inside Front and Outside Back Cover
Pages of Prospectus............. Available Information; Incorporation
of Certain Information by
Reference; Table of Contents
3. Risk Factors, Ratio of Earnings to
Fixed Charges and Other
Information..................... Summary
4. Terms of the Transaction.......... Summary; The Merger
5. Pro Forma Financial Information... *
6. Material Contracts with the
Company Being Acquired.......... The Merger
7. Additional Information Required
for Reoffering by Persons and
Parties Deemed to be
Underwriters.................... *
8. Interests of Named Experts and
Counsel......................... Experts; Legal Opinions
9. Disclosure of Commission Position
on Indemnification for Securities
Act Liabilities................. *
10. Information with Respect to S-3
Registrants..................... Incorporation of Certain Information
by Reference; Summary; The
Merger; Information about
Norwest-Recent Operating Results;
Certain Regulatory Considerations
11. Incorporation of Certain Information
by Reference.................... Incorporation of Certain Information
by Reference; Management and
Additional Information
12. Information with Respect to S-2 or
S-3 Registrants................. *
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13. Incorporation of Certain
Information by Reference........ *
14. Information with Respect to
Registrants Other Than S-3 or
S-2 Registrants................. *
15. Information with Respect to S-3
Companies....................... *
16. Information with Respect to S-2 or
S-3 Companies................... *
17. Information with Respect to
Companies Other Than S-3 or
S-2 Companies................... Summary--Selected Financial Data;
Summary--The Companies;
Summary--Comparative Unaudited Per
Share Data; Information About
Community; Certain Regulatory
Considerations
18. Information if Proxies, Consents
or Authorizations are to be
Solicited....................... Summary; Meeting Information;
Management and Additional
Information
19. Information if Proxies, Consents
or Authorizations are not to
be Solicited or in an Exchange
Offer........................... *
</TABLE>
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*Item is omitted because answer is negative or item is inapplicable.
<PAGE> 4
COMMUNITY CREDIT CO.
3101 W. 69th Street
Edina, Minnesota 55435
------- ---, 1994
Dear Shareholder:
The Board of Directors cordially invites you to attend a Special Meeting of
Shareholders of Community Credit Co. ("Community") to be held at the principal
executive office of Community, 3101 W. 69th Street, Edina, Minnesota, on
- --------, February --, 1994, commencing at 2:00 p.m., local time.
At this important meeting, you will be asked to consider and vote on, among
other things, the Agreement and Plan of Reorganization (the "Merger Agreement")
providing for a merger transaction (the "Merger") whereby Community will become
a wholly-owned subsidiary of Norwest Corporation ("Norwest").
In the merger, you will receive approximately 1.1996 shares of Norwest
Common Stock, plus cash in lieu of fractional shares, for each of your shares
of Community Common Stock. The transaction is intended to be free from federal
income taxation to the extent you receive solely Norwest Common Stock in
exchange for your shares of Community Common Stock.
The Community Board of Directors has approved the Merger Agreement as being
in the best interests of Community and its shareholders and recommends that
shareholders vote FOR approval of the Merger Agreement.
A Notice of the Special Meeting and a Proxy Statement-Prospectus containing
detailed information concerning the Merger are attached. We urge you to
carefully review these materials before completing the enclosed proxy card.
It is a condition to the consummation of the Merger that the Merger
Agreement receive the approval of the holders of a majority of the outstanding
shares of Community Common Stock. A failure to vote will have the same effect
as a vote against the Merger Agreement. Accordingly, it is important that your
shares be represented at the Special Meeting whether or not you plan to attend
the Special Meeting in person. Therefore, we urge you to complete, sign and
date the enclosed proxy card and return it in the accompanying pre-addressed
envelope, which requires no postage if mailed within the United States. You
are, of course, welcome to attend the Special Meeting and to vote your shares
in person.
Should you require assistance in completing your proxy card or if you have
questions about the voting procedure or the accompanying Proxy
Statement-Prospectus, please feel free to contact me at (612)920-9270.
Ernest F. Dorn, Jr.
Chairman
<PAGE> 5
COMMUNITY CREDIT CO.
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders of Community
Credit Co., a Minnesota corporation ("Community"), will be held at the
principal executive office of Community, 3101 W. 69th Street, Edina, Minnesota,
on --------, February --, 1994, at 2:00 p.m., local time, for the following
purpose:
1. To consider and vote upon the Agreement and Plan of
Reorganization dated as of November 23, 1993 (together with the Agreement
and Plan of Merger attached thereto, the "Merger Agreement") between
Community and Norwest Corporation, a Delaware corporation ("Norwest"), a
copy of which Merger Agreement is included in the accompanying Proxy
Statement-Prospectus as Appendix A, under the terms of which Community
would be merged (the "Merger") with a new Minnesota corporation to be
formed by Norwest, with Community as the surviving corporation, and each
outstanding share of common stock of Community, $1.00 par value, would be
converted into approximately 1.1996 shares of the common stock, par value
$1 2/3 per share, of Norwest; and to authorize such further action by the
Board of Directors and proper officers of Community as may be necessary or
appropriate to carry out the intent and purposes of the Merger Agreement.
2. To consider and vote upon an amendment to Article III, Section
3.02 of the Bylaws of Community (to be effective as of the effective time
of the Merger) to reduce the number of directors to three.
3. To consider and vote upon the following persons to be elected
(effective as of the effective time of the Merger) as directors of
Community; Steve R. Wagner, Gary M. Poetting and Faye L. Kunz.
4. To ratify all actions taken by the officers and directors of
Community since the last annual meeting of shareholders.
5. To transact such other business as may properly come before the
meeting or any adjournments or postponements thereof.
Only holders of Community Common Stock of record at the close of business
on February 1, 1994, will be entitled to notice of and to vote at the Special
Meeting or any adjournments or postponements thereof.
Your attention is directed to the Proxy Statement-Prospectus accompanying
this notice for a more complete statement regarding the matters to be acted
upon at the Special Meeting.
By Order of the Board of Directors
Ernest F. Dorn, Jr.
- ------- ----, 1994 Chairman
<PAGE> 6
IMPORTANT NOTICES
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE MARK, SIGN,
DATE AND RETURN THE ENCLOSED PROXY AS SOON AS POSSIBLE IN THE ENCLOSED
ENVELOPE.
THE BOARD OF DIRECTORS OF COMMUNITY RECOMMENDS THAT THE SHAREHOLDERS VOTE
TO APPROVE THE MERGER AGREEMENT AND THE MERGER CONTEMPLATED THEREBY.
PLEASE DO NOT SEND ANY CERTIFICATES FOR YOUR COMMUNITY COMMON STOCK AT THIS
TIME.
<PAGE> 7
PROXY STATEMENT
of
COMMUNITY CREDIT CO.
FOR SPECIAL MEETING OF SHAREHOLDERS
To Be Held On February --, 1994
PROSPECTUS
of
NORWEST CORPORATION
Common Stock
This Prospectus of Norwest Corporation ("Norwest") relates to 3,727,000
shares of common stock, par value $1 2/3 per share, of Norwest ("Norwest Common
Stock") issuable to the shareholders of Community Credit Co. ("Community") upon
consummation of the proposed merger (the "Merger") of Community with a
wholly-owned corporation to be formed under Minnesota law by Norwest ("Merger
Co.") for purposes of effecting the Merger, with Community as the surviving
corporation, pursuant to the terms of an Agreement and Plan of Reorganization
between Norwest and Community, dated as of November 23, 1993 (together with the
Agreement and Plan of Merger attached thereto, the "Merger Agreement"). The
Merger Agreement is set forth in Appendix A and incorporated herein by
reference.
This Prospectus also serves as the Proxy Statement of Community for the
Special Meeting of Shareholders to be held on February --, 1994 (the "Special
Meeting") to approve the Merger Agreement and certain other proposals described
herein.
Upon consummation of the Merger, each outstanding share of common stock of
Community ("Community Common Stock"), will be converted into approximately
1.1996 shares of Norwest Common Stock (the "Exchange Ratio") plus cash in lieu
of fractional shares. For a more complete description of the Merger Agreement
and the terms of the Merger, see "THE MERGER."
The outstanding shares of Norwest Common Stock are, and the shares offered
hereby will be, listed on the New York Stock Exchange ("NYSE") and the Chicago
Stock Exchange ("CSE"). The last reported sale price of Norwest Common Stock
on the NYSE Composite Tape on ------- ----, 1994 was $----- per share.
This Proxy Statement-Prospectus and the form of proxy are first being
mailed to shareholders of Community on or about ------- ---, 1994.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT-PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Proxy Statement-Prospectus is ------- ---, 1994.
<PAGE> 8
AVAILABLE INFORMATION
Norwest is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Reports, proxy
statements and other information concerning Norwest can be inspected and copied
at the Commission's public reference room located at Room 1024, 450 Fifth
Street, N.W., Washington D.C. 20549, and at the public reference facilities in
the Commission's regional offices located at Seven World Trade Center, Suite
1300, New York, New York 10048, and at 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511. Copies of such material can be obtained at
prescribed rates by writing to the Commission, Public Reference Section, 450
Fifth Street, N.W., Washington, D.C. 20549. Reports, proxy statements and
other information filed by Norwest with the New York Stock Exchange and the
Chicago Stock Exchange may be inspected at the offices of the New York Stock
Exchange, 20 Broad Street, New York, New York 10005, and at the offices of the
Chicago Stock Exchange, One Financial Place, 440 South LaSalle Street, Chicago,
Illinois 60605.
This Proxy Statement-Prospectus does not contain all of the information set
forth in the Registration Statement on Form S-4 and exhibits thereto (the
"Registration Statement") covering the securities offered hereby which Norwest
has filed with the Commission. Certain portions of the Registration Statement
have been omitted pursuant to the rules and regulations of the Commission.
Reference is hereby made to such omitted portions for further information with
respect to Norwest and the securities offered hereby.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
This Proxy Statement-Prospectus incorporates documents by reference which
are not presented herein or delivered herewith. Documents relating to Norwest,
excluding exhibits unless specifically incorporated herein, are available
without charge upon written or oral request to Laurel A. Holschuh, Secretary,
Norwest Corporation, Norwest Center, Sixth and Marquette, Minneapolis,
Minnesota 55479-1026, (612)667-8655. In order to ensure timely delivery of the
documents, any request should be made by February ----, 1994.
The following documents filed with the Commission by Norwest (file No.
1-2979) are incorporated herein by reference: (a) Annual Report on Form 10-K
for the year ended December 31, 1992, as amended by Amendment No. 1 on Form 8
dated March 3, 1993; (b) Quarterly Reports on Form 10-Q for the quarters ended
March 31, June 30, and September 30, 1993; (c) Current Reports on Form 8-K
dated February 8, 1993, March 12, 1993, June 28, 1993, August 10, 1993, August
31, 1993, September 15, 1993, September 27, 1993, October 25, 1993 and December
29, 1993; (d) Registration Statement on Form 8-A filed December 6, 1988, as
amended by Amendment No. 1 on Form 8 filed on July 21, 1989; (e) Registration
Statement on Form 8-A dated December 21, 1990; and (f) Registration Statement
on Form 8-A dated August 8, 1991.
All documents filed by Norwest pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date hereof and prior to the
Special Meeting shall be deemed to be incorporated herein by reference and to
be a part hereof from the date of such filing. Any statement contained in a
document incorporated or deemed to be incorporated herein by reference shall
be deemed to be modified or superseded for purposes hereof to the extent that
a statement contained herein or in any other subsequently filed document which
also is, or is deemed to be, incorporated herein by reference modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part hereof.
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Table of Contents
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Page
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AVAILABLE INFORMATION................................................ 2
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE.................... 2
SUMMARY.............................................................. 5
The Companies.................................................... 5
The Merger....................................................... 6
The Special Meeting and Vote Required............................ 6
Dissenters' Rights............................................... 7
Community's Reasons for the Merger; Recommendation of the
Community Board of Directors................................... 7
Effective Date and Time of the Merger............................ 8
Conditions and Termination....................................... 8
Regulatory Approvals............................................. 8
Management and Operations After the Merger....................... 9
Accounting Treatment............................................. 9
Agreements for Voting Community Common Stock..................... 9
Certain Federal Income Tax Consequences.......................... 9
Markets and Market Prices........................................ 9
Comparative Unaudited Per Share Data............................. 10
Selected Financial Data.......................................... 13
MEETING INFORMATION.................................................. 16
General.......................................................... 16
Date, Place and Time............................................. 16
Record Date; Vote Required....................................... 16
Principal Shareholders and Security Ownership of Management...... 17
Voting and Revocation of Proxies................................. 18
Solicitation of Proxies.......................................... 19
Dissenters' Rights............................................... 19
THE MERGER........................................................... 21
Background and Reasons for the Merger............................ 21
Terms of the Merger.............................................. 22
Effective Date and Time of the Merger............................ 23
Surrender of Certificates........................................ 23
Conditions to the Merger......................................... 24
Regulatory Approvals............................................. 26
Business of Community Pending the Merger......................... 26
Waiver, Amendment and Termination................................ 27
Management and Operations of Community After the Merger.......... 28
Certain Transactions............................................. 28
Effect on Employee Benefits and Stock Plans...................... 28
Certain Differences in Rights of Stockholders.................... 30
Certain Federal Income Tax Consequences.......................... 40
Resale of Norwest Common Stock................................... 42
Dividend Reinvestment and Optional Cash Payment Plan............. 43
Accounting Treatment............................................. 43
Expenses......................................................... 43
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Page
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INFORMATION ABOUT NORWEST - RECENT OPERATING RESULTS................. 44
INFORMATION ABOUT COMMUNITY.......................................... 46
CERTAIN REGULATORY CONSIDERATIONS.................................... 60
MANAGEMENT AND ADDITIONAL INFORMATION................................ 65
EXPERTS.............................................................. 65
LEGAL OPINIONS....................................................... 65
CONSOLIDATED FINANCIAL STATEMENTS OF COMMUNITY....................... F-1
APPENDIX A -- AGREEMENT AND PLAN OF REORGANIZATION AND
AGREEMENT AND PLAN OF MERGER........................... A-1
APPENDIX B -- MINNESOTA DISSENTERS' RIGHTS: SECTIONS
302A.471 AND 302A.473 OF THE MINNESOTA
BUSINESS CORPORATION ACT............................... B-1
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION
NOT CONTAINED IN THIS PROXY STATEMENT-PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION SHOULD NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY COMMUNITY OR NORWEST. THIS PROXY STATEMENT-PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO PURCHASE, THE
SOLICITATION OF A PROXY, IN ANY JURISDICTION TO OR FROM ANY PERSON TO WHOM OR
FROM WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE
DELIVERY OF THIS PROXY STATEMENT-PROSPECTUS NOR ANY DISTRIBUTION OF SECURITIES
MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF NORWEST OR COMMUNITY SINCE THE DATE
OF THIS PROXY STATEMENT-PROSPECTUS.
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SUMMARY
The following summary is not intended to be complete and is qualified
in all respects by the more detailed information included in this Proxy
Statement-Prospectus, the Appendices hereto and the documents incorporated
herein by reference. As used in this Proxy Statement-Prospectus, the terms
"Norwest" and "Community" refer to such corporations, respectively, and where
the context requires, such entities and their respective subsidiaries. All
information concerning Norwest included in this Proxy Statement-Prospectus has
been furnished by Norwest and all information concerning Community included in
this Proxy Statement-Prospectus has been furnished by Community. Neither
Norwest nor Community warrants the accuracy or completeness of information
relating to the other.
The Companies
Norwest. Norwest Corporation is a regional bank holding company which
was organized under the laws of Delaware in 1929 and is registered under the
Bank Holding Company Act of 1956, as amended (the "BHCA"). As a diversified
financial services organization, Norwest operates through subsidiaries engaged
in banking and in related businesses. Norwest provides retail, commercial,
and corporate banking services to its customers through banks located in
Arizona, Colorado, Illinois, Indiana, Iowa, Minnesota, Montana, Nebraska,
New Mexico, North Dakota, Ohio, South Dakota, Texas, Wisconsin, and Wyoming.
Norwest provides additional financial services to its customers through
subsidiaries engaged in various businesses, principally mortgage banking,
consumer finance, equipment leasing, agricultural finance, commercial finance,
securities brokerage and investment banking, insurance, computer and data
processing services, trust services, and venture capital investments.
At September 30, 1993, Norwest had consolidated total assets of $50.4
billion, total deposits of $31.6 billion, and total stockholders' equity of
$3.4 billion. Based on total assets at September 30, 1993, Norwest was the
13th largest commercial banking organization in the United States. Norwest
recently completed, through its subsidiary GST Co., the acquisition of First
United Bank Group, Inc. ("First United"), a bank holding company headquartered
in Albuquerque, New Mexico, in exchange for 17,785,447 shares (exclusive of
shares reserved for stock options) of Norwest Common Stock. First United
owned and operated banks in New Mexico and Texas as well as other subsidiaries
engaged in related businesses, and had $3.5 billion in assets at September 30,
1993. See also "INFORMATION ABOUT NORWEST - RECENT OPERATING RESULTS."
Norwest regularly explores opportunities for acquisitions of financial
institutions and related businesses. Generally, management of Norwest does
not make a public announcement about an acquisition until a definitive
agreement has been signed. Norwest has entered into definitive agreements for
the acquisition of various other financial institutions (excluding Community)
having aggregate total assets at September 30, 1993, of approximately
$1.1 billion. Certain of these acquisitions have received regulatory
approval and are expected to be completed in the first quarter of 1994. The
remaining acquisitions are subject to the approval of regulatory authorities
and are also expected to be completed in the first quarter of 1994. None of
these acquisitions are significant to the financial statements of Norwest,
either individually or in the aggregate.
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<PAGE> 12
Norwest's principal executive offices are located at Norwest Center,
Sixth and Marquette, Minneapolis, Minnesota 55479, and its telephone number is
612-667-1234.
Additional information concerning Norwest is included in the Norwest
documents incorporated herein by reference. (See "INCORPORATION OF CERTAIN
INFORMATION BY REFERENCE")
Community. Community is a consumer finance company organized under
the laws of the State of Minnesota in 1946. Its principal executive offices
are located at 3101 W. 69th Street, Edina, Minnesota 55435, and its telephone
number is 612-920-9270. It and its two consumer finance subsidiaries operate
a total of 51 consumer finance offices in Minnesota, Wisconsin and Illinois.
Community also has two subsidiaries engaged in credit life and other insurance
activities. At September 30, 1993, Community had consolidated assets of $170
million and shareholders' equity of $38 million. (See "INFORMATION ABOUT
COMMUNITY" and "CONSOLIDATED FINANCIAL STATEMENTS OF COMMUNITY.")
The Merger
The Merger Agreement provides for the formation of a new Minnesota
corporation to be wholly owned by Norwest ("Merger Co."), and the merger of
Merger Co. into Community, with Community as the surviving corporation. Upon
consummation of the Merger, each outstanding share of Community Common Stock
will be converted into approximately 1.1996 shares of Norwest Common Stock,
plus cash in lieu of fractional shares. See "THE MERGER -- Terms of the
Merger." Each outstanding share of Norwest Common Stock issued and outstanding
at the Effective Time (defined below) will remain outstanding and unchanged.
The Special Meeting and Vote Required
The Special Meeting of Community shareholders to consider and vote on the
Merger and other related proposals described herein will be held at the
principal executive office of Community, 3101 W. 69th Street, Edina,
Minnesota, on -------- February --, 1994, at 2:00 p.m., local time. Only
holders of record of Community Common Stock at the close of business on
February 1, 1994, will be entitled to notice of and to vote at the Special
Meeting. On the record date, there were outstanding and entitled to vote
- --------- shares of Community Common Stock. Each share of Community Common
Stock is entitled to one vote on the Merger Agreement. For additional
information relating to the Special Meeting, see "MEETING INFORMATION."
Approval of the Merger Agreement requires the affirmative vote of the
holders of at least a majority of all outstanding shares of Community Common
Stock. Approval of the Merger Agreement by Norwest stockholders is not
required under Delaware law.
In addition to the Merger Agreement, shareholders of Community will be
asked at the Special Meeting to consider and vote on the following issues:
(a) approval of an amendment to Article III, Section 3.02 of the Bylaws of
Community (to be effective as of the Effective Time) to reduce the number of
directors to three; (b) approval of the following persons to be elected as
directors of Community (to be effective as of the Effective Time): Steve R.
Wagner, Gary M. Poetting and Faye L. Kunz;
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<PAGE> 13
(c) ratification of all actions taken by the officers and directors of
Community since the last annual meeting of shareholders; and (d) and any other
business as may properly come before the Special Meeting.
As of December 31, 1993, directors and executive officers of Community
owned beneficially or controlled the voting of an aggregate of 1,693,571 shares
of Community Common Stock, or approximately 54.5% of the shares of Community
Common Stock outstanding on such date. As of December 31, 1993, neither
Norwest nor any of its directors or executive officers beneficially owned any
shares of Community Common Stock. See "MEETING INFORMATION."
Dissenters' Rights
Section 302A.471 of the Minnesota Business Corporation Act provides
that a shareholder of a Minnesota corporation (such as Community) may dissent
from, and obtain payment for the fair value of such shareholder's shares, plus
interest, in the event of certain corporate actions including the Merger.
Section 302A.473 of the Minnesota Business Corporation Act defines the "fair
value of the shares" to mean the value of the shares of a corporation
immediately before the effective date of any such corporate action. As a
result of these statutory provisions, each holder of Community Common Stock
(determined as of the February 1, 1994 record date) will be entitled to
receive, in cash, the value for such shares, as determined by a state court in
Minnesota, plus interest, provided that the shareholder, prior to the vote,
files with Community a written notice of intent to demand the fair value of the
shares and the shareholder does not vote in favor of the Merger and complies
with certain statutory procedures within time periods specified in the
dissenters' rights provision of Minnesota law. The value of the shares of
Community Common Stock, as determined in any such court proceeding, could be
more than, the same as, or less than the value of the consideration to be
received under the Merger Agreement by the holders of Community Common Stock
who do not dissent from the Merger. See "THE MERGER -- Dissenters' Rights" and
Appendix B hereto.
Community's Reasons for the Merger; Recommendation of the Community Board of
Directors
The Board of Directors of Community has carefully considered the terms of
the Merger Agreement, including all proposals provided for therein, has
approved it as being in the best interests of Community and its shareholders,
and recommends that Community shareholders vote FOR the proposal to approve
the Merger Agreement. In addition, the Board of Directors recommends that
Community shareholders vote FOR the other related proposals being considered
at the Special Meeting in connection with the Merger, all as more fully
discussed herein.
The recommendation of Community's Board of Directors is based upon a
number of factors, including the terms of the Merger, the Merger Agreement,
substantial benefits expected to result from the combination of Community and
Norwest, information concerning the financial condition, results of
operations, and prospects of Norwest and Community on a stand-alone and
combined basis, the Board's view of the relative merits of other opportunities
presented to
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<PAGE> 14
the Board or that the Board believed would be available, including the
possibility of remaining independent, and the market price of Norwest Common
Stock. See "SUMMARY -- Markets and Market Prices" and "THE MERGER --
Background of and Reasons for the Merger".
Community's Board of Directors believes that the Merger is fair to and in
the best interests of Community and the holders of Community Common Stock and
that the terms of the Merger Agreement are attractive in that such agreement
allows Community shareholders to become shareholders in Norwest, an
institution which the Community Board believes has achieved broad geographic
and line of business diversification. See "THE MERGER -- Background of and
Reasons for the Merger."
Effective Date and Time of the Merger
The Merger is expected to become effective at 11:59 p.m. (the "Effective
Time"), Central Standard time, on the date on which the Merger Agreement or
Articles of Merger are filed with the Secretary of State of the State of
Minnesota (the "Effective Date"). Such filing will be made (i) ten
business days following satisfaction or waiver of all conditions precedent set
forth in the Merger Agreement or (ii) on such other date as may be agreed upon
by Norwest and Community. Subject to such conditions, the parties expect the
Merger to become effective in the first quarter of 1994, although there can be
no assurance that this will in fact occur. See "THE MERGER -- Effective Date
and Time of the Merger" and "--Conditions to the Merger."
Conditions and Termination
The respective obligations of Norwest and Community to consummate the
Merger are subject to certain conditions, including the receipt of regulatory
approvals, approval of the Merger Agreement by the shareholders of Community,
receipt by Norwest and Community of certain accounting and tax opinions and
certain other conditions customary in transactions of this nature. See "THE
MERGER -- Conditions to the Merger" and "-- Regulatory Approvals."
The Merger Agreement may be terminated at any time prior to the Effective
Time, whether prior to or after approval by the Community shareholders, by
either party if, among other reasons, the Merger shall not have been
consummated by April 1, 1994, unless such failure of consummation shall be due
to the failure of the party seeking termination to perform its respective
covenants and agreements under the Merger Agreement. See "THE MERGER --
Waiver, Amendment and Termination."
Regulatory Approvals
Consummation of the Merger requires the approval of the Board of
Governors of the Federal Reserve System (the "Federal Reserve Board") under
Section 4 of the Bank Holding Company Act of 1956, as amended (the "BHCA").
In addition, the approvals of the insurance authorities of the States of
Arizona and Vermont (the "State Insurance Authorities") under state insurance
holding company laws are required for consummation of the Merger. Norwest has
filed an application with the Federal Reserve Board and applications for such
- 8 -
<PAGE> 15
approvals with the State Insurance Authorities. There can be no assurance
that the Federal Reserve Board or the State Insurance Authorities will approve
the Merger, or as to the date of such approvals. There can also be no
assurance that any such approval will not contain a condition or requirement
that causes such approval to fail to satisfy the conditions to the
consummation of the Merger. See "THE MERGER -- Regulatory Approvals."
Management and Operations After the Merger
Following the Merger, Norwest intends to transfer Community and its
subsidiaries to Norwest's consumer finance subsidiary, Norwest Financial
Services, Inc. ("Norwest Financial"). Norwest Financial plans to have
Community and its subsidiaries operate at their present locations and to
continue to make the financial services available to their customers. Norwest
Financial also expects to facilitate the expansion of Community's consumer
finance business into additional states. See "THE MERGER -- Management and
Operations of Community After the Merger"
Accounting Treatment
It is intended that the Merger will be accounted for as a "pooling of
interests" by Norwest under generally accepted accounting principles. See
"THE MERGER -- Conditions to the Merger" and -- "Accounting Treatment."
Agreements for Voting Community Common Stock
Ernest F. Dorn, Sr. and Ernest F. Dorn, Jr. have entered into agreements
with Norwest pursuant to which they have agreed, among other things, to vote
all shares of Community Common Stock beneficially owned by them in favor of
the Merger. On December 31, 1993, Ernest F. Dorn, Sr. beneficially owned
832,550 shares of Community Common Stock (approximately 26.8% of the
outstanding shares of Community Common Stock as of such date), and Ernest F.
Dorn, Jr. beneficially owned 125,090 shares of Community Common Stock
(approximately 4.0% of the outstanding shares of Community Common Stock as of
such date).
Certain Federal Income Tax Consequences
It is intended that for federal income tax purposes the Merger will be
treated as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"), and that, accordingly,
(i) no gain or loss will be recognized by Community or Norwest as a result of
the Merger and (ii) no gain or loss will be recognized by Community
stockholders who exchange all of their shares of Community Common Stock solely
for shares of Norwest Common Stock in the Merger, except with respect to any
cash received in lieu of a fractional share interest in Norwest Common Stock.
Consummation of the Merger is dependent upon, among other conditions, receipt
by Community of an opinion of counsel, dated as of the Effective Time,
substantially to the effect set forth above. See "THE MERGER -- Certain
Federal Income Tax Consequences."
Markets and Market Prices
Norwest Common Stock is listed on the NYSE and CSE. Community Common
Stock is not publicly traded and has no established trading market. The
- 9 -
<PAGE> 16
following table sets forth the high and low sales prices of Norwest Common
Stock as reported on the NYSE Composite Transactions Tape and the cash
dividends declared, for the periods indicated.
<TABLE>
<CAPTION>
Norwest Common Stock (1)
-------------------------------------
High Low Dividends
------- ------- ---------
<S> <C> <C> <C>
1992
First Quarter................ $19.06 $16.625 $.125
Second Quarter............... 19.875 17.375 .125
Third Quarter................ 19.875 17.75 .145
Fourth Quarter............... 22.125 18.625 .145
1993
First Quarter................ $26.00 $20.625 $.145
Second Quarter............... 28.38 22.88 .165
Third Quarter................ 28.00 25.625 .165
Fourth Quarter............... 29.00 22.50 .165
1994
First Quarter (through
-----------, 1994)......... $----- $------ $.---
</TABLE>
(1) Market price and dividend information for Norwest Common Stock has been
retroactively adjusted to reflect a 2-for-1 stock split in the form of a
stock dividend paid June 28, 1993 for stockholders of record June 4,
1993.
The closing price per share of Norwest Common Stock and the equivalent
per share price of Community Common Stock (giving effect to the Merger and
assuming conversion of the Community Common Stock at the Exchange Ratio of
1.1996, which is the approximate Exchange Ratio) on November 22, 1993, the
last trading day preceding the signing of the Merger Agreement, were $23.00
and $27.59, respectively.
Community shareholders are advised to obtain current market quotations
for Norwest Common Stock. No assurance can be given concerning the market
price of Norwest Common Stock before or after the Effective Date. The market
price for Norwest Common Stock will fluctuate between the date of this Proxy
Statement-Prospectus and the Effective Date. However, the number of shares of
Norwest Common Stock to be exchanged for outstanding shares of Community
Common Stock is fixed and will not be adjusted to reflect changes in the
market value of Norwest Common Stock or Community Common Stock. The Merger
Agreement may be terminated by Community in certain circumstances relating to
a decrease in the market value of Norwest Common Stock. See "THE MERGER --
Waiver, Amendment and Termination."
Comparative Unaudited Per Share Data
The following table presents selected comparative unaudited per share
data for Norwest Common Stock on a historical and a pro forma combined basis
and for Community Common Stock on a historical and a pro forma equivalent
basis giving effect to the Merger using the pooling-of-interests method of
- 10 -
<PAGE> 17
accounting. For a description of the pooling-of-interests method of
accounting with respect to the Merger and the related effects on the
historical financial statements of Norwest, see "THE MERGER -- Accounting
Treatment." The information is derived from the consolidated historical
financial statements of Norwest including the related notes thereto,
incorporated by reference into this Proxy Statement-Prospectus. This
information should be read in conjunction with such historical financial
statements and the related notes thereto. See "INCORPORATION OF CERTAIN
INFORMATION BY REFERENCE" and "INFORMATION ABOUT COMMUNITY."
These data are not necessarily indicative of the results of the future
operations of the combined entity or the actual results that would have been
achieved had the Merger been consummated prior to the periods indicated.
- 11 -
<PAGE> 18
COMPARATIVE UNAUDITED PER SHARE DATA
<TABLE>
<CAPTION>
Norwest Common Stock Community Common Stock
--------------------- ----------------------
Pro Forma Pro Forma
Historical Combined Historical Equivalent
---------- --------- ---------- ----------
<S> <C> <C> <C> <C>
BOOK VALUE(1):
September 30, 1993.............$10.65 10.65 12.43 12.77
December 31, 1992.............. 9.69 9.68 10.80 11.61
DIVIDENDS DECLARED(2)(3):
Nine Months Ended:
September 30, 1993............. 0.475 0.475 0.750(3) 0.570
Year Ended:
December 31, 1992.............. 0.540 0.540 0.750 0.648
December 31, 1991.............. 0.470 0.470 0.650 0.564
December 31, 1990.............. 0.423 0.423 0.550 0.507
NET INCOME (LOSS)(4):
Nine Months Ended:
September 30, 1993............. 1.53 1.53 1.63 1.84
Year Ended:
December 31, 1992.............. 1.16 1.16 1.91 1.39
December 31, 1991.............. 1.33 1.33 1.56 1.59
December 31, 1990.............. 0.57 0.57 1.36 0.69
</TABLE>
(1) The pro forma combined book values per share of Norwest Common Stock are
based upon the historical total combined common equity for Norwest and
Community, divided by total pro forma common shares of the combined
entity assuming conversion of the Community Common Stock at the exchange
ratio of 1.1996. The pro forma equivalent book values per share of
Community Common Stock represent the pro forma combined amounts
multiplied by 1.1996, which is the approximate Exchange Ratio.
(2) The pro forma equivalent dividends per share of Community Common Stock
represent the cash dividends declared on a share of Norwest Common Stock
multiplied by 1.1996, which is the approximate Exchange Ratio.
(3) A dividend of $1.00 per share of Community Common Stock was declared in
December of 1993.
(4) The pro forma combined net income per share (based on fully diluted
weighted average shares outstanding) is based upon the combined
historical net income for Norwest and Community divided by the pro forma
weighted average common shares of the combined entity. The pro forma
equivalent net income per share of Community Common Stock represents the
pro forma combined net income multiplied by 1.1996, which is the
approximate Exchange Ratio.
- 12 -
<PAGE> 19
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Nine Months Ended
September 30 Year Ended December 31
----------------- -----------------------------------------------
1993 1992 1992(1) 1991 1990(2) 1989(3) 1988
---- ---- ------- ---- ------- ------- ----
(In millions except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
Norwest:
Interest income......... $ 2,768.2 2,680.0 3,587.0 3,802.1 3,690.7 3,440.7 2,948.2
Interest expense........ 1,011.2 1,168.9 1,509.2 2,024.2 2,201.9 2,100.9 1,696.4
-------- -------- -------- -------- -------- -------- --------
Net interest income... 1,757.0 1,511.1 2,077.8 1,777.9 1,489.5 1,339.8 1,251.8
Provision for credit
losses................ 99.6 154.5 266.7 401.9 428.3 225.5 184.0
Non-interest income..... 1,116.5 923.8 1,228.8 1,031.2 872.1 711.9 604.0
Non-interest expenses... 2,090.4 1,775.8 2,436.6 1,939.5 1,666.9 1,455.3 1,359.6
-------- -------- -------- -------- -------- -------- --------
Income before income
taxes............... 683.5 504.6 603.3 467.7 266.4 370.9 312.2
Income tax expense...... 204.9 130.1 163.2 66.8 110.1 96.0 28.4
-------- -------- -------- -------- -------- -------- --------
Income before cumulative
effect of a change in
accounting method..... 478.6 374.5 440.1 400.9 156.3 274.9 283.8
Cumulative effect on years
prior to 1992 of change
in accounting method.. -- (76.0) (76.0) -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Net income.............. 478.6 298.5 364.1 400.9 156.3 274.9 283.8
======== ======== ======== ======== ======== ======== ========
Net income per share:
Primary:
Before cumulative effect
of a change in
accounting method... 1.56 1.22 1.42 1.34 0.57 1.00 1.04
Cumulative effect on
years prior to 1992
of change in accounting
method.............. -- (0.26) (0.26) -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Net income.............. 1.56 0.96 1.16 1.34 0.57 1.00 1.04
======== ======== ======== ======== ======== ======== ========
Fully diluted:
Before cumulative
effect of a change
in accounting
method............ 1.53 1.20 1.41 1.33 0.57 0.99 1.02
Cumulative effect on
years prior to
1992 of change in
accounting method. -- (0.25) (0.25) -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Net income.............. 1.53 0.95 1.16 1.33 0.57 0.99 1.02
======== ======== ======== ======== ======== ======== ========
Dividends declared per
common share.......... 0.475 0.395 0.540 0.470 0.423 0.380 0.325
At period end:
Total assets.......... $50,387.9 43,278.0 46,657.2 42,736.3 41,088.4 36,229.3 32,984.5
Long-term debt........ 6,001.7 4,455.7 4,481.0 3,610.4 3,007.0 2,658.0 2,381.0
Total stockholders'
equity.............. 3,438.6 3,121.6 3,140.7 2,984.8 2,296.5 2,163.6 2,136.2
</TABLE>
- 13 -
<PAGE> 20
(1) On February 9, 1993, Lincoln Financial Corporation ("Lincoln"), a $2.0
billion bank holding company headquartered in Fort Wayne, Indiana, was
acquired in a pooling transaction. Norwest's historical results have
been restated to include the historical results of Lincoln. Appropriate
Norwest items reflect an increase in Lincoln's provision for credit
losses of $60.0 million and $33.5 million in Lincoln's provisions and
expenditures for costs related to restructuring activities.
(2) On April 19, 1991, United Banks of Colorado, Inc. ("United"), a $5.5
billion financial institution headquartered in Denver, Colorado, merged
with Norwest in a pooling transaction. Norwest's historical results have
been restated to include the historical results of United. Appropriate
Norwest items reflect United's special provisions for credit losses and
writedowns for other real estate owned, which together totaled $165
million, and $31 million of accruals for expected reorganization and
restructuring costs for the year ended December 31, 1990. The special
provisions were due to deterioration of several large commercial loan
relationships, the anticipated results of the then recent examination by
the Office of the Comptroller of the Currency, and the anticipated impact
of the Resolution Trust Corporation's accelerated efforts to liquidate
foreclosed properties at deep discounts.
(3) On May 1, 1990, First Interstate Corporation of Wisconsin ("FIWI"), a
$2.0 billion financial institution headquartered in Sheboygan, Wisconsin,
merged with Norwest in a pooling transaction. Norwest's historical
results have been restated to include the historical results of FIWI.
Appropriate Norwest items reflect $12.0 million in charges resulting from
FIWI's decision to sell its portfolio of stripped mortgage-backed
securities, an increase in FIWI's provision for credit losses of $16.2
million, and $24.5 million in FIWI's provisions and expenditures for
costs related to restructuring activities.
- 14 -
<PAGE> 21
<TABLE>
<CAPTION>
Nine Months Ended
September 30 Year Ended December 31
----------------- -----------------------------------------------
1993 1992 1992 1991 1990 1989 1988
---- ---- ---- ---- ---- ---- ----
(in millions except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
Community:
Interest and fees....... $ 20.0 $ 17.8 $ 24.0 $ 22.6 $ 22.1 $ 20.2 $ 17.3
Insurance & other....... 3.7 3.5 4.7 4.4 4.5 4.8 4.4
------ ------ ------ ------ ------ ------ ------
Total revenues........ 23.7 21.3 28.7 27.0 26.6 25.0 21.7
Interest expense........ 6.0 5.5 7.4 7.7 8.4 8.0 6.1
Provision for loss...... 1.5 1.3 2.0 2.1 2.3 2.0 1.6
Other expense........... 9.0 8.0 10.8 10.4 10.1 9.8 8.8
------ ------ ------ ------ ------ ------ ------
Total expenses........ 16.5 14.8 20.2 20.2 20.8 19.8 16.5
Income before income
tax................... 7.2 6.5 8.5 6.8 5.8 5.2 5.2
Income tax.............. 2.2 2.0 2.6 2.0 1.6 1.3 1.3
------ ------ ------ ------ ------ ------ ------
Net income.............. $ 5.0 $ 4.5 $ 5.9 $ 4.8 $ 4.2 $ 3.9 $ 3.9
====== ====== ====== ====== ====== ====== ======
Net income/share
Primary............... $ 1.63 $ 1.45 $ 1.91 $ 1.56 $ 1.36 $ 1.26 $ 1.26
Fully diluted......... 1.63 1.45 1.91 1.56 1.36 1.26 1.26
Dividend/share(1)....... -- -- 0.75 0.65 0.55 0.50 0.45
At period end:
Total assets.......... $170.3 $142.8 $146.6 $129.9 $124.4 $120.6 $104.1
Long term debt........ 76.2 62.5 74.5 57.7 57.2 60.9 53.0
Total stockholders'
equity.............. 38.4 34.1 33.2 29.6 26.8 24.3 22.0
</TABLE>
- ------------------------
(1) A dividend of $1.00 per share of Community Common Stock was declared in
December of 1993.
- 15 -
<PAGE> 22
MEETING INFORMATION
General
This Proxy Statement-Prospectus is being furnished to holders of Community
Common Stock in connection with the solicitation of proxies by the Board of
Directors of Community for use at the Special Meeting of Shareholders (the
"Special Meeting") to be held on February --, 1994, and any adjournments or
postponements thereof, to consider and vote on a proposal to approve the Merger
Agreement; to approve an amendment to Article III, Section 3.02 of the Bylaws
of Community (to be effective as of the Effective Time) to reduce the number of
directors to three; to elect the following persons to be elected as directors
of Community (to be effective as of the Effective Time): Steve R. Wagner, Gary
M. Poetting and Faye L. Kunz; to ratify all actions taken by the officers and
directors of Community since the last annual meeting of shareholders; and to
consider any other business that may properly come before the Special Meeting.
Each copy of this Proxy Statement-Prospectus mailed to holders of Community
Common Stock is accompanied by a form of proxy for use at the Special Meeting.
This Proxy Statement-Prospectus, the attached Notice, and the proxy enclosed
herewith are first being mailed to shareholders of Community on or about
- ------- ---, 1994.
Date, Place and Time
The Special Meeting will be held at the principal executive office of
Community, 3101 W. 69th Street, Edina, Minnesota, on --------, February --,
1994, at 2:00 p.m., local time.
Record Date; Vote Required
The close of business on February 1, 1994, has been fixed as
the record date for the determination of shareholders of Community entitled to
receive notice of and to vote at the Special Meeting. On the record date,
there were --------- shares of Community Common Stock outstanding. Each share
of Community Common Stock outstanding on the record date is entitled to one
vote upon each matter properly submitted at the Special Meeting. Approval of
the Merger Agreement, and the other proposals referred to herein, requires the
affirmative vote of the holders of at least a majority of all outstanding
shares of Community Common Stock. An abstention or a failure to vote will have
the same effect as a vote against the Merger Agreement and such other
proposals.
As of December 31, 1993, directors and executive officers of Community
owned beneficially an aggregate of 1,693,571 shares of Community Common Stock,
or approximately 54.5% of the shares of Community Common Stock outstanding on
such date. As of December 31, 1993, neither Norwest nor any of its directors
or executive officers owned beneficially any shares of Community Common Stock.
- 16 -
<PAGE> 23
Principal Shareholders and Security Ownership of Management
Principal Shareholders
The following persons, as of December 31, 1993, beneficially owned more
than 5% of the outstanding shares of Community Common Stock:
<TABLE>
<CAPTION>
Number of Shares
Name and Address Beneficially Owned Percent of Class
- ---------------- ------------------ ----------------
<S> <C> <C>
Ernest F. Dorn, Sr. 832,550 26.8%
1276 Tealwood Place
Long Lake, MN 55356
Michael S. Dorn 228,850(1) 7.4%
8341 No. 82nd Place
Scottsdale, AZ 85258
Judith Dorn Heslin 195,450(2) 6.3%
10040 E. Happy Valley Rd., House #15
Scottsdale, AZ 85255
Patricia Dorn Jaffray 179,050(3) 5.8%
320 Orono Orchard Rd.
Wayzata, MN 55391
Gretchen D. Mosher 201,450(4) 6.5%
280 Canterbury
Bloomfield Hills, MI 48013
Wales N. Ewing 160,000(5) 5.2%
310 So. Ocean Blvd.
Boca Raton, FL 33432
William N. Whitaker 334,004(6) 10.8%
10040 E. Happy Valley Rd., House #15
Scottsdale, AZ 85255
</TABLE>
- ------------
(1) Includes 14,650 shares of Community Common Stock held by Michael S. Dorn
and Linda Dorn and 4,800 shares of Community Common Stock held by
Michael S. Dorn as trustee for Dorn & Associates, Inc.
(2) Includes 91,450 shares of Community Common Stock held by Joseph A. Heslin
and Judith Dorn Heslin.
(3) Includes 25,150 shares of Community Common Stock held by Benjamin S.
Jaffray and Patricia D. Jaffray.
(4) Includes 139,861 shares of Community Common Stock held by Gretchen D.
Mosher, Trustee of the Gretchen D. Mosher Trust dated March 26, 1992;
58,439 shares held by Gretchen D. Mosher and Virginia E. Michaels,
Successor Co-Trustees of the Richard U. Mosher Trust dated March 26, 1992,
and 3,150 shares held by Gretchen Dorn Mosher and Ashley Mosher.
(5) Such shares of Community Common Stock are held by Wales N. Ewing as
Trustee of the Wales N. Ewing Revocable Trust dated July 11, 1988.
(6) Such shares of Community Common Stock are held by William N. Whitaker as
Trustee of the William N. Whitaker Revocable Trust.
- 17 -
<PAGE> 24
Security Ownership of Management
Set forth below is the number of shares of Community Common Stock
beneficially owned by each Community director, and by all directors and
executive officers as a group, as of December 31, 1993.
<TABLE>
<CAPTION>
Number of Shares
Name Position Beneficially Owned Percent of Class
- ---- -------- ------------------ ----------------
<S> <C> <C> <C>
Ernest F. Dorn, Jr. Chairman 125,090(1) 4.0%
Ernest F. Dorn, Sr. Vice Chairman 832,550 26.8%
Kenneth D. Noel President and
Director 18,892(2) .6%
Michael S. Dorn Director 228,850(3) 7.4%
Joseph A. Heslin Director 91,450(4) 2.9%
Benjamin S. Jaffray Director 25,150(5) .8%
Clay R. Moore Director 0 --
William N. Whitaker Director 334,004(6) 10.8%
Executive Officers and
directors as a group
(16 persons) 1,693,571(7) 54.5%
</TABLE>
(1) Includes 26,000 shares of Community Common Stock held in a segregated
profit sharing account for Mr. Dorn.
(2) Includes a total of 16,700 shares of Community Common Stock held in a
retirement account and in a segregated profit sharing account for Mr.
Noel. Does not include 2,192 shares of Community Common Stock held by
Esther L. Noel.
(3) Includes 14,650 shares of Community Common Stock held by Michael S. Dorn
and Linda Dorn and 4,800 shares held by Michael S. Dorn as trustee for Dorn
& Associates, Inc.
(4) Such shares are held by Joseph Heslin and Judith Dorn Heslin. Does not
include 104,000 shares of Community Common Stock held by Judith Dorn
Heslin.
(5) Such shares of Community Common Stock are held by Benjamin S. Jaffray and
Patricia D. Jaffray. Does not include 153,900 shares of Community Common
Stock held by Patricia Dorn Jaffray.
(6) Such shares of Community Common Stock are held by William N. Whitaker as
Trustee of the William N. Whitaker Revocable Trust.
(7) Includes 47,100 shares of Community Common Stock held in retirement
accounts or segregated profit sharing accounts.
Voting and Revocation of Proxies
Shares of Community Common Stock represented by a proxy properly signed and
received at, or prior to, the Special Meeting, unless subsequently revoked,
will be voted at the Special Meeting and any adjournments or postponements
thereof in accordance with the instructions thereon. If a proxy is signed and
returned without indicating any voting instructions, the shares represented by
the proxy will be voted FOR approval of the Merger Agreement, FOR approval of
the amendment to the Bylaws, FOR all of the nominees to the Board of Directors
and FOR ratification of all other actions by the officers and board of
directors of Community undertaken since the last annual meeting of
shareholders. Any proxy given pursuant to this
- 18 -
<PAGE> 25
solicitation may be revoked by the person giving it at any time before the
proxy is voted by the filing with the Chairman of Community of an instrument
revoking it, by substitution of a new proxy bearing a later date with the
Chairman of Community prior to or at the Special Meeting, or by a request for
the return of the proxy at the Special Meeting. Attendance at the Special
Meeting will not in and of itself constitute a revocation of a proxy.
The Board of Directors is not aware of any business to be acted upon at the
Special Meeting other than as described herein. If, however, other matters are
properly brought before the Special Meeting, or any adjournment or postponement
thereof, the persons appointed as proxies will have discretion to vote or act
thereon in their discretion.
Solicitation of Proxies
In addition to solicitation by mail, directors, officers, and employees of
Community, who will not be specifically compensated for such services, may
solicit proxies from the shareholders of Community, personally or by telephone
or telegram or other forms of communication. Community will bear its own
expenses in connection with the solicitation of proxies for the Special
Meeting. See "THE MERGER--Expenses."
HOLDERS OF COMMUNITY COMMON STOCK ARE REQUESTED TO COMPLETE, DATE AND SIGN
THE ACCOMPANYING PROXY AND RETURN IT PROMPTLY TO COMMUNITY IN THE ENCLOSED
POSTAGE-PREPAID ENVELOPE.
Dissenters' Rights
Pursuant to Sections 302A.471 and 302A.473 of the Minnesota Business
Corporation Act (the "MBCA"), any holder of Community Common Stock may dissent
from the Merger and elect to have the "fair value of the shares" of Community
Common Stock (i.e., the value of such shares immediately before the effective
date of the Merger) paid in cash, plus interest (i.e., interest commencing five
days after the effective date of the Merger up to and including the date of
payment), provided that such holder complies with the requirements of Section
302A.473 of the MBCA.
The following is a brief summary of the statutory procedures required to be
followed by a holder of Community Common Stock in order to perfect his
dissenters' rights under Section 302A.473 of the MBCA. Such summary does not
purport to be complete and is qualified in its entirety by reference to
Sections 302A.471 and 302A.473, the text of which is set forth in full in
Appendix B to this Proxy Statement-Prospectus.
A shareholder cannot assert dissenters' rights with respect to less than
all of the shares registered in the name of such shareholder, unless such
shareholder is the registered holder of shares of Community Common Stock that
are beneficially owned by another person and the registered owner discloses the
name and address of each beneficial owner on whose behalf the registered holder
is dissenting. A beneficial owner may assert dissenters' rights under the MBCA
and be treated as a dissenting shareholder of record if such beneficial owner
submits to Community at the time of or before the assertion of the dissenters'
rights a written consent of the registered shareholder.
- 19 -
<PAGE> 26
If any holder of Community Common Stock elects to exercise dissenters'
rights with respect to the Merger, such shareholder must satisfy all of the
following conditions:
1. Such shareholder must file with Community before the vote on the Merger
a written notice of intent to demand the fair value of his or her shares.
2. Such shareholder must not vote his or her shares in favor of the
Merger.
3. After the Merger has been approved by the shareholders, Community must
send to all dissenting shareholders who filed the written notice specified
above a notice that contains: (a) the address to which a demand for payment
and the stock certificates of Community must be sent in order to obtain payment
for the shares, and the date by which they must be received; (b) a form to be
used to certify the date on which the shareholder acquired the shares and to
demand payment therefor; and (c) a copy of Sections 302A.471 and 302A.473 of
the MBCA and a brief description of the procedures to be followed under such
sections.
4. The dissenting shareholder must demand payment for the shares and
deposit the stock certificates within thirty (30) days after receiving the
notice from Community.
After the Merger takes effect, or after Community receives the
shareholder's demand for payment, whichever is later, Community must remit to
the dissenting shareholder the amount that Community estimates to be the fair
value of the shareholder's shares, plus interest, accompanied by: (a) certain
financial information for Community; (b) an estimate of the fair value of the
shares and a brief description of the method used to determine the estimate;
and (c) a copy of Sections 302A.471 and 302A.473 and a brief description of the
procedure to be followed in demanding supplemental payment from Community.
If a dissenting shareholder believes that the amount remitted by Community
is less than the fair value of the shares, plus interest, the shareholder may
give written notice to Community of his or her own estimate of the fair value
of the shares, plus interest, within thirty (30) days after Community sends the
remittance to the shareholder, and the shareholder may demand payment of the
difference. Otherwise, a dissenting shareholder is entitled only to the amount
remitted by Community.
If Community receives such a demand from the shareholder, Community must,
within sixty (60) days after receipt of the demand, either pay the amount
demanded or agreed upon by the shareholder or file in court a petition
requesting that the court determine the fair value of the shareholder's shares,
plus interest. The court shall then determine the fair value of the shares,
which is binding on all shareholders. The shareholder is entitled to judgment
in cash for the amount by which the fair value of the shares, as determined by
the court, plus interest, exceeds the amount originally remitted to the
shareholder by Community, but shall not be liable to Community for the amount,
if any, by which the amount, if any, remitted to the dissenting shareholder by
Community exceeds the fair value of the shares as determined by the court, plus
interest.
Costs and expenses shall be determined by the court, which shall assess
those costs and expenses against Community, except that the court may assess
part or all of those costs and expenses against a dissenter whose action is
found to be arbitrary, vexatious, or not in good faith.
The rights provided to Holders of Community Common Stock in Sections
302A.471 and 302A.473 are exclusive. Such holders who wish to dissent from
the Merger do not have a right at law or in equity to have the Merger set aside
or rescinded, except in the case of fraud.
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THE MERGER
This section of the Proxy Statement-Prospectus describes certain aspects of
the proposed Merger. The following description does not purport to be complete
and is qualified in its entirety by reference to the Merger Agreement, which is
included as Appendix A to this Proxy Statement-Prospectus and is incorporated
herein by reference. All shareholders are urged to read the Merger Agreement
in its entirety.
Background of and Reasons for the Merger
Background of the Merger.
Norwest Financial is primarily engaged in the consumer finance business,
and over the years, Norwest Financial's growth in this business has come from a
combination of acquisitions and internally generated growth. Norwest
Financial, as a corporate objective, seeks to acquire consumer finance
businesses that are similar to its own or have other features that are
compatible with Norwest Financial's operations. Norwest Financial recognized
that Community has such a business, and in June of 1993 Norwest Financial
representatives approached Community's management to determine whether there
would be any interest in a possible business combination. Community's Board
of Directors reviewed Norwest Financial's preliminary proposal for an
acquisition by Norwest by way of an exchange of shares of Community for shares
of Norwest at its June 15, 1993 meeting and, while discussions were in a very
preliminary stage, the Chairman indicated he would continue discussions with
Norwest Financial.
During the next several weeks, further discussions were held, and Norwest
Financial's preliminary proposal to acquire Community was reviewed at the July
19, 1993 meeting of Community's Board of Directors. At such meeting, (i) the
Chairman, Ernest F. Dorn, Jr., Ernest F. Dorn, Sr., and the Executive Committee
of the Board, consisting of such two individuals and Michael S. Dorn, were
authorized to continue negotiations with Norwest Financial for the sale of
Community on the basis of a tax-free exchange of Norwest Common Stock for
Community Common Stock, (ii) certain guidelines were suggested as to the terms
of any such transaction, (iii) the Board of Directors expressly reserved the
right to approve or reject any final offer, and (iv) the Chairman was
authorized to retain Dain Bosworth Incorporated as Community's financial
advisor.
Community did retain Dain Bosworth Incorporated as its financial advisor,
who assisted Community's representatives in the negotiation of a proposed
acquisition of Community by Norwest, and a letter of intent was entered into by
Community and Norwest on September 28, 1993. Following the execution of the
letter of intent, the Merger Agreement, as a definitive purchase agreement, was
negotiated and entered into by Norwest and Community on November 23, 1993,
following the approval thereof on November 22, 1993, by the Board of Directors
of Community.
Community's Reasons for the Merger; Recommendation of the Community
Board of Directors. The recommendation of Community's Board of Directors is
based upon a number of factors, including: the terms of the Merger and the
Merger Agreement; benefits expected to result from the combination of Community
and Norwest; information concerning the financial condition, results of
operation and prospects of Norwest and Community on a stand-alone and combined
basis; the Board's view of the relative merits of other opportunities that had
been presented or that the Board believed would be available, including the
possibility of remaining independent; the market prices of Norwest Common Stock
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<PAGE> 28
and the lack of a public market for Community Common Stock; that the Merger
would be an event free of federal income taxation to Community shareholders to
the extent they receive Norwest Common Stock solely in exchange for their
shares of Community Common Stock; the likelihood that the Merger would be
approved by the appropriate regulatory authorities; and the general conditions
of, and the likelihood of further consolidation in the consumer finance
industry. See SUMMARY -- Markets and Market Prices" and "Certain Federal
Income Tax Consequences."
Community's Board of Directors believes that the Merger would provide
holders of Community Common Stock with the opportunity to receive a premium
over the prices per share of Community Common Stock at which individual trades
have occurred in the past and, generally to the extent that Community
shareholders receive Norwest Common Stock in the Merger, enable them to
participate as Norwest shareholders, on a tax-deferred basis, in the expanded
opportunities for growth and profitability made possible by the Merger. In
this regard, Community's Board considered the historical prices at which
isolated transactions in Community Common Stock had occurred and the lack of an
established market therefor, and the historical prices and trading information
with respect to Norwest Common Stock (see "SUMMARY -- Markets and Market
Prices"); and the ability of the combined company to pay dividends.
Community's Board of Directors also believes that the Merger would result in a
combined entity that is (i) committed to serving the financial needs of
Community's employees, customers and communities, both locally and throughout
Norwest's markets, (ii) capable of competing more effectively with larger
financial institutions that have exerted increasing competitive pressure on
Community, (iii) well-capitalized, and (iv) capable of enjoying significant
market penetration throughout the nation's financial services markets.
Based on these matters, and on other matters as it deemed relevant, the
Board of Directors of Community approved the Merger Agreement as being fair to
and in the best interest of Community and its shareholders.
THE BOARD OF DIRECTORS OF COMMUNITY RECOMMENDS THAT SHAREHOLDERS OF
COMMUNITY VOTE FOR THE PROPOSAL TO APPROVE THE MERGER AGREEMENT.
Norwest's Reasons for the Merger.
Norwest and Norwest Financial each seek growth in finance receivables and
other assets through acquisitions. Community specializes in the financing of
automobile purchases as a part of its consumer finance business, and Norwest
Financial is seeking to enter that niche of the consumer finance business
through an acquisition. Because of the expertise of Community and its
management and employees in the automobile finance business, Community's
historical success and the prospects for geographic expansion of Community's
business into additional states, Norwest Financial's management believes that
the Merger will be in Norwest's best interests and Community will enable
Norwest Financial to enter the automobile finance business on a profitable
basis and will otherwise complement Norwest Financial's existing business
activities.
Terms of the Merger
Prior to the Effective Time, Norwest will have caused Merger Co. to be
formed as a wholly-owned subsidiary of Norwest under Minnesota law. At the
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Effective Time, Merger Co. will be merged into Community, with Community as the
surviving corporation. The Articles of Incorporation and Bylaws of Community
at the Effective Time will govern the surviving corporation until amended or
repealed in accordance with applicable law.
At the Effective Time, each share of Community Common Stock outstanding
immediately prior to the Effective Time will be converted into approximately
1.1996 shares of Norwest Common Stock (based on 3,106,800 shares of Community
Common Stock outstanding at the Effective Time). No fractional shares of
Norwest Common Stock will be issued in the Merger. Instead, Norwest will pay
to each holder of Community Common Stock who would otherwise be entitled to a
fractional share an amount of cash equal to such fraction multiplied by the
average of the closing prices of Norwest Common Stock on the NYSE for the five
trading days immediately preceding the Effective Time.
The Merger Agreement provides that if, between the date of the Merger
Agreement and the Effective Time, the outstanding shares of Norwest Common
Stock are changed into a different number or class of shares by reason of any
reclassification, recapitalization, stock split, split-up, combination, or
exchange of shares or readjustment, or if a stock dividend thereon is declared
with a record date within the same period, the number of shares of Norwest
Common Stock issuable upon conversion of the Community Common Stock will be
adjusted accordingly.
Shares of Norwest capital stock issued and outstanding at the Effective
Time will remain outstanding and unchanged.
Effective Date and Time of the Merger
Each of the parties has agreed 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
Merger will become effective on the day on which the executed Agreement and
Plan of Merger (included as part of the Merger Agreement attached hereto as
Appendix A) or executed Articles of Merger are filed with the Secretary of
State of the State of Minnesota. These filings will be made (i) within ten (10)
business days following satisfaction or waiver of all conditions precedent to
the Merger as set forth in the Merger Agreement, or (ii) on such other date as
may be agreed upon by Norwest and Community. At the Effective Time, the
separate existence of Merger Co. will cease and Merger Co. will be merged into
Community. Subject to the conditions contained in the Merger Agreement, the
parties expect the Merger to become effective in the first quarter of 1994,
although there can be no assurance that this will be the case. See "Background
of and Reasons for the Merger," "Conditions to the Merger" and "Regulatory
Approvals."
Surrender of Certificates
As soon as practicable after the Effective Time, Norwest Bank Minnesota,
N.A., acting in the capacity of exchange agent for Norwest (the "Exchange
Agent"), will mail to each former holder of record of shares of Community
Common Stock a form of letter of transmittal, together with instructions for the
exchange of such holder's Community Common Stock certificates for certificates
representing Norwest Common Stock.
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<PAGE> 30
COMMUNITY SHAREHOLDERS SHOULD NOT SEND IN THEIR CERTIFICATES UNTIL THEY
RECEIVE THE LETTER OF TRANSMITTAL FORM AND INSTRUCTIONS.
Upon surrender to the Exchange Agent of one or more certificates for
Community Common Stock, together with a properly completed and signed letter of
transmittal, there will be issued and mailed to the holder a certificate or
certificates representing the number of whole shares of Norwest Common Stock to
which the holder is entitled and, where applicable, a check for the amount
representing any fractional share. A certificate for Norwest Common Stock or a
check in respect of fractional shares may be issued in a name other than the
name in which the surrendered certificate is registered only if (i) the
certificate surrendered is properly endorsed or accompanied by appropriate
stock powers and otherwise in proper form for transfer and (ii) the person
requesting the issuance of such certificate or such payment either pays to the
Exchange Agent any transfer or other taxes required by reason of the issuance
of a certificate or payment for such shares in a name other than the registered
holder of the certificate surrendered or establishes to the satisfaction of the
Exchange Agent that such tax has been paid or is not applicable.
All Norwest Common Stock issued pursuant to the Merger will be deemed
issued as of the Effective Time. No dividend with a record date after the
Effective Time will be paid to Community shareholders entitled to receive
certificates for shares of Norwest Common Stock until such shareholders
surrender their certificates representing shares of Community Common Stock.
Upon such surrender there shall be paid to the shareholder in whose name the
certificates representing such shares of Norwest Common Stock are issued any
dividends the record and payment dates of which shall have been after the
Effective Time and before the date of such surrender. After such surrender,
there shall be paid to the person in whose name the certificates representing
such shares of Norwest Common Stock are issued, on the appropriate dividend
payment date, any dividend on such shares of Norwest Common Stock which shall
have a record date after the Effective Time and prior to the date of surrender,
but a payment date subsequent to the surrender. In no event shall the persons
entitled to receive such dividends be entitled to receive interest on amounts
payable as dividends.
Conditions to the Merger
Shareholder Approval. The Merger will occur only if it is approved by
the requisite vote of the shareholders of Community at the Special Meeting.
See "MEETING INFORMATION." Approval of the Merger Agreement by Norwest
stockholders is not required under Delaware law.
Other Conditions. Consummation of the Merger is subject to the
satisfaction of certain other conditions, unless waived, to the extent waiver
is permitted by applicable law. Such conditions to the obligations of both
parties to consummate the Merger include, but are not limited to: (i) the
receipt of all necessary regulatory approvals, including the approval of the
Federal Reserve Board under the BHCA, and the approval of the insurance
departments of the States of Arizona and Vermont under applicable state
insurance holding company laws, and the expiration of all applicable waiting
periods, (ii) the continued effectiveness of the Registration Statement of
which this Proxy Statement-Prospectus is a part and receipt by Norwest of all
state securities law or blue sky authorizations necessary for the Merger, (iii)
the absence of an
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order of a court or governmental authority of competent jurisdiction
restraining, enjoining or otherwise prohibiting the consummation of the Merger,
(iv) the continued accuracy of representations and warranties by the other
party, (v) the performance by the other party of its obligations under the
Merger Agreement, and (vi) the receipt of certain certificates from the other
party, and (vii) the absence of any changes or circumstances which might
reasonably be expected to have a material adverse effect on the financial
condition, results of operations, or business of the other party and its
subsidiaries taken as a whole, other than changes in laws or regulations
affecting the consumer finance industry generally, changes in the general level
of interest rates, changes required by Norwest under the Merger Agreement, or
changes required by the Financial Accounting Standards Board, generally
accepted accounting principles or KPMG Peat Marwick.
Community's obligation to consummate the Merger is also subject to:
(i) authorization for listing on the NYSE and the CSE upon official notice of
issuance of the shares of Norwest Common Stock issuable pursuant to the Merger,
and (ii) the receipt by Community of an opinion from Mackall, Crounse & Moore
regarding the tax free nature of the Merger to holders of Community Common
Stock and certain other tax matters.
Norwest's obligation to consummate the Merger is also subject to:
(i) qualification of the Merger as a pooling of interests for accounting
purposes and the receipt from Norwest's certified public accountants at KPMG
Peat Marwick and Community's certified public accountants at KPMG Peat Marwick,
of opinions to the effect that the Merger so qualifies, (ii) the receipt by
Norwest of a letter from Community's chief executive officer and chief
financial officer, with respect to Community's financial statements and other
information regarding Community, (iii) there being no reasonable basis for the
imposition on Community or any of its subsidiaries of any material liability
arising under any local, state or federal environmental statute, (iv) the
absence of any condition or requirement in any approvals, licenses or consents
granted by any regulatory authority relating to Community or any of its
subsidiaries that would or would reasonably be expected to (a) so materially
adversely impact the business, financial condition or results of operations of
Community and its subsidiaries, taken as a whole, or (b) require Norwest or
Norwest Financial, Inc. to divest itself of any of its subsidiaries or
operating units, so as to render unduly burdensome, in the reasonable good
faith judgment of Norwest, the consummation of the Merger, (v) the total number
of shares of Community Common Stock outstanding and subject to issuance upon
exercise of all warrants, options, conversion rights, phantom shares or other
share equivalents, not having exceeded 3,106,800, and (vi) Community and each
of its subsidiaries having obtained all consents or waivers from other parties
to loan agreements, leases and other contracts required for the consummation
of the Merger, and Community and each of its subsidiaries having obtained all
permits, authorizations, consents, waivers and approvals required for the
lawful consummation by it of the Merger, (vii) the absence of any material loss
or material interference with the business of Community and its subsidiaries,
considered as a whole, having been sustained since December 31, 1992, from any
civil disturbance, fire, explosion, flood or other calamity, which is not
covered by insurance, and (viii) any accounting adjustments requested by
Norwest pursuant to the Merger Agreement having been made and any dividend
requested by Norwest pursuant to the Merger Agreement having been declared and
paid. See "THE MERGER -- Regulatory Approvals" and "Waiver, Amendment and
Termination."
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Norwest's obligation to consummate the Merger is also subject to
Ernest F. Dorn, Jr. having entered into a mutually satisfactory employment
agreement with a three-year term with Norwest, and Ernest F. Dorn, Jr. and
Ernest F. Dorn, Sr. having executed and delivered to Norwest a specified
indemnification agreement. These conditions have previously been satisfied.
Regulatory Approvals
Consummation of the Merger requires the approval of the Federal Reserve
Board under Section 4 of the BHCA. In addition, the approvals of the state
insurance departments of the States of Arizona and Vermont, under state
insurance holding company statutes for the change in ultimate ownership of
Community's two insurance subsidiaries that will result from the Merger, are
also required for the consummation of the Merger. Norwest filed an application
with the Federal Reserve Board for approval of the Merger on December 13, 1993
and with the Arizona and Vermont insurance departments on January 20, 1994 and
January 10, 1994, respectively. There can be no assurances that the Federal
Reserve Board will approve the Merger or either of the state insurance
departments will approve the change in indirect ownership of Community's
insurance subsidiaries, or as to the dates of such approvals. There can be no
assurance that any such approval will not contain a condition or requirement
which causes such approval to fail to satisfy the conditions to the
consummation of the Merger.
Norwest and Community are not aware of any other governmental approvals or
actions that are required for consummation of the Merger except as described
above. Should any other approval or action be required, it is presently
contemplated that such approval or action would be sought. There can be no
assurance whether or when any such approval or action, if needed, could be
obtained.
Business of Community Pending the Merger
Under the Merger Agreement, Community and each of its subsidiaries are
generally obligated to maintain its corporate existence in good standing,
maintain the character of its business, and conduct its business in its
ordinary and usual manner, extend credit in accordance with existing lending
policies, maintain proper business and accounting records in accordance with
generally accepted principles, maintain current investment practices, and to
use its best efforts to maintain and preserve its business organizations,
employees, and business relationships and insurance coverage, retain the
services of its current principal employees, comply with all laws, regulations,
and legal requirements applicable to Community and its subsidiaries, and use
its best efforts to obtain any approvals or consents required to maintain
existing leases or other contracts in effect following the Merger. The Merger
Agreement also provides that prior to the Effective Time except as required by
the terms of the Merger Agreement, neither Community nor any of its
subsidiaries may, among other things (without the prior written consent of
Norwest): (i) declare or pay any dividends on its capital stock (except for
(a) a dividend not exceeding $1 per share on not more than 3,106,800 shares of
Community Common Stock provided such dividend payment does not disqualify the
Merger as a pooling-of-interests for accounting purposes (which dividend of $1
per share was declared in December of 1993), (b) dividends declared by a
Community subsidiary's board of directors in accordance with applicable laws
and regulations, and (c) dividends declared and
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paid by Community prior to the Effective Time to Community shareholders of
record as of the record date for Norwest's regular common stock dividend, if
any, for the first quarter of 1994, if the Effective Time has not occurred prior
to such record date, in an amount not exceeding the first quarter cash dividend
such shareholders would have received on Norwest Common Stock they would have
received in the Merger if the Effective Time had occurred immediately prior to
such record date); (ii) increase the compensation of any officers, directors, or
executive employees, except pursuant to existing compensation plans or practices
and bonus plans consistent with historical practices; (iii) solicit or enter
into any discussions with any entity or person concerning (a) the purchase of
any shares of Community Common Stock or rights to purchase such shares, or any
other equity security of Community or any subsidiary of Community, (b) a tender
or exchange offer for such shares or other equity securities, (c) the purchase,
lease, or other acquisition of all or a significant portion of the assets of
Community or any Community subsidiary, or (d) the merger, consolidation, or
other business combination with Community or any Community subsidiary; (iv)
amend or otherwise change its articles of incorporation or bylaws except as
provided for herein; (v) issue any shares of capital stock except upon exercise
of certain existing rights and as otherwise contemplated by the Merger
Agreement; (vi) grant, convert, or award any options, warrants, conversion
rights, or other rights to acquire any shares of its capital stock, phantom
shares, or other share equivalents except as specified in the Merger Agreement;
(vii) redeem, purchase or otherwise acquire any shares of its capital stock,
(viii) authorize or incur any long-term debt; (ix) intentionally take any action
that would disqualify the Merger as a pooling of interests for accounting
purposes or as a reorganization that would be tax free to the holders of
Community Common Stock (except with respect to cash paid in lieu of fractional
shares); (x) mortgage, pledge or subject to lien or other encumbrance any of its
properties, except in the ordinary course of business; (xi) enter into any
agreement, contract or commitment in excess of $100,000 except commercial paper
issued and credit transactions entered (under which Community or any of its
subsidiaries is the creditor) in the ordinary course of business and in
accordance with existing policies and procedures; (xii) make any investments
except in the ordinary course of business; (xiii) amend or terminate any benefit
plan except as specified in the Merger Agreement or required by law; or (xiv)
make any contributions to any benefit plan, except as required by the existing
terms of such plan or by applicable law.
Waiver, Amendment and Termination
Prior to the Effective Time, any provision of the Merger Agreement,
including, without limitation, the conditions to consummation of the Merger and
the restrictions described under "Business of Community Pending the Merger,"
may be (i) waived in writing by the party for whose benefit the condition or
restriction exists (to the extent permitted by law) or (ii) amended at any time
(including as to the structure of the transaction) by written agreement of the
parties approved by their respective Boards of Directors or their delegates
whether before or after the Special Meeting; provided that, after approval of
the Merger Agreement by the shareholders of Community, no such amendment may
adversely affect the consideration to be received by Community shareholders.
The Merger Agreement provides that it may be terminated, whether before or
after the approval of the Merger Agreement by the shareholders of Community,
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(i) by mutual written consent of Community and Norwest; (ii) by either Community
or Norwest upon written notice to the other party if the Merger shall not have
been consummated by April 1, 1994 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 in the Merger Agreement to be
performed or observed by such party; (iii) by Community or Norwest upon written
notice to the other party if any court or governmental authority of competent
jurisdiction shall have issued a final, non-appealable order enjoining or
otherwise prohibiting the consummation of the transactions contemplated by the
Merger Agreement; and (iv) by Community, during the period commencing on the
date the Merger is approved by the Federal Reserve Board under the BHCA (the
"Fed Approval Date") and ending on the earlier of 15 days after the Fed Approval
Date and the day before the Closing Date, if both the average of the daily
closing prices of a share of Norwest Common Stock as reported on the NYSE
Composite Tape during the period of 20 trading days ending at the end of the
third trading day immediately preceding the Fed Approval Date (the "Norwest
Average Price") is less than $20 and the Norwest Average Price divided by the
closing price on November 22, 1993 is less than a number derived from a stock
pricing formula set forth in paragraph 8 of the Merger Agreement.
Management and Operations of Community After the Merger
Following the Merger, Norwest intends to transfer Community and its
subsidiaries to Norwest Financial, and Norwest Financial intends to operate
Community and its subsidiaries at their present locations and to offer to their
customers the financial products and services made available currently by
Community and its subsidiaries. In addition, Norwest Financial expects to cause
Community and its subsidiaries to expand their business activities into
additional states and otherwise facilitate the growth of their businesses.
Customers of Community and its subsidiaries will also benefit from Norwest
Financial's financial strength and the years of experience of its consumer
finance subsidiaries in operating consumer finance businesses throughout the
United States.
Certain Transactions
One of Norwest's banking subsidiaries serves as trustee of certain of
Community's employee benefit plans, and Community and its subsidiaries have
customary banking relationships with subsidiary banks of Norwest in the
ordinary course of business.
Effect on Employee Benefits and Stock Plans
The Merger Agreement provides that, on or after the Effective Date, Norwest
will permit all employees of Community and its subsidiaries to participate in
Norwest Financial's Thrift and Profit Sharing Plan, a qualified defined
contribution retirement plan (the "TAPS Plan"), subject to the eligibility
requirements of the TAPS Plan, not more than 30 days following the Effective
Date. Such employees, for purposes of the TAPS Plan, shall, subject to the
break-in-service rules of the TAPS Plan, receive full credit for years of past
service with Community and its subsidiaries for vesting and participation
purposes. Norwest will also maintain the Community Credit Co. Profit Sharing
Plan (the "Profit Sharing Plan") as a stand-alone plan, substantially as
presently in effect, for at least 18 months following the Merger; however,
Norwest will not be required to make contributions to the Profit Sharing Plan
following the Merger. Norwest expects to amend the Profit Sharing Plan to the
extent permitted under applicable law to permit eligible participants in the
Profit Sharing Plan with self-directed investments to transfer their interests
in the Profit Sharing Plan into individual retirement arrangements. The Merger
Agreement requires Norwest to amend the Profit Sharing Plan (i) to cause
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participants who are not fully vested in their respective benefits under the
Profit Sharing Plan and who involuntarily separate from service with Community
or any of its subsidiaries by reason of the Merger, and within 90 days following
the Merger, to be fully vested in their respective benefits under the Profit
Sharing Plan; and (ii) to cause all participants who are not at the time fully
vested in their respective benefits under the Profit Sharing Plan, to be fully
vested in their respective benefits under the Profit Sharing Plan at the end of
the 18 month period following the Merger. During such 18 month period, the
investment committee previously established under the Profit Sharing Plan will
be permitted to specify the timing of any sales or other dispositions of
Norwest Common Stock held by the Profit Sharing Plan (that is not otherwise
subject to the sole investment discretion of any participant in the Profit
Sharing Plan). At the end of such 18 month period, Norwest may cause the Profit
Sharing Plan to be merged with and into the TAPS Plan.
Under the Merger Agreement, the Community Credit Co. Pension Plan (the
"Pension Plan") will be merged into the Norwest Financial Pension Plan (the
"NFPP") as soon as practicable after the Effective Date of the Merger. The
Pension Plan is a defined benefit plan that provides retirement benefits for
employees of Community and its subsidiaries. Employees of Community and its
subsidiaries who have attained age 21 and have completed 1,000 hours of service
in one year or in any subsequent year are eligible to participate in the Pension
Plan. Each Community employee shall be eligible to participate in the NFPP,
with full credit for years of past service with Community or its subsidiaries
(subject to the break-in-service rules of the NFPP) for purposes of vesting,
participation and early retirement subsidies.
The Merger Agreement provides that Norwest will cause the NFPP to
calculate the pension benefits of each employee of Community or any of its
subsidiaries who completes at least one hour of service after the Merger on a
basis no less favorable to the employee than the greater of (i) the pension
computed under the NFPP pension formulas (including the minimum pension
provisions thereof) taking into account service with Community or its
subsidiaries as if it were service with Norwest, and (ii) the pension computed
under the Pension Plan formulas in effect at the time of the Merger based on the
employee's prior service with Community or its subsidiaries and the employee's
final average compensation at the time of retirement from Norwest, plus the
pension computed under the NFPP formulas (including the minimum pension
provisions thereof) based upon service and earnings with Norwest following the
Merger.
Employees of Community or its subsidiaries will, following the Merger, be
eligible to participate in non-qualified supplemental retirement plans
maintained by Norwest Financial, and as soon as administratively feasible, the
other employee benefit plans and payroll practices maintained by Norwest
Financial. Such employees will continue to participate in the employee benefit
plans and payroll practices maintained by Community prior to the Merger, and
they will be entitled to continue to participate in the Community employee
welfare benefit plans following the Merger until such time as it is
administratively feasible to provide coverages under Norwest Financial's plans
and discontinue coverages under Community's plans.
Community maintains a stock option plan pursuant to which certain key
employees of Community are granted options to purchase Community Common Stock.
This plan will terminate upon consummation of the Merger.
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Certain Differences in Rights of Stockholders
If the shareholders of Community approve the Merger Agreement and the
Merger is subsequently consummated, all shareholders of Community will become
stockholders of Norwest. Norwest is a corporation organized under, and governed
by, the Delaware General Corporation Law (the "DGCL"). Community is a
corporation organized under, and governed by, the Minnesota Business Corporation
Act (the "MBCA").
The following summary describes certain differences between holding Norwest
Common Stock and Community Common Stock to the extent such differences are
created by the state corporation laws applicable to Norwest and Community or
arise because of differences between Norwest's Certificate of Incorporation,
By-laws and Shareholder Rights Plan and Community's Articles of Incorporation
and By-laws. This summary is qualified in its entirety by reference to the
DGCL, the MBCA, Norwest's Certificate of Incorporation and By-laws, Community's
Articles of Incorporation and By-laws, and the shareholder rights plan of
Norwest.
Authorized Stock
Community. The authorized capital stock of Community consists of 8,000,000
shares of common stock, $1 par value, of which 3,106,800 shares were
outstanding as of December 31, 1993.
Norwest. Norwest's Certificate of Incorporation authorizes the issuance
of 500,000,000 shares of common stock, par value $1 2/3 per share, and 5,000,000
shares of preferred stock (the "Norwest Preferred Stock"). At September 30,
1993, 293,099,468 shares of Norwest Common Stock were issued, of which
290,770,768 were outstanding and 2,328,700 were held as treasury shares;
2,276,500 shares of Norwest Preferred Stock were issued and outstanding; and
1,000,000 additional shares of Norwest Preferred Stock were reserved for
issuance upon the exercise of certain rights described below. See "Rights Plans
- -- Norwest." Norwest has authorized for issuance from time to time and
registered with the Securities and Exchange Commission an additional 1,700,000
shares of Norwest Preferred Stock. Norwest has also authorized for issuance
from time to time and registered with the Commission pursuant to a universal
shelf registration statement, an indeterminate number of securities (the "Shelf
Securities") with an aggregate initial offering price not to exceed
$1,000,000,000. The Shelf Securities may be issued as Preferred Stock or as
securities convertible into shares of Preferred Stock or Common Stock. Based on
the current number of shares of Preferred Stock authorized for issuance under
Norwest's Certificate of Incorporation, the maximum number of shares of
Preferred Stock and Common Stock, respectively, that could be issued pursuant to
effective shelf registration statements, when added to shares of Preferred Stock
and Common Stock already reserved for issuance, issued or outstanding, could not
exceed respectively, 5,000,000 shares of Preferred Stock, and 500,000,000 shares
of Common Stock. All or any portion of the authorized but unissued Norwest
Preferred Stock or Shelf Securities issuable as, or convertible into, Norwest
Preferred Stock may be issued by the Board of Directors of Norwest without
further action by Norwest stockholders. The relative rights and preferences of
any series of Norwest Preferred Stock issued in the future may be established by
Norwest's Board of Directors without stockholder action. Holders of Norwest
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Preferred Stock have certain rights and preferences with respect to dividends
upon liquidation, dissolution or winding up of Norwest that are superior to
those of holders of Norwest Common Stock. In addition, Norwest's Board of
Directors has the discretion to issue additional shares of Norwest Common Stock
under certain circumstances without the approval of Norwest stockholders.
Although management of Norwest has no current plans for the issuance of any
additional shares of Norwest Preferred Stock, except as disclosed in this Proxy
Statement-Prospectus, such shares, when and if issued, could have dividend,
liquidation, voting, and other rights superior to those of Norwest Common
Stock.
Election and Removal of Directors
Community. Community currently has eight directors who serve for one-year
terms. Shareholders are entitled to one vote for each director standing for
election at each annual meeting for each share recorded in the name of that
shareholder on the books of Community. Cumulative voting for the election of
directors is not permitted by Community's Articles of Incorporation.
Community's By-Laws provide that a director, or the entire Board of Directors,
may be removed at any time, with or without cause, by the holders of a majority
of the shares entitled to vote in the election of directors. Any vacancy in the
Board is filled by a majority vote of the directors then in office, and any
director so appointed to fill such vacancy may be removed, with or without
cause, by a majority of the remaining directors present if the shareholders have
not elected directors in the interval between the time of appointment to fill
the vacancy and the time of removal. In connection with the Merger,
shareholders of Community are being asked to approve an amendment to the By-laws
of Community to reduce the board of directors to three members.
Norwest. Norwest currently has 17 directors who serve for one-year terms.
Cumulative voting is not allowed in the election of directors to Norwest's
Board, and each shareholder of Norwest may cast one vote in the election of
directors for each share held of record by such shareholder. Under Delaware
law, any director or the entire Board of Directors of Norwest may be removed,
with or without cause, by the holders of a majority of the shares then entitled
to vote at an election of directors. Vacancies on the Board are filled by a
majority vote of the directors then in office.
Rights Plans
Community. Unlike Norwest, Community has not adopted any shareholder
rights plan or issued any similar rights to holders of Community Common Stock.
One "Norwest Right" (as defined below) will be attached to each share of Norwest
Common Stock issued in the Merger.
Norwest. On November 22, 1988, the Board of Directors of Norwest declared
a dividend of one preferred share purchase right (collectively, the "Norwest
Rights") for each outstanding share of Norwest Common Stock. The dividend was
paid on December 9, 1988, to stockholders of record on that date. Holders of
shares of Norwest Common Stock issued subsequent to that date, including those
to be issued in connection with the Merger, receive the Norwest Rights with
their shares. The Norwest Rights trade automatically with shares of Norwest
Common Stock and become exercisable only under certain circumstances. The
Norwest Rights are designed to protect the interests of Norwest and its
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stockholders against coercive takeover tactics. The purpose of the Norwest
Rights is to encourage potential acquirors to negotiate with Norwest's Board of
Directors prior to attempting a takeover and to give the Board leverage in
negotiating on behalf of all stockholders the terms of any proposed takeover.
The Norwest Rights may, but are not intended to, deter takeover proposals.
Until a Norwest Right is exercised, the holder of a Norwest Right, as
such, will have no rights as a stockholder of Norwest including, without
limitation, the right to vote or receive dividends. Upon becoming exercisable,
each Norwest Right will entitle the registered holder to purchase from Norwest
one four-hundredth of a share of Norwest Series A Junior Participating Preferred
Stock (collectively, the "Junior Preferred Shares"). The purchase price for
each one four-hundredth of a Junior Preferred Share is $175.00. The purchase
price is subject to adjustment upon the occurrence of certain events, including
stock dividends on the Junior Preferred Shares or issuance of warrants for, or
securities convertible on certain terms into Junior Preferred Shares. The
number of Norwest Rights outstanding and the number of Junior Preferred Shares
issuable upon exercise of the Norwest Rights are subject to adjustment in the
event of a stock split of, or a stock dividend on, Norwest Common Stock.
The Norwest Rights will become exercisable only if a person or group
acquires or announces an offer to acquire 25% or more of the outstanding shares
of Norwest Common Stock. This triggering percentage may be reduced to no less
than 15% by the Board of Directors prior to the time the Norwest Rights become
exercisable. The Norwest Rights have certain additional features that will be
triggered upon the occurrence of specified events:
(1) If a person or group acquires at least the triggering percentage
of Norwest Common Stock, the Norwest Rights permit holders of the Norwest
Rights, other than such person or group, to acquire Norwest Common Stock at
50% of market value. However, this feature will not apply if a person or
group which owns less than the triggering percentage acquires at least 85%
of the outstanding shares of Norwest Common Stock pursuant to a cash tender
offer for 100% of the outstanding Norwest Common Stock.
(2) After a person or group acquires at least the triggering
percentage and before the acquiror owns 50% of the outstanding shares of
Norwest Common Stock, the Board of Directors may exchange each Norwest
Right, other than Norwest Rights owned by such acquiror, for one share of
Norwest Common Stock or one four-hundredth of a Junior Preferred Share.
(3) In the event of certain business combinations involving Norwest
or the sale of 50% or more of the assets or earning power of Norwest, the
Norwest Rights permit holders of the Norwest Rights to purchase the stock
of the acquiror at 50% of such shares' market value.
The Junior Preferred Shares will not be redeemable. Each Junior Preferred
Share will be entitled to a minimum preferential quarterly dividend payment of
$1.00 per share but will be entitled to an aggregate dividend of 400 times the
dividend declared per share of Norwest Common Stock. In the event of
liquidation, the holders of the Junior Preferred Shares will be entitled to a
minimum preferential liquidation payment of $400.00 per share but will be
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entitled to an aggregate payment of 400 times the payment made per share of
Norwest Common Stock. Each Junior Preferred Share will have 400 votes, voting
together with the Norwest Common Stock. Finally, in the event of any merger,
consolidation or other transaction in which Norwest Common Stock is exchanged,
each Junior Preferred Share will be entitled to receive 400 times the amount
received per share of Norwest Common Stock. These rights are protected by
customary antidilution provisions.
At any time prior to the acquisition by a person or group of the
triggering percentage or more of the outstanding shares of Norwest Common Stock,
the Board of Directors may redeem the Norwest Rights in whole, but not in part,
at a price of $.0025 per Norwest Right (the "Redemption Price"). The redemption
of the Norwest Rights may be made effective at such time, on such basis and with
such conditions as the Board of Directors in its sole discretion may establish.
Immediately upon any redemption of the Norwest Rights, the right to exercise
such Rights will terminate and the only remaining right of the holders of
Norwest Rights will be to receive the Redemption Price.
The Norwest Rights will expire on November 23, 1998, unless extended or
earlier redeemed by Norwest. Generally, the terms of the Norwest Rights may be
amended by the Board of Directors without the consent of the holders of the
Norwest Rights.
Required Vote for Authorization of Certain Actions
Community. The MBCA generally requires the affirmative vote of the
holders of a majority of the shares of each class entitled to vote to approve a
merger, consolidation, share exchange or sale, lease, exchange or other
disposition of all or substantially all of Community's assets. However, no vote
of Community shareholders is required to approve a merger if (a) Community is
the surviving corporation of the merger, (b) Community's Articles of
Incorporation are not amended in the transaction, (c) each holder of shares of
Community that were outstanding immediately prior to the time of the merger will
hold the same number of shares immediately following the time of the merger,
with identical rights, (d) the voting power of the outstanding shares of
Community entitled to vote immediately after the merger, plus the voting power
of the shares of Community entitled to vote issuable on conversion of, or on the
exercise of rights to purchase, securities issued in the transaction, do not
exceed by more than 20%, the voting power of the outstanding shares of Community
entitled to vote immediately before the merger, and (e) the number of shares of
Community immediately after the merger, plus the number of shares of Community
issuable on conversion of, or on the exercise of rights to purchase, securities
issued in the transaction, will not exceed by more than 20%, the number of
shares of Community immediately before the merger. The adoption of the Merger
Agreement and the Merger by the affirmative vote of the holders of a majority of
the shares of Community Common Stock eligible to vote is a condition to the
parties' obligation to close.
Norwest. Under Delaware law the vote of a simple majority of the
outstanding shares of Norwest Common Stock entitled to vote thereon is required
to approve a merger or consolidation, or the sale, lease, or exchange of
substantially all of Norwest's corporate assets. With respect to a merger, no
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vote of the stockholders of Norwest is required if Norwest is the surviving
corporation and (1) the related agreement of merger does not amend Norwest's
Certificate of Incorporation, (2) each share of stock of Norwest outstanding
immediately before the merger is an identical outstanding or treasury share of
Norwest after the merger, and (3) the number of shares of Norwest stock to be
issued in the merger (or to be issuable upon conversion of any convertible
instruments to be issued in the merger) does not exceed 20% of the shares of
Norwest Common Stock outstanding immediately before the merger. The approval of
the Merger Agreement by the stockholders of Norwest is not required under the
DGCL. Norwest, as the sole shareholder of Merger Co. following its
organization, will approve the Merger Agreement.
In addition to being subject to the laws of Delaware, Norwest, as a bank
holding company, is subject to various provisions of federal law with respect to
mergers, consolidations and certain other corporate transactions.
Amendment of Corporate Charter
Community. Under Minnesota law, any amendment to Community's Articles
of Incorporation requires the affirmative vote of a majority of the holders of
the outstanding shares of Community Common Stock. The MBCA provides for
dissenters' rights in the event an amendment to Community's Articles of
Incorporation in certain circumstances materially and adversely affects the
rights or preferences of the dissenting shareholders' shares.
Norwest. Under Delaware law, the vote of a simple majority of the holders
of the outstanding shares of Norwest Common Stock entitled to vote thereon is
required to effect an amendment of Norwest's Certificate of Incorporation.
Dissenters' Rights
Community. Sections 302A.471 and 302A.473 of the MBCA provide for
dissenters' rights for a plan of merger or plan of share exchange by a Minnesota
corporation, or in the event of the sale, lease, transfer or other disposition
of all or substantially all of the property and assets of a Minnesota
corporation not made in the usual or regular course of its business under
certain conditions, or in the event of certain amendments to the articles of
incorporation of the corporation. Shareholders of Community may exercise
dissenters' rights in connection with the Merger. See "MEETING INFORMATION --
Dissenters' Rights" and Appendix B hereto.
Norwest. Under Delaware law, a stockholder of Norwest is generally
entitled to receive payment of the appraised value of his Norwest Common Stock
if such stockholder dissents from a merger or consolidation. However, appraisal
rights are not available in merger or consolidation transactions to holders of:
(a) shares listed on a national stock exchange or held of record by more than
2,000 persons, or (b) shares of the corporation surviving a merger unless, in
either case, holders of such stock are required by the terms of the merger or
consolidation to accept anything other than: (i) shares of the surviving or
resulting corporation; (ii) shares of stock of another corporation so listed or
held of record by not fewer than 2,000 persons; and/or (iii) cash in lieu of
fractional shares of such corporations. Appraisal rights are not available for
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a sale of assets or an amendment to the certificate of incorporation. Because
shares of Norwest Common Stock are listed on the NYSE and the CSE, and Norwest
currently has more than 2,000 stockholders of record, its stockholders are not,
subject to such express exceptions, currently entitled to any rights of
appraisal in connection with proposed mergers or consolidations involving
Norwest.
Special Meetings
Community. Under Minnesota law and Community's By-Laws, a special meeting
of Community's shareholders may be called by Community's Chairman, President,
the Treasurer, two or more directors or a shareholder or shareholders holding
10% (or in certain cases, 25%) or more of the outstanding shares of Community
Common Stock.
Norwest. Under Delaware law and the By-Laws of Norwest, a special meeting
of stockholders may be called only by the Chairman of the Board, a Vice
Chairman, the President, or a majority of the Board of Directors.
Limitation of Director Liability in Certain Circumstances
Community. Section 302A.251 of the MBCA provides that a director of a
Minnesota corporation such as Community shall not be liable for any action taken
or not taken as a director except for liability arising out of any breach or
failure to perform the duties of the director's office in good faith, with the
care an ordinarily prudent person in a like position would exercise under
similar circumstances and in a manner reasonably believed to be in the best
interests of the corporation. Community's Articles of Incorporation contains a
provision permitted under Subdivision 4 of Section 302A.251 of the MBCA limiting
personal liability of its directors to Community or its shareholders for
monetary damages for breach of fiduciary duty as director, except for (a) any
breach of the director's duty of loyalty to Community and its shareholders, (b)
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (c) payment of a dividend or approval of a stock
repurchase in violation of Section 302A.559 of the MBCA or Section 80A.23 of the
Minnesota Securities Act, or (d) for any transaction from which the directors
derived an improper personal benefit. In addition, such limitation of liability
does not extend to acts or omissions occurring prior to May 29, 1987, the date
such provision in Community's Articles of Incorporation became effective.
Norwest. Under Delaware law, absent a provision in the certificate of
incorporation to the contrary, directors can be held liable for gross negligence
in connection with decisions made on behalf of the corporation in the
performance of their duty of care, but will not be liable for simple negligence.
As permitted by the DGCL, Norwest's Certificate of Incorporation provides that a
director (including an officer who is also a director) of Norwest shall not be
liable personally to Norwest or its stockholders for monetary damages for breach
of fiduciary duty as a director, except for liability arising out of (a) any
breach of the director's duty of loyalty to Norwest or its stockholders, (b)
acts or omissions not in good faith or which involve intentional misconduct
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or a knowing violation of law, (c) payment of a dividend or approval of a stock
repurchase in violation of Section 174 of the DGCL or (d) any transaction from
which the director derived an improper personal benefit. This provision
protects Norwest directors against personal liability for monetary damages from
breaches of their duty of care. However, it does not eliminate the director's
duty of care. For example, this provision in Norwest's Certificate of
Incorporation has no effect on the availability of equitable remedies, such as
an injunction or rescission, based upon a director's breach of his or her duty
of care.
Indemnification and Insurance
Community. As mandated by Section 302A.521 of the MBCA and by Article
VI of Community's By-Laws, directors, officers and employees of Community shall
be indemnified against judgments, penalties, fines and actions, suits or
proceedings, whether civil, criminal, administrative or investigative if they
are wholly successful with respect thereto or if they acted in good faith and in
a manner they reasonably believed to be in, or not opposed to, the best
interests of Community, and, regarding any criminal action or proceeding, had no
reasonable cause to believe their conduct was unlawful or had reasonable cause
to believe their conduct was lawful.
A claim, action, suit or proceeding includes any claim, action, suit or
proceeding that a person is threatened to be made a party to, or is involved in,
because he is or was a director, officer or employee of Community (or was
serving at the request of Community as a director, trustee, officer, employee or
agent of another entity) while serving in such capacity.
The right to indemnification is not exclusive of any other right which any
person may have or acquire by contract or otherwise.
Norwest. The DGCL provides that directors, officers and other employees
and individuals may be indemnified against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement in connection with
specified actions, suits or proceedings, whether civil, criminal,
administrative or investigative (other than an action by or in the right of the
corporation -- a "derivative action") if they acted in good faith and in a
manner they reasonably believed to be in, or not opposed to, the best interests
of the corporation, and, regarding any criminal action or proceeding, had no
reasonable cause to believe their conduct was unlawful. A similar standard is
applicable in the case of derivative actions, except that indemnification only
extends to expenses (including attorneys' fees) incurred in connection with the
defense or settlement of such actions. The DGCL requires court approval before
there can be any indemnification where the person seeking indemnification has
been found liable to the corporation. To the extent that a person otherwise
eligible to be indemnified is successful on the merits of any claim or defense
described above, indemnification for expenses (including attorneys' fees)
actually and reasonably incurred is mandated by the DGCL.
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Norwest's Certificate of Incorporation provides that Norwest must
indemnify, to the fullest extent authorized by the DGCL, each person who was or
is made a party to, is threatened to be made a party to, or is involved in, any
action, suit or proceeding because he is or was a director or officer of Norwest
(or was serving at the request of Norwest as a director, trustee, officer,
employee or agent of another entity) while serving in such capacity against all
expenses, liabilities or loss incurred by such person in connection therewith,
provided that indemnification in connection with a proceeding brought by such
person will be permitted only if the proceeding was authorized by Norwest's
Board of Directors. Norwest's Certificate of Incorporation also provides that
Norwest must pay expenses incurred in defending the proceedings specified above
in advance of their final disposition, provided that if so required by the DGCL,
such advance payments for expenses incurred by a director or officer may be made
only if he undertakes to repay all amounts so advanced if it is ultimately
determined that the person receiving such payments is not entitled to be
indemnified.
Norwest is authorized by its Certificate of Incorporation to provide
similar indemnification to employees or agents of Norwest.
Pursuant to its Certificate of Incorporation, Norwest may maintain
insurance, at its expense, to protect itself and any directors, officers,
employees or agents of Norwest or another entity against any expense, liability
or loss, regardless of whether Norwest has the power or obligation to indemnify
that person against such expense, liability or loss under the DGCL.
The right to indemnification is not exclusive of any other right which
any person may have or acquire under any statute, provision of Norwest's
Certificate of Incorporation or By-Laws, agreement, vote of stockholders or
disinterested directors or otherwise.
Antitakeover Statutes
Community.
Minnesota Control Share Acquisition Statute. Section 302A.671 of the
MBCA, the Minnesota Control Share Acquisition statute, restricts the voting
rights of certain shares ("control shares") that, except for Section 302A.671
would have voting power, of an issuing public corporation (a corporation with
more than 50 shareholders, such as Community) that, when added to all other
shares of such corporation owned by a person, would entitle that person,
immediately after the acquisition of such shares, to exercise or direct the
exercise of the voting power of such corporation in the election of directors
within any of the following ranges of voting power: (a) one-fifth or more but
less than one-third of all voting power; (b) one-third or more but less than a
majority of all voting power; and (c) a majority or more of all voting power (a
"control share acquisition"). The voting rights of such control shares are
restricted to those rights granted by a resolution approved by the holders of a
majority of the outstanding voting shares, excluding the voting shares owned by
the acquiring shareholder and certain other "interested shares", including
shares owned by officers of the issuing corporation and employees of the
issuing corporation that are also directors of the issuing corporation.
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Section 302A.671 does not apply to the acquisition of shares of an issuing
public corporation if among other reasons, the acquisition is consummated (a)
before August 1, 1984; or pursuant to a contract existing before August 1, 1984;
(b) pursuant to an inter vivos gift not made to avoid the statute or pursuant
to the laws of descent and distribution; (c) pursuant to a satisfaction of a
pledge or other security interest created in good faith and not for the purposes
of circumventing the statute; or (d) pursuant to a merger or plan of share
exchange or other acquisition effected in compliance with MBCA Sections 302A.601
through 302A.661 if the issuing public corporation is a party to the agreement
of merger or plan of share exchange or other agreement. Because Community, as
the issuing corporation, is a party to the Merger, which is being effected in
compliance with MBCA Section 302A.671, Norwest's acquisition of Community shares
in connection with the Merger will not be considered a control share
acquisition.
Minnesota Business Combination Statute. Section 302A.673 of the MBCA, the
Minnesota Business Combination statute, is similar, but not identical, to
Section 203 of the DLGL. Section 302A.673 prohibits Minnesota corporations from
engaging in certain transactions (including mergers, consolidations, asset
sales, liquidations or dissolutions, reclassifications, recapitalizations,
disproportionate share conversions, loans, advances, other financial assistance,
or tax benefits not received proportionately by all shareholders) (each, a
"business combination") with a person that is the beneficial owner, directly or
indirectly, of 10% or more of the voting power of the outstanding voting shares
of the Minnesota corporation (an "interested shareholder") for a period of four
years after such person becomes an interested shareholder unless, prior to the
date the interested shareholder becomes an interested shareholder, the board of
directors of the Minnesota corporation approves either the transaction in which
such person becomes an interested shareholder or such business combination.
Following the four-year moratorium period, the Minnesota corporation may engage
in certain business combinations with an interested shareholder only if, among
other things, (a) the business combination is approved by the affirmative vote
of the holders of a majority of the outstanding voting shares not beneficially
owned by the interested shareholder proposing the business combination or (b)
the business combination meets certain criteria designed to ensure that the
remaining shareholders receive fair consideration for their shares. Section
302A.673 of the MBCA will not apply to the Merger Agreement or the Plan of
Merger included as a part thereof.
Other Provisions. The MBCA also specifically authorizes directors, in
considering the best interests of a Minnesota corporation, to consider the
effects of any action on shareholders, employees, suppliers, creditors and
customers of the corporation, and communities in which offices or other
facilities of the corporation are located, and any other factors the directors
consider pertinent. Under the MBCA, directors are not required to approve a
proposed business combination or other corporate action if the directors
determine in good faith that such approval is not in the best interest of the
corporation.
In taking or declining to take any action or in making any recommendation
to a corporation's shareholders with respect to any matter, directors are
authorized under the MBCA to consider both the short-term and long-term
interests of the corporation as well as interests of other constituencies and
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other relevant factors. Any determination made with respect to the
foregoing by a majority of the disinterested directors shall
conclusively be presumed to be valid unless it can be demonstrated that such
determination was not made in good faith after reasonable investigation.
Because of the foregoing provisions of the MBCA, the Board of Directors of
a Minnesota corporation will have flexibility in responding to unsolicited
acquisition proposals, and accordingly it may be more difficult for an acquiror
to gain control of the corporation in a transaction not approved by the Board.
Norwest
Delaware Business Combination Statute. Section 203 of the DGCL ("Section
203"), which applies to Norwest, regulates transactions with major stockholders
after they become major stockholders. Section 203 prohibits a Delaware
corporation from engaging in mergers, dispositions of 10% or more of its
assets, issuances of stock and other transactions ("business combinations")
with a person or group that owns 15% or more of the voting stock of the
corporation (an "interested stockholder"), for a period of three years after
the interested stockholder crosses the 15% threshold. These restrictions on
transactions involving an interested stockholder do not apply if (a) before the
interested stockholder owned 15% or more of the voting stock, the board of
directors approved the business combination or the transaction that resulted in
the person or group becoming an interested stockholder; (b) in the transaction
that resulted in the person or group becoming an interested stockholder, the
person or group acquired at least 85% of the voting stock other than stock
owned by inside directors and certain employee stock plans; (c) after the
person or group became an interested stockholder, the board of directors and at
least two-thirds of the voting stock other than stock owned by the interested
stockholder approves the business combination; or (d) certain competitive
bidding circumstances.
Action Without a Meeting
Community. Under Section 302A.441 of the MBCA, any action required or
permitted to be taken at a shareholders' meeting may be taken without a meeting
by written consent signed by all of the shareholders entitled to vote on such
action.
Norwest. Section 228 of the DGCL permits any action required or permitted
to be taken at a stockholder's meeting to be taken by written consent signed by
the holders of the number of shares that would have been required to effect the
action at an actual meeting of the stockholders. Generally, holders of a
majority of outstanding shares can effect such an action. The DGCL also
provides that a corporation's certificate of incorporation may restrict or even
prohibit stockholders' action without a meeting. Norwest's Certificate of
Incorporation does not restrict or prohibit stockholders' action without a
meeting.
By-laws
Community. Article XI of Community's By-Laws provide that the By-Laws may
be amended or repealed by the Board of Directors or by the shareholders as
provided in the MBCA. This corresponds with MBCA Section 302A.181 which
provides that the Board of Directors have the power to adopt, amend or repeal
By-Laws unless the articles of incorporation provide otherwise.
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Norwest. Section 109 of the DGCL places the power to adopt, amend or
repeal by-laws in the corporation's shareholders, but permits the corporation,
in its certificate of incorporation, also to vest such power with the board of
directors. Norwest's Certificate of Incorporation contains such a provision.
Although the Board of Directors of Norwest has been vested with such authority,
Norwest's stockholders' power to adopt, amend or repeal by-laws remains
unrestricted.
Preemptive Rights
Community. MBCA Section 302A.413 provides that the shareholders of a
corporation have a preemptive right to acquire a corporation's unissued shares
unless denied or limited in the articles of incorporation or by the Board of
Directors pursuant to MBCA Section 302A.401. Community's Articles of
Incorporation deny any such preemptive rights.
Norwest. Under Section 102 of the DGCL, shareholders have no statutory
preemptive rights, unless a corporation's certificate of incorporation specifies
otherwise. Norwest's Certificate of Incorporation does not provide for any such
preemptive rights.
Dividends
Community. The MBCA does not permit dividend distributions if, after
giving effect to the proposed dividend, (a) the corporation would be unable to
pay its debts as they become due in the ordinary course of business, or (b) the
corporation's total assets would be less than the sum of its total liabilities
plus (unless the articles of incorporation permit otherwise) the amount that
would be needed, if the corporation were to be dissolved at the time of
distribution, to satisfy the preferential rights (if any) of shareholders who
preferential rights are superior to those shareholders receiving the
distribution.
Norwest. Delaware corporations may pay dividends out of surplus or, if
there is no surplus, out of net profits for the fiscal year in which declared
and for the preceding fiscal year. Section 170 of the DGCL also provides that
dividends may not be paid out of net profits if, after the payment of the
dividend, capital is less than the capital represented by the outstanding stock
of all classes having a preference upon the distribution of assets.
Norwest is subject to Federal Reserve Board policies regarding payment of
dividends, which generally limit dividends to operating earnings.
Certain Federal Income Tax Consequences
The following discussion summarizes the material federal income tax
consequences of the Merger. The discussion does not address all aspects of
federal taxation that may be relevant to particular Community shareholders, and
it may not be applicable to shareholders who are not citizens or residents of
the United States, or who acquired their Community Common Stock pursuant to the
exercise of employee stock options or otherwise as compensation. The discussion
does not address the effect of any applicable state, local or foreign tax laws
or any federal tax laws other than those pertaining to income tax. EACH
COMMUNITY SHAREHOLDER SHOULD CONSULT HIS OR HER OWN TAX ADVISOR AS TO THE
PARTICULAR TAX CONSEQUENCES TO HIM OR HER OF THE MERGER.
- 40 -
<PAGE> 47
This discussion is based on the Code, regulations or rulings now in
effect or proposed thereunder, current administrative rulings and practice, and
judicial precedent, all of which are subject to change. Any such change, which
may or may not be retroactive, could alter the tax consequences to Community
shareholders discussed herein. This discussion is also based on certain
assumptions regarding the factual circumstances at the Effective Time, including
certain representations to be made by Community, certain Community shareholders
and the directors and officers of Community, and Norwest. This discussion
assumes that Community shareholders hold their shares of Community Common Stock
as a capital asset within the meaning of Section 1221 of the Code. If any of
these factual assumptions or representations is inaccurate, the tax consequences
of the Merger could differ from those described herein.
The Merger is conditioned upon, among other things, an opinion from
Mackall, Crounse & Moore, its counsel, concerning certain federal income tax
consequences, assuming the Merger occurs in accordance with the Merger Agreement
and conditioned on the accuracy of certain representations made by Norwest,
certain Community shareholders and the directors and officers of Community, and
Community. Such opinion is to state that the material federal income tax
consequences expected from the Merger under currently applicable law are as
follows:
(1) The Merger will constitute a reorganization for federal income
tax purposes under Sections 368(a)(1)(A) and 368(a)(2)(E) of the Code.
(2) Community shareholders will recognize no gain or loss as a result
of the exchange of their Community Common stock for shares of Norwest
Common Stock pursuant to the Merger, except with respect to cash received
in lieu of fractional shares, as discussed below.
(3) A holder of Community Common Stock who receives cash in the
Merger in lieu of a fractional share interest in Norwest Common Stock will
be treated as if the fractional shares were distributed as part of the
exchange and then were redeemed by Norwest. The tax consequences of the
assumed redemption will be determined in accordance with Section 302 of the
Code. If the redemption meets one of four tests set forth in that section,
the shareholder will be treated as if the shareholder sold his or her
fractional share of Norwest Common Stock for the amount of cash received.
Therefore, such shareholder will recognize gain (or loss) to the extent
that the amount of the cash received exceeds (or is less than) the tax
basis allocable to the fractional share. Generally, the tax basis of the
fractional share will equal a pro rata portion of the total basis of all of
the shareholder's Norwest Common Stock received in the exchange. Any gain
or loss recognized will be capital gain or loss, assuming that the
fractional share of Norwest Common Stock would have been a capital asset in
the hands of the shareholder, such gain or loss will be long-term gain or
loss if such stock was held for more than one year, and the holding period
for the fractional share will include the shareholder's holding period for
the Community Common Stock surrendered. If none of the four tests provided
in Section 302 is met, the assumed redemption will be treated as a
dividend, and the shareholder will most likely be required to recognize as
ordinary income the full amount of the cash received.
- 41 -
<PAGE> 48
(4) The aggregate tax basis of the shares of Norwest Common Stock
received by each shareholder of Community in the Merger will be equal to
the aggregate adjusted tax basis of the shares of Community Common Stock
surrendered, decreased by the amount of any cash or property received and
increased by the amount of any gain recognized.
(5) The holding period of the shares of Norwest Common Stock received
will include the holding period of the share of Community Common Stock
exchanged therefor.
An opinion of counsel does not provide the same degree of assurance with
respect to the tax consequences of a transaction as a private letter ruling from
the Service. An opinion of counsel, unlike a private letter ruling from the
Service, has no binding effect on the Service but rather represents counsel's
legal judgment based on the current law. The Service could take a position
contrary to counsel's opinion and, if the matter is litigated, a court may reach
a decision contrary to the opinion.
THE FEDERAL INCOME TAX CONSEQUENCES SET FORTH ABOVE ARE FOR GENERAL
INFORMATION ONLY. EACH SHAREHOLDER SHOULD CONSULT A TAX ADVISOR AS TO THE
PARTICULAR CONSEQUENCES OF THE MERGER THAT MAY APPLY TO SUCH SHAREHOLDER,
INCLUDING THE APPLICATION OF STATE, LOCAL AND FOREIGN TAX LAWS, AND POSSIBLE
CHANGES IN FEDERAL INCOME TAX LAW SINCE THE DATE OF THIS PROXY STATEMENT-
PROSPECTUS.
Resale of Norwest Common Stock
The shares of Norwest Common Stock issuable to shareholders of
Community upon consummation of the Merger have been registered under the
Securities Act of 1993 (the "Securities Act"). Such shares may be traded
freely and without restriction by those shareholders not deemed to be
"affiliates" of Community or Norwest as that term is defined in the rules under
the Securities Act. Norwest Common Stock received by those shareholders of
Community who are deemed to be "affiliates" of Community at the time of the
Special Meeting may be resold, without registration, as provided for by Rule
145, or as otherwise permitted under the Securities Act. In the Merger
Agreement, Community has agreed to use its best efforts to cause each Community
shareholder who may reasonably be deemed to be an affiliate of Community to
enter into an agreement with Norwest providing that such affiliate will not
sell, transfer or otherwise dispose of the shares of Norwest Common Stock to be
received by such person in the Merger except in compliance with the applicable
provisions of the Securities Act and the rules and regulations promulgated
thereunder. This Proxy Statement-Prospectus does not cover any resales of
Norwest Common Stock received by affiliates of Community.
The Merger Agreement provides for the filing by Norwest of listing
applications with the NYSE and the CSE covering the shares of Norwest Common
Stock issuable upon consummation of the Merger. It is a condition to the
consummation of the Merger that such shares of Norwest Common Stock shall have
been authorized for listing on the NYSE and the CSE effective upon official
notice of issuance.
- 42 -
<PAGE> 49
Dividend Reinvestment and Optional Cash Payment Plan
Norwest currently has a Dividend Reinvestment and Optional Cash Payment
Plan which provides in substance, for those stockholders who elect to
participate, that dividends on Norwest Common Stock will be reinvested in shares
of Norwest Common Stock at market price (as defined). The plan also permits
participants to invest through voluntary cash payments, within certain dollar
limitations, in additional shares of Norwest Common Stock at the market price
(as defined) of such stock at the time of purchase. It is anticipated that
after the Effective Time, Norwest will continue to offer its Dividend
Reinvestment and Optional Cash Payment Plan and shareholders of Community who
receive Norwest Common Stock in the Merger will have the right to participate
therein.
Accounting Treatment
Norwest's obligation to consummate the Merger is conditioned upon
qualification of the Merger under the pooling-of-interests method of accounting
and the receipt by Norwest of an opinion from Norwest's and Community's
independent public accountants to the effect that the Merger qualifies for
pooling-of-interests method of accounting if consummated in accordance with the
Merger Agreement. Under the pooling-of-interests method of accounting, the
historical basis of the assets and liabilities of Norwest and Community will be
combined at the Effective Time and carried forward at their previously recorded
amounts, and the shareholders' equity accounts of Community and Norwest will be
combined on Norwest's consolidated balance sheet. Income and other financial
statements of Norwest will not be restated retroactively because the Merger is
not material to the financial statements of Norwest.
In order for the Merger to qualify for pooling-of-interests accounting
treatment, substantially all (90% or more) of the outstanding Community Common
Stock must be exchanged for Norwest Common Stock. Norwest and Community have
agreed not to intentionally take any action that would disqualify the Merger
from pooling-of-interests treatment by Norwest. In this regard, Community has
agreed to use its best efforts to obtain and deliver to Norwest signed
representations from the directors and executive officers of Community that they
will not sell, transfer or otherwise dispose of, or reduce their risk relative
to, any shares of Norwest or Community during the period commencing 30 days
prior to the closing of the Merger and ending upon publication of financial
results including at least 30 days of combined operations of Norwest and
Community.
The unaudited pro forma summary financial information contained in this
Proxy Statement-Prospectus has been prepared using the pooling-of-interests
accounting method to account for the Merger. See "SUMMARY -- Comparative
Unaudited Per Share Data."
Expenses
The Merger Agreement provides, in general, that each of Norwest and
Community will pay its own expenses in connection with the Merger and the
transactions contemplated thereby, including fees and expenses of its own
accountants and counsel.
- 43 -
<PAGE> 50
INFORMATION ABOUT NORWEST -
RECENT OPERATING RESULTS
Norwest's net income was $653.6 million for the year ended December 31,
1993, an increase of 48.5% over the $440.1 million earned in 1992. Net income
per common share was $2.13 for the year ended December 31, 1993, compared with
$1.42 in 1992, an increase of 50.4%. Return on common equity was 20.9% and
return on assets was 1.38% for the year ended December 31, 1993, compared with
15.2% and 1.03%, respectively, in 1992.
Norwest reported net income of $175.0 million for the quarter ended
December 31, 1993, a 167.1% increase over the $65.6 million earned in the fourth
quarter of 1992. Net income per common share was $0.57 for the fourth quarter
of 1993, compared with $0.20 for the same quarter of 1992. Return on assets was
1.37% and return on common equity was 21.3% for the quarter ended December 31,
1993, compared with 0.59% and 8.3%, respectively, for the fourth quarter of
1992.
The 1992 results have been restated for the 2-for-1 stock split
(effected in the form of a 100% stock dividend) distributed on June 28, 1993,
and include Lincoln Financial Corporation (Lincoln), acquired on February 9,
1993, in a pooling of interests transaction. The fourth quarter of 1992 results
include $93.5 million pre-tax charges taken by Lincoln to conform their credit
and accounting practices to those of Norwest and other restructuring-related
charges. The 1992 annual results, for comparative purposes, do not include a
one-time special charge of $76.0 million, or $0.26 per common share, related to
Norwest's early adoption of Statement of Financial Accounting Standards No. 106,
Employers' Accounting for Postretirement Benefits Other Than Pensions.
Consolidated tax-equivalent net interest income was $2,408.7 million and
$627.4 million for the year and quarter ended December 31, 1993, compared with
$2,114.7 million and $575.4 million, respectively, in 1992, increases of 13.9
percent and 9.0 percent, respectively. The increase for the year is primarily
due to a 11.3% increase in average earning assets and a 13 basis point increase
in net interest margin. The increase from the fourth quarter of 1992 is due to
a 14.2 percent increase in average earnings assets, partially offset by a 25
basis point decrease in net interest margin.
Norwest provided $140.1 million and $40.5 million for credit losses for the
year and quarter ended December 31, 1993, or 0.56% and 0.61% of average loans
and leases, compared with $266.7 million and $112.2 million, respectively, or
1.22% and 1.95% of average loans and leases, for the same periods in 1992. The
1992 provision includes $60.0 million for credit losses taken by Lincoln during
the fourth quarter. Net credit losses totaled $173.6 million and $61.9 million
for the year and quarter ended December 31, 1993, compared with $217.6 million
and $64.3 million, respectively, for the same periods in 1992.
As a percent of average loans and leases, net credit losses were 0.70% and
0.93% for the year and quarter ended December 31, 1993, compared with 1.00% and
1.12% for the same periods in 1992.
Non-performing assets, including non-accrual, restructured, and 90-day
past due loans and leases, and other real estate owned, totaled $285.5 million,
0.6% of total assets, at December 31, 1993, compared with $372.7 million, or
0.8%, at December 31, 1992. The decrease is primarily due to a $29.6 million,
$23.5
- 44 -
<PAGE> 51
million and $36.2 million reduction in real estate non-accrual loans, commercial
non-accrual loans and other real estate owned, respectively, partially offset by
a $5.1 million increase in restructured loans. The allowance for credit losses
was $744.9 million at December 31, 1993, and represents 260.9% of non-performing
assets.
Norwest consolidated non-interest income was $1,542.5 million and $426.0
million for the year and quarter ended December 31, 1993, compared with $1,228.8
million and $305.0 million, respectively, for the same periods in 1992. The
full year increase from 1992 reflects growth in mortgage banking revenues, net
venture capital gains and various fee-based services, partially offset by
decreases in credit card fees, trading account gains and net gains on investment
securities available for sale. Excluding gains on investment/mortgage-backed
securities, venture capital gains, and gains on investment/mortgage-backed
securities available for sale, non-interest income was up 26.1% over 1992.
Non-interest expenses were $2,840.8 million and $750.4 million for the
year and quarter ended December 31, 1993, compared with $2,436.6 million and
$660.8 million, respectively, for the same periods in 1992. The increase for
the year ended December 31, 1993 is primarily attributable to an increase in
salaries and benefits at both the mortgage banking operations to support large
volume increases in originations and servicing, and at Norwest Financial
Services, Inc., due to the acquisition in the fourth quarter of 1992 of Trans
Canada Credit Corporation, Ltd., and increased charitable contributions.
Norwest's banking group reported earnings of $397.2 million and $108.6
million for the year and quarter ended December 31, 1993, compared with $227.7
million and $8.0 million, respectively, for the same periods in 1992. Included
in the fourth quarter of 1992 banking group results are Lincoln's special
provision for credit losses, merger and transition related expenses and
restructuring costs totaling $93.5 million before income taxes. Mortgage
banking operations earned $56.3 million and $10.2 million for the year and
quarter ended December 31, 1993, compared with $53.4 million and $9.4 million,
respectively, for the same periods in 1992. Norwest Financial Services, Inc.
(commercial and consumer finance) reported earnings of $200.1 million and $56.2
million for the year and quarter ended December 31, 1993, compared with $159.0
million and $48.2 million, respectively, for the same periods in 1992.
At December 31, 1993, total assets were $50.8 billion, compared with
$46.7 billion at December 31, 1992. The increase is primarily due to a $4.3
billion increase in loans and leases, and student loans and mortgages held for
sale, including $2.6 billion of loans and leases acquired in acquisitions
completed during 1993. This increase was partially offset by a $0.4 billion
decrease in investment securities and investment securities available for sale.
Total long-term debt at December 31, 1993, was $6.8 billion compared with $4.5
billion at December 31, 1992. This increase is primarily due to a net increase
of $1.0 billion of Federal Home Loan Bank advances by subsidiary banks of
Norwest and a net increase of $1.0 billion of long-term debt issued by Norwest.
Total stockholders' equity was $3.6 billion at December 31, 1993, compared with
$3.1 billion at December 31, 1992. See "INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE."
- 45 -
<PAGE> 52
INFORMATION ABOUT COMMUNITY
Description of Business
General
Community is a Minnesota corporation organized on December 3, 1946. Unless the
context otherwise requires, any reference in this section, "INFORMATION ABOUT
COMMUNITY," to "Community" shall include Community and its wholly owned
subsidiaries.
Community is engaged in the consumer finance business. Consumer finance
receivables consist of loans made to individuals (loan), retail instalment
contracts originating from the sale of automobiles (motor), and retail
instalment contracts originating from the sale of other goods (consumer). All
motor and consumer business is included under the heading retail instalment
business.
Community originated its business by opening branch offices in Minneapolis and
St. Paul on April 1, 1947. Expansion followed to Wisconsin and Illinois with
new branch offices opening in those states on February 1, 1966 and December 1,
1992, respectively. Community has 51 branch offices operating in three states.
Community Common Stock is not publicly traded and has no established trading
market. A cash dividend of $1.00 per share of Community Common Stock was
declared in December of 1993, and a cash dividend of $.75 per share of
Community Common Stock was declared in December of 1992.
- 46 -
<PAGE> 53
CONSUMER OPERATIONS
At December 31, 1992, the amount and type of consumer receivables outstanding
was as follows:
<TABLE>
<CAPTION>
Consumer Receivables Outstanding
<S> <C>
Loans:
Secured by real estate $ 27,177,567
Not secured by real estate 78,565,642
------------
Total loans 105,743,209
Retail instalment contracts 49,936,491
------------
Total consumer receivables 155,679,700
------------
Deductions:
Deferred finance income 36,583,747
Allowance for credit losses 3,113,554
------------
Total deductions 39,697,341
Consumer receivables - net $115,982,359
============
</TABLE>
Loans had an average balance per account of $5,518. Retail instalment
contracts had an average balance per account of $4,420.
Geography
At December 31, 1992, Community had consumer finance branch offices in 3 states.
The number of consumer finance branch offices and percentage of consumer finance
receivables at December 31, 1992, is shown below:
<TABLE>
<CAPTION>
Number of Branch Offices and Percent of Receivables
<S> <C> <C>
Illinois 1 -%
Minnesota 28 68
Wisconsin 17 32
-- ---
46 100%
== ====
</TABLE>
During 1992, the number of consumer finance branch offices increased by one.
- 47 -
<PAGE> 54
Growth and Volume of Consumer Finance Receivables
The following tables present the growth and volume of Community's loans and
retail instalment contracts for the five years ended December 31, 1992:
Consumer Finance Receivables
and Number of Accounts Outstanding
<TABLE>
<CAPTION>
Percentage Percentage Average Number
At Consumer Increase Increase Balance of
December Finance From Previous Number of From Previous Per Branch
31 Receivables Year Accounts Year Account Offices
- -------- ----------- ------------- --------- ------------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
1992 $155,679,700 14% 30,461 11% $5,111 46
1991 136,102,641 1 27,360 (15) 4,975 45
1990 134,571,137 3 32,023 (18) 4,202 45
1989 130,691,425 15 39,252 6 3,330 44
1988 113,160,022 23 37,172 19 3,044 41
</TABLE>
Loans Made and Retail Instalment Contracts Purchased
<TABLE>
<CAPTION>
Retail Average
Average Instalment Number of Size
Year Ended Number of Size Loan Contracts Contracts Contracts
Dec. 31 Loans Made * Loans Made Made Purchased Purchased Purchased
- ---------- ------------ ---------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
1992 $112,897,645 16,241 6,951 $58,228,991 14,776 3,941
1991 100,643,737 14,883 6,762 34,095,601 6,081 5,607
1990 98,615,584 15,092 6,534 36,385,383 12,881 2,825
1989 98,349,098 17,214 5,713 48,613,491 27,773 1,750
1988 88,140,037 16,154 5,456 40,542,240 23,709 1,710
</TABLE>
*Includes balances renewed of $31,047,836, $26,143,570, $23,150,650,
$23,256,305 and $21,088,055, for the years 1992 through 1988, respectively.
- 48 -
<PAGE> 55
Regulation
Community's consumer finance lending operations are, for the most part,
regulated by consumer finance laws or similar legislation in each of the states
where Community has branch offices. Although consumer finance laws have been in
effect many years, new and amending legislation is frequently enacted. In those
states which have enacted legislation in recent years that affects the maximum
permitted amount of loan and the maximum allowable rate of charge, the trend has
been to increase such amounts and rates of charge, or to deregulate the same
altogether.
Consumer finance laws generally require that each branch office be licensed to
conduct its business. In most jurisdictions the granting of licenses is
dependent on a finding of financial responsibility, character and fitness of the
applicant and, in some circumstances, public convenience and advantage. Each
licensed branch office is subject to state regulation and examination. In
nearly all states a report of the activities of licensed branch offices must be
made annually to the appropriate state department. Licenses are revocable for
cause and their continuance depends upon compliance with the provisions of the
applicable state law. Community has never had any of its licenses revoked.
The Federal Consumer Credit Protection Act requires a written statement showing
the annual percentage rate of finance charge and other information to be given
to borrowers/buyers when consumer credit contracts are made. It also requires
certain disclosures to applicants concerning credit reports that are used as a
basis for denying or increasing the charge for credit.
The Federal Equal Credit Opportunity Act prohibits discrimination against
applicants with respect to any aspect of a credit transaction on the basis of
sex, marital status, race, color, religion, national origin, age (provided the
applicant has the capacity to contract), or because all or part of the
applicant's income derives from any public assistance program, or because the
applicant has in good faith exercised any right under the Federal Consumer
Credit Protection Act.
By virtue of a Federal Trade Commission rule, sales finance contracts and
certain loans, (those made for the borrower's purchase of personal property from
a seller having a relationship with the lender) contain a provision that the
lender is subject to all claims and defenses which the borrower could assert
against the seller. However, the borrower's recovery under such provision
cannot exceed the amount paid under the contract.
A Federal Trade Commission trade regulation rule on creditor practices
prohibits, among other things, the taking of a security interest (other than a
purchase money security interest) in certain of a borrower's household goods.
Regulation of Community Credit Co.'s insurance subsidiaries is described under
"Insurance Operations."
- 49 -
<PAGE> 56
Business Methods
Loans are generally repayable in monthly installments and are made for periods
of 120 months or less. Retail instalment contracts purchased are repayable in
equal monthly installments and generally have original maturities of 60 months
or less.
In order to make a careful selection of credit risks, Community reviews credit
information concerning each applicant to determine income, living expenses,
payment obligations, indebtedness, paying habits, and length and stability of
employment. The information is obtained from the applicants, the applicants'
employers, creditors of the applicants and credit reporting agencies. Community
believes that any risk to its business which may be created by unfavorable local
conditions is minimized by the large number of customers, their broad range of
occupations and geographical distribution.
Nearly all loans are secured by liens on automobiles, cash value life insurance,
stocks, savings accounts, real estate, or personal property and/or cosigners. Of
the total loans made during 1992, 99.9% of the amount and 99.8% of the number
were secured by security agreements or other forms of security. Liens are
recorded on all automobile loans, real estate loans and liquid asset loans. The
decision to record a lien or to appraise or examine the title to collateral
depends upon the size of the loan and the type of collateral. As an alternative
to perfecting liens on personal property securing certain loans, Community
purchases non-filing insurance, the cost of which is borne by the borrowers.
Unless the value is negligible, automobiles and other collateral are repossessed
on seriously delinquent accounts and sold for the best price obtainable. The
remaining balances, if any, are written off. Generally, Community institutes
legal proceedings on its loans, including foreclosure on collateral, only when
it appears that recovery is likely, which will justify the cost of bringing
suit.
Generally, Community carries only one loan with a borrower at any one time. It
is not uncommon however, for a borrower to have a motor sales finance contract
as well as a direct loan on other collateral. In most cases, when a borrower
wishes to obtain additional money from Community before the loan is fully
repaid, a new loan is made sufficient to pay the balance on the old loan and
supply the new money, provided the borrower's credit is satisfactory. Of the
total amount of loans made during 1992, 68% represented funds lent to borrowers
who requested additional money while still owing Community. In the years 1991
through 1988, this figure was 65%, 66%, 70%, and 67%, respectively. In 1992, of
the 16,241 loans made by Community, 11,082 were to borrowers who requested
additional money while still owing a balance to Community. Community's policy
is that loans are not made to present customers to cure a default in principal
or interest.
Retail instalment contracts are purchased not only because they are profitable
in themselves, but also because they provide a source of new loan customers.
During 1992, approximately 14% of the number of all loans made were to present
sales finance customers.
Community's average earned rates of charge on the average amount of consumer
receivables outstanding during each of the years 1992 through 1988 were 20.66%,
21.03%, 20.91%, 20.76%, and 21.35%, respectively.
- 50 -
<PAGE> 57
Loss Experience
The allowance for losses on receivables is based on loss experience in relation
to receivables outstanding. All such receivables which appear to be
uncollectible are written off. In addition, receivables are written off if they
become 120 days past due on original terms, except real estate loans where the
balance is less than 90% of the current appraised value and certain receivables
being paid under Chapter 13 bankruptcy plans. If collateral is repossessed from
a borrower, it is sold for the best price obtainable and the balance is written
off. Real estate loan balances remaining after foreclosure and sale will be
charged off at the time of sale.
Insurance Operations
The credit insurance operations have a close interrelationship with Community's
consumer finance lending operations. Community makes credit life, credit
disability insurance, and single premium term insurance available to borrowers.
If the customer decides to purchase insurance, an additional charge is made.
Credit life insurance generally provides for the repayment of the indebtedness
upon the death of the insured borrower. Credit disability coverage provides for
the monthly payment of the indebtedness while the borrower is disabled because
of accident or illness.
Generally, where applicable laws permit, Community purchases non-filing
insurance coverage on qualified personal property collateral. Non-filing
insurance is an alternative to perfecting a security interest in property used
as collateral. Payment is provided up to a specified limit when there is a loss
with this coverage which resulted from the failure to perfect a security
interest.
Community Credit Co.'s life insurance subsidiary reinsures the credit life,
credit disability insurance, and single premium term insurance written by
Community. In addition, Community's casualty insurance subsidiary underwrites
the non-filing insurance policies issued to Community.
The laws of the states in which Community operates regulate the sale of
insurance to borrowers by prescribing, among other things, the maximum amount
and term thereof and by fixing the permissible premium or authorizing the state
insurance commissioner or other state official to fix the maximum premium rates
on such insurance. Credit insurance rates have been reduced in recent years.
- 51 -
<PAGE> 58
Premiums are ceded to the Company's life insurance subsidiary on an as written
basis for credit life and 5 year term policies and on an earned basis for
disability insurance. Insurance premiums, claims, other expenses, and income
earned by the Company's life insurance subsidiary from these activities is
summarized below:
<TABLE>
<CAPTION>
1992 1991 1990 1989 1988
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Premiums:
Life $ 875,977 $ 835,605 $ 937,042 $1,371,066 $1,620,328
Disability 1,387,692 1,374,031 1,428,728 1,397,377 1,257,039
Claims Expense:
Life 102,855 102,559 288,546 304,658 452,437
Disability 630,972 590,984 663,666 505,393 528,708
Other Expense:
Life 279,804 260,163 294,088 433,007 515,532
Disability 444,061 439,690 457,193 447,160 402,253
Income:
Life 493,318 472,883 354,408 633,402 652,359
Disability 312,659 343,357 307,869 444,823 326,078
</TABLE>
Income for the Company's casualty insurance subsidiary for the years 1992
through 1988 was $101,918, $84,943, $111,875, $125,714 and $32,667,
respectively.
- 52 -
<PAGE> 59
SOURCES OF FUNDS
Community funds its operations through payments of principal and interest from
finance receivables, capital funds, the sale of debt securities, and borrowings
from banks. Fixed rate borrowings with original maturities of more than one
year comprise 71% of Community's total indebtedness at December 31, 1992. The
remaining 29% includes commercial paper with maturities of nine months or less.
The effective interest rates on commercial paper debt is higher than the stated
rates due to commitment fees paid in connection with Community's bank credit
agreements (lines of credit). These agreements provide an alternative source of
liquidity to support Community's commercial paper borrowings.
The weighted average annual interest cost of the total average monthly
borrowings outstanding in each of the respective years 1992 through 1988 without
giving effect to commitment fees relating to bank credit agreements were 7.38%,
8.21%, 9.14%, 9.42%, and 8.99% respectively. The corresponding figures after
giving effect to commitment fees were 7.46%, 8.30%, 9.22%, 9.50%, and 9.09%
respectively. Community has obtained and continues to obtain, at prevailing
rates, funds sufficient for the conduct of its business.
The following table contains certain information regarding bank lines of credit
and short-term borrowings during the periods indicated:
<TABLE>
<CAPTION>
(Dollars in Thousands) Years Ended December 31
-------------------------------------------------------
1992 1991 1990 1989 1988
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Bank credit agreements $51,175 $50,175 $46,775 $42,360 $37,360
Number of credit agreements 14 14 15 16 15
Monthly average outstanding:
Commercial paper $36,868 $36,128 $31,847 $26,925 $17,206
Other loans 373 794 683 382 238
Less excess funds
investments (203) (310) (57) (108) (62)
------- ------- ------- ------- -------
Net average short-term
borrowings $37,038 $36,612 $32,473 $27,199 $17,382
Ratio of bank credit ======= ======= ======= ======= =======
agreements to above 138% 137% 144% 156% 215%
</TABLE>
COMPETITION
Community is in a highly competitive business. Community competes daily with
banks, credit unions, General Motors Acceptance Corp ("GMAC"), Chrysler Credit,
Ford Motor Credit and, most of all, other finance companies, both in the direct
and indirect business. Service, rapport and flexibility, with occasional
adjustments in interest rates, are the main areas of competition. In general,
rates are very similar between Community and other finance companies on both
direct and indirect business. Community's rates are normally higher than the
banks, credit unions and automobile finance sources such as GMAC, Chrysler
Credit and Ford Motor Credit.
Community is the largest privately owned finance company in the midwest, and is
one of the largest independent consumer finance companies in the United States
(based on receivables outstanding).
- 53 -
<PAGE> 60
COMMUNITY CREDIT CO.
Selected Quarterly Financial Data (Unaudited)
Selected quarterly financial data for 1992 and 1991 were as follows:
<TABLE>
<CAPTION>
(In Thousands)
Net Net Income
Interest Provision Income Per Share,
Total and Debt for Credit Net Per Fully
Quarter Ended Income Expense Losses Income Share Diluted
- ------------- ------ -------- ---------- ------ ------- ----------
<S> <C> <C> <C> <C> <C> <C>
March 31, 1991 $6,706 $1,992 $352 $1,233 $.40 $.40
June 30, 1991 6,838 1,917 645 1,207 .39 .39
September 30, 1991 6,777 1,948 472 1,283 .42 .42
December 31, 1991 6,723 1,870 622 1,061 .35 .35
March 31, 1992 6,850 1,795 419 1,425 .46 .46
June 30, 1992 7,189 1,865 554 1,515 .49 .49
September 30, 1992 7,301 1,873 371 1,523 .50 .50
December 31, 1992 7,408 1,894 605 1,397 .45 .45
</TABLE>
- 54 -
<PAGE> 61
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
1992, 1991 and 1990
Community's total income increased 6% in 1992 and 1% in 1991 ($28.7 million in
1992 compared with $27.0 million in 1991 and $26.6 million in 1990).
Income from finance charges increased 6% in 1992 and 2% in 1991 ($23.1 million
in 1992 compared with $21.8 million in 1991 and $21.4 million in 1990). Changes
in income from finance charges result primarily from (1) changes in the amount
of consumer receivables outstanding and (2) changes in the rate of charge on
those receivables.
<TABLE>
<CAPTION>
1992 1991
---- ----
<S> <C> <C>
Increase in average consumer
receivables outstanding 7% 2%
</TABLE>
<TABLE>
<CAPTION>
1992 1991 1990
---- ---- ----
<S> <C> <C> <C>
Rate of charge on consumer receivables: 20.66% 21.03% 20.91%
</TABLE>
Increases in income from finance charges in both 1992 and 1991 were due
primarily to growth in average consumer receivables outstanding. Growth in
average consumer receivables in 1992 was due to a combination of purchases and
regular business activity. Growth in 1991 was due primarily to regular business
activity.
Changes in the earned rates of charge were due to changes in prevailing market
rates combined with a change in the portfolio mix.
Insurance premiums and commissions increased 5% in 1992 and decreased 8% in 1991
($2.4 million in 1992 compared with $2.3 million in 1991 and $2.5 million in
1990). The 1991 decrease was due to insurance rates being decreased in
Wisconsin (12% decrease for disability, 8% decrease for life) on January 1,
1991. Changes in insurance premiums and commissions are generally expected to
correspond to changes in average consumer direct loans outstanding. Average
consumer direct loans outstanding increased 1% in 1992 and 5% in 1991. Insurance
losses and loss expenses increased 10% in 1992 and decreased 28% in 1991
($753,000 in 1992 compared with $685,000 in 1991 and $947,000 in 1990).
Other income increased 8% in 1992 and 8% in 1991 ($2.4 million in 1992 compared
with $2.2 million in 1991 and $2.0 million in 1990). An increase in investment
income accounted for the majority of the increase in 1992 and 1991. Average
investments outstanding increased 4% in 1992 and 11% in 1991.
Operating expenses increased 4% in 1992 and 6% in 1991 ($10.1 million in 1992
compared with $9.7 million in 1991 and $9.1 million in 1990). The increases
were due primarily to inflation.
- 55 -
<PAGE> 62
Interest and debt expense decreased 4% in 1992 and 8% in 1991 ($7.4 million in
1992 compared with $7.7 million in 1991 and $8.4 million in 1990). Changes in
interest and debt expense result primarily from (1) changes in the amount of
borrowings outstanding and (2) changes in the cost of those borrowings.
<TABLE>
<CAPTION>
Increase in average debt outstanding: 1992 1991
---- ----
<S> <C> <C>
Short-term 1% 13%
Long-term 11 (4)
Total 7 2
</TABLE>
<TABLE>
<CAPTION>
Cost of Funds: 1992 1991 1990
---- ---- ----
<S> <C> <C> <C>
Short-term 4.53% 6.89% 8.93%
Long-term 9.29 9.30 9.93
Total 7.51 8.34 9.22
</TABLE>
Changes in average debt outstanding correspond to changes in average receivables
outstanding. Average receivables increased 7% in 1992 and 2% in 1991.
Provision for credit losses decreased 7% in 1992 and 10% in 1991 ($1.9 million
in 1992 compared with $2.1 million in 1991 and $2.3 million in 1990). The 1992
decrease was due to a 49% decrease in actual losses ($.54 million in 1992
compared to $1.1 million in 1991), primarily resulting from the Board of
Directors action of putting K.D. Noel in charge of reducing losses in
Wisconsin. Net write-offs as a percentage of average net receivables
outstanding was 1.39% in 1992 compared with 1.99% in 1991 and 2.19% in 1990.
The effective tax rates were 31.1% in 1992, 30.0% in 1991, and 28.6% in 1990.
The changes in effective tax rate were primarily due to the change in the
ratio of the life insurance earnings to the finance company earnings.
Community Credit Co. adopted Statement of Financial Accounting Standards
("SFAS") 109, "Accounting for Income Taxes," in 1993. SFAS 109 takes the asset
and liability approach to comprehensive interperiod tax accounting. Prior to
1993, FASB 96 requirements were followed. Implementing SFAS 109 did not have a
material effect on Community's deferred tax assets or net earnings.
Borrowings constitute the largest part of Community's capitalization. At
December 31, 1992, 76% of Community's capital had been obtained from borrowings
and 24% from shareholder's equity. Seventy-one percent of Community's
borrowings was in fixed-rate term borrowings with original maturities of more
than one year. The remaining 29% was in commercial paper with maturities of
nine months or less. At December 31, 1991, short-term borrowings comprised 38%
of total borrowing.
Community Credit Co. maintains bank lines of credit to provide an alternative
source of liquidity to support the Company's commercial paper borrowings. At
December 31, 1992, lines of credit totaling $51.2 million were being maintained
at 14 unaffiliated banks; $51.2 million was available on that date.
Community Credit Co. obtains its long-term debt capital from the issuance of
debt securities to institutional investors.
- 56 -
<PAGE> 63
Community Credit Co. anticipates the continued availability of borrowed funds,
at prevailing interest rates, to provide for Community's growth in the
foreseeable future. Funds are also generated internally from payments of
principal and interest on Community's finance receivables.
September 30, 1993 and 1992
Community's performance in the third quarter of 1993 closely paralleled
performance in the first nine months of 1993. The discussion and analysis that
follows therefore, is limited to the first nine months as a whole and does not
include a separate discussion of the third quarter.
Community's total income increased 11% for the first nine months ($23.7 million
in the first nine months of 1993 compared with $21.3 million in the first nine
months of 1992). The increase was primarily due to the increase in average
finance receivables.
Income from finance charges increased 12% for the first nine months ($19.2
million in the first nine months of 1993 compared with $17.1 million in the
first nine months of 1992). The increase in income from finance charges was due
to growth in average consumer finance receivables offset by a decline in the
rate of charge on consumer receivables. In total, average receivables in the
first nine months of 1993 increased 18% compared with the first nine months of
1992.
<TABLE>
<CAPTION>
Nine Months Ended September 30
------------------------------
1993 1992
---- ----
<S> <C> <C>
Rate of charge on consumer receivables: 19.84% 20.82%
</TABLE>
The 18% increase in average consumer receivables was generated primarily from
the purchase of finance contracts due to the expansion in Illinois. The
increase in income from finance charges of 12% was less than the increase in
average consumer finance receivables of 18% due to the fact that the rates
charged were lower in the sales finance business than in regular loan
receivables. The lower rates were primarily due to competition.
Insurance premiums and commissions increased 4% ($1.9 million in the first nine
months of 1993 compared with $1.8 million in the first nine months of 1992).
Changes in insurance premiums and commissions generally correspond to changes
in average consumer finance loans outstanding. Average consumer finance loans
outstanding increased 1% in the first nine months of 1993 compared with the
first nine months of 1992.
Other income increased 7% ($1.9 million in the first nine months of 1993
compared with $1.8 million in the first nine months of 1992).
Operating expenses increased 13% ($8.4 million in the first nine months of 1993
compared with $7.4 million in the first nine months of 1992). The increase was
due primarily to increases in employee compensation and benefits and other
costs resulting from business expansion. At September 30, 1993, Community was
operating 49 consumer finance branches compared with 45 at September 30, 1992.
- 57 -
<PAGE> 64
Interest and debt expense increased 9% ($6.0 million in the first nine months of
1993 compared with $5.5 million in the first nine months of 1992). Changes in
interest and debt expense result primarily from (1) changes in the amount of
borrowings outstanding due to funding requirements for receivables and dividends
and (2) changes in the cost of those borrowings. Average total outstanding
borrowings in the first nine months of 1993 increased 17% from the first nine
months of 1992; average short-term debt outstanding increased 6% while average
long-term debt increased 24%.
<TABLE>
<CAPTION>
Nine Months Ended September 30
------------------------------
Costs of funds: 1993 1992
---- ----
<S> <C> <C>
Short-term 3.79% 4.62%
Long-term 8.67 9.36
Total 7.01 7.56
</TABLE>
Changes in average debt outstanding generally correspond to changes in average
finance receivables outstanding. Average finance receivables increased 18%
from the first nine months of 1992.
Provision for credit losses increased 14% ($1.5 million in the first nine months
of 1993 compared with $1.3 million in the first nine months of 1992). This
increase relates primarily to the expansion into Illinois and the set up of
reserve for loss on the ouststandings. Net write-offs decreased 2% in the first
nine months of 1993 compared with the first nine months of 1992. Net write-offs
as a percentage of average net receivables outstanding declined to .76% in the
first nine months of 1993 compared with .91% in the first nine months of 1992.
The effective tax rate was 30.3% for the first nine months of 1993 and 31.2%
for the first nine months of 1992, reflecting the impact of FASB 109.
Community Credit Co. maintains bank lines of credit to provide an alternative
source of liquidity to support the company's commercial paper borrowings. At
September 30, 1993, lines of credit totaling $51.2 million were being maintained
at 14 unaffiliated banks. None of this credit was in use at the time.
Community Credit Co. obtains its long-term debt capital from private offerings.
Community Credit Co. anticipates the continued availability of borrowed funds,
at prevailing interest rates, to provide for Community's growth in the
foreseeable future. Funds are also generated internally from payments of
principal and interest on Community's finance receivables.
Statement of Financial Accounting Standards
In May, 1993, the Financial Accounting standard Board (FASB) issued Statement of
Financial Accounting standards (SFAS) No. 114, Accounting by Creditors for
Impairment of a Loan, which requires that certain impaired loans be measured to
reflect the time value of money. SFAS No. 114 is required to be adopted for
fiscal years beginning after December 15, 1994. The impact of adoption of the
new accounting standards on Community's financial statements has not yet been
determined.
- 58 -
<PAGE> 65
In May, 1993, the FASB issued SFAS No. 115, Accounting for Certain Investments
in Debt and Equity Securities. This statement addressed the accounting and
reporting for investments by classifying into three categories -- securities
held to maturity, trading securities, and available for sale. The statement is
effective for fiscal years beginning after December 15, 1993. The impact of
adoption on Community's financial statement will not be material.
- 59 -
<PAGE> 66
CERTAIN REGULATORY CONSIDERATIONS
General
As a bank holding company, Norwest is subject to the supervision of the
Federal Reserve Board. Norwest's banking subsidiaries are subject to
supervision and examination by applicable federal and state banking agencies.
All of Norwest's banking subsidiaries are insured and therefore are subject to
regulation by the Federal Deposit Insurance Corporation (the "FDIC"). In
addition to the impact of regulation, commercial banks are affected
significantly by the actions of the Federal Reserve Board as it attempts to
control the money supply and credit availability in order to influence the
economy.
Norwest is a legal entity separate and distinct from its banking and
nonbanking subsidiaries. Accordingly, the right of Norwest, and thus the right
of Norwest's creditors, to participate in any distribution of the assets or
earnings of any subsidiary is necessarily subject to the prior claims of
creditors of such subsidiary, except to the extent that claims of Norwest in its
capacity as a creditor may be recognized. The principal sources of Norwest's
revenues are dividends and fees from its subsidiaries.
Dividend Restrictions
Various federal and state statutory and regulatory provisions limit the
amount of dividends the subsidiary banks can pay to Norwest without regulatory
approval. The approval of the Office of the Comptroller of the Currency (the
"OCC") is required for any dividend by a national bank if the total of all
dividends declared by the bank in any calendar year would exceed the total of
its net profits, as defined by regulation, for that year combined with its
retained net profits for the preceding two years less any required transfers to
surplus or a fund for the retirement of any preferred stock. In addition, a
national bank may not pay a dividend in an amount greater than its net profits
then on hand after deducting its losses and bad debts. For this purpose, bad
debts are defined to include, generally, loans which have matured and are in
arrears with respect to interest by six months or more, other than such loans
which are well secured and in the process of collection. Under these provisions
Norwest's national bank subsidiaries could have declared, as of September 30,
1993, without obtaining prior regulatory approval, aggregate dividends of at
least $136.3 million. The payment of dividends by any subsidiary bank may also
be affected by other factors, such as the maintenance of adequate capital for
such subsidiary bank.
If, in the opinion of the applicable regulatory authority, a bank under
its jurisdiction is engaged in or is about to engage in an unsafe or unsound
practice (which, depending on the financial condition of the bank, could include
the payment of dividends), such authority may require, after notice and hearing,
that such bank cease and desist from such practice. The Federal Reserve Board,
the OCC, and the FDIC have issued policy statements which provide that insured
banks and bank holding companies should generally pay dividends only out of
current operating earnings.
Holding Company Structure
Norwest's banking subsidiaries are subject to restrictions under federal
law which limit the transfer of funds by the subsidiary banks to Norwest and its
nonbanking subsidiaries, whether in the form of loans, extensions of credit,
- 60 -
<PAGE> 67
investments, or asset purchases. Such transfers by any subsidiary bank to
Norwest or any nonbanking subsidiary are limited in amount to 10% of the bank's
capital and surplus and, with respect to Norwest and all such nonbanking
subsidiaries, to an aggregate of 20% of such bank's capital and surplus.
Furthermore, such loans and extensions of credit are required to be secured in
specified amounts.
The Federal Reserve Board has a policy to the effect that a bank holding
company is expected to act as a source of financial and managerial strength to
each of its subsidiary banks and to commit resources to support each such
subsidiary bank. This support may be required at times when Norwest may not
have the resources to provide it. Any capital loans by Norwest to any of the
subsidiary banks are subordinate in right of payment to deposits and to certain
other indebtedness of such subsidiary bank. In addition, the Crime Control Act
of 1990 provides that in the event of a bank holding company's bankruptcy, any
commitment by the bank holding company to a federal bank regulatory agency to
maintain the capital of a subsidiary bank will be assumed by the bankruptcy
trustee and entitled to a priority of payment.
A depository institution insured by the FDIC can be held liable for any
loss incurred by, or reasonably expected to be incurred by, the FDIC after
August 9, 1989, in connection with (i) the default of a commonly controlled
FDIC-insured depository institution or (ii) any assistance provided by the FDIC
to a commonly controlled FDIC-insured depository institution in danger of
default. "Default" is defined generally as the appointment of a conservator or
receiver and "in danger of default" is defined generally as the existence of
certain conditions indicating that a "default" is likely to occur in the absence
of regulatory assistance.
Federal law (12 U.S.C. # 55) permits the OCC to order the pro rata
assessment of stockholders of a national bank whose capital stock has become
impaired, by losses or otherwise, to relieve a deficiency in such national
bank's capital stock. This statute also provides for the enforcement of any
such pro rata assessment of stockholders of such national bank to cover such
impairment of capital stock by sale, to the extent necessary, of the capital
stock of any assessed stockholder failing to pay the assessment. Similarly,
the laws of certain states provide for such assessment and sale with respect to
the subsidiary banks, is subject to such provisions.
Capital Requirements
In January 1989, the Federal Reserve Board issued final risk-based
capital guidelines for bank holding companies, such as Norwest. The new
guidelines, which became effective December 31, 1990, were phased in over two
years. The minimum ratio of total capital to risk-adjusted assets (including
certain off-balance sheet items, such as stand-by letters of credit) is 8%. At
least half of the total capital is to be comprised of common equity, retained
earnings, and a limited amount of non-cumulative perpetual preferred stock
("Tier 1 capital"). The remainder ("Tier 2 capital") may consist of hybrid
capital instruments, perpetual debt, mandatory convertible debt securities, a
limited amount of subordinated debt, other preferred stock, and a limited amount
of loan and lease loss reserves. In addition, the Federal Reserve Board has
approved final minimum "leverage ratio" (the ratio Tier 1 capital to quarterly
average total assets) guidelines for bank holding companies and state member
banks. These guidelines provide for a minimum leverage ratio of 3% for bank
- 61 -
<PAGE> 68
holding companies and state member banks that meet certain specified criteria,
including that they have the highest regulatory rating. All other bank holding
companies and state member banks will be required to maintain a leverage ratio
of 3% plus an additional cushion of 100 to 200 basis points. The guidelines
also provide that banking organizations experiencing internal growth or making
acquisitions will be expected to maintain strong capital positions
substantially above the minimum supervisory levels, without significant
reliance on intangible assets. Furthermore, the guidelines indicate that the
Federal Reserve Board will continue to consider a "tangible Tier 1 leverage
ratio" in evaluating proposals for expansion or new activities. The tangible
Tier 1 leverage ratio is the ratio of a banking organization's Tier 1 capital,
less all intangibles, to total assets, less all intangibles. Each of Norwest's
banking subsidiaries is also subject to capital requirements adopted by
applicable federal regulatory agencies which are substantially similar to the
foregoing. As of September 30, 1993, Norwest's Tier 1 and total capital (the
sum of Tier 1 and Tier 2 capital) to risk-adjusted assets ratios were 9.80% and
12.42%, respectively, and Norwest's ratio of Tier 1 capital to total assets,
based on average total assets for the quarter ended September 30, 1993, was
6.81%. Neither Norwest nor any subsidiary bank has been advised by its
appropriate federal regulatory agency of any specific leverage ratio applicable
to it.
The Federal Reserve Board has adopted changes to its risk-based and
leverage ratio requirements applicable to bank holding companies and state
chartered member banks that require that all intangibles, including core deposit
intangibles, purchased mortgage servicing rights ("PMSRs"), and purchased credit
card relationships ("PCCRs") be deducted from Tier 1 capital. The changes,
however, grandfather identifiable assets (other than PMSRs and PCCRs) acquired
on or before February 19, 1992, and permit the inclusion of readily marketable
PMSRs and PCCRs in Tier 1 capital to the extent that (i) PMSRs and PCCRs do not
exceed 50% of Tier 1 capital and (ii) PCCRs do not exceed 25% of Tier 1 capital.
For such purposes, PMSRs and PCCRs each would be included in Tier 1 capital only
up to the lesser of (i) 90% of their fair market value (which must be determined
quarterly) and (ii) 100% of the remaining unamortized book value of such assets.
The OCC has adopted substantially similar regulations. Management does not
expect the foregoing changes to have a material adverse impact on the results of
operations of Norwest.
FDICIA
In December 1991, Congress enacted the Federal Deposit Insurance
Corporation Improvement Act of 1991 ("FDICIA"), which substantially revises the
bank regulatory and funding provisions of the Federal Deposit Insurance Act and
makes revisions to several other federal banking statutes.
Among other things, FDICIA requires the federal banking agencies to take
"prompt corrective action" in respect of depository institutions that do not
meet minimum capital requirements. FDICIA establishes five capital tiers: "well
capitalized," "adequately capitalized," "undercapitalized," "significantly
undercapitalized," and "critically undercapitalized." A depository
institution's capital tier will depend upon where its capital levels are in
relation to various relevant capital measures, which will include a risk-based
capital measure and a leverage ratio capital measure, and certain other factors.
A depository institution is well capitalized if it significantly exceeds
the minimum level required by regulation for each relevant capital measure,
- 62 -
<PAGE> 69
adequately capitalized if it meets each such measure, undercapitalized if it
fails to meet any such measure, significantly undercapitalized if it is
significantly below any such measure, and critically undercapitalized if it
fails to meet any critical capital level set forth in regulations. The critical
capital level must be a level of tangible equity equal to not less than 2% of
total assets and not more than 65% of the minimum leverage ratio to be
prescribed by regulation (except to the extent that 2% would be higher than such
65% level). An institution may be deemed to be in a capitalization category
that is lower than is indicated by its actual capital position if, among other
things, it receives an unsatisfactory examination rating.
Under regulations adopted pursuant to the foregoing provisions, for an
institution to be well capitalized it must have a Tier 1 risk-based capital
ratio of at least 6%, and a Tier 1 leverage ratio of at least 5%, a total
risk-based capital ratio of at least 10%, and not be subject to any specific
capital order or directive. For an institution to be adequately capitalized it
must have a Tier 1 risk-based capital ratio of at least 4%, a total risk-based
capital ratio of at least 8%, and a leverage ratio of at least 4% (and in some
cases 3%). As of September 30, 1993, all of Norwest's banking subsidiaries were
well capitalized.
FDICIA generally prohibits a depository institution from making any
capital distribution (including payment of a dividend) or paying any management
fee to its holding company if the depository institution would thereafter be
undercapitalized. Undercapitalized depository institutions are subject to a
wide range of limitations on operations and activities including growth
limitations and are required to submit a capital restoration plan. The federal
banking agencies may not accept a capital plan without determining, among other
things, that the plan is based on realistic assumptions and is likely to succeed
in restoring the depository institution's capital. In addition, for a capital
restoration plan to be acceptable, the depository institution's parent holding
company must guarantee that the institution will comply with such capital
restoration plan. The aggregate liability of the parent holding company is
limited to the lesser of (i) an amount equal to 5% of the depository
institution's total assets at the time it became undercapitalized and (ii) the
amount which is necessary (or would have been necessary) to bring the
institution into compliance with all capital standards applicable with respect
to such institution as of the time it fails to comply with the plan. If a
depository institution fails to submit an acceptable plan, it is treated as if
it is significantly undercapitalized.
Significantly undercapitalized depository institutions may be subject to a
number of requirements and restrictions, including orders to sell sufficient
voting stock to become adequately capitalized, requirements to reduce total
assets, and cessation of receipt of deposits from correspondent banks.
Critically undercapitalized institutions are subject to the appointment of a
receiver or conservator.
FDICIA directs that each federal banking agency prescribe standards for
depository institutions and depository institution holding companies relating to
internal controls, information systems, internal audit systems, loan
documentation, credit underwriting, interest rate exposure, asset growth,
compensation, a maximum ratio of classified assets to capital, minimum earnings
sufficient to absorb losses, a minimum ratio of market value to book value for
publicly traded shares, and such other standards as the agency deems
appropriate. The impact of such standards on Norwest cannot be ascertained.
- 63 -
<PAGE> 70
FDICIA also contains a variety of other provisions that may affect the
operations of Norwest, including new reporting requirements, revised regulatory
standards for real estate lending, "truth in savings" provisions, and the
requirement that a depository institution give 90 days' notice to customers and
regulatory authorities before closing any branch.
Under other regulations promulgated under FDICIA a bank cannot accept
brokered deposits (deposits obtained through a person engaged in the business of
placing deposits with insured depository institutions or with interest rates
significantly higher than prevailing market rates) unless (i) it is "well
capitalized" or (ii) it is "adequately capitalized" and receives a waiver from
the FDIC. A bank is defined to be well capitalized if it maintains a leverage
ratio of at least 5%, a ratio of Tier 1 capital to risk-adjusted assets of at
least 6%, and a ratio of total capital to risk-adjusted assets of at least 10%,
and is not otherwise in a "troubled condition" as specified by its appropriate
federal regulatory agency. A bank is defined to be "adequately capitalized" if
it meets all of the minimum capital requirements. A bank that cannot receive
brokered deposits also cannot offer "pass-through" insurance on certain employee
benefit accounts, unless it provides certain notices to affected depositors. In
addition, a bank that is "adequately capitalized" and has not received a waiver
from the FDIC may not pay an interest rate on any deposits in excess of 75 basis
points over certain prevailing market rates. There are no such restrictions on
a bank that is "well capitalized." As of September 30, 1993, all of Norwest's
banking subsidiaries were well capitalized and therefore were not subject to
these restrictions.
FDIC Insurance
Effective January 1, 1993, the deposit insurance assessment rate for the
Bank Insurance Fund ("BIF") and the Savings Association Insurance Fund ("SAIF")
increased as part of the adoption by the FDIC of a transitional risk-based
assessment system. In June 1993, the FDIC published final regulations making
the transitional system permanent effective January 1, 1994, but left open the
possibility that it may consider expanding the range between the highest and
lowest assessment rates at a later date. An institution's risk category is
based upon whether the institution is well capitalized, adequately capitalized,
or less than adequately capitalized. Each insured depository institution is
also to be assigned to one of the following "supervisory subgroups": Subgroup
A, B, or C. Subgroup A institutions are financially sound institutions with few
minor weaknesses; Subgroup B institutions are institutions that demonstrate
weaknesses which, if not corrected, could result in significant deterioration;
and Subgroup C institutions are institutions for which there is a substantial
probability that the FDIC will suffer a loss in connection with the institution
unless effective action is taken to correct the areas of weakness. Based on its
capital and supervisory subgroups, each BIF and SAIF member institutions will be
assigned an annual FDIC assessment rate varying from 0.23% per annum (for well
capitalized Subgroup A institutions) to 0.31% (for undercapitalized Subgroup C
institutions). Adequately capitalized institutions will be assigned assessment
rates varying from 0.26% to 0.30%. Norwest incurred $62.5 million of FDIC
insurance expense in 1992. Because of decreases in the reserves of the BIF and
SAIF due to the increased number of bank failures in recent years, it is
possible the BIF and SAIF premiums will be further increased and it is possible
that there may be a special assessment. Any such further increase or special
assessment would also decrease net income, and a special assessment could have a
material adverse effect on the results of operations of Norwest.
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<PAGE> 71
MANAGEMENT AND ADDITIONAL INFORMATION
Certain information relating to the executive compensation, voting
securities and the principal holders thereof, certain relationships and related
transactions, and other related matters concerning Norwest is included or
incorporated by reference in Norwest's Annual Report on Form 10-K for the year
ended December 31, 1992, as amended by Amendment No. 1 on Form 8 filed on March
3, 1993, which are incorporated in this Proxy Statement-Prospectus by reference.
See "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE." Stockholders of
Community desiring copies of such documents may contact Norwest at its address
or phone number indicated under "AVAILABLE INFORMATION" above.
EXPERTS
The consolidated financial statements of Norwest Corporation and
subsidiaries as of December 31, 1992, and 1991, and for each of the years in the
three-year period ended December 31, 1992, incorporated by reference herein,
have been incorporated herein in reliance upon the report of KPMG Peat Marwick,
independent certified public accountants, incorporated by reference herein, and
upon the authority of said firm as experts in accounting and auditing.
The consolidated financial statements of Community Credit Co. and
subsidiaries as of December 31, 1992 and 1991, and for each of the years in the
three-year period ended December 31, 1992 included herein, have been included
herein in reliance upon the report of KPMG Peat Marwick, independent certified
public accountants, appearing elsewhere herein, and upon the authority of said
firm as experts in accounting and auditing.
LEGAL OPINIONS
A legal opinion to the effect that the shares of Norwest Common Stock
offered hereby, when issued in accordance with the Merger Agreement, will be
validly issued and fully paid and nonassessable, has been rendered by
Stanley S. Stroup, Executive Vice President and General Counsel of Norwest. As
of September 30, 1993, Mr. Stroup beneficially owned 102,250 shares of Norwest
Common Stock and had options to acquire 215,931 additional shares.
- 65 -
<PAGE> 72
CONSOLIDATED FINANCIAL STATEMENTS
OF COMMUNITY CREDIT CO. AND SUBSIDIARIES
INDEX
Page
----
INDEPENDENT AUDITORS' REPORT F-2
CONSOLIDATED BALANCE SHEETS
December 31, 1992 and 1991 F-3
CONSOLIDATED STATEMENTS OF EARNINGS
Years ended December 31, 1992, 1991 and 1990 F-5
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Years ended December 31, 1992, 1991 and 1990 F-6
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 1992, 1991 and 1990 F-7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1992, 1991 and 1990 F-8
CONSOLIDATING SCHEDULE - BALANCE SHEET INFORMATION
December 31, 1992 F-18
CONSOLIDATING SCHEDULE - EARNINGS
Year ended December 31, 1992 F-20
CONSOLIDATED BALANCE SHEETS
(unaudited) September 30, 1993 and December 31, 1992 F-21
CONSOLIDATED STATEMENTS OF EARNINGS
(unaudited) for the three months ended
September 30, 1993 and 1992, and the nine
months ended September 30, 1993 and 1992 F-23
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited) for the nine months ended
September 30, 1993 and 1992 F-24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited) F-25
F-1
<PAGE> 73
KPMG Peat Marwick
Certified Public Accountants
4200 Norwest Center
90 South Seventh Street
Minneapolis, MN 55402
Independent Auditors' Report
The Board of Directors
Community Credit Co.:
We have audited the accompanying consolidated balance sheets of Community
Credit Co. and subsidiaries as of December 31, 1992 and 1991, and the related
consolidated statements of earnings, shareholders' equity and cash flows for
each of the years in the three-year period ended December 31, 1992. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Community Credit
Co. and subsidiaries at December 31, 1992 and 1991, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1992, in conformity with generally accepted accounting
principles.
Our audits were made for the purpose of forming an opinion on the consolidated
financial statements taken as a whole. The consolidating information
(Schedules 1 and 2) is presented for purposes of additional analysis of the
consolidated financial statements rather than to present the financial position
and results of operations of the individual companies. The consolidating
information has been subjected to the auditing procedures applied in the audits
of the consolidated financial statements and, in our opinion, is fairly stated
in all material respects in relation to the consolidated financial statements
taken as a whole.
KPMG Peat Marwick
January 22, 1993
F-2
<PAGE> 74
COMMUNITY CREDIT CO. AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1992 and 1991
<TABLE>
<CAPTION>
Assets 1992 1991
---- ----
<S> <C> <C>
Cash and cash equivalents $ 3,455,381 3,065,189
Investment securities (note 2) 23,978,990 23,040,739
Finance receivables (note 3):
Direct installment loans 105,743,209 100,451,354
Retail installment contracts:
Motor vehicle 44,676,565 33,699,530
Consumer 5,259,926 1,951,757
------------ ------------
Total retail installment contracts 49,936,491 35,651,287
------------ ------------
Total finance receivables 155,679,700 136,102,641
------------ ------------
Deductions:
Deferred finance income 36,583,747 32,300,683
Allowance for credit losses 3,113,594 2,722,053
------------ ------------
Total deductions 39,697,341 35,022,736
------------ ------------
Finance receivables-net 115,982,359 101,079,905
Fixed assets used in operations-at cost, less
allowance for depreciation of $946,356 and
$879,109 for 1992 and 1991, respectively 633,433 524,806
Deferred income tax benefits 1,525,851 1,375,910
Other assets 963,889 818,843
------------ ------------
$146,539,903 129,905,392
============ ============
(continued)
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 75
COMMUNITY CREDIT CO. AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1992 and 1991
<TABLE>
<CAPTION>
Liabilities and Shareholders' Equity 1992 1991
------------ ------------
<S> <C> <C>
Liabilities:
Short-term notes payable (note 5) $ 30,390,438 35,400,675
Accounts payable and accrued expenses 1,994,994 1,631,673
Dividends payable 2,303,100 1,995,435
Income taxes payable 242,480 37,535
Dealers' reserves 1,681,393 1,172,614
Insurance loss and mortality reserves 957,633 1,043,433
Unearned insurance premiums 570,090 577,355
Unearned insurance commissions 419,385 381,553
Long-term debt (note 6) 74,450,000 57,700,000
Deferred compensation 360,000 360,000
------------ ------------
Total liabilities 113,369,513 100,300,273
------------ ------------
Shareholder's equity:
Common stock, par value $1.00. Authorized
8,000,000 shares; issued and outstanding 3,070,800 3,069,900
3,070,800 and 3,069,900 shares for 1992
and 1991, respectively
Additional paid-in capital 353,580 346,515
Retained earnings (note 6) 29,746,010 26,188,704
------------ ------------
Total shareholders' equity 33,170,390 29,605,119
Commitments (note 8)
------------ ------------
$146,539,903 129,905,392
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 76
COMMUNITY CREDIT CO. AND SUBSIDIARIES
Consolidated Statements of Earnings
Years ended December 31, 1992, 1991 and 1990
<TABLE>
<CAPTION>
1992 1991 1990
----------- ----------- -----------
<S> <C> <C> <C>
Revenue:
Interest and fees $23,975,367 22,571,750 22,130,556
Insurance premiums 2,409,665 2,291,003 2,494,150
Investment 2,141,152 1,989,165 1,829,360
Other income 219,452 190,755 189,532
----------- ----------- -----------
Total revenue 28,745,636 27,042,673 26,643,598
----------- ----------- -----------
Operating expenses:
Interest 7,426,515 7,726,739 8,416,418
Provision for credit losses (note 3) 1,948,600 2,090,438 2,314,090
Incurred claims and changes in
mortality reserves 752,724 685,350 946,949
Salaries and employee benefits (note 4) 6,744,106 6,541,742 6,165,421
Occupancy expense 780,430 769,858 729,047
Telephone expense 336,001 335,434 329,744
Other operating expenses 2,245,850 2,061,491 1,915,497
----------- ----------- -----------
Total operating expenses 20,234,226 20,211,052 20,817,166
----------- ----------- -----------
Earnings before income taxes 8,511,410 6,831,621 5,826,432
Income taxes (note 7) 2,651,004 2,048,593 1,663,954
----------- ----------- -----------
Net earnings $ 5,860,406 4,783,028 4,162,478
=========== =========== ===========
Net earnings per share $ 1.91 $ 1.56 $ 1.36
=========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements
F-5
<PAGE> 77
COMMUNITY CREDIT CO. AND SUBSIDIARIES
Consolidated Statements of Shareholders' Equity
Years ended December 31, 1992, 1991 and 1990
<TABLE>
<CAPTION>
Additional Total
paid-in Retained shareholders'
Shares Amount capital earnings equity
---------- ---------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1989 3,069,600 $ 3,069,600 344,160 20,927,078 24,340,838
Shares issued 300 300 2,355 0 2,655
Net earnings 0 0 0 4,162,478 4,162,478
Cash dividend ($.55 per share) 0 0 0 (1,688,445) (1,688,445)
---------- ---------- -------- ---------- ----------
Balance, December 31, 1990 3,069,900 3,069,900 346,515 23,401,111 26,817,526
Net earnings 0 0 0 4,783,028 4,783,028
Cash dividend ($.65 per share) 0 0 0 (1,995,435) (1,995,435)
---------- ---------- -------- ---------- ----------
Balance December 31, 1991 3,069,900 3,069,900 346,515 26,188,704 29,605,119
Shares issued 900 900 7,065 0 7,965
Net earnings 0 0 0 5,860,406 5,860,406
Cash dividend ($.75 per share) 0 0 0 (2,303,100) (2,303,100)
---------- ---------- -------- ---------- ----------
Balance, December 31, 1992 3,070,800 $ 3,070,800 353,580 29,746,010 33,170,390
========== ========== ======== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements
F-6
<PAGE> 78
COMMUNITY CREDIT CO. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended December 31, 1992, 1991 and 1990
<TABLE>
<CAPTION>
1992 1991 1990
------------ ------------ ------------
<S> <C> <C> <C>
Net earnings $ 5,860,406 4,783,028 4,162,478
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation expense 244,765 223,406 271,211
Provision for credit losses 1,948,600 2,090,438 2,314,090
Gain on sale of fixed assets (157,642) (123,036) (106,075)
(Increase) decrease in deferred income tax benefits (149,942) 55,983 (139,998)
(Increase) decrease in other assets (145,046) (2,745) 324,977
Increase (decrease) in accounts payable and
accrued expenses 363,321 189,561 (205,203)
Increase (decrease) in income taxes payable 204,945 55,681 (43,000)
Increase in dealer reserves 508,779 295,264 279,038
Decrease in unearned insurance
premiums, loss reserves and unearned
insurance commissions (55,233) (252,016) (154,843)
Other, net (21,177) 20,000 (129,488)
------------ ------------ ------------
Net cash provided by operating activities 8,601,776 7,335,564 6,573,187
------------ ------------ ------------
Cash flows from investing activities:
Proceeds from maturity of investment securities 1,444,991 1,464,917 415,000
Purchase of investment securities (2,362,064) (3,815,058) (2,113,125)
Principal payments received on finance receivables 75,215,429 67,060,518 68,522,532
Disbursements for finance receivables (92,066,483) (71,061,527) (72,525,033)
Proceeds from sale of fixed assets 645,643 570,634 481,981
Purchase of fixed assets (841,393) (607,473) (621,073)
------------ ------------ ------------
Net cash used in investing activities (17,963,877) (6,387,989) (5,839,718)
------------ ------------ ------------
Cash flows from financing activities:
Net (decrease) increase in short-term notes payable (5,010,237) 1,622,907 4,915,294
Proceeds from issuance of long-term debt 22,000,000 10,000,000 0
Retirement of long-term debt (5,250,000) (9,500,000) (3,650,000)
Proceeds from issuance of shares 7,965 0 2,655
Dividends paid (1,995,435) (1,688,445) (1,534,800)
------------ ------------ ------------
Net cash provided (used) by financing
activities 9,752,293 434,462 (266,851)
------------ ------------ ------------
Net increase in cash and cash equivalents 390,192 1,382,037 466,618
Cash and cash equivalents, beginning of year 3,065,189 1,683,152 1,216,534
------------ ------------ ------------
Cash and cash equivalents, end of year $ 3,455,381 3,065,189 1,683,152
============ ============ ============
Supplemental disclosures of cash flow information:
Interest Paid $ 7,287,651 7,642,622 8,546,293
============ ============ ============
Income taxes paid $ 2,596,000 1,936,929 1,846,952
============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-7
<PAGE> 79
COMMUNITY CREDIT CO. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1992, 1991 and 1990
(1) Summary of Significant Accounting Policies
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
Community Credit Co. (the Company) and its four wholly owned subsidiary
companies, Community Credit Plan, Inc. and Community Credit Co. of
Illinois (finance subsidiaries), Scott Life Insurance Company (Scott
Life) (a life insurance subsidiary) and Community Casualty Co. (a
captive casualty insurance subsidiary). All significant intercompany
balances and transactions have been eliminated in consolidation.
Finance Income
The Company recognizes income from precomputed finance charges using
primarily the actuarial (interest) method.
Insurance Premiums
Credit life insurance premiums are credited to income by Scott Life on a
sum-of-the-years- digits method. Disability insurance premiums are
credited to income as ceded.
Premiums on five-year term policies and security interest nonfiling
insurance are taken into income on an as-written basis.
Allowance for Credit Losses
The Company maintains an allowance for credit losses sufficient to cover
management's estimate of losses that will be incurred in collection of
receivables. The unpaid balances of all retail installment contracts
and direct installment loans are charged off against the allowance for
losses when installments are more than 120 days past due on the basis of
original contract terms. Any balance remaining after the collateral is
sold is immediately charged off against the allowance.
Investment Securities
Investments owned by the Company's insurance subsidiaries are carried at
amortized cost, as management has the ability and intent to hold their
investments to maturity.
Depreciation and Amortization
The Company depreciates the cost of assets over their estimated useful
lives. Furniture and office equipment are depreciated primarily over a
period of five to seven years using an accelerated method and
automobiles are depreciated over a period of three to five years also
using an accelerated method. Leasehold improvements are amortized using
a straight-line method over their estimated useful lives.
F-8
<PAGE> 80
COMMUNITY CREDIT CO. AND SUBSIDIARIES
Income Taxes
The Company accounts for income taxes under the provisions of Statement of
Financial Accounting Standards No. 96 which was adopted by the Company
effective January 1, 1987.
The Company follows the generally accepted practice of recognizing the
income tax effects of transactions in the year in which they enter into
the determination of net earnings, regardless of when they are
recognized for income tax purposes. Accordingly, income tax expense
includes charges and credits for deferred income taxes and the
accumulated deferred income tax benefits are reflected in the
accompanying consolidated balance sheets.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash on deposit at financial
institutions and commercial paper.
(2) Investment Securities
Investment securities consist of the following at December 31:
<TABLE>
<CAPTION>
1992 1991
------------------------------------------------- -------------------------
Gross Gross
Amortized unrealized unrealized Approximate Amortized Approximate
cost gains losses market value cost market value
----------- ---------- ---------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Bonds and notes:
U.S. government
and governmen-
tal agencies and
authorities $ 15,447,345 1,551,412 0 16,998,757 14,989,336 16,728,381
States, municipali-
ties and political
subdivisions 1,995,000 57,122 0 2,052,122 2,195,000 2,267,430
Industrial devel-
opment and
revenue 2,940,401 195,159 173,260 2,962,300 3,393,433 3,433,212
Corporate bonds 1,740,994 140,698 0 1,881,692 1,240,970 1,305,033
----------- ---------- ---------- ------------ ----------- ------------
Total bonds
and notes 22,123,740 1,944,391 173,260 23,894,871 21,818,739 23,734,056
Preferred stock 1,855,250 75,000 2,500 1,927,750 1,222,000 1,335,250
----------- ---------- ---------- ------------ ----------- ------------
$ 23,978,990 2,019,391 175,760 25,822,621 23,040,739 25,069,306
=========== ========== ========== ============ =========== ============
</TABLE>
(Continued)
F-9
<PAGE> 81
COMMUNITY CREDIT CO. AND SUBSIDIARIES
The amortized cost and approximate market value of bonds and notes at
December 31, 1992, by contractual maturity, is shown below. Expected
maturities will differ from contractual maturities because borrowers may
have the right to call or prepay obligations with or without call or
prepayment penalties.
<TABLE>
<CAPTION>
Amortized Approximate
cost market value
------------ ------------
<S> <C> <C>
Due in one year or less $ 950,002 964,557
Due after one year through five years 6,588,409 7,094,745
Due after five years through ten years 10,831,935 11,663,590
Due after ten years 3,753,394 4,171,979
------------ ------------
$ 22,123,740 23,894,871
============ ============
</TABLE>
Scott Life maintains a minimum of $500,000 of investments on deposit in
Arizona as required by statute for the protection of policyholders.
(3) Finance Receivables
Contractual maturities of direct installment loans and retail installment
contracts at December 31, 1992 were as follows:
<TABLE>
<CAPTION>
Retail
Direct installment loans installment contracts Total
------------------------ ------------------------ ------------------------
Percent Percent Percent
Maturity Amount of total Amount of total Amount of total
- -------- ------------------------ ------------------------ ------------------------
<S> <C> <C> <C>
Past due $ 194,191 .18% $ 68,582 .14% $ 262,773 .17%
1 to 6
months 22,899,322 21.66 11,264,830 22.56 34,164,152 21.95
7 to 9
months 10,382,022 9.82 4,880,071 9.77 15,262,093 9.80
10 to 12
months 9,819,928 9.29 4,657,669 9.33 14,477,597 9.30
------------------------ ------------------------ ------------------------
Total-1993 43,295,463 40.95 20,871,152 41.80 64,166,615 41.22
------------------------ ------------------------ ------------------------
13 to 15
months 9,088,288 8.59 4,327,498 8.67 13,415,786 8.62
16 to 18
months 8,252,184 7.80 3,989,816 7.99 12,242,000 7.86
19 to 24
months 13,344,154 12.62 6,822,523 13.66 20,166,677 12.95
------------------------ ------------------------ ------------------------
Total-1994 30,684,626 29.01 15,139,837 30.32 45,824,463 29.43
------------------------ ------------------------ ------------------------
1995 15,099,551 14.28 8,983,074 17.98 24,082,625 15.47
1996 5,157,674 4.88 3,889,565 7.79 9,047,239 5.81
1997 3,225,966 3.05 1,039,789 2.08 4,265,755 2.74
1998 and
thereafter 8,279,929 7.83 13,074 .03 8,293,003 5.33
------------------------ ------------------------ ------------------------
$105,743,209 100.00% $ 49,936,491 100.00% $155,679,700 100.00%
======================== ======================== ========================
</TABLE>
(Continued)
F-10
<PAGE> 82
COMMUNITY CREDIT CO. AND SUBSIDIARIES
Experience of the Company has shown that a substantial portion of the
finance receivables will be renewed prior to contractual maturity dates.
Accordingly, the foregoing tabulation is not to be regarded as a
forecast of future cash collections.
The following provides an analysis of the allowance for credit losses:
<TABLE>
<CAPTION>
Year ended December 31
---------------------------------------
1992 1991 1990
----------- ----------- -----------
<S> <C> <C> <C>
Allowance for credit losses at
beginning of year $ 2,722,053 2,691,423 2,613,828
Provision for credit losses 1,948,600 2,090,438 2,314,090
Charge-offs (2,302,102) (2,689,271) (2,712,545)
Recoveries 745,043 629,463 476,050
----------- ----------- -----------
Net charge-offs (1,557,059) (2,059,808) (2,236,495)
----------- ----------- -----------
Allowance for credit losses at
end of year $ 3,113,594 2,722,053 2,691,423
=========== =========== ===========
</TABLE>
Direct installment loans are secured primarily by first liens on
automobiles and second mortgages on single-family homes. At December
31, 1992 and 1991 approximately $27,200,000 and $25,600,000 of direct
installment loans were secured by real estate, respectively. Retail
motor vehicle receivables purchased from dealers are secured by first
liens on automobiles. Retail consumer receivables purchased from
dealers are secured by consumer goods. The Company's policy is to
consider repossession or the initiation of foreclosure proceedings on an
individual customer basis.
The Company is licensed to transact business in Minnesota, Wisconsin and
Illinois. Although the Company's portfolio is primarily secured by
automobiles and/or single-family homes, local economic conditions could
affect the customer's ability to honor their loan contract.
(4) Employee Benefit Plans
The Company maintains a profit sharing trust covering substantially all
full-time employees who have reached age 20-1/2 years and who have
satisfied minimum continuous employment requirements on the plan
anniversary date. Under terms of the plan, as amended, when after tax
earnings equal or exceed $3,000,000, the Company contributes 5% of
participants' aggregate annual compensation, as defined, or a larger
amount as determined by the board of directors, not to exceed the
maximum contribution deductible under the Internal Revenue Code. Total
Company contributions to the profit sharing trust amounted to $218,717,
$209,378 and $175,866 for 1992, 1991 and 1990, respectively.
(Continued)
F-11
<PAGE> 83
COMMUNITY CREDIT CO. AND SUBSIDIARIES
The Company also has a noncontributory defined benefit pension plan for
employees who have attained the age of 20-1/2 years and have satisfied
minimum continuous employment requirements on the plan anniversary date.
Under terms of the plan, the Company makes contributions in amounts
determined by an actuary. Pension costs are funded as accrued by
payment to a trust established for the plan. The Company's
contributions to the plan were $156,000, $132,000 and $114,844 for 1992,
1991 and 1990, respectively. Total pension expense for this plan
amounted to $83,283, $100,015 and $76,101 for 1992, 1991 and 1990,
respectively.
The following table sets forth the plan's funded status and amounts
recognized in the Company's balance sheet at December 31:
<TABLE>
<CAPTION>
1992 1991
------------ -----------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested $ (2,137,756) (1,944,044)
Nonvested (15,289) (9,443)
------------ -----------
Accumulated benefit obligation (2,153,045) (1,953,487)
============ ===========
Projected benefit obligation for service rendered
to date (2,621,634) (2,378,640)
Plan assets at fair value, primarily U.S.
Treasury notes 2,924,293 2,721,867
------------ -----------
Plan assets in excess of projected benefit
obligation 302,659 343,227
Unrecognized net gain from past experience
different from that assumed and effects of
changes in assumptions (35,458) (140,281)
Unrecognized net transition obligation (91,979) (100,341)
------------ -----------
Prepaid pension cost $ 175,222 102,605
============ ===========
</TABLE>
<TABLE>
<CAPTION>
1992 1991 1990
--------- --------- ---------
<S> <C> <C> <C>
Net periodic pension cost for the year
ended December 31 included in the
following components:
Service cost-benefits earned $ 115,836 119,652 100,011
during the year
Interest cost on projected benefit
obligation 189,242 169,574 151,709
Actual return on plan assets (194,269) (365,649) (192,922)
Net amortization and deferral (27,526) 176,438 17,303
--------- --------- ---------
Net periodic pension cost 83,283 100,015 76,101
========= ========= =========
</TABLE>
For 1992 and 1991 the weighted average discount rate and rate of increase
in future compensation levels used in determining the actuarial present
value of the projected benefit obligation were 8% and 5.5%,
respectively. The expected long-term rate of return on assets was 8%.
(Continued)
F-12
<PAGE> 84
COMMUNITY CREDIT CO. AND SUBSIDIARIES
(5) Short-term Notes Payable (Unsecured) and Bank Lines of Credit
The majority of the Company's lines of credit require the Company to pay
commitment fees of one quarter of 1% on the amount of the line of
credit. Aggregate lines of credit were $51,000,000 and $50,000,000 at
December 31, 1992 and 1991, respectively. There were no outstanding
borrowings under line-of-credit agreements at December 31, 1992 or 1991.
The line of credit agreements expire at various dates; however, the
arrangements may be withdrawn at any time at the option of each bank.
The following summarizes information regarding short-term borrowings:
<TABLE>
<CAPTION>
Weighted Weighted
average Maximum Average average
interest amount amount interest
rate outstanding outstanding rate
Balance at at end during during during
end of year of year the year the year the year
----------- --------- ---------- ------------ --------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1992:
Bank loans $ 0 0.00% $ 5,450,000 372,699 4.87%
Commercial paper 30,390,438 3.85 40,081,039 36,867,868 4.27
Year ended December 31, 1991:
Bank loans 0 0.00 5,000,000 794,041 7.37
Commercial paper 35,400,675 5.05 44,955,933 36,128,263 6.57
Year ended December 31, 1990:
Bank loans 1,275,000 8.88 3,650,000 683,466 9.27
Commercial paper 32,502,768 8.23 36,104,615 31,847,227 8.66
</TABLE>
(6) Long-term Debt
A summary of unsecured long-term debt at December 31 follows:
<TABLE>
<CAPTION>
1992 1991
----------- -----------
<S> <C> <C>
Senior notes-9.50%:
$3,300,000 principal, due July 15, 1997;
$3,300,000 principal, due July 15, 1998;
$3,400,000 principal, due July 15, 1999 $ 10,000,000 10,000,000
Senior notes-9.75%, due July 5, 1993 5,000,000 5,000,000
Senior notes-8.60%:
$1,400,000 principal, due May 15, 1992;
$1,400,000 principal, due May 15, 1993;
$1,400,000 principal, due May 15, 1994;
$1,400,000 principal, due May 15, 1995;
$1,400,000 principal, due May 15, 1996 $ 5,600,000 7,000,000
</TABLE>
(Continued)
F-13
<PAGE> 85
COMMUNITY CREDIT CO. AND SUBSIDIARIES
<TABLE>
<CAPTION>
1992 1991
----------- -----------
<S> <C> <C>
Senior notes-8.85%:
$2,000,000 principal, due June 15, 1992;
$2,000,000 principal, due June 15, 1993;
$2,000,000 principal, due June 15, 1994;
$2,000,000 principal, due June 15, 1995;
$2,000,000 principal, due June 15, 1996 $ 8,000,000 10,000,000
Senior notes-8.95%:
$1,200,000 principal, due July 1, 1992;
$1,200,000 principal, due July 1, 1993;
$1,200,000 principal, due July 1, 1994;
$1,200,000 principal, due July 1, 1995;
$1,200,000 principal, due July 1, 1996;
$1,000,000 principal, due July 1, 1997 5,800,000 7,000,000
Senior notes-9.00%:
$2,000,000 principal, due May 15, 1993;
$2,000,000 principal, due May 15, 1994;
$2,000,000 principal, due May 15, 1995;
$2,000,000 principal, due May 15, 1996;
$2,000,000 principal, due May 15, 1997 10,000,000 10,000,000
Senior notes-8.56%:
$1,666,667 principal, due May 1, 1997;
$1,666,667 principal, due May 1, 1998;
$1,666,667 principal, due May 1, 1999;
$1,666,667 principal, due May 1, 2000;
$1,666,667 principal, due May 1, 2001;
$1,666,665 principal, due May 1, 2002 10,000,000 0
Senior notes-6.99%:
$1,800,000 principal, due December 1, 1995;
$3,200,000 principal, due December 1, 1996;
$2,400,000 principal, due December 1, 1997;
$2,400,000 principal, due December 1, 1998;
$2,200,000 principal, due December 1, 1999 12,000,000 0
Senior subordinated notes-10.13%:
$650,000 principal, due July 1, 1992;
$650,000 principal, due July 1, 1993;
$650,000 principal, due July 1, 1994;
$650,000 principal, due July 1, 1995;
$550,000 principal, due July 1, 1996;
$550,000 principal, due July 1, 1997 3,050,000 3,700,000
</TABLE>
(Continued)
F-14
<PAGE> 86
COMMUNITY CREDIT CO. AND SUBSIDIARIES
<TABLE>
<CAPTION>
1992 1991
----------- -----------
<S> <C> <C>
Junior subordinated notes-9.90%:
$1,000,000 principal, due May 1, 1993;
$2,000,000 principal, due May 1, 1994;
$2,000,000 principal, due May 1, 1995 $ 5,000,000 5,000,000
----------- -----------
$ 74,450,000 57,700,000
=========== ===========
</TABLE>
The aggregate annual maturities of long-term debt for the five years
subsequent to December 31, 1992 are:
<TABLE>
<CAPTION>
Years ending Subordinated
December 31 Senior notes notes Total
------------ ------------ ------------ ------------
<S> <C> <C> <C>
1993 $ 11,600,000 1,650,000 13,250,000
1994 6,600,000 2,650,000 9,250,000
1995 8,400,000 2,650,000 11,050,000
1996 9,800,000 550,000 10,350,000
1997 10,366,667 550,000 10,916,667
Thereafter 19,633,333 0 19,633,333
------------ ------------ ------------
$ 66,400,000 8,050,000 74,450,000
============ ============ ============
</TABLE>
The agreements applicable to the senior notes and subordinated notes
payable contain various restrictive provisions. Under the most
restrictive of such provisions, approximately $4,550,000 of consolidated
retained earnings was unrestricted on December 31, 1992 as to payments
of cash dividends or the purchase of the Company's capital stock.
(7) Income Taxes
The components of income tax expense are as follows:
<TABLE>
<CAPTION>
1992 1991 1990
----------- ----------- -----------
<S> <C> <C> <C>
Current:
Federal $ 2,256,980 1,585,869 1,449,141
State 543,966 406,741 354,811
----------- ----------- -----------
Total current 2,800,946 1,992,610 1,803,952
Deferred (149,942) 55,983 (139,998)
----------- ----------- -----------
$ 2,651,004 2,048,593 1,663,954
=========== =========== ===========
</TABLE>
(Continued)
F-15
<PAGE> 87
COMMUNITY CREDIT CO. AND SUBSIDIARIES
The actual tax expense for 1992, 1991 and 1990 differs from the "expected"
tax expense for those years (computed by applying the U.S. federal
corporate tax rate to earnings before income taxes) as follows:
<TABLE>
<CAPTION>
1992 1991 1990
----- ----- -----
<S> <C> <C> <C>
Expected federal income tax rate 34.0% 34.0% 34.0%
State income taxes, net of federal income tax
benefit 4.2 3.5 3.6
Tax exempt municipal bond income (1.6) (2.4) (3.2)
Special deduction available to life insurance
companies (5.8) (6.6) (6.6)
Other, net .3 1.5 .8
----- ----- -----
31.1% 30.0% 28.6%
===== ===== =====
</TABLE>
The deferred income tax benefits included in the balance sheet primarily
relate to differences in tax accounting treatments for allowance for
credit losses, deferred compensation and unearned insurance premiums and
commissions.
Under provisions of the Internal Revenue Code, part of Scott Life's annual
underwriting profits for taxable years ended prior to January 1, 1984
are segregated for income tax purposes in an account designated
"policyholders' surplus" on which the payment of income tax is deferred.
The Deficit Reduction Act of 1984 froze the amount of the policyholders'
surplus account as of December 31, 1983 and allows no subsequent
additions to the account. In the event certain limitations provided in
the Internal Revenue Code are exceeded or the policyholders' surplus
account is distributed to the Company, federal income taxes would become
payable. Neither such distribution nor significant reductions in
policyholders' surplus is contemplated by the Company. The balance in
the policyholders' surplus account is approximately $1,041,000 at
December 31, 1992.
In February 1992 the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 109, Accounting for Income Taxes,
(SFAS No. 109). SFAS No. 109 is effective for years beginning after
December 15, 1992. The Company plans to apply the provisions of SFAS
No. 109 during 1993 without restating prior years' financial statements.
The adoption of SFAS No. 109 is expected to have a favorable impact on
1993 net earnings and will be reported separately as a cumulative effect
of the change in the method of accounting for income taxes in the 1993
consolidated statement of earnings.
(Continued)
F-16
<PAGE> 88
COMMUNITY CREDIT CO. AND SUBSIDIARIES
(8) Commitments
At December 31, 1992 the Company and its subsidiaries were lessees of
office space under operating leases expiring through 1997. Minimum
annual rentals relating to such leases are as follows:
<TABLE>
<CAPTION>
Years ending
December 31
------------
<S> <C>
1993 $ 576,960
1994 439,032
1995 439,742
1996 213,925
1997 139,446
</TABLE>
Rental expense on leases for the years ended December 31, 1992, 1991 and
1990 amounted to $692,639, $673,519 and $639,030, respectively,
including amounts paid for real estate taxes and other lease costs.
(9) Stock Options
During 1992, 1988 and 1987 the board of directors granted options to
certain officers to buy shares of common stock under a nonqualified
stock option plan. At December 31, 1992 a total of 28,000 options were
outstanding and exercisable at an average exercise price of $11.46 per
share. All the options will expire within ten years of the date of
grant. During 1992, 1991 and 1990, 900, 0 and 300 options,
respectively, were exercised at $8.85 per share.
F-17
<PAGE> 89
Schedule 1
COMMUNITY CREDIT CO. AND SUBSIDIARIES
Consolidating Schedule-Balance Sheet Information
December 31, 1992
<TABLE>
<CAPTION>
Community
Credit Co. Scott Life
and finance Insurance Community
Assets subsidiaries Company Casualty Co. Eliminations Consolidated
------------- ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents $ 983,702 2,032,527 439,152 0 3,455,381
Investment securities 0 23,654,685 324,305 0 23,978,990
Finance receivables:
Direct installment loans 105,743,209 0 0 0 105,743,209
Retail installment contracts:
Motor vehicle 44,676,565 0 0 0 44,676,565
Consumer 5,259,926 0 0 0 5,259,926
------------- ------------ ------------ ------------ -------------
Total retail installment
contracts 49,936,491 0 0 0 49,936,491
------------- ------------ ------------ ------------ -------------
Total finance receivables 155,679,700 0 0 0 155,679,700
Deductions:
Deferred finance income 36,583,747 0 0 0 36,583,747
Allowance for credit losses 3,113,594 0 0 0 3,113,594
------------- ------------ ------------ ------------ -------------
Total deductions 39,697,341 0 0 0 39,697,341
------------- ------------ ------------ ------------ -------------
Finance receivables-net 115,982,359 0 0 0 115,982,359
Fixed assets used in operations-
at cost, less allowance for
depreciation 633,433 0 0 0 633,433
Deferred policy acquisition costs 0 142,523 0 (142,523) 0
Deferred income tax benefits 1,509,176 16,675 0 0 1,525,851
Investment in subsidiaries 25,448,211 0 0 (25,448,211) 0
Other assets 398,135 559,344 23,663 (17,253) 963,889
------------- ------------ ------------ ------------ -------------
$ 144,955,016 26,405,754 787,120 (25,607,987) 146,539,903
============= ============ ============ ============ =============
</TABLE>
(Continued)
F-18
<PAGE> 90
Schedule 1, Cont.
COMMUNITY CREDIT CO. AND SUBSIDIARIES
Consolidating Schedule-Balance Sheet Information, Continued
December 31, 1992
<TABLE>
<CAPTION>
Community
Credit Co. Scott Life
and finance Insurance Community
subsidiaries Company Casualty Co. Eliminations Consolidated
------------- ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C>
Liabilities and Shareholders' Equity
Liabilities:
Short-term notes payable $ 30,390,438 0 0 0 30,390,438
Accounts payable and accrued
expenses 1,891,385 120,000 862 (17,253) 1,994,994
Dividends payable 2,303,100 0 0 0 2,303,100
Income taxes payable 146,402 79,715 16,363 0 242,480
Dealers' reserves 1,681,393 0 0 0 1,681,393
Insurance loss and mortality
reserves 0 894,856 62,777 0 957,633
Unearned insurance premiums 0 570,090 0 0 570,090
Unearned insurance commissions 561,908 0 0 (142,523) 419,385
Long-term debt 74,450,000 0 0 0 74,450,000
Deferred compensation 360,000 0 0 0 360,000
------------- ------------ ------------ ------------ -------------
Total liabilities 111,784,626 1,664,661 80,002 (159,776) 113,369,513
------------- ------------ ------------ ------------ -------------
Shareholders' equity:
Common stock 3,070,800 100,000 100,000 (200,000) 3,070,800
Additional paid-in capital 353,580 0 150,000 (150,000) 353,580
Retained earnings 29,746,010 24,641,093 457,118 (25,098,211) 29,746,010
------------- ------------ ------------ ------------ -------------
Total shareholder's equity 33,170,390 24,741,093 707,118 (25,448,211) 33,170,390
------------- ------------ ------------ ------------ -------------
$ 144,955,016 26,405,754 787,120 (25,607,987) 146,539,903
============= ============ ============ ============ =============
</TABLE>
See accompanying independent auditors' report.
F-19
<PAGE> 91
Schedule 2
COMMUNITY CREDIT CO. AND SUBSIDIARIES
Consolidating Schedule-Earnings
Year ended December 31, 1992
<TABLE>
<CAPTION>
Community
Credit Co. Scott Life
and finance Insurance Community
subsidiaries Company Casualty Co. Eliminations Consolidated
------------- ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
Revenue:
Interest and fees $ 23,975,367 0 0 0 23,975,367
Insurance premiums and
insurance commissions 569,451 2,263,669 142,463 (565,918) 2,409,665
Investment and other income 219,452 2,100,628 40,524 0 2,360,604
------------- ------------ ------------ ------------ -------------
Total revenue 24,764,270 4,364,297 182,987 (565,918) 28,745,636
------------- ------------ ------------ ------------ -------------
Operating expenses:
Interest 7,426,515 0 0 0 7,426,515
Provision for credit losses 1,948,600 0 0 0 1,948,600
Incurred claims and changes in
mortality reserves 0 733,827 18,897 0 752,724
Insurance commissions 0 565,918 0 (565,918) 0
Personnel expenses 5,949,847 0 0 0 5,949,847
Other operating expenses 3,913,002 233,812 9,726 0 4,156,540
------------- ------------ ------------ ------------ -------------
Total operating expenses 19,237,964 1,533,557 28,623 (565,918) 20,234,226
------------- ------------ ------------ ------------ -------------
Earnings before income
taxes 5,526,306 2,830,740 154,364 0 8,511,410
Income taxes 2,281,704 316,854 52,446 0 2,651,004
Equity in earnings of subsidiaries 2,615,804 0 0 (2,615,804) 0
------------- ------------ ------------ ------------ -------------
Net earnings $ 5,860,406 2,513,886 101,918 (2,615,804) 5,860,406
============= ============ ============ ============ =============
</TABLE>
See accompanying independent auditors' report.
F-20
<PAGE> 92
COMMUNITY CREDIT CO. AND SUBSIDIARIES
Consolidated Balance Sheets (unaudited)
<TABLE>
<CAPTION>
September 30 December 31
------------ ------------
Assets 1993 1992
------ ------------ ------------
<S> <C> <C>
Cash and cash equivalents $ 3,795,790 $ 3,455,381
Investment securities 25,499,979 23,978,990
Finance receivables:
Direct loans 107,149,591 105,743,209
Retail loans:
Motor vehicle 71,089,478 44,676,565
Consumer 4,873,484 5,259,926
------------ ------------
Total retail 75,962,962 49,936,491
------------ ------------
Total receivables 183,112,553 155,679,700
Deductions:
Deferred finance income 41,775,561 36,583,747
Allowance for credit losses 3,662,251 3,113,594
------------ ------------
Total deductions 45,437,812 39,697,341
------------ ------------
Finance receivables - net 137,674,741 115,982,359
Fixed assets (at cost, less
allowance for depreciation of
$912,504 for 1993 and
$946,356 for 1992 700,804 633,433
Deferred income tax benefits 1,715,301 1,525,851
Other assets 1,136,411 963,889
------------ ------------
Total assets $170,523,026 $146,539,903
============ ============
(continued)
</TABLE>
F-21
<PAGE> 93
COMMUNITY CREDIT CO. AND SUBSIDIARIES
Consolidated Balance Sheets (Unaudited)
<TABLE>
<CAPTION>
September 30 December 31
------------ ------------
Liabilities and
- ---------------
Shareholders' Equity 1993 1992
- ---------------------- ------------ ------------
<S> <C> <C>
Liabilities
Short term notes payable $ 48,367,096 $ 30,390,438
Accounts payable and accrued
expenses 2,495,335 1,994,994
Dividends payable 2,303,100
Income taxes payable 226,849 242,480
Dealers' reserves 2,567,493 1,681,393
Insurance loss and mortality
reserves 934,555 957,633
Unearned insurance premiums 562,740 570,090
Unearned insurance commissions 408,297 419,385
Long term debt 76,200,000 74,450,000
Deferred compensation 360,000 360,000
------------ ------------
Total liabilities 132,122,365 113,369,513
Shareholders' equity:
Common stock, par value $1.00.
Authorized 8,000,000 shares;
issued and outstanding
3,089,800 shares and
3,070,800 shares, respectively 3,089,800 3,070,800
Additional paid-in capital 554,422 353,580
Retained earnings 34,756,439 29,746,010
------------ ------------
Total shareholders' equity 38,400,661 33,170,390
------------ ------------
Total liabilities and equity $170,523,026 $146,539,903
============ ============
</TABLE>
See accompanying notes to interim financial information.
F-22
<PAGE> 94
COMMUNITY CREDIT CO. AND SUBSIDIARIES
Consolidated Statements of Earnings (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
-------------------------------- -------------------------------
1993 1992 1993 1992
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Revenue:
Interest and fees $6,977,459 $6,088,067 $20,012,137 $17,797,873
Insurance premiums
and commissions 626,299 626,068 1,845,986 1,774,476
Investment and
other income 644,529 586,852 1,885,814 1,767,925
---------- ---------- ----------- -----------
Total revenue 8,248,287 7,300,987 23,743,937 21,340,274
Operating expenses:
Interest 2,023,533 1,872,887 6,009,979 5,532,550
Provision for credit
losses 579,332 370,666 1,530,792 1,343,823
Incurred claims and
changes in mortality
reserves 144,364 266,812 569,854 523,178
Personnel expenses 1,705,577 1,497,327 4,980,989 4,369,562
Other operating expenses 1,219,401 1,042,722 3,464,205 3,080,351
---------- ---------- ----------- -----------
Total operating expenses 5,672,207 5,050,414 16,555,819 14,849,464
---------- ---------- ----------- -----------
Earnings before income taxes 2,576,080 2,250,573 7,188,118 6,490,810
Income taxes 783,561 727,704 2,177,690 2,027,411
---------- ---------- ----------- -----------
Net earnings $1,792,519 $1,522,869 $ 5,010,428 $ 4,463,399
========== ========== =========== ===========
Net earnings per share $ 0.58 $ 0.50 $ 1.63 $ 1.45
========== ========== =========== ===========
</TABLE>
See accompanying notes to interim financial information.
F-23
<PAGE> 95
COMMUNITY CREDIT CO. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (unaudited)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
----------------------------------
1993 1992
----------- -----------
<S> <C> <C>
Net earnings $ 5,010,428 $ 4,463,399
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Depreciation expense 179,142 162,751
Provision for credit losses 1,530,792 1,343,823
Gain on sale of fixed assets (143,973) (129,531)
Change in deferred taxes (189,450) (137,776)
Change in other assets (172,522) (213,835)
Change in accounts payable and
accrued expenses 500,341 680,590
Change in income taxes payable (15,631) 174,912
Change in dealers' reserves 886,100 470,299
Change in unearned insurance
premiums, loss reserves and
unearned insurance commissions (41,516) (48,086)
Other, net (70,880) (11,582)
----------- -----------
Net cash provided by operating
activities 7,472,831 6,754,964
----------- -----------
Cash flows from investing activities:
Proceeds from maturity of
investments 3,013,067 785,700
Purchase of investments (4,505,988) (1,863,609)
Principal payments received on
finance receivables 64,742,416 54,903,503
Disbursements for finance
receivables (87,965,590) (68,897,995)
Proceeds from sale of fixed
assets 587,185 544,323
Purchase of fixed assets (634,080) (683,616)
----------- -----------
Net cash used in investing activities (24,762,990) (15,211,694)
----------- -----------
Cash flows from financing activities
Net increase in short term
notes payable 17,976,658 4,548,741
Proceeds from issuance of long
term debt 19,000,000 10,000,000
Retirement of long term debt (17,250,000) (5,250,000)
Proceeds from issuance of shares 207,010 0
Dividends paid (2,303,100) (1,995,435)
----------- -----------
Net cash provided by financing
activities 17,630,568 7,303,306
----------- -----------
Net decrease in cash and cash
equivalents 340,409 (1,153,424)
Cash and cash equivalents,
beginning of year 3,455,381 3,065,189
----------- -----------
Cash and cash equivalents,
end of year $ 3,795,790 $ 1,911,765
=========== ===========
Supplemental disclosures of
Cash flows information:
Interest paid $5,743,720 $ 5,128,621
Income taxes paid $1,529,500 $ 1,299,000
</TABLE>
See accompanying notes to interim financial information.
F-24
<PAGE> 96
COMMUNITY CREDIT CO. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
The accompanying unaudited financial statements and notes have been prepared in
accordance with generally accepted accounting principles and the accounting
policies set forth in Community Credit Co. and Subsidiaries' 1992 Annual Report
and should be read in conjunction with the Notes to Consolidated Financial
Statements therein.
1. Principles of Consolidation.
The consolidated financial statements include the accounts of Community
Credit Co. and its four wholly owned subsidiary companies, Community Credit
Plan, Inc. and Community Credit Co. of Illinois (finance subsidiaries),
Scott Life Insurance Company (a life insurance subsidiary) and Community
Casualty Co. (a casualty insurance subsidiary). All significant
intercompany balances and transactions have been eliminated in
consolidation.
The consolidated balance sheet as of September 30, 1993 and the
consolidated statements of earnings and cash flows for the three- and
nine-month periods ended September 30, 1993 and 1992 are unaudited.
However, in the opinion of management, these financial statements include
all adjustments, which consist only of normal recurring adjustments,
necessary for fair presentation of the financial position of Community
Credit Co. and subsidiaries. The results of operations for the unaudited
three- and nine-month periods ended September 30, 1993 are not necessarily
indicative of the results which may be expected for the entire year 1993.
2. Dividend Restrictions
The agreements applicable to the senior notes and subordinated notes payable
contain various restrictive provisions. Under the most restrictive of such
provisions, approximately $13,585,000 of consolidated retained earnings was
unrestricted on September 30, 1993 as to payments of cash dividends or the
purchase of the Community Credit Co.'s capital stock.
3. Change in Method of Accounting for Income Taxes
In February 1992, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 109, Accounting for Income Taxes.
Under the asset and liability method of SFAS No. 109, deferred tax assets
and liabilities are recognized for the future tax consequences attributable
to differences between the financial statement carrying amounts of existing
assets and liabilities and their respective tax bases. Deferred tax assets
and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are
expected to be recovered or settled. Under Statement 109, the effect on
deferred tax assets and liabilities of a change in tax rates is recognized
in income in the period that includes the enactment date.
Effective January 1, 1993, the Company adopted Statement 109. The
cumulative effect of that change in the method of accounting for income
taxes was not material.
F-25
<PAGE> 97
The components of income tax expense for the three- and nine-months ended
September 30, 1993 are as follows:
<TABLE>
<CAPTION>
Three-months Nine-months
------------ -----------
<S> <C> <C>
Current:
Federal 660,420 1,893,712
State 165,105 473,428
------- ---------
Total current 825,525 2,367,140
Deferred (41,964) (189,450)
------- ---------
Total income tax expense 783,561 2,177,690
======= =========
</TABLE>
The tax effects of temporary differences that give rise to the deferred tax
assets at September 30, 1993 are as follows:
<TABLE>
<S> <C>
Allowance for credit losses 1,281,708
Unearned premiums and commissions 219,427
Deferred compensation 145,685
Other 68,481
---------
Deferred tax assets 1,715,301
Valuation allowance 0
---------
Deferred tax assets, net 1,715,301
=========
</TABLE>
The effective tax rate and the components of income tax expense as
calculated pursuant to Statement 109 are not expected to be significantly
different from amounts reported in prior years.
4. Subsequent Event
On November 22, 1993, the Company declared a $1.00 per share dividend
aggregating $3,106,800.
F-26
<PAGE> 98
APPENDIX A
AGREEMENT AND PLAN OF REORGANIZATION
AND AGREEMENT AND PLAN OF MERGER
<PAGE> 99
AGREEMENT
AND
PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") entered into as of
the 23rd day of November, 1993, by and between Community Credit Co.
("Community"), a Minnesota 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 Community (the
"Merger") pursuant to an agreement 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 Common
Stock of Community of the par value of $1.00 per share ("Community Common
Stock") outstanding immediately prior to the time the Merger becomes effective
in accordance with the provisions of the Merger Agreement (the "Effective Time
of the Merger") 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 Community pursuant to the Merger Agreement, with
Community as the surviving corporation, in which merger each share of Community
Common Stock outstanding immediately prior to the Effective Time of the Merger
(other than shares as to which statutory dissenters' appraisal rights have been
exercised) will be converted into and exchanged for the number of shares of
Norwest Common Stock determined by dividing the aggregate number of 3,727,000
shares of Norwest Common Stock by the total number of shares of Community
Common Stock outstanding immediately before the Effective Time of Merger.
(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, stock split, split-up, combination,
exchange of shares or readjustment, or if a stock dividend thereon shall be
declared with a record date within such period, then the number of shares of
Norwest Common Stock into which a share of Community Common Stock 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 Community Common Stock shall be converted will
equal the number of shares of Norwest Common Stock which holders of
shares of Community Common Stock would have received pursuant to such
reclassification,
A-1
<PAGE> 100
recapitalization, stock split, split-up, combination, exchange of shares or
readjustment, or stock dividend 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
scrip certificates therefor shall be issued to represent any such fractional
interest, and any holder thereof shall be paid an amount of cash equal to the
product obtained by multiplying the fractional share interest to which such
holder is entitled by the average of the closing prices of a share of Norwest
Common Stock as reported by the consolidated tape of the New York Stock
Exchange for each of the five (5) trading days immediately preceding
the Effective Time of the Merger.
(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 Minnesota 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, but in no
event earlier than January 15, 1994 (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, or such other date as may be specified as the effective date in such
documents so filed, is herein referred to as the "Effective Date of the
Merger". The Effective Time of the Merger shall be 11:59 p.m. Central Standard
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 Community pursuant to the
Merger Agreement.
The closing of the transactions contemplated by this Agreement and the
Merger Agreement (the "Closing") shall take place on the Closing Date at the
offices of Norwest, Norwest Center, Sixth and Marquette, Minneapolis,
Minnesota.
2. REPRESENTATIONS AND WARRANTIES OF COMMUNITY. Community represents and
warrants to Norwest as follows:
(a) Organization and Authority. Community is a corporation duly organized,
validly existing and in good standing under the laws of the State of Minnesota,
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 Community or its subsidiaries and has corporate
power and authority to own its properties and assets and to carry on
its business as it is now being conducted. Community has furnished Norwest
true and correct copies of its articles of incorporation and by-laws, as
amended.
(b) Community's Subsidiaries. Schedule 2(b) sets forth a complete and
correct list of all of Community's subsidiaries as of the date hereof
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(particularly excluding Great American Investment Company, individually a
"Community Subsidiary" and collectively the "Community Subsidiaries"), all
shares of the outstanding capital stock of each of which are owned directly or
indirectly by Community. No equity security of any Community Subsidiary is or
may be required to be issued by reason of any option, warrant, scrip, right to
subscribe to, call or commitment of any character whatsoever relating to, or
security or right convertible into, shares of any capital stock of such
subsidiary, and there are no contracts, commitments, understandings or
arrangements by which any Community Subsidiary is bound to issue additional
shares of its capital stock, or any option, warrant or right to purchase or
acquire any additional shares of its capital stock. All of such shares so
owned by Community 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 Community Subsidiary is a corporation 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. Community 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 (other than Community Subsidiaries), and is not, directly
or indirectly, a partner in any partnership or party to any joint venture.
(c) Capitalization. The authorized capital stock of Community consists of
8,000,000 shares of common stock, $1.00 par value, of which as of the close of
business on September 30, 1993, 3,089,800 shares were outstanding and no shares
were held in the treasury. The maximum number of shares of Community Common
Stock (assuming for this purpose that phantom shares and other
share-equivalents constitute Community Common Stock) that would be
outstanding as of the Effective Date of the Merger if all options, warrants,
conversion rights and other rights with respect thereto were exercised is
3,106,800. All of the outstanding shares of capital stock of Community have
been duly and validly authorized and issued and are fully paid and
nonassessable. Except as set forth in Schedule 2(c), there are no outstanding
subscriptions, contracts, conversion privileges, options, warrants, calls or
other rights obligating Community or any Community Subsidiary to issue, sell or
otherwise dispose of, or to purchase, redeem or otherwise acquire, any shares of
capital stock of Community or any Community Subsidiary. Since September 30,
1993 no shares of Community capital stock have been purchased, redeemed or
otherwise acquired, directly or indirectly, by Community or any Community
Subsidiary and no dividends or other distributions have been declared, set
aside, made or paid to the shareholders of Community.
(d) Authorization. Community 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 Community and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by the Board of
Directors of Community. Subject to such approvals of shareholders and of
government agencies and other governing boards having regulatory authority over
Community and Community Subsidiaries as may be required by statute or
regulation, this Agreement and the Merger Agreement are valid and binding
obligations of Community enforceable against Community in accordance with their
respective terms.
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Except as set forth on Schedule 2(d), neither the execution, delivery and
performance by Community of this Agreement or the Merger Agreement, nor the
consummation of the transactions contemplated hereby and thereby, nor
compliance by Community 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 Community or any
Community Subsidiary under any of the terms, conditions or provisions of (x) its
articles of incorporation or by-laws or (y) any material note, bond, mortgage,
indenture, deed of trust, license, lease, agreement or other instrument or
obligation to which Community or any Community Subsidiary is a party or by which
it may be bound, or to which Community or any Community Subsidiary or any of the
properties or assets of Community or any Community Subsidiary may be subject, or
(ii) to the best knowledge of Community, violate any judgment, ruling, order,
writ, injunction, decree, statute, rule or regulation applicable to Community or
any Community Subsidiary or any of their respective properties or assets.
(e) Community Financial Statements. The consolidated statements of
financial condition of Community and Community's Subsidiaries as of December
31, 1992 and 1991 and related consolidated statements of income,
shareholders' equity and cash flows for the three years ended December 31, 1992,
together with the notes thereto, certified by KPMG Peat Marwick, and the
unaudited consolidated statements of financial condition of Community and
Community's Subsidiaries as of September 30, 1993 and the related unaudited
consolidated statements of income, shareholders' equity for the nine months then
ended (collectively, the "Community 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 Community and Community's Subsidiaries at the
dates and the consolidated results of operations of Community and Community's
Subsidiaries for the periods stated therein.
(f) Reports. Since January 1, 1987, Community and each Community
Subsidiary has filed all reports, registrations and statements, together with
any required amendments thereto, that it was required to file with any
applicable state lending or insurance authorities, the failure to file of which
could result in a material penalty or a material disruption of Community or any
Community Subsidiary or could have any other material adverse effect on
Community or any Community Subsidiary. All such reports and statements filed
with any such regulatory body or authority are collectively referred to herein
as the "Community Reports". As of their respective dates, the Community
Reports complied in all material respects with all the rules and regulations
promulgated by applicable state lending or insurance 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.
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(g) Properties and Leases. Except as may be reflected in the Community
Financial Statements and except for collateral repossessed in the ordinary
course of business, Community and each Community Subsidiary have good title
free and clear of any liens, claims, charges, options, encumbrances or
similar restrictions to all the real and personal property reflected in
Community's consolidated balance sheet as of September 30, 1993, 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 pursuant to which Community or any
Community Subsidiary, as lessee, leases real or personal property (except for
leases of personal property which may be terminated by Community or a Community
Subsidiary by giving one month or less notice), which leases are described on
Schedule 2(g), are valid and effective in accordance with their respective
terms, and there is not, under any such lease, any existing material default by
Community or such Community Subsidiary or any event which, with notice or lapse
of time or both, would constitute such a material default. Community's and each
Community Subsidiary's leased premises and equipment in regular use have been
well maintained and are in good and serviceable condition, reasonable wear and
tear excepted.
(h) Taxes. Except as set forth on Schedule 2(h), each of Community and the
Community Subsidiaries has filed all federal, state, county, and local tax
returns, including information returns, required to be filed by it, and paid
all taxes known, to the best knowledge of Community, to be 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 Community and
the Community Subsidiaries for the fiscal year ended December 31, 1989, 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 Community nor any Community Subsidiary
is a party to any pending action or proceeding, nor, to the best knowledge of
Community, 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, or local taxing authority in connection with an audit or examination of
the tax returns, business or properties of Community or any Community Subsidiary
which has not been settled, resolved and fully satisfied. Except as set forth
on Schedule 2(h), each of Community and the Community Subsidiaries has paid all
taxes known, to the best knowledge of Community, to be owed or which it is
required to withhold from amounts owing to employees, creditors or other third
parties. The consolidated balance sheet as of September 30, 1993, referred to
in paragraph 2(e) hereof, includes adequate provision for all accrued but unpaid
federal, state, county, and local taxes, interest, penalties, assessments or
deficiencies of Community and the Community Subsidiaries with respect to all
periods through the date thereof in all material respects.
(i) Absence of Certain Changes. Since December 31, 1992 there has been no
change in the business, financial condition or results of operations of
Community or any Community 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 Community or any Community Subsidiary.
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(j) Commitments and Contracts. Except as set forth on Schedule 2(j),
neither Community nor any Community Subsidiary is a party or subject to any of
the following (whether written or, in the case of material contracts or
agreements made by or with officers of Community employed at Community's home
office, oral, and whether express or implied):
(i) any employment contract or agreement (including any obligations
with respect to severance or termination pay liabilities or fringe
benefits) with any present or former officer, director, employee or
consultant (other than those which are terminable at will by Community or
such Community Subsidiary);
(ii) any plan, contract or agreement 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 containing covenants which limit the ability of
Community or any Community 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, Community or any Community Subsidiary may
carry on its business (other than as may be required by law or applicable
regulatory authorities); or
(v) any other contract or agreement which is a "material contract"
within the meaning of Item 601(b)(10) of Regulation S-K or which was not
made in the ordinary course of business.
(k) Litigation and Other Proceedings. Community has furnished Norwest
copies of all attorney responses to the request of the independent auditors for
Community with respect to loss contingencies as of December 31, 1992 in
connection with Community financial statements and a written list of legal and
regulatory proceedings filed against Community or any Community Subsidiary
since said date. Except as set forth on Schedule 2(k), neither
Community nor any Community Subsidiary is a party to any pending or, to the best
knowledge of Community, threatened, claim, action, suit, investigation or
proceeding, or is subject to any order, judgment or decree which order, judgment
or decree involves potential liability to Community or any Community Subsidiary
of more than $25,000 or is otherwise material to the business, operations or
financial condition of Community or any Community Subsidiary. The potential
liability to Community or Community Subsidiaries under all orders, judgments and
decrees currently existing and unsatisfied does not exceed $100,000 in the
aggregate.
(l) Insurance. Community and each Community Subsidiary is presently
insured, and, with the exception of Community Credit Co. of Illinois, has been
insured since October, 1989, under the insurance policies and for such risks
and amounts listed on Schedule 2(l), and has maintained all insurance
required by applicable law and regulation.
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(m) Compliance with Laws. Community and each Community Subsidiary has all
permits, licenses, authorizations, orders and approvals of, and has made all
filings, applications and registrations with 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 Community or such subsidiary; all such
permits, licenses, certificates of authority, orders and approvals are in full
force and effect and, to the best knowledge of Community, no suspension or
cancellation of any of them is threatened; and all such filings, applications
and registrations are current. Except as set forth on Schedule 2(m), 2(k) or
2(w), the conduct by Community and each Community Subsidiary of its business and
the condition and use of its properties does not violate or infringe, in any
respect material to any such business, any applicable law, statute, ordinance,
license or regulation. Neither Community nor any Community Subsidiary is in
default under any written order, license, regulation or demand of any federal,
state, municipal or other governmental agency or with respect to any written
order, writ, injunction or decree of any court. Except for statutory or
regulatory restrictions of general application, and except as set forth in
Schedule 2(m), no governmental authority has placed any restriction on the
business or properties of Community or any Community Subsidiary which reasonably
could be expected to have a material adverse effect on the business or
properties of Community or any Community Subsidiary.
(n) Labor. No work stoppage involving Community or any Community
Subsidiary is pending or, to the best knowledge of Community, threatened.
Neither Community nor any Community Subsidiary is involved in, or, to the best
knowledge of Community, threatened with or affected by, any labor dispute,
labor arbitration, labor lawsuit or labor administrative proceeding.
Employees of Community and the Community Subsidiaries are not represented by any
labor union nor are any collective bargaining agreements otherwise in effect
with respect to such employees.
(o) Material Interests of Certain Persons. Except as set forth on Schedule
2(o), no officer or director of Community or any Community Subsidiary, or any
"associate" (as such term is defined in Rule 14a-1 under the Securities
Exchange Act of 1934 which, together with the rules and regulations
thereunder, will be referred to as 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
Community or any Community Subsidiary.
(p) Community 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 Community or any Community Subsidiary acts as the plan
sponsor as defined in ERISA Section 3(16)(B), or in which any employee or
officer of Community or any Community Subsidiary participates as such an
officer or employee, or with respect to which any liability under ERISA or
otherwise exists or may be incurred by Community or any Community
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.
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(ii) Each Plan is and has been operated and administered substantially
in accordance with its provisions and in material compliance with applica-
ble law, and, in the case of each Plan that is a qualified retirement plan
under the Internal Revenue Code of 1986, there has been no failure to com-
ply with applicable laws or to operate or administer such Plan in accor-
dance with its provisions where any such failure could reasonably be
expected to result in the disqualification of such Plan or a related trust
under the Internal Revenue Code of 1986. Except as set forth on Schedule
2(p), Community or the Community 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.
Community knows of no reason that any 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 Plan may not have been amended to comply with the Tax Reform
Act of 1986 (the "TRA") and other recent legislation and regulations,
although each such 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 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 for the plan year ending
December 31, 1992, exceed the value of the assets of the Plan allocable to
such vested or accrued benefits.
(iv) Except as disclosed in Schedule 2(p), to the best knowledge of
Community, 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 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
Community or the Community Subsidiaries.
(v) No Plan which is subject to Title IV of ERISA or any trust created
thereunder has been terminated, nor, to the best knowledge of Community,
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.
(vi) No Plan or any trust created thereunder has, since January 1,
1984, and, to the best knowledge of Community, since the effective date of
ERISA, incurred any "accumulated funding deficiency", as such term is
defined in Section 412 of the Code (whether or not waived).
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(vii) Except as disclosed in Schedule 2(p) or permitted by paragraph
4(b) of this Agreement, 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 payment (including,
without limitation, severance, unemployment compensation, golden parachute
or otherwise) becoming due to any director or employee or former employee
of Community or any Community Subsidiary under any Plan or otherwise,
(ii) 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,
except insofar as any such transaction would result in such payments,
increases or accelerations caused by termination of employment and in such
event, only to the extent of such payments, increases or accelerations that
would have occurred from termination of employment in the absence of such
transaction.
(viii) Community is in substantial compliance with those reporting and
disclosure requirements of ERISA and the Code that apply to the Plans, and
there has been no failure of compliance that could have a material adverse
effect on the financial condition of Community or any Plan.
(q) Proxy Statement, etc. None of the information regarding Community and
the Community Subsidiaries supplied or to be supplied by Community 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 Community Common Stock pursuant to the
provisions of the Merger Agreement (the "Registration Statement"), (ii) the
proxy statement to be mailed to Community's shareholders in connection with the
meeting to be called to consider the Merger (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 in light of the
circumstances, 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 in light of the circumstances, 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 Community and the Community Subsidiaries are responsible for filing with
any 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. Neither Community nor any Community
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 of 1933 and the rules and regulations thereunder (the
"Securities Act").
(s) Brokers and Finders. Except for the employment of Dain Bosworth
Incorporated by Community, neither Community nor any Community Subsidiary nor
any of their respective officers, directors or employees has employed any
broker
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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 Community or any Community Subsidiary in connection with this
Agreement and the Merger Agreement or the transactions contemplated hereby and
thereby.
(t) No Defaults. Neither Community nor any Community Subsidiary is in
default in any material respect, nor has any event occurred which, with the
passage of time or the giving of notice, or both, would constitute a default in
any material respect, under any written agreement, indenture, or loan
agreement; any oral agreement, indenture or loan agreement disclosed
(or which should be disclosed) on Schedule 2(j); or any 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. To the best knowledge of Community, all parties
with whom Community or any Community Subsidiary has leases, written agreements
or written contracts or who owe to Community or any Community Subsidiary
obligations other than with respect to those arising in the ordinary course of
the consumer finance business of Community or the Community Subsidiaries are in
compliance therewith in all material respects.
(u) Environmental Liability. There is no legal, administrative, or other
proceeding, claim, or action of any nature seeking to impose, or that could
reasonably be expected to result in the imposition of, on Community or any
Community Subsidiary, any liability exceeding $25,000 arising from the release
of hazardous substances 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 knowledge of Community, threatened against
Community or any Community Subsidiary; based on the acts or omissions of
Community or any Community Subsidiary or their agents or employees, or, to the
best knowledge of Community, based on the acts or omissions of any third
parties, there is no reasonable basis for any such proceeding, claim or action;
and neither Community nor any Community 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.
(v) General Liabilities. Except as set forth on Schedule 2(v) or any other
Schedule to this Agreement or shown on Community Financial Statements, neither
Community nor any Community Subsidiary has any material liabilities, whether
accrued, contingent or otherwise, including without limitation, liabilities
under guaranties or indemnification agreements. For purposes of this
paragraph (v), "material" means more than $25,000 with respect to any liability
or more than $100,000 with respect to all such liabilities in the aggregate.
(w) Receivables. The word "Receivables" as used herein shall mean all
loans, sale contracts, credit agreements, invoices and other obligations or
rights to payments owned by Community or Community Subsidiaries which have been
included as "Receivables" in the Consolidated Financial Statements of
Community. All of the Receivables, together with any instruments
securing the same, were made for valuable consideration and constitute valid
obligations of the persons shown as indebted thereon by the records of
Community legally enforceable according to their terms, and except as set forth
in Schedule 2(w), to the best knowledge of Community, there are no claims or
defenses with respect to the Receivables which, in the best judgment of
Community would be sustainable or
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which could result in a material liability to Community or any Community
Subsidiary except for claims or defenses relating to any bankruptcy, insolvency
or other laws to the extent that they limit the rights of creditors generally.
Except for de minimus deviations in the amounts of payments, all payments shown
on Community's records relating to the Receivables were made on the date
indicated on said records and were either made by the persons shown as indebted
thereon or by someone authorized to make payments on their behalf other than a
Community employee or agent or a dealer or an employee or agent of a dealer
from whom the Receivable was purchased, except for payments by an insurer or a
dealer pursuant to a repurchase obligation. Except for adjustments made in the
ordinary course of business and de minimus deviations, the amounts shown on
Community's records to be owing and unpaid on the respective Receivables
represent the true and correct outstanding balances owing and unpaid thereon,
and the information concerning the Receivables and security therefor and the
person shown as indebted thereon is correct.
(x) Great American Investment Company. Great American Investment Company
is a wholly-owned subsidiary of Community which (i) has not conducted any
business activity since 1970 and (ii) has no assets or liabilities whatsoever.
3. REPRESENTATIONS AND WARRANTIES OF NORWEST. Norwest represents and
warrants to Community 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 is registered
as a bank holding company with the Federal Reserve Board under the Bank Holding
Company Act of 1956 as amended (the "BHC Act"). Norwest has furnished
Community with true and complete copies of its certificate of incorporation and
bylaws, as amended.
(b) Norwest Subsidiaries. Schedule 3(b) sets forth a complete and correct
list as of September 30, 1993, 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, 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. # 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.
(c) Norwest Capitalization. The authorized capital stock of Norwest
consists of (i) 5,000,000 shares of Preferred Stock, without par value, of
which
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as of the close of business on August 31, 1993, 1,143,750 shares of 10.24%
Cumulative Preferred Stock at $100 stated value and 1,132,750 shares of
Cumulative Convertible Preferred Stock, Series B, at $200 stated value were
outstanding, and (ii) 500,000,000 shares of Common Stock, $1-2/3 par value, of
which as of the close of business on August 31, 1993, 290,472,163 shares were
outstanding and 2,627,305 shares were held in the treasury.
(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. 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.
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, 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) 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.
(e) Norwest Financial Statements. The consolidated statements of financial
condition of Norwest and Norwest's subsidiaries as of December 31, 1992 and
1991 and related consolidated statements of income, stockholders'
equity and cash flows for the three years ended December 31, 1992, together
with the notes thereto, certified by KPMG Peat Marwick and included in
Norwest's Annual Report on Form 10-K for the fiscal year ended December 31,
1992 as amended by Form 8 dated March 3, 1993 (the "Norwest 10-K") as filed
with the SEC, and the unaudited consolidated balance sheets of Norwest and its
subsidiaries as of September 30, 1993 and the related unaudited consolidated
statements of income and cash flows for the 9 months then ended included in
Norwest's Quarterly Report on Form 10-Q for the fiscal quarter ended September
30, 1993 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
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consolidated results of operations, changes in financial position and
cash flows of Norwest and its subsidiaries for the periods stated therein.
(f) 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.
(g) No Reliance on Projections. Norwest understands that Community makes
no representation or warranty whatsoever as to the future profitability of
Community or any Community Subsidiary, and Norwest shall have no claim (whether
for indemnification or otherwise) against Community or any of its directors,
officers, employees, stockholders or agents as to any projection or statement
by any of them as to the future profitability of Community or any
Community Subsidiary.
(h) 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 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 or such Subsidiary; all such permits,
licenses, certificates of authority, orders and approvals are in full force and
effect, and to the best knowledge of 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 any such business, any applicable law, statute,
ordinance, license or regulation. Neither Norwest nor any Norwest Subsidiary
is in default under any written order, license, regulation or demand of any
federal, state, municipal or other governmental agency or with respect to any
written order, writ, injunction or decree of any court. Except for statutory
or regulatory restrictions of general application, no 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.
(i) Absence of Certain Changes. Since December 31, 1992, 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) Norwest Benefit Plans.
(i) The only "employee benefit plans" within the meaning of Section
3(3) of ERISA for which Norwest Financial, Inc. ("NFI") acts as plan
sponsor as defined in ERISA Section 3(16)(B), or in which any employee or
officer of NFI or any of its subsidiaries participates as such an officer
or employee, or with respect to which any liability under ERISA or
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otherwise exists or may be incurred by NFI are those set forth on Schedule
3(j) (the "NFI Plans"). No NFI Plan is a "multi-employer plan" within the
meaning of Section 3(37) of ERISA.
(ii) Each NFI Plan is and has been operated and administered
substantially in accordance with its provisions and in material compliance
with applicable law, and, in the case of each NFI Plan that is a qualified
retirement plan under the Internal Revenue Code of 1986, there has been no
failure to comply with applicable laws or to operate or administer such
NFI Plan in accordance with its provisions where any such failure could
reasonably be expected to result in the disqualification of such NFI Plan
or a related trust under the Internal Revenue Code of 1986. Except as set
forth on Schedule 3(j), NFI has 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 NFI Plans
to which the qualification requirements of Section 401(a) of the Code
apply. Norwest knows of no reason that any NFI 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 NFI Plan may not have been amended to comply with TRA
and other recent legislation and regulations, although each such NFI 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 NFI 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 NFI Plan for the plan year ending
December 31, 1992, exceed the value of the assets of the NFI Plans
allocable to such vested or accrued benefits.
(iv) Except as set forth on Schedule 3(j), and to the best knowledge
of Norwest, no NFI 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 such NFI Plan or trust, or any
trustee, fiduciary or administrator thereof, or any party dealing with any
such NFI 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) No NFI Plan which is subject to Title IV of ERISA or any trust
created thereunder has been terminated, nor, to the best knowledge of
Norwest, have there been any "reportable events" as that term is defined in
Section 4043 of ERISA with respect to any NFI Plan, other than those events
which may result from the transactions contemplated by this Agreement and
the Merger Agreement.
(vi) No NFI Plan or any trust created thereunder has, since January 1,
1984, and, to the best knowledge of Norwest, since the effective date of
ERISA, incurred any "accumulated funding deficiency", as such term is
defined in Section 412 of the Code (whether or not waived).
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(vii) NFI is in substantial compliance with those reporting and
disclosure requirements of ERISA and the Code that apply to the NFI plans,
and there has been no failure of compliance that could have a material
adverse effect on the financial condition of Norwest or any NFI plan.
(k) 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 known, to the best knowledge of Norwest,
to be 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(k), (i) neither Norwest nor
any Norwest Subsidiary is a party to any pending action or proceeding,
nor to the best knowledge of Norwest, 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 paid all taxes
known, to the best knowledge of Norwest, to be owed or which it is required to
withhold from amounts owing to employees, creditors or other third parties.
(l) Reports. Since January 1, 1987, 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 any applicable state
lending or insurance authorities the failure to file of which could result in a
material penalty or a material disruption of Norwest and its subsidiaries taken
as a whole or could have any other material adverse effect on Norwest and its
subsidiaries taken as a whole. 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
applicable state lending or insurance 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.
4. COVENANTS OF COMMUNITY. Community covenants and agrees with Norwest as
follows:
(a) Except as otherwise permitted or required by this Agreement or except
as otherwise permitted with Norwest's prior approval, from the date
hereof until the Effective Time of the Merger, Community, and each Community
Subsidiary will: maintain its corporate existence in good standing; maintain
the general
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character of its business and conduct its business in its ordinary and usual
manner (including, without limitation, the disposition of its assets); extend
credit in accordance with existing lending policies, maintain proper business
and accounting records in accordance with generally accepted principles;
maintain current investment practices; maintain its properties in good repair
and condition, ordinary wear and tear excepted; maintain presently existing
insurance coverage; use its best efforts to preserve its business organization
intact, to keep the services of its present principal employees and to preserve
its good will and the good will of its suppliers, customers and others having
business relationships with it; use its best efforts to obtain any approvals or
consents required to maintain existing leases and other contracts in effect
following the Merger; comply with all material obligations and duties imposed
upon them by laws, regulations, ordinances, codes, orders, licenses and permits
applicable to the properties and operations of Community and each Community
Subsidiary; provided that Norwest shall not unreasonably interfere with the
conduct of Community's business, permit Norwest and its representatives to
participate in the negotiation of any leases, licenses or other material
contracts (or extensions or renewals thereof); and provided that Norwest shall
not unreasonably interfere with the conduct of Community's business, permit
Norwest and its representatives (including KPMG, Peat Marwick and Deloitte
Touche) 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 Community herein expressed.
(b) Except as otherwise contemplated or required by this Agreement, from
the date hereof until the Effective Time of the Merger, Community and each
Community Subsidiary will not (without the prior written consent of Norwest,
which consent will not be unreasonably withheld or delayed): amend or
otherwise change its articles of incorporation or by-laws; issue or
sell or authorize for issuance or sale, or grant any options or make other
agreements with respect to the issuance or sale or conversion of, any shares of
its capital stock, phantom shares or other share-equivalents, or any other of
its securities; authorize or incur any long-term debt, mortgage, pledge or
subject to lien or other encumbrance any of its properties; enter into any
agreement, contract or commitment in excess of $100,000 except commercial paper
issued and credit transactions entered (under which Community or any Community
Subsidiary is the creditor) in the ordinary course of business and in
accordance with policies and procedures in effect on the date hereof; make any
investments other than in the ordinary course of business, amend or terminate
any Plan except for the merger thereof with NFI Plans as contemplated by this
Agreement or as required by law; make any contributions to any Plan except as
required by the terms of such Plan in effect as of the date hereof or by
applicable law; declare, set aside, make or pay any dividend or other
distribution with respect to its capital stock except any dividend declared and
issued by (i) Community in accordance with historical practice, provided such
payment does not disqualify the Merger as a "pooling of interests" for
accounting purposes and provided further that in no event shall such dividend
exceed $1.00 per share based on no more than 3,106,800 shares outstanding, (ii)
a subsidiary's Board of Directors in accordance with applicable law and
regulation, or (iii) Community payable prior to the Effective Date of the
Merger to shareholders of record on the record date for Norwest's regular
common stock dividend, if any, for the first quarter of 1994, if the
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Effective Time of the Merger has not occurred prior to such record date in an
amount not exceeding the first quarter cash dividend such shareholders would
have received on Norwest Common Stock received in the Merger if the Effective
Time of the Merger had occurred immediately prior to such record date; redeem,
purchase or otherwise acquire, directly or indirectly, any of the capital stock
of Community; increase the compensation of any officers, directors or executive
employees, except pursuant to existing compensation plans and practices and
bonus plans consistent with historical practices; sell or otherwise dispose of
any shares of the capital stock of any Community Subsidiary; or sell or
otherwise dispose of any of its assets or properties other than in the ordinary
course of business (other than the sale of investments of Scott Life Insurance
Company as may be necessary to effectuate the other provisions of this
Agreement). Nothing in this Agreement shall prohibit Community from paying
severance payments to employees terminated as a result of the Merger (which
payments may be made before or after the Effective Date of the Merger) and
payments to certain employees as incentive for continued service up to the date
of their termination resulting from the Merger (which payments may be made
before or after the Effective Date of the Merger); provided that the sum of any
severance payment and incentive payment paid to any employee shall not exceed
one-half of such employee's annual salary as of the date of this Agreement.
(c) The Board of Directors of Community will duly call, and will cause to
be held not later than twenty (20) 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
Community will (i) cause proper notice of such meeting to be given to its
shareholders in compliance with the Minnesota Business Corporation Act and
other applicable law and regulation, (ii) recommend by the affirmative vote of
the Board of Directors a vote in favor of approval of this Agreement and the
Merger Agreement, and (iii) use its best efforts to solicit from its
shareholders proxies to vote the Community common stock in favor thereof.
(d) Community will furnish or cause to be furnished to Norwest all the
information concerning Community 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 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 KPMG Peat Marwick to use such opinion in
such Registration Statement. Any interim quarterly financial information
provided under this paragraph must have been reviewed by KPMG Peat Marwick in
accordance with generally accepted auditing standards and Community must
provide Norwest with a copy of such review report.
(e) As soon as practicable after the date of the execution and delivery of
this Agreement, Community 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 Community 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) Community will use its best efforts to deliver to the Closing all
opinions, certificates and other documents required to be delivered by it at
the Closing.
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(g) Community will hold in confidence all documents and information
concerning Norwest and its subsidiaries furnished to Community 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 Community'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
Community, in the public domain, or later acquired by Community 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 Community, nor any Community Subsidiary, nor any director,
officer, representative or agent thereof, will, directly or indirectly,
solicit, authorize the solicitation of or enter into any discussions
with any corporation, partnership, person or other entity or group (other than
Norwest) concerning any offer or possible offer (i) to purchase any shares of
common stock, any option or warrant to purchase any shares of common stock, any
securities convertible into any shares of such common stock, or any other
equity security of Community or any Community Subsidiary, (ii) to make a tender
or exchange offer for any shares of such common stock or other equity security,
(iii) to purchase, lease or otherwise acquire the assets of Community or any
Community Subsidiary, or (iv) to merge, consolidate or otherwise combine with
Community or any Community Subsidiary. If any corporation, partnership, person
or other entity or group makes an offer or inquiry to Community or any
Community Subsidiary concerning any of the foregoing, Community or such
Community Subsidiary will promptly disclose such offer or inquiry, including
the terms thereof, to Norwest.
(i) Neither Community nor any Community Subsidiary shall take any action
which with respect to Community would disqualify the Merger as a "pooling of
interests" for accounting purposes.
(j) Community 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 Community who may reasonably be
deemed an "affiliate" of Community within the meaning of such term as defined
in Rule 144 and as used in Rule 145 under the Securities Act.
(k) Community shall make such adjustments immediately before the Merger to
be effective as of such dates as Norwest may request, but in no event before
January 1, 1994, as may be necessary to conform Community's accounting
practices and methods to those of Norwest and Norwest's plans with
respect to the conduct of Community's business following the Merger and to
provide for the costs and expenses relating to the consummation by Community of
the Merger and the other transactions contemplated by this Agreement.
(l) Not later than the Effective Date of Merger, all salaries, wages,
bonuses, commissions and any other amounts now or hereafter due present or
former employees, officers, directors and others relating to services rendered
to Community or any Community Subsidiary up to and including the Effective Date
of Merger will have been paid or properly accrued on the books of Community.
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(m) Community and each Community Subsidiary will take all action necessary
or required to operate the Plans so as to maintain compliance with the
provisions of ERISA and the Code, including the Tax Reform Act of 1986 and
regulations thereunder and other applicable law.
(n) Community will dissolve Great American Investment Company before the
Effective Date of Merger.
5. COVENANTS OF NORWEST. Norwest covenants and agrees with Community 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 Community all the information concerning
Norwest required for inclusion in a proxy statement or statements to be sent to
the shareholders of Community, or in any statement or application made by
Community 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 file with the SEC a registration statement on Form S-4 (the
"Registration Statement") under the Securities Act and any other applicable
documents, relating to the shares of Norwest Common Stock to be delivered to
the shareholders of Community pursuant to the Merger Agreement, and will use its
best efforts to cause the Registration Statement to become effective.
(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 Community pursuant to this Agreement and the Merger Agreement
will, upon such issuance and delivery to said shareholders pursuant to the
Merger Agreement, be duly authorized, validly issued, fully paid and
nonassessable. The shares of Norwest Common Stock to be delivered to the
shareholders of Community pursuant to the Merger Agreement will, when issued,
be free and clear of all liens and encumbrances and 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.
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(g) As soon as practicable after the date of the execution and delivery of
this Agreement, 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 Community to obtain all such approvals and consents required by Community.
(h) Norwest shall be bound by all of the provisions of the Confidentiality
Agreement dated September 27, 1993 by and between Community and Norwest
Financial Resources, Inc., a copy of which is attached hereto as Exhibit F,
provided however, that any reference therein to the date of said
Confidentiality Agreement shall be eliminated and replaced by the date
of this Agreement, and provided further that the terms and provisions of said
Confidentiality Agreement shall expire on the Effective Date of Merger.
(i) Norwest will file any documents or agreements required to be filed in
connection with the Merger under the Minnesota Business Corporation Act.
(j) Norwest will use its best efforts to deliver to the Closing all
opinions, certificates and other documents required to be delivered by it at
the Closing.
(k) 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. Norwest shall use its best efforts to obtain and
deliver to Community, prior to the Effective Date of the Merger, signed
representations from the directors and executive officers of Norwest to the
effect that, except for de minimus dispositions which will not disqualify the
Merger as a pooling of interests, they will not dispose of shares of Norwest or
Community during the period commencing 30 days prior to the Effective Date and
ending upon publication by Norwest of financial results including at least 30
days of combined operations of Community and Norwest.
(l) On or after the Effective Time of the Merger, Norwest
(i) will permit all employees of Community or any Community Subsidiary
who, on or before the Effective Time of the Merger, have completed at least
one year of service (i.e., 1,000 hours of service) with Community or a
Community Subsidiary and attained age 21 to participate in the Norwest
Financial Thrift and Profit Sharing Plan (the "TAPS Plan") as soon as
administratively feasible (and in no event more than 30 days following the
Effective Time of the Merger);
(ii) will, subject to the break-in-service rules of the TAPS Plan as in
effect on November 1, 1993, recognize prior service with Community or any
Community Subsidiary under the TAPS Plan for vesting and participation
purposes;
(iii) will maintain the Community Credit Co. Profit Sharing Plan (the
"Profit Sharing Plan") as a stand-alone plan, substantially as in effect
immediately preceding the Effective Time of the Merger, for a period of not
less than 18 months following the Effective Time of the Merger; provided
however, that Norwest shall not be under any obligation to make, directly
or indirectly, any further contributions to the Profit Sharing Plan and may
make such amendments to the Profit Sharing Plan as Norwest, in its sole
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discretion, deems necessary or appropriate to effectuate the foregoing; and
provided further, that Norwest will amend the Profit Sharing Plan if and to
the extent permitted under applicable law to permit participants in the
Profit Sharing Plan (other than participants who have made timely elections
under Section 242(b) of TEFRA) with self-directed investments to roll their
respective accrued benefits into individual retirement arrangements;
(iv) will, at the end of such 18-month period referred to in clause
(iii), amend the Profit Sharing Plan so as to cause all participants
therein to be fully vested in their respective accrued benefits (i.e.
account balances) therein;
(v) will amend the Profit Sharing Plan so as to cause participants
therein who involuntarily separate from service with Community or any
Community Subsidiary within 90 days after the Effective Time of the Merger
by reason of the transactions contemplated hereby or in the Merger
Agreement to be fully vested in their respective accrued benefits therein;
(vi) during the 18-month period referred to in clause (iii), will
permit the Community Credit Co. Profit Sharing Plan Investment Committee
established under the Profit Sharing Plan (as constituted immediately prior
to the Effective Time of the Merger, with such substitutions of members as
Ernest F. Dorn, Jr. shall have approved) to specify the timing of any sales
or other dispositions of Norwest Common Stock held by the Profit Sharing
Plan (or any related trust) that is not subject to the investment
discretion of any participant in the Profit Sharing Plan;
(vii) following the end of the 18-month period referred to in clause
(iii), may cause the Profit Sharing Plan to be merged with and into the
TAPS Plan;
(viii) as soon as administratively feasible, will cause the Community
Credit Co. Pension Plan (the Pension Plan) to be merged with and into the
Norwest Financial Pension Plan (the "NFPP");
(ix) will, subject to the break-in-service rules of the NFPP as in
effect on November 1, 1993, recognize prior service with Community or any
Community Subsidiary under the NFPP for purposes of vesting, participation
and early retirement subsidies; and
(x) will cause the NFPP to calculate the pension benefits of each
employee of Community or any Community Subsidiary who completes one hour of
service on or after the Effective Time of the Merger on a basis no less
favorable to such employee than the greater of the following:
(A) the pension computed under the NFPP under its formulas
(including the minimum pension provisions thereof), and for purposes
of determining years of accrued service, taking into account service
with Community or any Community Subsidiary as if it were service with
Norwest; and
(B) the pension computed under the Pension Plan formula or formulas
as in effect at the Effective Time of the Merger, and based on the
employee's service with Community or any Community Subsidiary prior to
the Effective Time of the Merger and the employee's average monthly
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compensation (as defined in the NFPP), plus the pension computed under
the NFPP under its formulas (including the minimum pension provisions
thereof) based on service with Norwest following the Effective Time of
the Merger;
(xi) will, from and after the Effective Date of the Merger, permit
each employee of Community or any Community Subsidiary whose benefits under
the Profit Sharing Plan, the Pension Plan, the TAPS Plan, and the NFPP, or
any combination of such plans, are limited by Section 415 of the Code, or
whose compensation that may be considered for the purposes of such plans is
limited by Section 401(a)(17) of the Code, to participate in the Norwest
Financial Pension Excess Benefit Plan or the Norwest Financial Thrift and
Profit Sharing Excess Benefit Plan (the "Excess Plans"); and
(xii) will cause benefits payable to any such employee referred to in
clause (xi) under the Excess Plans to be calculated on the basis of the
benefits that would have been payable to such employee under the Profit
Sharing Plan, the Pension Plan, the TAPS Plan, and the NFPP but for such
limitations, and not solely on the basis of the benefits that would have
been payable to such employee under the TAPS Plan and the NFPP.
Notwithstanding anything to the contrary in clauses (i) through (xii) of
this paragraph 5(l), following the Effective Time of the Merger Norwest may
make such amendments to each Community Plan as may be required by law
or as may be necessary to maintain such plan's qualified or other status under
the Code. Norwest acknowledges that employees of Community and Community
Subsidiares will enroll or continue participation in various welfare benefit
plans maintained by Community prior to the Effective Time of the Merger, and
Norwest will cause such plans to be maintained following the Effective Time of
the Merger until such time as it is administratively feasible to provide
coverage for such employees under Norwest's welfare benefit plans and
discontinue coverage under such Community welfare benefit plans.
(m) Norwest shall provide to Community a copy of its Quarterly Report on
Form 10-Q for the fiscal quarter ended September 30, 1993 promptly after such
Quarterly Report shall have been prepared and filed with the SEC.
6. CONDITIONS PRECEDENT TO OBLIGATION OF COMMUNITY. The obligation of
Community to effect the Merger shall be subject to the satisfaction at or
before the Time of Filing of the following further conditions, which
may be waived in writing by Community:
(a) Except to the extent such representations and warranties are by their
express provisions made as of a specified date, the representations and
warranties contained in paragraph 3 hereof shall be true and correct in all
respects material to Norwest and its subsidiaries taken as a whole as if made
at the Time of Filing.
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(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 at or before the Time of Filing.
(c) Community 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
Community required for approval of a plan of merger in accordance with the
provisions of Community's Articles of Incorporation and the Minnesota Business
Corporation Act.
(e) Community and Norwest shall have received approval by such governmental
agencies as may be required by law of the transactions contemplated by this
Agreement and the Merger Agreement, the failure to obtain of which would have a
material adverse effect on the ownership by Norwest of Community or its
Subsidiaries following the Merger and all waiting 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 Community 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 upon official notice of issuance.
(h) Community shall have received an opinion, dated the Closing Date, of
counsel to Community, 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) of the Code; (ii) no gain or loss will be recognized by
the holders of Community Common Stock upon receipt of Norwest Common Stock
except for cash received in lieu of fractional shares; (iii) the basis of the
Norwest Common Stock received by the shareholders of Community will be the same
as the basis of Community Common Stock exchanged therefor; and (iv) the holding
period of the shares of Norwest Common Stock received by the shareholders of
Community will include the holding period of the Community Common Stock,
provided such shares of Community Common 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.
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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 (except in the case of the conditions stated in 7(q), which
must be satisfied on or before the Effective Date of Merger be in any event,
before the Effective Time of Merger) of the following conditions, which may be
waived in writing by Norwest:
(a) Except to the extent such representations and warranties are by their
express provisions made as of a specified date, the representations and
warranties contained in paragraph 2 hereof shall be true and correct in all
respects material to Community or any Community Subsidiary as if made at the
Time of Filing.
(b) Community 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
Community required for approval of a plan of merger in accordance with the
provisions of Community's Articles of Incorporation and the Minnesota Business
Corporation Act.
(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 Community, as to the matters set forth in
subparagraphs (a) through (c) of this paragraph 7.
(e) Norwest and Community 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, the failure to obtain of which would have a
material adverse effect on the ownership by Norwest of Community or its
Subsidiaries following the Merger and all waiting 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 Community or any Community Subsidiary which would or
would reasonably be expected to (i) so materially adversely impact the
business, financial condition or results of operations of Community and
its Subsidiaries taken as a whole or (ii) require Norwest or NFI to divest
itself of any of its subsidiaries or operating units, so as to render unduly
burdensome, in the reasonable good faith judgment of Norwest, the consummation
of the Merger.
(f) Community and each Community Subsidiary shall have obtained any and all
consents or waivers from other parties to loan agreements, leases or other
contracts required for the consummation of the Merger, and Community and each
Community Subsidiary shall have obtained any and all 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.
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(h) The Merger shall qualify as a "pooling of interests" for accounting
purposes and Norwest shall have received from both Norwest's and Community's
Certified Public Accounts at KPMG Peat Marwick opinions to that effect.
(i) At any time since the date hereof the total number of shares of
Community Common Stock outstanding and subject to issuance upon exercise
(assuming for this purpose that phantom shares and other share-equivalents
constitute Community Common Stock) of all warrants, options, conversion rights,
phantom shares or other share-equivalents, other than any option held by
Norwest, shall not have exceeded 3,106,800.
(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 Community a letter, dated as of the effective date of the
Registration Statement and updated through the date of Closing, in form and
substance satisfactory to Norwest, to the effect that:
(i) the interim quarterly financial statements of Community 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 Community;
(ii) the amounts reported in the interim quarterly financial statements
of Community agree with the general ledger of Community;
(iii) the annual and quarterly financial statements of Community and
the Community 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 September 30, 1993 (or, if later, since the date of the most
recent unaudited consolidated financial statements of Community and the
Community Subsidiaries as may be included in the Registration Statement) to a
date 5 days prior to the effective date of the Registration Statement or 5 days
prior to the Closing, there are no increases in long-term debt, changes in the
capital stock or decreases in stockholders' equity of Community and the
Community Subsidiaries, except in each case for de minimis changes, increases
or decreases, changes, increases or decreases which occur in the
ordinary course of Community's business, or as a result of the declaration and
payment of the dividends described in Section 4(b) hereof or which the
Registration Statement discloses have occurred or may occur or which are
described in such letters. For the same period, there have been no decreases in
consolidated net interest income, consolidated net interest income after
provision for credit losses, consolidated income before income taxes,
consolidated net income and net income per share amounts of Community and the
Community Subsidiaries, or in income before equity in undistributed income of
subsidiaries, in each case as compared
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with the comparable period of the preceding year, except in each case for
de minimis changes, increases or decreases, changes, increases or decreases
which occur in the ordinary course of Community's business, or as a result of
the declaration and payment of the dividends described in Section 4(b) hereof
or 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 Community and the Community 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 Community and the Community
Subsidiaries and have found them to be in agreement with financial records and
analyses prepared by Community included in the annual and quarterly financial
statements, except as disclosed in such letters.
(l) Community and the Community Subsidiaries considered as a whole shall
not have sustained since December 31, 1992 any material loss or material
interference with their business from any civil disturbance or any fire,
explosion, flood or other calamity, not covered by insurance.
(m) There shall be no reasonable basis for any proceeding, claim or action
of any nature seeking to impose, or that could reasonably be expected to result
in the imposition on Community or any Community Subsidiary of, any material
liability arising from the release of hazardous substances 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.
(n) No change shall have occurred and no circumstances shall exist which
might reasonably be expected to have a material adverse effect on the financial
condition, results of operations, business or prospects of Community and the
Community Subsidiaries taken as a whole (other than changes in consumer finance
laws or regulations, or interpretations thereof, that affect the consumer
finance industry generally, changes in the general level of interest rates,
changes required by Norwest under this Agreement, or changes required by the
FASB, generally accepted accounting principles or by KPMG Peat Marwick).
(o) Norwest and Ernest F. Dorn, Jr. ("Dorn") shall have entered into a
mutually satisfactory employment agreement under which Dorn will continue to be
employed by Community for at least three (3) years after the Effective Date of
Merger.
(p) Ernest F. Dorn, Sr. and Ernest F. Dorn, Jr. shall have executed and
delivered to Norwest an Indemnification Agreement in form and substance as
Exhibit C hereto.
(q) Any accounting adjustments requested by Norwest pursuant to paragraph
4(k) shall have been made and any dividend requested by Norwest pursuant to
paragraph 11 shall have been declared and paid.
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8. TERMINATION OF AGREEMENT.
(a) This Agreement may be terminated at any time prior to the Time of
Filing:
(i) by mutual written consent of the parties hereto;
(ii) by either of the parties hereto upon written notice to the other
party if the Merger shall not have been consummated by April 1, 1994
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 Community 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 Agreement;
(iv) by Norwest if there has been a misrepresentation or breach in any
material respect on the part of Community in the representations and
warranties of Community set forth herein and such breach or
misrepresentation, after due notice, has not been corrected, or if, after
due notice, there has been a failure on the part of Community to comply in
any material respect with its agreements or covenants hereunder;
(v) by Community if there has been a misrepresentation or breach in
any material respect on the part of Norwest in the representations and
warranties of Norwest set forth herein and such breach or
misrepresentation, after due notice, has not been corrected, or if, after
due notice, there has been a failure on the part of Norwest to comply in
any material respect with its agreements or covenants hereunder;
(vi) by Norwest or Community if the employment agreement referred to in
paragraph 7(o) is not executed concurrently with this Agreement;
(vii) by Community during the period commencing on the day the Board of
Governors of the Federal Reserve System issues an order approving
consummation of the Merger (the "Fed Approval Date") and ending 15 days
after the Fed Approval Date or on the day before the Closing Date,
whichever occurs sooner, if both of the following conditions are satisfied:
(A) the average of the daily closing prices of a share of Norwest
Common Stock as reported on the consolidated tape of the NYSE during
the period of 20 trading days ending at the end of the third trading
day immediately preceding the Fed Approval Date (the "Norwest Average
Price") is less than $20.00; and
(B) the number obtained by dividing the Norwest Average Price by
the closing price of Norwest Common Stock on the trading day
immediately preceding the date of this Agreement is less than the
number obtained by dividing the Final Index Price (as defined in
subparagraph (c) below) by the Initial Index Price (as defined in
subparagraph (c) below) and subtracting .20 from such quotient;
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(viii) by Norwest if the Indemnification Agreement in form and
substance as Exhibit C hereto and the voting letters in form and substance
as Exhibit D hereto are not executed by Ernest F. Dorn, Sr. and Ernest F.
Dorn, Jr. before or concurrently with this Agreement; or
(ix) by Norwest or Community if an employment agreement between Norwest
and Ernest F. Dorn, Sr. is not executed before or concurrently with this
Agreement.
(b) Termination of this Agreement under this paragraph 8 shall not release,
or be construed as so releasing, either party hereto from any liability or
damage to the other party hereto arising out of the breaching party's wilful
and material breach of the warranties and representations made by it,
or wilful and material failure in performance of any of its covenants,
agreements, duties or obligations arising hereunder, and the obligations under
paragraph 4(g), 5(h) and 9 shall survive such termination.
(c) For purposes of this paragraph 8:
(i) The "Index Group" shall mean all of those companies listed on
Exhibit E the common stock of which is publicly traded and as to which
there is no pending publicly announced proposal at any time during the
period of 20 trading days described in paragraph 8(vii)(A) above for such
company to be acquired or to acquire another company in exchange for stock.
In the event that any such company or companies are so removed from the
Index Group, the weights attributed to the remaining companies shall be
adjusted proportionately.
(ii) The "Initial Index Price" shall mean the weighted average
(weighted in accordance with the factors listed on Exhibit E) of the
closing prices on November 22, 1993 of the companies comprising the Index
Group.
(iii) The "Final Price" of any company belonging to the Index Group
shall mean the average of the daily closing sale prices of a share of
common stock of such company, as reported in the consolidated transaction
reporting system for the market or exchange on which such common stock is
principally traded, during the period of 20 trading days described in
paragraph 8(vii)(A) above.
(iv) The "Final Index Price" shall mean the weighted average (weighted
in accordance with the factors listed on Exhibit E) of the Final Prices for
all of the companies comprising the Index Group.
If Norwest or any company belonging to the Index Group declares a stock
dividend or effects a reclassification, recapitalization, stock split,
split-up, combination, exchange of shares or similar transaction
between the date of this Agreement and the Fed Approval Date, the closing
prices for the common stock of such company shall be appropriately adjusted for
the purposes of the definitions above so as to be comparable to the price on
the date of this Agreement.
9. EXPENSES. All expenses in connection with this Agreement and the
transactions contemplated hereby, including without limitation legal and
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accounting fees incurred by Community and Community Subsidiaries shall be borne
by Community, and all such expenses incurred by Norwest shall be borne by
Norwest.
10. 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.
11. DIVIDEND TO BE PAID. If Norwest so requests, Community will, on (or at
Community's option before) the Effective Date of Merger, cause its wholly-owned
subsidiary, Scott Life Insurance Company, to declare and pay a dividend to
Community of up to $2.3 million.
12. 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 by telephone facsimile or shall be mailed by overnight courier or
first class registered or certified mail, postage prepaid, in any case
addressed as follows:
If to Norwest:
Norwest Corporation
Sixth and Marquette
Minneapolis, Minnesota 55479-1026
Attention: Secretary
and
Norwest Financial, Inc.
206 8th Street
Des Moines, Iowa 50309
Attention: General Counsel
If to Community:
Community Credit Co.
3101 W. 69th St.
Edina, Minnesota 55435
Attention: Ernest F. Dorn, Jr.
and
MacKall, Crounse & Moore
1600 TCF Tower
121 South Eighth Street
Minneapolis, Minnesota 55402-2859
Attention: Leslie H. Novak, Esq.
or to such other address with respect to a party as such party shall notify the
other in writing as above provided.
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13. COMPLETE AGREEMENT. This Agreement and the Merger Agreement and the
Exhibits and Schedules attached hereto, which by this reference are made an
integral part hereof, 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.
14. CAPTIONS. The captions contained in this Agreement are for convenience
of reference only and do not form a part of this Agreement.
15. WAIVER AND OTHER ACTION. Either party hereto may, by a signed writing,
give any consent, take any action pursuant to paragraph 8 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.
16. 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 Community shall be made which changes in a manner adverse to
such shareholders the consideration to be provided to said shareholders
pursuant to this Agreement and the Merger Agreement.
17. GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with the laws of the State of Minnesota.
18. PUBLIC STATEMENTS. Neither Community nor Norwest will, except as
required by law or regulation (in which case, the disclosing party will notify
the other party at least 48 hours prior to making such disclosure, unless, in
the reasonable judgment of counsel for the disclosing party, immediate
disclosure or disclosure before the expiration of such 48-hour period is
required under applicable law), or with the prior written consent of the other
party (which consent will not be unreasonably withheld or delayed), make any
public disclosure, or permit any public disclosure to be made, regarding this
Agreement or the Merger Agreement or the transactions contemplated hereby or
thereby, provided that nothing herein shall prohibit either party from making
any disclosure which is a communication directed to its employees or the
employees of any of its affiliates.
19. DEFINITIONAL TERM. As used in this Agreement, the term "to the best
knowledge of Community" refers only to the best knowledge of the directors and
officers of Community after they have made reasonable investigation or review
where appropriate as to the truthfulness of the assertion they are making. In
similar fashion, the term "to the best knowledge of Norwest" refers only to the
directors and officers of Norwest (with respect to representations and
warranties made in paragraph 3j, directors and officers of Norwest Financial,
Inc.) after they have made reasonable investigation or review where appropriate
as to the truthfulness of the assertion they are making.
20. REPRESENTATIONS AND WARRANTIES. The representations and warranties
contained in this Agreement (i) apply only to events occurring before the
Merger or the termination of this Agreement; and (ii) shall survive the
Effective Date
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of Merger only for an 18-month period beginning on the Effective Date of Merger
for the limited purpose of determining the rights and remedies of Norwest and
its successors and assigns under the Indemnification Agreement referred to in
paragraph 7(p). Except as set forth in paragraph 8(b), no representation or
warranty contained in this Agreement shall survive the termination of this
Agreement.
21. THIRD PARTIES. Nothing in this Agreement shall be construed to create
contractual rights in favor of (i) shareholders of Community or Norwest;
(ii) Community against any directors, officers, shareholders, employees or
agents of Norwest; (iii) Norwest against any directors, officers, shareholders,
employees or agents of Community, except the rights of Norwest under the
Indemnification Agreement referred to in paragraph 7(p). Nothing in this
paragraph 21 shall be construed to take away or limit any common law or
statutory rights of any persons or entities.
22. 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.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
NORWEST CORPORATION COMMUNITY CREDIT CO.
By: /s/Richard M. Kovacevich By: /s/Ernest F. Dorn, Jr.
------------------------------ ---------------------------
Its: President and Its: Chairman
Chief Executive Officer
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EXHIBIT A
AGREEMENT AND PLAN OF MERGER
Between
Community Credit Co.
a Minnesota corporation
(the surviving corporation)
and
MERGER CO.
a -------------- corporation
(the merged corporation)
This Agreement and Plan of Merger dated as of -------------, 1993, between
Community Credit Co., a Minnesota corporation (hereinafter sometimes called
"Community" and sometimes called the "surviving corporation") and MERGER CO., a
- ---------------- corporation ("Merger Co.") (said corporations being
hereinafter sometimes referred to as the "constituent corporations"),
WHEREAS, Merger Co., a wholly-owned subsidiary of Norwest Corporation, was
incorporated by Articles of Incorporation filed in the office of the Secretary
of State of the State of -------------- on --------------, 1993, and said
corporation is now a corporation subject to and governed by the provisions of
the --------------- Business Corporation Act. Merger Co. has authorized
capital stock of -------- shares of common stock having a par value of
$1.00 per share ("Merger Co. Common Stock"), of which ------- shares were
outstanding as of the date hereof; and
WHEREAS, Community was incorporated by Articles of Incorporation filed in
the office of the Secretary of State of the State of Minnesota on December 3,
1946 and said corporation is now a corporation subject to and governed by the
provisions of the Minnesota Business Corporation Act. Community has authorized
capital stock of 8,000,000 shares of Common Stock, par value $1.00 per share
("Community Common Stock") of which 3,089,800 shares were outstanding and no
shares were held in the treasury as of September 30, 1993; and
WHEREAS, Norwest Corporation and Community are parties to an Agreement and
Plan of Reorganization dated as of ---------------, 1993 (the "Reorganization
Agreement"), setting forth certain representations, warranties and covenants in
connection with the merger provided for herein; and
WHEREAS, the directors, or a majority of them, of each of the constituent
corporations respectively deem it advisable for the welfare and advantage of
said corporations and for the best interests of the respective shareholders of
said corporations that said corporations merge and that Merger Co. be merged
with and into Community, with Community continuing as the surviving
corporation, on the terms and conditions hereinafter set forth in
accordance with the provisions of the Minnesota Business Corporation Act, which
statute permits such merger; and
WHEREAS, it is the intent of the parties to effect a merger which qualifies
as a tax-free reorganization pursuant to Sections 368(a)(1)(A) and 368(a)(2)(E)
of the Internal Revenue Code of 1986, as amended;
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NOW, THEREFORE, the parties hereto, subject to the approval of the
shareholders of Merger Co., in consideration of the premises and of the mutual
covenants and agreements contained herein and of the benefits to accrue to the
parties hereto, have agreed and do hereby agree that Merger Co. shall be merged
with and into Community pursuant to the laws of the State of Minnesota, and do
hereby agree upon, prescribe and set forth the terms and conditions of the
merger of Merger Co. with and into Community, the mode of carrying said merger
into effect, the manner and basis of converting the shares of Community Common
Stock into shares of common stock of Norwest of the par value of $1-2/3 per
share ("Norwest Common Stock"), and such other provisions with respect to said
merger as are deemed necessary or desirable, as follows:
FIRST: At the time of merger Merger Co. shall be merged with and into
Community, one of the constituent corporations, which shall be the surviving
corporation, and the separate existence of Merger Co. shall cease and the name
of the surviving corporation shall continue to be Community Credit Co.
SECOND: The Articles of Incorporation of Community at the time of merger
shall be and remain the Articles of Incorporation of the surviving corporation
until further amended according to law.
THIRD: The By-Laws of Community at the time of merger shall be amended as
set forth below and, as so amended, shall be the By-Laws of the surviving
corporation until further amended according to the provisions of the Articles
of Incorporation of the surviving corporation or of said By-Laws:
AMENDMENT TO BY-LAWS RESOLVED,
that Article III, Section 3.02 of the by-laws of this corporation be and the
same hereby is stricken and that the following be and the same hereby is
inserted in lieu thereof:
"The number of directors shall be three. Each
director shall hold office until the next succeeding
annual meeting of the shareholders and until his
successor shall have been elected and shall qualify,
or until his death, resignation or removal. Directors
need not be residents of the state of incorporation
nor shareholders of the corporation unless required
by law."
FOURTH: The directors of Merger Co. at the time of merger shall be the
persons listed below, which persons shall remain the directors of the surviving
corporation and shall hold office from the time of merger until their
respective successors are elected and qualify:
Steve R. Wagner
Gary M. Poetting
Faye L. Kunz
FIFTH: The officers of Merger Co. at the time of merger shall be the
persons listed below, which persons shall remain the officers of the surviving
corporation and shall hold office from the time of merger until their
respective successors are elected or appointed and qualify:
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<TABLE>
<S> <C>
E. F. Dorn, Jr. - President
E. F. Dorn, Sr. - Executive Vice President
Kenneth D. Noel - Senior Vice President
J. R. Fisher - Senior Vice President
D. L. Abbott - Vice President
J. R. Watson - Vice President
Richard W. Harris - Vice President
G. D. Lorenz - Vice President
D. P. Losby - Vice President
J. J. O'Toole - Vice President
Gary M. Poetting - Vice President
Doug Seeley - Vice President
Eric T. Torkelson - Vice President
Steve R. Wagner - Vice President
J. M. Viens - Vice President
C. F. Smith - Vice President
Robert Hurzler - Assistant Vice President
Keith Jacobson - Assistant Vice President
Denise J.A. Holck - Treasurer
John C. Demro - Assistant Treasurer - Tax
J. Daniel Vandermark, Jr. - Assistant Treasurer - Tax
Faye L. Kunz - Assistant Secretary
Linda J. Walter - Assistant Secretary
</TABLE>
SIXTH: The manner and basis of converting the shares of Community Common
Stock into shares of Norwest Common Stock shall be as follows:
1. Each of the shares of Community Common Stock outstanding immediately
prior to the time of merger (other than shares as to which statutory
dissenters' rights have been exercised) shall at the time of merger, by
virtue of the merger and without any action on the part of the holder or
holders thereof, be converted into and exchanged for the number of shares
of Norwest Common Stock determined by dividing the aggregate number of
3,727,000 shares of Norwest Common Stock by the total number of shares of
Community Common Stock outstanding immediately prior to the time of merger.
2. As soon as practicable after the merger becomes effective, each holder
of a certificate for shares of Community Common Stock outstanding
immediately prior to the time of merger shall be entitled, upon surrender
of such certificate for cancellation to the surviving corporation or to
Norwest Bank Minnesota, National Association, as the designated agent of
the surviving corporation (the "Agent"), to receive a new certificate for
the number of whole shares of Norwest Common Stock to which such holder
shall be entitled on the basis set forth in paragraph 1 above. Until so
surrendered each certificate which, immediately prior to the time of
merger, represented shares of Community Common Stock shall not be
transferable on the books of the surviving corporation but shall be deemed
to evidence the right to receive the number of whole shares of Norwest
Common Stock into which such shares of Community Common Stock have been
converted on the basis above set forth; provided, however, until the holder
of such certificate for Community Common Stock shall have surrendered the
same for exchange as above set forth, no dividend payable to holders of
record of Norwest Common Stock as of any date subsequent to the effective
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date of merger shall be paid to such holder with respect to the Norwest
Common Stock, if any, represented by such certificate, but, upon surrender
and exchange thereof as herein provided, there shall be paid by the
surviving corporation or the Agent to the record holder of such certificate
for Norwest Common Stock issued in exchange therefor an amount with respect
to such shares of Norwest Common Stock equal to all dividends that shall
have been paid or become payable to holders of record of Norwest Common
Stock between the effective date of merger and the date of such exchange.
3. If between the date of the Reorganization Agreement and the time of
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, stock split, split-up, combination,
exchange of shares or readjustment, or if a stock dividend thereon shall be
declared with a record date within such period, then the number of shares
of Norwest Common Stock, if any, into which a share of Community Common
Stock shall be converted on the basis above set forth, will be
appropriately and proportionately adjusted so that the number of such
shares of Norwest Common Stock into which a share of Community Common Stock
shall be converted will equal the number of shares of Norwest Common Stock
which the holders of shares of Community Common Stock would have received
pursuant to such reclassification, recapitalization, stock split, split-up,
combination, exchange of shares or readjustment, or stock dividend had the
record date therefor been immediately following the time of merger.
4. No fractional shares of Norwest Common stock and no scrip certificates
therefor shall be issued to represent any such fractional interest, and any
holder of a fractional interest shall be paid an amount of cash equal to
the product obtained by multiplying the fractional share interest to which
such holder is entitled by the average of the closing prices of a share of
Norwest Common Stock as reported by the consolidated tape of the New York
Stock Exchange for each of the five (5) trading days immediately preceding
the time of merger.
5. Each share of Merger Co. Common Stock issued and outstanding at the
time of merger shall be converted into and exchanged for shares of the
surviving corporation after the time of merger.
SEVENTH: The merger provided for by this Agreement shall be effective as
follows:
1. The effective date of merger shall be the date on which Articles of
Merger (as described in subparagraph 1(b) of this Article Seventh) shall be
delivered to and filed by the Secretary of State of the State of Minnesota
or such other date as may be specified as the effective date in the
Articles of Merger; provided, however, that all of the following actions
shall have been taken in the following order:
a. This Agreement shall be approved and adopted on behalf of
Merger Co. and Community in accordance with the Minnesota Business
Corporation Act; and
b. Articles of Merger (with this Agreement attached as part thereof)
with respect to the merger, setting forth the information required by
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the Minnesota Business Corporation Act, shall be executed by the
President or a Vice President of Merger Co. and by the Secretary or an
Assistant Secretary of Merger Co., and by the President or a Vice
President of Community and by the Secretary or an Assistant Secretary
of Community, and shall be filed in the office of the Secretary of
State of the State of Minnesota in accordance with the Minnesota
Business Corporation Act.
2. The merger shall become effective as of 11:59 p.m. (the "time of
merger") on the effective date of merger.
EIGHTH: At the time of merger:
1. The separate existence of Merger Co. shall cease, and the corporate
existence and identity of Community shall continue as the surviving
corporation.
2. The merger shall have the other effects prescribed by Section 302A.641
of the Minnesota Business Corporation Act.
NINTH: The following provisions shall apply with respect to the merger
provided for by this Agreement:
1. The registered office of the surviving corporation in the State of
Minnesota shall be 3101 W. 69th Street, Edina, Minnesota 55435.
2. If at any time the surviving corporation shall consider or be advised
that any further assignment or assurance in law or other action is
necessary or desirable to vest, perfect or confirm in the surviving
corporation the title to any property or rights of Merger Co. acquired or
to be acquired as a result of the merger provided for herein, the proper
officers and directors of Community and Merger Co. may execute and deliver
such deeds, assignments and assurances in law and take such other action as
may be necessary or proper to vest, perfect or confirm title to such
property or right in the surviving corporation and otherwise carry out the
purposes of this Agreement.
3. For the convenience of the parties and to facilitate the filing of this
Agreement, any number of counterparts hereof may be executed and each such
counterpart shall be deemed to be an original instrument.
4. This Agreement and the legal relations among the parties hereto shall
be governed by and construed in accordance with the laws of the State of
Minnesota.
5. This Agreement cannot be altered or amended except pursuant to an
instrument in writing signed by both of the parties hereto.
6. At any time prior to the filing of Articles of Merger with the
Secretary of State of the State of Minnesota, this Agreement may be
terminated under the terms and conditions set forth in the Reorganization
Agreement upon approval by the Boards of Directors of either of the
constituent corporations notwithstanding the approval of the shareholders
of either constituent corporation.
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<PAGE> 135
IN WITNESS WHEREOF, the parties hereto have caused this Agreement and Plan
of Merger to be signed in their respective corporate names by the undersigned
officers and their respective corporate seals to be affixed hereto, pursuant to
authority duly given by their respective Boards of Directors, all as of the day
and year first above written.
<TABLE>
<S> <C>
COMMUNITY CREDIT CO.
By:
-----------------------------------
Its:
----------------------------------
(Corporate Seal)
Attest:
- -------------------------------------
Secretary
MERGER CO.
By:
-----------------------------------
Its:
----------------------------------
(Corporate Seal)
Attest:
- -------------------------------------
Secretary
</TABLE>
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<PAGE> 136
APPENDIX B
MINNESOTA DISSENTERS' RIGHTS:
SECTIONS 302A.471 AND 302A.473
OF THE MINNESOTA BUSINESS CORPORATIONS ACT
<PAGE> 137
APPENDIX B
Minnesota Dissenters' Rights: Sections 302A.471 and 302A.473 of the Minnesota
Business Corporations Act
302A.471 RIGHTS OF DISSENTING SHAREHOLDERS.--Subdivision 1. Actions
creating rights. A shareholder of a corporation may dissent from, and obtain
payment for the fair value of the shareholder's shares in the event of, any of
the following corporate actions:
(a) An amendment of the articles that materially and adversely affects the
rights or preferences of the shares of the dissenting shareholder in that it:
(1) alters or abolishes a preferential right of the shares;
(2) creates, alters, or abolishes a right in respect of the redemption of
the shares, including a provision respecting a sinking fund for the redemption
or repurchase of the shares;
(3) alters or abolishes a preemptive right of the holder of the shares to
acquire shares, securities other than shares, or rights to purchase shares or
securities other than shares;
(4) excludes or limits the right of a shareholder to vote on a matter, or
to cumulate votes, except as the right may be excluded or limited through the
authorization or issuance of securities of an existing or new class or series
with similar or different voting rights; except that an amendment to the
articles of an issuing public corporation that provides that section 302A.671
does not apply to a control share acquisition does not give rise to the right
to obtain payment under this section;
(b) A sale, lease, transfer, or other disposition of all or substantially
all of the property and assets of the corporation not made in the usual or
regular course of its business, but not including a disposition in dissolution
described in section 302A.725, subdivision 2, or a disposition pursuant to an
order of a court, or a disposition for cash on terms requiring that all or
substantially all of the net proceeds of disposition be distributed to the
shareholders in accordance with their respective interests within one year
after the date of disposition;
(c) A plan of merger, whether under this chapter or under chapter 322B, to
which the corporation is a party, except as provided in subdivision 3;
(d) A plan of exchange, whether under this chapter or under chapter 322B,
to which the corporation is a party as the corporation whose shares will be
acquired by the acquiring corporation, if the shares of the shareholder are
entitled to be voted on the plan; or
(e) Any other corporate action taken pursuant to a shareholder vote with
respect to which the articles, the bylaws, or a resolution approved by the
board directs that dissenting shareholders may obtain payment for their shares.
Subd. 2. Beneficial owners. (a) A shareholder shall not assert
dissenters' rights as to less than all of the shares registered in the name of
the shareholder, unless the shareholder dissents with respect to all the shares
that are beneficially owned by another person but registered in the name of the
shareholder and discloses the name and address of each beneficial owner on
whose behalf the shareholder dissents. In that event, the rights of the
dissenter shall be determined as if the shares as to which the shareholder has
dissented and the other shares were registered in the names of different
shareholders.
(b) A beneficial owner of shares who is not the shareholder may assert
dissenters' rights with respect to shares held on behalf of the beneficial
owner, and shall be treated as a dissenting shareholder under the terms of this
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section and section 302A.473, if the beneficial owner submits to the
corporation at the time of or before the assertion of the rights a written
consent of the shareholder.
Subd. 3. Rights not to apply. Unless the articles, the bylaws, or a
resolution approved by the board otherwise provide, the right to obtain payment
under this section does not apply to a shareholder of the surviving corporation
in a merger, if the shares of the shareholder are not entitled to be voted on
the merger.
Subd. 4. Other rights. The shareholders of a corporation who have a
right under this section to obtain payment for their shares do not have a right
at law or in equity to have a corporate action described in subdivision 1 set
aside or rescinded, except when the corporate action is fraudulent with regard
to the complaining shareholder or the corporation.
302A.473 PROCEDURES FOR ASSERTING DISSENTERS' RIGHTS.--Subdivision 1.
Definitions. (a) For purposes of this section, the terms defined in this
subdivision have the meanings given them.
(b) "Corporation" means the issuer of the shares held by a dissenter
before the corporate action referred to in section 302A.471, subdivision 1 or
the successor by merger of that issuer.
(c) "Fair value of the shares" means the value of the shares of a
corporation immediately before the effective date of the corporate action
referred to in section 302A.471, subdivision 1.
(d) "Interest" means interest commencing five days after the effective
date of the corporate action referred to in section 302A.471, subdivision 1 up
to and including the date of payment, calculated at the rate provided in
section 549.09 for interest on verdicts and judgments.
Subd. 2. Notice of action. If a corporation calls a shareholder meeting
at which any action described in section 302A.471, subdivision 1 is to be voted
upon, the notice of the meeting shall inform each shareholder of the right to
dissent and shall include a copy of section 302A.471 and this section and a
brief description of the procedure to be followed under these sections.
Subd. 3. Notice of dissent. If a proposed action must be approved by the
shareholders, a shareholder who wishes to exercise dissenters' rights must file
with the corporation before the vote on the proposed action a written notice of
intent to demand the fair value of the shares owned by the shareholder and must
not vote the shares in favor of the proposed action.
Subd. 4. Notice of procedure; deposit of shares. (a) After the proposed
action has been approved by the board and, if necessary, the shareholders, the
corporation shall send to all shareholders who have complied with subdivision 3
and to all shareholders entitled to dissent if no shareholder vote was
required, a notice that contains:
(1) The address to which a demand for payment and certificates of
certificated shares must be sent in order to obtain payment and the date by
which they must be received;
(2) Any restrictions on transfer of uncertificated shares that will apply
after the demand for payment is received;
(3) A form to be used to certify the date on which the shareholder, or the
beneficial owner on whose behalf the shareholder dissents, acquired the shares
or an interest in them and to demand payment; and
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<PAGE> 139
(4) A copy of section 302A.471 and this section and a brief description of
the procedures to be followed under these sections.
(b) In order to receive the fair value of the shares, a dissenting
shareholder must demand payment and deposit certificated shares or comply with
any restrictions on transfer of uncertificated shares within 30 days after the
notice was given, but the dissenter retains all other rights of a shareholder
until the proposed action takes effect.
Subd. 5. Payment; return of shares. (a) After the corporate action
takes effect, or after the corporation receives a valid demand for payment,
whichever is later, the corporation shall remit to each dissenting shareholder
who has complied with subdivisions 3 and 4 the amount the corporation estimates
to be the fair value of the shares, plus interest, accompanied by:
(1) the corporation's closing balance sheet and statement of income for a
fiscal year ending not more than 16 months before the effective date of the
corporate action, together with the latest available interim financial
statements;
(2) an estimate by the corporation of the fair value of the shares and a
brief description of the method used to reach the estimate; and
(3) a copy of section 302A.471 and this section, and a brief description
of the procedure to be followed in demanding supplemental payment.
(b) The corporation may withhold the remittance described in paragraph (a)
from a person who was not a shareholder on the date the action dissented from
was first announced to the public or who is dissenting on behalf of a person
who was not a beneficial owner on that date. If the dissenter has complied
with subdivisions 3 and 4, the corporation shall forward to the dissenter the
materials described in paragraph (a), a statement of the reason for withholding
the remittance, and an offer to pay to the dissenter the amount listed in the
materials if the dissenter agrees to accept that amount in full satisfaction.
The dissenter may decline the offer and demand payment under subdivision 6.
Failure to do so entitles the dissenter only to the amount offered. If the
dissenter makes demand, subdivisions 7 and 8 apply.
(c) If the corporation fails to remit payment within 60 days of the
deposit of certificates or the imposition of transfer restrictions on
uncertificated shares, it shall return all deposited certificates and cancel
all transfer restrictions. However, the corporation may again give notice
under subdivision 4 and require deposit or restrict transfer at a later time.
Subd. 6. Supplemental payment; demand. If a dissenter believes that the
amount remitted under subdivision 5 is less than the fair value of the shares
plus interest, the dissenter may give written notice to the corporation of the
dissenter's own estimate of the fair value of the shares, plus interest, within
30 days after the corporation mails the remittance under subdivision 5, and
demand payment of the difference. Otherwise, a dissenter is entitled only to
the amount remitted by the corporation.
Subd. 7. Petition; determination. If the corporation receives a
demand under subdivision 6, it shall, within 60 days after receiving the
demand, either pay to the dissenter the amount demanded or agreed to by the
dissenter after discussion with the corporation or file in court a petition
requesting that the court determine the fair value of the shares, plus
interest. The petition shall be filed in the county in which the registered
office of the corporation is located, except that a surviving foreign
corporation that receives a demand relating to the shares of a constituent
domestic corporation shall file the
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<PAGE> 140
petition in the county in this state in which the last registered office of the
constituent corporation was located. The petition shall name as parties all
dissenters who have demanded payment under subdivision 6 and who have not
reached agreement with the corporation. The corporation shall, after filing
the petition, serve all parties with a summons and copy of the petition under
the rules of civil procedure. Nonresidents of this state may be served by
registered or certified mail or by publication as provided by law. Except as
otherwise provided, the rules of civil procedure apply to this proceeding. The
jurisdiction of the court is plenary and exclusive. The court may appoint
appraisers, with powers and authorities the court deems proper, to receive
evidence on and recommend the amount of the fair value of the shares. The
court shall determine whether the shareholder or shareholders in question have
fully complied with the requirements of this section, and shall determine the
fair value of the shares, taking into account any and all factors the court
finds relevant, computed by any method or combination of methods that the
court, in its discretion, sees fit to use, whether or not used by the
corporation or by a dissenter. The fair value of the shares as determined by
the court is binding on all shareholders, wherever located. A dissenter is
entitled to judgment in cash for the amount by which the fair value of the
shares as determined by the court, plus interest, exceeds the amount, if any,
remitted under subdivision 5, but shall not be liable to the corporation for
the amount, if any, by which the amount, if any, remitted to the dissenter
under subdivision 5 exceeds the fair value of the shares as determined by the
court, plus interest.
Subd. 8. Costs; fees; expenses. (a) The court shall determine the costs
and expenses of a proceeding under subdivision 7, including the reasonable
expenses and compensation of any appraisers appointed by the court, and shall
assess those costs and expenses against the corporation, except that the court
may assess part or all of those costs and expenses against a dissenter whose
action in demanding payment under subdivision 6 is found to be arbitrary,
vexatious or not in good faith.
(b) If the court finds that the corporation has failed to comply
substantially with this section, the court may assess all fees and expenses of
any experts or attorneys as the court deems equitable. These fees and expenses
may also be assessed against a person who has acted arbitrarily, vexatiously,
or not in good faith in bringing the proceeding, and may be awarded to a party
injured by those actions.
(c) The court may award, in its discretion, fees and expenses to an
attorney for the dissenters out of the amount awarded to the dissenters, if
any.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation Law authorizes
indemnification of directors and officers of a Delaware corporation under
certain circumstances against expenses, judgments and the like in connection
with an action, suit or proceeding. Article Fourteenth of the Certificate of
Incorporation of Norwest Corporation ("Norwest") provides for broad
indemnification of directors and officers of Norwest.
Item 21. Exhibits and Financial Statement Schedules
2 - Agreement and Plan of Merger dated as of November 23, 1993 between
Community Credit Co. ("Community") and Norwest Corporation ("Norwest")
(included in Proxy Statement-Prospectus as part of Appendix A).
3(a) - Restated Certificate of Incorporation of Norwest, as amended
(incorporated herein by reference to Exhibit 3(b) to Norwest's Current
Report on Form 8-K dated June 28, 1993 (File No. 1-2979).
3(b) - Bylaws of Norwest, as amended (incorporated herein by reference to
Exhibit 4(c) to Norwest's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1991 (File No. 1-2979)).
4(a) - Certificate of Designations of Powers, Preferences, and Rights relating
to Norwest's 10.24% Cumulative Preferred Stock (incorporated by
reference to Exhibit 4(a) to Norwest's Registration Statement No.
33-38806).
4(b) - Certificate of Designations of Powers, Preferences, and Rights relating
to Norwest's Cumulative Convertible Preferred Stock, Series B
(incorporated by reference to Exhibit 2 to Norwest's Form 8-A, filed on
August 9, 1991 (File No. 1-2979)).
4(c) - Rights Agreement, dated as of November 22, 1988, between Norwest and
Citibank, N.A., including as Exhibit A the form of Certificate of
Designation, Preferences and Rights setting forth the terms of the
Series A Junior Participating Preferred Stock, without par value
(incorporated herein by reference to Exhibit 1 to Norwest's Form 8-A
filed on December 6, 1988 (File No. 1-2979)) and the Certificate of
Adjustment pursuant to Section 12 of the Rights Agreement (incorporated
herein by reference to Exhibit 3 to Form 8 filed on July 21, 1989 (File
No. 1-2979)).
5 - Opinion of General Counsel of Norwest. *
8 - Form of Opinion of Mackall, Crounse & Moore. *
23(a) - Consent of General Counsel of Norwest (included as part of Exhibit 5 *
filed herewith).
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<PAGE> 142
23(b) - Consent of Mackall, Crounse & Moore. *
23(c) - Consent of KPMG Peat Marwick (relating to financial statements of
Norwest). *
23(d) - Consent of KPMG Peat Marwick (relating to financial statements of
Community). *
24 - Powers of Attorney. *
99 - Form of Proxy for Special Meeting of Stockholders of Community. *
- ----------
*Filed herewith
Item 22. Undertakings
(a) The undersigned Norwest hereby undertakes to file, during any
period in which offers or sales are being made, a post-effective amendment to
this registration statement to (i) include any prospectus required by section
10(a)(3) of the Securities Act of 1933, (ii) reflect in the prospectus any
facts or events arising after the effective date of the registration statement
(or the most recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information set forth in
the registration statement, and (iii) include any material information with
respect to the plan of distribution not previously disclosed in the
registration statement or any material change to such information in the
registration statement.
(b) The undersigned Norwest hereby undertakes that, for the purpose of
determining any liability under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) The undersigned Norwest hereby undertakes to remove from
registration by means of a post-effective amendment any of the securities being
registered which remain unsold at the termination of the offering.
(d) The undersigned Norwest hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(e) The undersigned Norwest hereby undertakes that prior to any public
reoffering of the securities registered hereunder through use of a prospectus
which is a part of this registration statement, by any person or party who is
deemed to be an underwriter within the meaning of Rule 145(c), Norwest
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<PAGE> 143
undertakes that such reoffering prospectus will contain the information called
for by the applicable registration form with respect to reofferings by persons
who may be deemed underwriters, in addition to the information called for by
the other items of the applicable form.
(f) The undersigned Norwest hereby undertakes that every prospectus (i)
that is filed pursuant to paragraph (e) immediately preceding, or (ii) that
purports to meet the requirements of Section 10(a)(3) of the Act and is used in
connection with an offering of securities subject to Rule 415, will be filed as
a part of an amendment to the registration statement and will not be used until
such amendment is effective, and that, for purposes of determining any
liability under the Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(g) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of Norwest pursuant to the foregoing provisions, or otherwise, Norwest
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by Norwest of expenses
incurred or paid by a director, officer or controlling person of Norwest in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
(h) The undersigned Norwest hereby undertakes to respond to requests
for information that is incorporated by reference into the prospectus pursuant
to Item 4, 10(b), 11 or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
(i) The undersigned Norwest hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
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<PAGE> 144
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Minneapolis, on the 25th
day of January, 1994.
NORWEST CORPORATION
By /s/ Richard M. Kovacevich
--------------------------------------
Richard M. Kovacevich
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed on the 25th day of January, 1994, by
the following persons in the capacities indicated:
<TABLE>
<S> <C>
/s/ Richard M. Kovacevich President and Chief Executive Officer
- ----------------------------------- (Principal Executive Officer)*
Richard M. Kovacevich
/s/ John T. Thornton Executive Vice President and
- ----------------------------------- Chief Financial Officer
John T. Thornton (Principal Financial Officer)
/s/ Michael A. Graf Senior Vice President and Controller
- ----------------------------------- (Principal Accounting Officer)
Michael A. Graf
DAVID A. CHRISTENSEN |
PIERSON M. GRIEVE |
FREDERIC C. HAMILTON |
CHARLES M. HARPER |
N. BERNE HART |
WILLIAM A. HODDER |
GEORGE C. HOWE |
LLOYD P. JOHNSON |
REATHA CLARK KING | A majority of the Board of Directors*
RICHARD M. KOVACEVICH |
RICHARD S. LEVITT |
RICHARD D. McCORMICK |
CYNTHIA H. MILLIGAN |
JOHN E. PEARSON |
IAN M. ROLLAND |
STEPHEN E. WATSON |
MICHAEL W. WRIGHT |
</TABLE>
*Richard M. Kovacevich, by signing his name hereto, does hereby sign this
document on behalf of each of the directors named above pursuant to powers
of attorney duly executed by such persons.
/s/ Richard M. Kovacevich
---------------------------------------
Richard M. Kovacevich
Attorney-in-Fact
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<PAGE> 145
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description Form of Filing
- ------ ----------- --------------
<S> <C> <C>
2 - Agreement and Plan of Merger dated as of November 23,
1993 between Community Credit Co. ("Community") and
Norwest Corporation ("Norwest") (included in Proxy
Statement-Prospectus as part of Appendix A).
3(a) - Restated Certificate of Incorporation of Norwest, as
amended (incorporated herein by reference to Exhibit
3(b) to Norwest's Current Report on Form 8-K dated
June 28, 1993 (File No. 1-2979).
3(b) - Bylaws of Norwest, as amended (incorporated herein by
reference to Exhibit 4(c) to Norwest's Quarterly Report
on Form 10-Q for the quarter ended March 31, 1991
(File No. 1-2979)).
4(a) - Certificate of Designations of Powers, Preferences,
and Rights relating to Norwest's 10.24% Cumulative
Preferred Stock (incorporated by reference to
Exhibit 4(a) to Norwest's Registration Statement
No. 33-38806).
4(b) - Certificate of Designations of Powers, Preferences,
and Rights relating to Norwest's Cumulative
Convertible Preferred Stock, Series B (incorporated
by reference to Exhibit 2 to Norwest's Form 8-A, filed
on August 9, 1991 (File No. 1-2979)).
4(c) - Rights Agreement, dated as of November 22, 1988,
between Norwest and Citibank, N.A., including as
Exhibit A the form of Certificate of Designation,
Preferences and Rights setting forth the terms of the
Series A Junior Participating Preferred Stock,
without par value (incorporated herein by reference
to Exhibit 1 to Norwest's Form 8-A filed on
December 6, 1988 (File No. 1-2979)) and the
Certificate of Adjustment pursuant to Section 12 of
the Rights Agreement (incorporated herein by
reference to Exhibit 3 to Form 8 filed on July 21,
1989 (File No. 1-2979)).
5 - Opinion of General Counsel of Norwest. Electronic
Transmission
8 - Form of Opinion of Mackall, Crounse & Moore. Electronic
Transmission
23(a) - Consent of General Counsel of Norwest (included as Electronic
part of Exhibit 5 filed herewith). Transmission
23(b) - Consent of Mackall, Crounse & Moore. Electronic
Transmission
</TABLE>
<PAGE> 146
<TABLE>
<CAPTION>
Exhibit
Number Description Form of Filing
- ------ ----------- --------------
<S> <C> <C>
23(c) - Consent of KPMG Peat Marwick (relating to financial Electronic
statements of Norwest). Transmission
23(d) - Consent of KPMG Peat Marwick (relating to financial Electronic
statements of Community). Transmission
24 - Powers of Attorney. Electronic
Transmission
99 - Form of Proxy for Special Meeting of Stockholders of Electronic
Community. Transmission
</TABLE>
<PAGE> 1
EXHIBIT 5
[LETTERHEAD OF STANLEY S. STROUP]
January 25, 1994
Board of Directors
Norwest Corporation
Norwest Center
Sixth and Marquette
Minneapolis, Minnesota 55479-1000
Ladies and Gentlemen:
In connection with the proposed registration under the Securities
Act of 1933, as amended, of 3,727,000 shares of the common stock (the
"Shares"), par value $1 2/3 per share of Norwest Corporation (the
"Company"), a Delaware corporation, which are proposed to be issued by
the Company in connection with the proposed merger of Community Credit
Co., a Minnesota corporation, with a wholly-owned subsidiary of the
Company that will subsequently be organized by the Company (the
"Merger"), I have examined such corporate records and other documents,
including the Registration Statement on Form S-4 relating to the
Shares and have reviewed such matters of law as I have deemed
necessary for this opinion, and I advise you that in my opinion:
1. The Company is a corporation duly organized and existing under
the laws of the State of Delaware.
2. All necessary corporate action on the part of the Company has
been taken to authorize the issuance of the Shares to be issued by the
Company in connection with the Merger, and, when issued pursuant to
the Merger as contemplated by the Registration Statement, the Shares
will be legally and validly issued, fully paid, and nonassessable.
I consent to the filing of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
/s/ Stanley S. Stroup
<PAGE> 1
EXHIBIT 8
MACKALL, CROUNSE & MOORE
PROPOSED OPINION OF COUNSEL TO BE DELIVERED
AT CLOSING SUBJECT TO CHANGES IN FACTS AND LAW,
THE RECEIPT OF ADDITIONAL INFORMATION,
AND THE REVIEW OF FINAL DOCUMENTS
--------------, 1994
Members of the Board of Directors
Community Credit Co.
3101 West 69th Street
Edina, MN 55435
Re: Agreement and Plan of Reorganization By and Between
Community Credit Co. and Norwest Corporation, Dated
November 23, 1993
Our File No. 14137-97
Gentlemen:
We have acted as counsel for Community Credit Co., a Minnesota
corporation ("Community"), in connection with the Agreement and Plan
of Reorganization dated as of November 23, 1993, (the "Plan of
Reorganization"), between Community and Norwest Corporation, a Delaware
corporation ("Norwest"). This opinion is furnished to you pursuant to
Section 6(h) of the Plan of Reorganization. The Plan of
Reorganization provides, among other things, for:
1. The merger of a wholly owned subsidiary of Norwest organized in
the state of Minnesota (the "Merger Co.") with and into Community
in accordance with an Agreement and Plan of Merger between
Community and Merger Co. (the "Plan of Merger") set forth in the
Plan of Reorganization under which Community will be the surviving
corporation (the "Merger").
2. The exchange, as part of the Merger, of 3,727,000 of the voting
common stock of Norwest, par value $1-2/3 per share ("Norwest
Common Stock"), in exchange for all of the issued and outstanding
shares of common stock of Community, par value $1 per share
("Community Common Stock"), excluding only shares as to which
statutory dissenter's appraisal rights have been exercised.
<PAGE> 2
MACKALL, CROUNSE & MOORE
Members of the Board of Directors
Page 2
3. The number of shares of Norwest Common Stock to be issued to the
shareholders of Community shall be proportionally adjusted for any
reclassification, recapitalization, stock split, split up,
combination, exchange of shares or stock dividend which may have
occurred until the effective date of the merger ("Effective Time
of Merger").
4. No fractional shares of Norwest Common Stock and no script
certificates shall be issued to represent any fractional interest,
and the holder thereof shall be paid an amount of cash equal to
the value thereof based upon 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 immediately preceding the Effective Time of Merger.
You have requested our opinion to assist you in determining the
federal income tax consequences of the Plan of Reorganization and the
Merger under the Internal Revenue Code of 1986, as amended (the
"Code"), and all treasury regulations (including proposed regulations)
promulgated thereunder (to the extent such regulations are valid and
binding), and the judicial decisions and administrative rulings and
procedures pertinent thereto. This opinion is limited in its entirety
to the Code and such relevant regulations and interpretations to the
date hereof, and no opinion is rendered with respect to the potential
modifications of the Code or such interpretations which may be made
hereafter, including retroactive changes made subsequent to the date
hereof.
In connection with this opinion, we have examined and reviewed the
Plan of Reorganization, the Plan of Merger and the proposed documents
to be delivered pursuant thereto (the "Reorganization Documents"), and
have taken such additional steps, reviewed such additional documents
and obtained such additional representations as we have deemed
necessary in order to render our opinion, including those set forth
herein. In rendering this opinion with respect to the application of
the Code to the transactions contemplated under the Reorganization
Documents, we are relying upon the accuracy of the representations
made to us concerning the facts, assumptions and circumstances
relating to the merger and the transactions contemplated in the
Reorganization Documents. Based upon these representations and a
review of the same, nothing has come to our attention that gives us
reason to believe that any relevant facts represented to us are not
true, and therefore, we have not deemed it necessary to otherwise
independently verify the facts, assumptions or circumstances relating
to the merger and the transactions contemplated in the Reorganization
Documents.
<PAGE> 3
MACKALL, CROUNSE & MOORE
Members of the Board of Directors
Page 3
The qualification of the Merger (as contemplated under the
Reorganization Documents) as a reorganization within the meaning of
Section 368(a) of the Code under which, subject to certain exceptions
as provided in the Code, Norwest, Merger Co., Community and the
shareholders of Community shall not be subject to the recognition of
gain or loss is conditioned upon numerous objective and subjective
facts and circumstances. With respect to the Merger, you have made
the following representations, which are based, in part, upon your own
reasonable investigations of the facts, assumptions and circumstances.
In this regard, we have assumed, and you have represented to us, the
following:
1. Community, Norwest and Merger Co. (the "Parties to the
Reorganization") are duly organized and existing corporations in
good standing under the laws of the states in which they are
incorporated and doing business, with full authority to own their
properties and carry on their businesses as presently conducted.
2. The Parties to the Reorganization have the corporate power and
authority to enter into and perform all acts required under the
Reorganization Documents.
3. The Reorganization Documents and the Merger shall all have been
validly approved by the Boards of Directors of the Parties to the
Reorganization, and their shareholders as necessary, in accordance
with their respective articles of incorporation, bylaws and
controlling documents, and in accordance with the requirements of
the Minnesota Business Corporation Act.
4. The Merger shall be consummated in accordance with the Plan of
Merger, together with the Articles of Merger required by the
Minnesota Business Corporation Act, and shall be properly filed
and accepted in compliance with the requirements of the Minnesota
Business Corporation Act.
5. Community shall have complied with all provisions of the
Reorganization Documents including but not limited to:
a. No distributions or dividends shall have been paid with respect
to the Community Common Stock subsequent to the Plan of
Reorganization in excess of the limitations set forth in the
Plan of Reorganization, including the limitations necessary to
prevent disqualification of the Merger as a "pooling of
interests" for accounting purposes;
b. No redemption, purchases or other direct or indirect
acquisitions of Community Credit Stock shall have been made;
<PAGE> 4
MACKALL, CROUNSE & MOORE
Members of the Board of Directors
Page 4
c. No compensation of officers, directors or executive employees
shall have been increased except pursuant to existing
compensation plans and practices and bonus plans consistent
with historical practices;
d. No shares of the capital stock of any subsidiary of Community
shall have been disposed of; and
e. No substantial change in the assets and operations of Community
shall have occurred other than through the ordinary course of
business, and specifically including that no action shall have
been taken which would disqualify the Merger as a "pooling of
interests" for accounting purposes.
6. The Merger shall have qualified as a "pooling of interests" for
accounting purposes and Norwest shall have received an opinion
from the certified public accountants at KPMG Peat Marwick to that
effect.
7. There has been no disposition of substantial operating assets of
Community to its shareholders within the past two years and no
purchase or redemption of a substantial portion of the Community
Common Stock within the past two years or in contemplation of the
Merger.
8. The amounts to be paid to shareholders of Community for Community
Common Stock as to which statutory dissenters' appraisal rights
shall have been exercised and with respect to the cash paid in
lieu of fractional shares of Norwest Common Stock to be issued to
holders of Community Common Stock under the terms of the Merger,
shall not exceed five percent (5%) of the total value of all
Community Common Stock outstanding as of the date of the Plan of
Reorganization; and all such payments shall be made in cash or
equivalents, and not in operating assets of Community.
9. There are no binding contracts, commitments, letters of intent or
plans for the sale for Norwest Common Stock to be received by the
shareholders of Community in the Merger which, in the aggregate,
will exceed five percent (5%) of the total issued and outstanding
Community Common Stock as of the date of the Plan of
Reorganization.
10. The Merger is being entered into for valid business purposes, and
a principal purpose of the Merger is not tax avoidance or tax
evasion.
<PAGE> 5
MACKALL, CROUNSE & MOORE
Members of the Board of Directors
Page 5
Based upon the above representations and assumptions, and our
evaluation of the relevant facts and review of the Reorganization
Documents set forth above, and based upon the Code and all treasury
regulations and proposed treasury regulations promulgated thereunder,
judicial decisions, and administrative rulings and procedures as of
this date, it is our opinion that for federal income tax purposes:
1. The Merger will constitute a reorganization within the meaning of
Sections 368(a)(1)(A) and 368(a)(2)(E) of the Code.
2. No gain or loss will be recognized by the holders of Community
Common Stock upon receipt of Norwest Common Stock, except for cash
received in lieu of fractional shares.
3. The basis of the Norwest Common Stock received by the shareholders
of Community will be the same as the basis of Community Common
Stock exchanged therefore, reduced proportionally for any cash
received in lieu of fractional shares.
4. The holding period of the shares of Norwest Common Stock received
by the shareholders of Community will including the holding period
of the Community Common Stock exchanged therefor; provided that
such shares of Community Common Stock were held as a capital asset
by the shareholders of Community as of the Effective Time of the
Merger.
The opinions set forth above are subject to the following
qualifications:
a. We have assumed the due execution and delivery of the
Reorganization Documents, the genuineness of all signatures,
the authenticity of all Reorganization Documents submitted to
us as originals, and the conformity to the originals of all
Reorganization Documents submitted to us as copies. We have
also assumed the accuracy of all factual matters contained in
the Reorganization Documents we have examined.
b. We are qualified to practice law in the State of Minnesota and
have not made a special examination of any law other than the
laws of the State of Minnesota and the federal laws of the
United States. Accordingly, in connection with the rendering
of this opinion, we express no opinion as to the law of any
state, or as to any matters subject to such laws, other than
the laws of the State of Minnesota and the federal laws of the
United States. We have assumed that, if and where applicable,
laws of other states are the same as the laws of the State of
Minnesota.
<PAGE> 6
MACKALL, CROUNSE & MOORE
Members of the Board of Directors
Page 6
c. Our opinion is limited to matters expressly set forth herein
and no opinion is to be implied or inferred beyond the matters
expressly so stated.
d. We can give no assurance that the Internal Revenue Service or a
court will agree with the conclusions reached herein. Further,
since our opinions are based upon our analysis of current law
and the judicial and administrative interpretations thereof,
the tax consequences discussed herein could be materially and
adversely affected by changes in the law or interpretations
thereof subsequent to the date of this opinion letter, which
changes and interpretations may be retroactive.
This opinion is furnished for your benefit and the benefit of your
shareholders, and may not be relied upon by any other person without
our express prior written consent. This opinion speaks only as of the
date hereof and is limited to present statutes, laws and regulations,
and to the facts as they currently exist, and we have assumed no
obligation to update or supplement this opinion.
Sincerely,
MACKALL, CROUNSE & MOORE
Robert F. Strauss
<PAGE> 1
EXHIBIT 23(b)
CONSENT OF MACKALL, CROUNSE & MOORE
We hereby consent to the filing, as an exhibit to the Registration
Statement, of a draft of our opinion to be rendered to the Board of Directors
of Community Credit Co. in connection with the proposed merger with a wholly
owned subsidiary of Norwest Corporation and to the reference to our firm in the
Proxy Statement/Prospectus contained in the Registration Statement.
MACKALL, CROUNSE & MOORE
/s/ Robert F. Strauss
Robert F. Strauss
January 21, 1994
<PAGE> 1
KPMG Peat Marwick
Certified Public Accountants
4200 Norwest Center Exhibit 23(c)
90 South Seventh Street
Minneapolis, MN 55402
Independent Auditors' Consent
The Board of Directors
Norwest Corporation:
We consent to the use of our report dated January 20, 1993
incorporated herein by reference and to the reference to our firm
under the heading "EXPERTS" in the Proxy Statement-Prospectus. Our
report refers to the Corporation's adoption of Financial Accounting
Standards Board's Statement of Financial Accounting Standards No. 106,
"Employers' Accounting for Postretirement Benefits Other Than
Pensions."
/s/ KPMG Peat Marwick
January 25, 1994
<PAGE> 1
KPMG Peat Marwick
Certified Public Accountants
4200 Norwest Center Exhibit 23(d)
90 South Seventh Street
Minneapolis, MN 55402
Independent Auditors' Consent
The Board of Directors
Community Credit Co.:
We consent to the use of our report dated January 22, 1993 included herein and
to the reference to our firm under the heading "EXPERTS" in the Proxy
Statement-Prospectus.
/s/ KPMG Peat Marwick
January 25, 1994
<PAGE> 1
EXHIBIT 24
NORWEST CORPORATION
Power of Attorney
of Director and/or Officer
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director
and/or officer of NORWEST CORPORATION, a Delaware corporation, does
hereby make, constitute and appoint LLOYD P. JOHNSON, RICHARD M.
KOVACEVICH, STANLEY S. STROUP, JOHN T. THORNTON, LAUREL A. HOLSCHUH
AND H. BERNT VON OHLEN, and each or any one of them, the undersigned's
true and lawful attorneys-in-fact, with power of substitution, for the
undersigned and in the undersigned's name, place and stead, to sign
and affix the undersigned's name as such director and/or officer of
said Corporation to a Registration Statement on Form S-4 or other
applicable form, and all amendments, including post-effective
amendments, thereto, to be filed by said Corporation with the
Securities and Exchange Commission, Washington, D.C., in connection
with the registration under the Securities Act of 1933, as amended, of
up to 3,750,000 shares of Common Stock of the Corporation which may be
issued in connection with the acquisition by the Corporation of
Community Credit Co., and to file the same, with all exhibits thereto
and other supporting documents, with said Commission, granting unto
said attorneys-in-fact, and each of them, full power and authority to
do and perform any and all acts necessary or incidental to the
performance and execution of the powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this power of
attorney this 27th day of July, 1993.
/s/ David A. Christensen
-------------------------------
David A. Christensen
<PAGE> 2
EXHIBIT 24
NORWEST CORPORATION
Power of Attorney
of Director and/or Officer
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director
and/or officer of NORWEST CORPORATION, a Delaware corporation, does
hereby make, constitute and appoint LLOYD P. JOHNSON, RICHARD M.
KOVACEVICH, STANLEY S. STROUP, JOHN T. THORNTON, LAUREL A. HOLSCHUH
AND H. BERNT VON OHLEN, and each or any one of them, the undersigned's
true and lawful attorneys-in-fact, with power of substitution, for the
undersigned and in the undersigned's name, place and stead, to sign
and affix the undersigned's name as such director and/or officer of
said Corporation to a Registration Statement on Form S-4 or other
applicable form, and all amendments, including post-effective
amendments, thereto, to be filed by said Corporation with the
Securities and Exchange Commission, Washington, D.C., in connection
with the registration under the Securities Act of 1933, as amended, of
up to 3,750,000 shares of Common Stock of the Corporation which may be
issued in connection with the acquisition by the Corporation of
Community Credit Co., and to file the same, with all exhibits thereto
and other supporting documents, with said Commission, granting unto
said attorneys-in-fact, and each of them, full power and authority to
do and perform any and all acts necessary or incidental to the
performance and execution of the powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this power of
attorney this 27th day of July, 1993.
/s/ Pierson M. Grieve
-------------------------------
Pierson M. Grieve
<PAGE> 3
EXHIBIT 24
NORWEST CORPORATION
Power of Attorney
of Director and/or Officer
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director
and/or officer of NORWEST CORPORATION, a Delaware corporation, does
hereby make, constitute and appoint LLOYD P. JOHNSON, RICHARD M.
KOVACEVICH, STANLEY S. STROUP, JOHN T. THORNTON, LAUREL A. HOLSCHUH
AND H. BERNT VON OHLEN, and each or any one of them, the undersigned's
true and lawful attorneys-in-fact, with power of substitution, for the
undersigned and in the undersigned's name, place and stead, to sign
and affix the undersigned's name as such director and/or officer of
said Corporation to a Registration Statement on Form S-4 or other
applicable form, and all amendments, including post-effective
amendments, thereto, to be filed by said Corporation with the
Securities and Exchange Commission, Washington, D.C., in connection
with the registration under the Securities Act of 1933, as amended, of
up to 3,750,000 shares of Common Stock of the Corporation which may be
issued in connection with the acquisition by the Corporation of
Community Credit Co., and to file the same, with all exhibits thereto
and other supporting documents, with said Commission, granting unto
said attorneys-in-fact, and each of them, full power and authority to
do and perform any and all acts necessary or incidental to the
performance and execution of the powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this power of
attorney this 27th day of July, 1993.
/s/ Charles M. Harper
-------------------------------
Charles M. Harper
<PAGE> 4
EXHIBIT 24
NORWEST CORPORATION
Power of Attorney
of Director and/or Officer
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director
and/or officer of NORWEST CORPORATION, a Delaware corporation, does
hereby make, constitute and appoint LLOYD P. JOHNSON, RICHARD M.
KOVACEVICH, STANLEY S. STROUP, JOHN T. THORNTON, LAUREL A. HOLSCHUH
AND H. BERNT VON OHLEN, and each or any one of them, the undersigned's
true and lawful attorneys-in-fact, with power of substitution, for the
undersigned and in the undersigned's name, place and stead, to sign
and affix the undersigned's name as such director and/or officer of
said Corporation to a Registration Statement on Form S-4 or other
applicable form, and all amendments, including post-effective
amendments, thereto, to be filed by said Corporation with the
Securities and Exchange Commission, Washington, D.C., in connection
with the registration under the Securities Act of 1933, as amended, of
up to 3,750,000 shares of Common Stock of the Corporation which may be
issued in connection with the acquisition by the Corporation of
Community Credit Co., and to file the same, with all exhibits thereto
and other supporting documents, with said Commission, granting unto
said attorneys-in-fact, and each of them, full power and authority to
do and perform any and all acts necessary or incidental to the
performance and execution of the powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this power of
attorney this 27th day of July, 1993.
/s/ N. Berne Hart
-------------------------------
N. Berne Hart
<PAGE> 5
EXHIBIT 24
NORWEST CORPORATION
Power of Attorney
of Director and/or Officer
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director
and/or officer of NORWEST CORPORATION, a Delaware corporation, does
hereby make, constitute and appoint LLOYD P. JOHNSON, RICHARD M.
KOVACEVICH, STANLEY S. STROUP, JOHN T. THORNTON, LAUREL A. HOLSCHUH
AND H. BERNT VON OHLEN, and each or any one of them, the undersigned's
true and lawful attorneys-in-fact, with power of substitution, for the
undersigned and in the undersigned's name, place and stead, to sign
and affix the undersigned's name as such director and/or officer of
said Corporation to a Registration Statement on Form S-4 or other
applicable form, and all amendments, including post-effective
amendments, thereto, to be filed by said Corporation with the
Securities and Exchange Commission, Washington, D.C., in connection
with the registration under the Securities Act of 1933, as amended, of
up to 3,750,000 shares of Common Stock of the Corporation which may be
issued in connection with the acquisition by the Corporation of
Community Credit Co., and to file the same, with all exhibits thereto
and other supporting documents, with said Commission, granting unto
said attorneys-in-fact, and each of them, full power and authority to
do and perform any and all acts necessary or incidental to the
performance and execution of the powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this power of
attorney this 27th day of July, 1993.
/s/ William A. Hodder
-------------------------------
William A. Hodder
<PAGE> 6
EXHIBIT 24
NORWEST CORPORATION
Power of Attorney
of Director and/or Officer
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director
and/or officer of NORWEST CORPORATION, a Delaware corporation, does
hereby make, constitute and appoint LLOYD P. JOHNSON, RICHARD M.
KOVACEVICH, STANLEY S. STROUP, JOHN T. THORNTON, LAUREL A. HOLSCHUH
AND H. BERNT VON OHLEN, and each or any one of them, the undersigned's
true and lawful attorneys-in-fact, with power of substitution, for the
undersigned and in the undersigned's name, place and stead, to sign
and affix the undersigned's name as such director and/or officer of
said Corporation to a Registration Statement on Form S-4 or other
applicable form, and all amendments, including post-effective
amendments, thereto, to be filed by said Corporation with the
Securities and Exchange Commission, Washington, D.C., in connection
with the registration under the Securities Act of 1933, as amended, of
up to 3,750,000 shares of Common Stock of the Corporation which may be
issued in connection with the acquisition by the Corporation of
Community Credit Co., and to file the same, with all exhibits thereto
and other supporting documents, with said Commission, granting unto
said attorneys-in-fact, and each of them, full power and authority to
do and perform any and all acts necessary or incidental to the
performance and execution of the powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this power of
attorney this 27th day of July, 1993.
/s/ George C. Howe
-------------------------------
George C. Howe
<PAGE> 7
EXHIBIT 24
NORWEST CORPORATION
Power of Attorney
of Director and/or Officer
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director
and/or officer of NORWEST CORPORATION, a Delaware corporation, does
hereby make, constitute and appoint LLOYD P. JOHNSON, RICHARD M.
KOVACEVICH, STANLEY S. STROUP, JOHN T. THORNTON, LAUREL A. HOLSCHUH
AND H. BERNT VON OHLEN, and each or any one of them, the undersigned's
true and lawful attorneys-in-fact, with power of substitution, for the
undersigned and in the undersigned's name, place and stead, to sign
and affix the undersigned's name as such director and/or officer of
said Corporation to a Registration Statement on Form S-4 or other
applicable form, and all amendments, including post-effective
amendments, thereto, to be filed by said Corporation with the
Securities and Exchange Commission, Washington, D.C., in connection
with the registration under the Securities Act of 1933, as amended, of
up to 3,750,000 shares of Common Stock of the Corporation which may be
issued in connection with the acquisition by the Corporation of
Community Credit Co., and to file the same, with all exhibits thereto
and other supporting documents, with said Commission, granting unto
said attorneys-in-fact, and each of them, full power and authority to
do and perform any and all acts necessary or incidental to the
performance and execution of the powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this power of
attorney this 27th day of July, 1993.
/s/ Lloyd P. Johnson
-------------------------------
Lloyd P. Johnson
<PAGE> 8
EXHIBIT 24
NORWEST CORPORATION
Power of Attorney
of Director and/or Officer
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director
and/or officer of NORWEST CORPORATION, a Delaware corporation, does
hereby make, constitute and appoint LLOYD P. JOHNSON, RICHARD M.
KOVACEVICH, STANLEY S. STROUP, JOHN T. THORNTON, LAUREL A. HOLSCHUH
AND H. BERNT VON OHLEN, and each or any one of them, the undersigned's
true and lawful attorneys-in-fact, with power of substitution, for the
undersigned and in the undersigned's name, place and stead, to sign
and affix the undersigned's name as such director and/or officer of
said Corporation to a Registration Statement on Form S-4 or other
applicable form, and all amendments, including post-effective
amendments, thereto, to be filed by said Corporation with the
Securities and Exchange Commission, Washington, D.C., in connection
with the registration under the Securities Act of 1933, as amended, of
up to 3,750,000 shares of Common Stock of the Corporation which may be
issued in connection with the acquisition by the Corporation of
Community Credit Co., and to file the same, with all exhibits thereto
and other supporting documents, with said Commission, granting unto
said attorneys-in-fact, and each of them, full power and authority to
do and perform any and all acts necessary or incidental to the
performance and execution of the powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this power of
attorney this 27th day of July, 1993.
/s/ Reatha Clark King
-------------------------------
Reatha Clark King
<PAGE> 9
EXHIBIT 24
NORWEST CORPORATION
Power of Attorney
of Director and/or Officer
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director
and/or officer of NORWEST CORPORATION, a Delaware corporation, does
hereby make, constitute and appoint LLOYD P. JOHNSON, RICHARD M.
KOVACEVICH, STANLEY S. STROUP, JOHN T. THORNTON, LAUREL A. HOLSCHUH
AND H. BERNT VON OHLEN, and each or any one of them, the undersigned's
true and lawful attorneys-in-fact, with power of substitution, for the
undersigned and in the undersigned's name, place and stead, to sign
and affix the undersigned's name as such director and/or officer of
said Corporation to a Registration Statement on Form S-4 or other
applicable form, and all amendments, including post-effective
amendments, thereto, to be filed by said Corporation with the
Securities and Exchange Commission, Washington, D.C., in connection
with the registration under the Securities Act of 1933, as amended, of
up to 3,750,000 shares of Common Stock of the Corporation which may be
issued in connection with the acquisition by the Corporation of
Community Credit Co., and to file the same, with all exhibits thereto
and other supporting documents, with said Commission, granting unto
said attorneys-in-fact, and each of them, full power and authority to
do and perform any and all acts necessary or incidental to the
performance and execution of the powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this power of
attorney this 27th day of July, 1993.
/s/ Richard M. Kovacevich
-------------------------------
Richard M. Kovacevich
<PAGE> 10
EXHIBIT 24
NORWEST CORPORATION
Power of Attorney
of Director and/or Officer
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director
and/or officer of NORWEST CORPORATION, a Delaware corporation, does
hereby make, constitute and appoint LLOYD P. JOHNSON, RICHARD M.
KOVACEVICH, STANLEY S. STROUP, JOHN T. THORNTON, LAUREL A. HOLSCHUH
AND H. BERNT VON OHLEN, and each or any one of them, the undersigned's
true and lawful attorneys-in-fact, with power of substitution, for the
undersigned and in the undersigned's name, place and stead, to sign
and affix the undersigned's name as such director and/or officer of
said Corporation to a Registration Statement on Form S-4 or other
applicable form, and all amendments, including post-effective
amendments, thereto, to be filed by said Corporation with the
Securities and Exchange Commission, Washington, D.C., in connection
with the registration under the Securities Act of 1933, as amended, of
up to 3,750,000 shares of Common Stock of the Corporation which may be
issued in connection with the acquisition by the Corporation of
Community Credit Co., and to file the same, with all exhibits thereto
and other supporting documents, with said Commission, granting unto
said attorneys-in-fact, and each of them, full power and authority to
do and perform any and all acts necessary or incidental to the
performance and execution of the powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this power of
attorney this 27th day of July, 1993.
/s/ Richard S. Levitt
-------------------------------
Richard S. Levitt
<PAGE> 11
EXHIBIT 24
NORWEST CORPORATION
Power of Attorney
of Director and/or Officer
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director
and/or officer of NORWEST CORPORATION, a Delaware corporation, does
hereby make, constitute and appoint LLOYD P. JOHNSON, RICHARD M.
KOVACEVICH, STANLEY S. STROUP, JOHN T. THORNTON, LAUREL A. HOLSCHUH
AND H. BERNT VON OHLEN, and each or any one of them, the undersigned's
true and lawful attorneys-in-fact, with power of substitution, for the
undersigned and in the undersigned's name, place and stead, to sign
and affix the undersigned's name as such director and/or officer of
said Corporation to a Registration Statement on Form S-4 or other
applicable form, and all amendments, including post-effective
amendments, thereto, to be filed by said Corporation with the
Securities and Exchange Commission, Washington, D.C., in connection
with the registration under the Securities Act of 1933, as amended, of
up to 3,750,000 shares of Common Stock of the Corporation which may be
issued in connection with the acquisition by the Corporation of
Community Credit Co., and to file the same, with all exhibits thereto
and other supporting documents, with said Commission, granting unto
said attorneys-in-fact, and each of them, full power and authority to
do and perform any and all acts necessary or incidental to the
performance and execution of the powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this power of
attorney this 27th day of July, 1993.
/s/ Richard D. McCormick
-------------------------------
Richard D. McCormick
<PAGE> 12
EXHIBIT 24
NORWEST CORPORATION
Power of Attorney
of Director and/or Officer
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director
and/or officer of NORWEST CORPORATION, a Delaware corporation, does
hereby make, constitute and appoint LLOYD P. JOHNSON, RICHARD M.
KOVACEVICH, STANLEY S. STROUP, JOHN T. THORNTON, LAUREL A. HOLSCHUH
AND H. BERNT VON OHLEN, and each or any one of them, the undersigned's
true and lawful attorneys-in-fact, with power of substitution, for the
undersigned and in the undersigned's name, place and stead, to sign
and affix the undersigned's name as such director and/or officer of
said Corporation to a Registration Statement on Form S-4 or other
applicable form, and all amendments, including post-effective
amendments, thereto, to be filed by said Corporation with the
Securities and Exchange Commission, Washington, D.C., in connection
with the registration under the Securities Act of 1933, as amended, of
up to 3,750,000 shares of Common Stock of the Corporation which may be
issued in connection with the acquisition by the Corporation of
Community Credit Co., and to file the same, with all exhibits thereto
and other supporting documents, with said Commission, granting unto
said attorneys-in-fact, and each of them, full power and authority to
do and perform any and all acts necessary or incidental to the
performance and execution of the powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this power of
attorney this 27th day of July, 1993.
/s/ Cynthia H. Milligan
-------------------------------
Cynthia H. Milligan
<PAGE> 13
EXHIBIT 24
NORWEST CORPORATION
Power of Attorney
of Director and/or Officer
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director
and/or officer of NORWEST CORPORATION, a Delaware corporation, does
hereby make, constitute and appoint LLOYD P. JOHNSON, RICHARD M.
KOVACEVICH, STANLEY S. STROUP, JOHN T. THORNTON, LAUREL A. HOLSCHUH
AND H. BERNT VON OHLEN, and each or any one of them, the undersigned's
true and lawful attorneys-in-fact, with power of substitution, for the
undersigned and in the undersigned's name, place and stead, to sign
and affix the undersigned's name as such director and/or officer of
said Corporation to a Registration Statement on Form S-4 or other
applicable form, and all amendments, including post-effective
amendments, thereto, to be filed by said Corporation with the
Securities and Exchange Commission, Washington, D.C., in connection
with the registration under the Securities Act of 1933, as amended, of
up to 3,750,000 shares of Common Stock of the Corporation which may be
issued in connection with the acquisition by the Corporation of
Community Credit Co., and to file the same, with all exhibits thereto
and other supporting documents, with said Commission, granting unto
said attorneys-in-fact, and each of them, full power and authority to
do and perform any and all acts necessary or incidental to the
performance and execution of the powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this power of
attorney this 27th day of July, 1993.
/s/ John E. Pearson
-------------------------------
John E. Pearson
<PAGE> 14
EXHIBIT 24
NORWEST CORPORATION
Power of Attorney
of Director and/or Officer
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director
and/or officer of NORWEST CORPORATION, a Delaware corporation, does
hereby make, constitute and appoint LLOYD P. JOHNSON, RICHARD M.
KOVACEVICH, STANLEY S. STROUP, JOHN T. THORNTON, LAUREL A. HOLSCHUH
AND H. BERNT VON OHLEN, and each or any one of them, the undersigned's
true and lawful attorneys-in-fact, with power of substitution, for the
undersigned and in the undersigned's name, place and stead, to sign
and affix the undersigned's name as such director and/or officer of
said Corporation to a Registration Statement on Form S-4 or other
applicable form, and all amendments, including post-effective
amendments, thereto, to be filed by said Corporation with the
Securities and Exchange Commission, Washington, D.C., in connection
with the registration under the Securities Act of 1933, as amended, of
up to 3,750,000 shares of Common Stock of the Corporation which may be
issued in connection with the acquisition by the Corporation of
Community Credit Co., and to file the same, with all exhibits thereto
and other supporting documents, with said Commission, granting unto
said attorneys-in-fact, and each of them, full power and authority to
do and perform any and all acts necessary or incidental to the
performance and execution of the powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this power of
attorney this 27th day of July, 1993.
/s/ Ian M. Rolland
-------------------------------
Ian M. Rolland
<PAGE> 15
EXHIBIT 24
NORWEST CORPORATION
Power of Attorney
of Director and/or Officer
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director
and/or officer of NORWEST CORPORATION, a Delaware corporation, does
hereby make, constitute and appoint LLOYD P. JOHNSON, RICHARD M.
KOVACEVICH, STANLEY S. STROUP, JOHN T. THORNTON, LAUREL A. HOLSCHUH
AND H. BERNT VON OHLEN, and each or any one of them, the undersigned's
true and lawful attorneys-in-fact, with power of substitution, for the
undersigned and in the undersigned's name, place and stead, to sign
and affix the undersigned's name as such director and/or officer of
said Corporation to a Registration Statement on Form S-4 or other
applicable form, and all amendments, including post-effective
amendments, thereto, to be filed by said Corporation with the
Securities and Exchange Commission, Washington, D.C., in connection
with the registration under the Securities Act of 1933, as amended, of
up to 3,750,000 shares of Common Stock of the Corporation which may be
issued in connection with the acquisition by the Corporation of
Community Credit Co., and to file the same, with all exhibits thereto
and other supporting documents, with said Commission, granting unto
said attorneys-in-fact, and each of them, full power and authority to
do and perform any and all acts necessary or incidental to the
performance and execution of the powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this power of
attorney this 27th day of July, 1993.
/s/ Stephen E. Watson
-------------------------------
Stephen E. Watson
<PAGE> 16
EXHIBIT 24
NORWEST CORPORATION
Power of Attorney
of Director and/or Officer
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director
and/or officer of NORWEST CORPORATION, a Delaware corporation, does
hereby make, constitute and appoint LLOYD P. JOHNSON, RICHARD M.
KOVACEVICH, STANLEY S. STROUP, JOHN T. THORNTON, LAUREL A. HOLSCHUH
AND H. BERNT VON OHLEN, and each or any one of them, the undersigned's
true and lawful attorneys-in-fact, with power of substitution, for the
undersigned and in the undersigned's name, place and stead, to sign
and affix the undersigned's name as such director and/or officer of
said Corporation to a Registration Statement on Form S-4 or other
applicable form, and all amendments, including post-effective
amendments, thereto, to be filed by said Corporation with the
Securities and Exchange Commission, Washington, D.C., in connection
with the registration under the Securities Act of 1933, as amended, of
up to 3,750,000 shares of Common Stock of the Corporation which may be
issued in connection with the acquisition by the Corporation of
Community Credit Co., and to file the same, with all exhibits thereto
and other supporting documents, with said Commission, granting unto
said attorneys-in-fact, and each of them, full power and authority to
do and perform any and all acts necessary or incidental to the
performance and execution of the powers herein expressly granted.
IN WITNESS WHEREOF, the undersigned has executed this power of
attorney this 27th day of July, 1993.
/s/ Michael W. Wright
-------------------------------
Michael W. Wright
<PAGE> 1
COMMUNITY CREDIT CO. EXHIBIT 99
3101 W. 69th Street
Edina, Minnesota 55435
PROXY TO VOTE COMMON STOCK
For Special Meeting of Shareholders
------------, ---, 1994
The undersigned, revoking all prior proxies, hereby appoints Ernest F. Dorn,
Jr. and Daniel L. Abbott and each of them, the lawful attorneys and proxies of
the undersigned, with full power of substitution and revocation, to vote all
shares of stock of Community Credit Co. ("Community") of record in the name of
the undersigned at the close of business on February 1, 1994, at the Special
Meeting of Shareholders to be held on February -- ,1994, 2:00 p.m. (local
time), at the principal executive office of Community, 3101 W. 69th
Street, Edina, Minnesota, or at any adjournment or postponement thereof, with
all the powers the undersigned would possess if personally present, upon all
matters set forth in the Notice of Special Meeting of Shareholders of Community
Credit Co., dated ----------------, 1994, as follows:
1. Approval of the Agreement and Plan of Reorganization dated as of
November 23, 1993 (together with the Agreement and Plan of Merger attached
thereto, the "Merger Agreement") between Community and Norwest Corporation
("Norwest"), providing for the acquisition of Community by Norwest, to be
effected pursuant to a merger (the "Merger") of a wholly owned subsidiary of
Norwest with and into Community, each outstanding share of common stock of
Community, $1.00 par value, to be converted into approximately 1.1996 shares of
the common stock of Norwest, par value $1-2/3 per share.
/ / For / / Against / / Abstain
2. Approval of an amendment to Article III, Section 3.02 of the Bylaws of
Community (to be effective as of the effective time of the Merger) to reduce
the number of directors to three.
/ / For / / Against / / Abstain
3. Election of the following nominees (to be effective as of the effective
time of the Merger) as directors: Steve R. Wagner, Gary M. Poetting, and
Faye L. Kunz.
/ / For All Nominees / / Withheld For All Nominees
For All Nominees Except the Following:
(Mark no box and write the name of the nominee(s) withheld in the space
provided below.)
-----------------------------------------------------------------
4. Ratification of all actions taken by the officers and directors of
Community since the last annual meeting of shareholders.
/ / For / / Against / / Abstain
<PAGE> 2
EXHIBIT 99 (Cont.)
5. To transact such other business as may properly come before the meeting
or any adjournment or postponement thereof.
/ / For / / Against / / Abstain
Shares represented by all properly executed proxies will be voted in the
manner directed herein by the undersigned shareholder and in the discretion of
the proxy holders as to any other matter that may properly come before the
Special Meeting of Shareholders.
IF NO DIRECTION IS MADE, proxies will be voted FOR items 1, 2, 3, 4, and
in the discretion of the proxy holders as to any other matter that may come
before the Special Meeting of Shareholders.
- -------------------------------------------------------------------------------
Please mark, date, sign and mail this proxy promptly in the enclosed
envelope.
The Board of Directors recommends a vote FOR items 1, 2, 3 and 4.
The undersigned hereby acknowledges receipt of the Notice of the Special
Meeting of Shareholders of Community Credit Co. dated -----------------, 1994,
and the Proxy Statement-Prospectus furnished herein.
Please sign below exactly as your name appears on below. In the case of
shares owned in joint tenancy or as tenants in common, all should sign.
Fiduciaries should indicate their title and authority.
Dated: -------------------------------, 1994
---------------------------------------------
---------------------------------------------
Signature
