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Filed Pursuant to Rule 424(b)(2)
File No. 33-62391
THE FOOTHILL GROUP, INC.
11111 SANTA MONICA BOULEVARD
LOS ANGELES, CALIFORNIA 90025
September 13, 1995
Dear Stockholder:
You are cordially invited to attend a Special Meeting of Stockholders of The
Foothill Group, Inc. ("Foothill") to be held at the Peninsula Hotel, 9882
Little Santa Monica Boulevard, Beverly Hills, California, on Monday, October
16, 1995, at 10:00 a.m., local time. At the Special Meeting you will be asked
to consider and vote upon a proposal to approve the Agreement and Plan of
Reorganization, dated as of May 15, 1995, between Foothill and Norwest
Corporation ("Norwest"), and the related Agreement and Plan of Merger
(together, the "Merger Agreement"), providing for the merger of a wholly owned
subsidiary of Norwest into Foothill (the "Merger").
Under the terms of the Merger Agreement, the Merger will result in the
conversion of each share of capital stock of Foothill outstanding immediately
prior to the time the Merger becomes effective into shares of Norwest Common
Stock.
The enclosed Proxy Statement-Prospectus contains a more complete description
of the terms of the Merger. You are urged to read the Proxy Statement-
Prospectus carefully.
The Board of Directors has unanimously approved the Merger Agreement as being
in the best interests of Foothill and its stockholders and recommends that you
vote in favor of the Merger. Foothill has received an opinion from The Chicago
Corporation, an investment banking firm experienced in the valuation of
financial institutions, that as of the date thereof the consideration to be
received in the Merger is fair to the stockholders of Foothill from a financial
point of view. Consummation of the Merger is subject to a number of conditions
including approval of the Merger Agreement by Foothill's stockholders and
receipt by Foothill of an opinion of counsel to the effect that the Merger will
be treated as a tax-free reorganization for federal income tax purposes. YOU
SHOULD CONSULT YOUR OWN TAX ADVISOR CONCERNING THE FEDERAL, AND ANY APPLICABLE
STATE, LOCAL, AND FOREIGN INCOME TAX CONSEQUENCES OF THE MERGER.
It is very important that your shares be represented at the Special Meeting,
regardless of whether you plan to attend in person. A failure to vote for
approval of the Merger Agreement will have the same effect as a vote against
the Merger Agreement. Therefore, in order to ensure that your vote is
represented at the Special Meeting, PLEASE DATE, SIGN, AND PROMPTLY RETURN YOUR
PROXY IN THE ENCLOSED ENVELOPE. If you attend the meeting, you may vote in
person if you wish, even though you have previously returned your proxy.
On behalf of the Board of Directors, I recommend you vote FOR approval of the
Merger Agreement.
Don L. Gevirtz
Chairman of the Board and Chief
Executive Officer
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THE FOOTHILL GROUP, INC.
11111 SANTA MONICA BOULEVARD
LOS ANGELES, CALIFORNIA 90025
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NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON OCTOBER 16, 1995
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To Our Stockholders:
A special meeting of the stockholders (the "Special Meeting") of The Foothill
Group, Inc. ("Foothill"), a Delaware corporation, will be held at 10:00 a.m.,
local time, on October 16, 1995, at the Peninsula Hotel, 9882 Little Santa
Monica Boulevard, Beverly Hills, California, for the following purposes:
1. To consider and vote upon a proposal to approve the Agreement and Plan
of Reorganization, dated as of May 15, 1995, as amended, between Foothill
and Norwest Corporation ("Norwest"), a Delaware corporation, (including the
Agreement and Plan of Merger attached thereto) a copy of which is included
in the accompanying Proxy Statement-Prospectus as Appendix A, under the
terms of which (i) a newly formed wholly owned subsidiary of Norwest would
be merged with and into Foothill (the "Merger"), with Foothill, as the
surviving corporation, becoming a wholly owned subsidiary of Norwest, (ii)
each outstanding share of Class A Common Stock, no par value per share, of
Foothill ("Foothill Common Stock") (other than shares owned by Norwest or
its subsidiaries, all of which will be canceled) would be converted into
0.92 shares of common stock, par value $1 2/3 per share, of Norwest
("Norwest Common Stock"), and (iii) each outstanding share of Series A
Convertible Preferred Stock of Foothill ("Foothill Preferred") would be
converted into 6.1333272 shares of Norwest Common Stock; and to authorize
such further action by the Board of Directors and officers of Foothill as
may be necessary or appropriate to carry out the intent and purposes of the
Merger.
2. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Only stockholders of record on the books of Foothill at the close of business
on September 1, 1995, are entitled to notice of and will be entitled to vote at
the Special Meeting or any adjournment thereof. Approval of the Merger
Agreement and the Merger will require the affirmative vote of the holders of a
majority of the outstanding shares of Foothill Common Stock and Foothill
Preferred entitled to vote thereon, voting together as a single class.
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
Henry K. Jordan
Secretary
Los Angeles, California
September 13, 1995
TO ASSURE THAT YOUR SHARES ARE REPRESENTED AT THE SPECIAL MEETING, PLEASE
COMPLETE, SIGN, AND DATE, THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE
ACCOMPANYING ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
THE PROXY MAY BE REVOKED AT ANY TIME PRIOR TO ITS EXERCISE IN THE MANNER
DESCRIBED IN THE PROXY STATEMENT-PROSPECTUS.
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PROXY STATEMENT OF
THE FOOTHILL GROUP, INC.
FOR A SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON OCTOBER 16, 1995
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PROSPECTUS
OF
NORWEST CORPORATION
COMMON STOCK
----------------
This Proxy Statement-Prospectus relates to up to 20,000,000 shares of the
common stock ("Norwest Common Stock"), par value $1 2/3 per share, of Norwest
Corporation ("Norwest") issuable to the stockholders of The Foothill Group,
Inc. ("Foothill") upon consummation of the merger (the "Merger") of a wholly
owned subsidiary of Norwest ("Merger Co.") with Foothill, with Foothill as the
surviving corporation, pursuant to the terms of an Agreement and Plan of
Reorganization dated as of May 15, 1995, as amended, between Foothill and
Norwest (together with the Agreement and Plan of Merger attached thereto, the
"Merger Agreement"). A copy of the Merger Agreement is attached as Appendix A
to this Proxy Statement-Prospectus and incorporated by reference herein.
This Proxy Statement-Prospectus is being furnished to the stockholders of
Foothill in connection with the solicitation of proxies by the Board of
Directors of Foothill (the "Foothill Board") for use at the special meeting of
stockholders of Foothill to be held on October 16, 1995, and at any and all
adjournments or postponements thereof (the "Special Meeting").
At the Special Meeting, the holders of record of the outstanding capital
stock of Foothill will consider and vote upon a proposal to approve the Merger
Agreement. Upon consummation of the Merger, each outstanding share of Class A
Common Stock, no par value per share, of Foothill ("Foothill Common Stock")
will be converted into 0.92 shares of Norwest Common Stock and each outstanding
share of Series A Convertible Preferred Stock of Foothill ("Foothill
Preferred," and together with the Foothill Common Stock, the "Foothill Capital
Stock") will be converted into 6.1333272 shares of Norwest Common Stock. For a
more complete description of the Merger Agreement and the terms of the Merger,
see "THE MERGER."
Norwest Common Stock is traded on the New York Stock Exchange ("NYSE") under
the symbol "NOB" and on the Chicago Stock Exchange ("CHX"). The closing price
of Norwest Common Stock as reported on the NYSE Composite Tape on September 12,
1995, was $31.00 per share. Foothill Common Stock is traded on the NYSE. The
closing price of Foothill Common Stock as reported on the NYSE Composite Tape
on September 12, 1995, was $28.125.
This Proxy Statement-Prospectus and the form of proxy are first being mailed
to stockholders of Foothill on or about September 15, 1995.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
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.
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The date of this Proxy Statement-Prospectus is September 13, 1995.
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TABLE OF CONTENTS
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AVAILABLE INFORMATION..................................................... 4
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE........................... 5
SUMMARY................................................................... 6
The Companies........................................................... 6
Special Meeting and Vote Required....................................... 7
Terms of the Merger..................................................... 7
Recommendation of the Board of Directors of Foothill.................... 8
Opinion of Foothill's Financial Advisor................................. 9
Certain Considerations.................................................. 9
Effective Date and Time of the Merger................................... 9
Surrender of Stock Certificates......................................... 9
Conditions and Termination.............................................. 9
Regulatory Approvals.................................................... 9
No Solicitation......................................................... 10
Accounting Treatment.................................................... 10
Management and Operations After the Merger.............................. 10
Certain Transactions.................................................... 10
Interests of Certain Persons in the Merger.............................. 11
Appraisal Rights........................................................ 11
Stock Option Agreement Between Norwest and Foothill..................... 11
Certain Federal Income Tax Matters...................................... 11
Market Information...................................................... 12
Certain Differences in Rights of Stockholders........................... 12
Comparative Per Common Share Data....................................... 12
Selected Financial Data................................................. 13
MEETING INFORMATION....................................................... 16
General................................................................. 16
Date, Place, and Time................................................... 16
Record Date; Vote Required.............................................. 16
Principal Stockholders and Security Ownership of Management of Foothill. 17
Voting and Revocation of Proxies........................................ 18
Solicitation of Proxies................................................. 18
THE MERGER................................................................ 19
Terms of the Merger..................................................... 19
Background of the Merger................................................ 20
Recommendation of the Board of Directors of Foothill; Reasons for the
Merger................................................................. 20
Opinion of Foothill's Financial Advisor................................. 21
Certain Considerations.................................................. 23
Effective Date and Time of the Merger................................... 23
Surrender of Stock Certificates......................................... 23
Conditions to Consummation of the Merger................................ 24
Regulatory Approvals.................................................... 26
Business Pending the Merger............................................. 26
Certain Covenants....................................................... 27
No Solicitation......................................................... 27
Waiver, Amendment, and Termination...................................... 27
Effect on Employee Benefit Plans........................................ 28
Certain Transactions.................................................... 28
</TABLE>
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<TABLE>
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Interests of Certain Persons in the Merger............................. 28
Indemnification........................................................ 31
Management and Operations After the Merger............................. 31
Stock Option Agreement Between Norwest and Foothill.................... 31
Certain Differences in Rights of Stockholders.......................... 33
Rights of Dissenting Foothill Stockholders............................. 41
Certain U.S. Federal Income Tax Matters................................ 41
Resale of Norwest Common Stock......................................... 43
Stock Exchange Listing................................................. 43
Accounting Treatment................................................... 43
Expenses............................................................... 44
Dividend Reinvestment and Optional Cash Payment Plan................... 44
COMPARATIVE PER SHARE PRICES AND DIVIDENDS............................... 44
CERTAIN REGULATORY CONSIDERATIONS........................................ 45
General................................................................ 45
Dividend Restrictions.................................................. 45
Holding Company Structure.............................................. 45
Capital Requirements................................................... 46
Federal Deposit Insurance Corporation Improvement Act of 1991.......... 47
FDIC Insurance......................................................... 48
EXPERTS.................................................................. 48
LEGAL OPINIONS........................................................... 49
MANAGEMENT OF NORWEST AND ADDITIONAL INFORMATION......................... 49
APPENDIX A--AGREEMENT AND PLAN OF REORGANIZATION, AND AGREEMENT AND PLAN
OF MERGER, AMENDMENT TO THE PLAN OF REORGANIZATION
APPENDIX B--STOCK OPTION AGREEMENT
APPENDIX C--OPINION OF THE CHICAGO CORPORATION
</TABLE>
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AVAILABLE INFORMATION
Norwest and Foothill are subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and, in
accordance therewith, file reports, proxy statements, and other information
with the Securities and Exchange Commission (the "Commission").
The reports, proxy statements, and other information filed by Norwest and
Foothill with the Commission can be inspected and copied at the public
reference facilities of the Commission, Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the regional offices of the Commission 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
materials 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 and Foothill
also may be inspected at the offices of the New York Stock Exchange at 20 Broad
Street, New York, New York 10005 and, in the case of Norwest, at the offices of
the Chicago Stock Exchange at 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 the exhibits thereto (the
"Registration Statement") covering the securities offered hereby that 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, Foothill, and the securities offered hereby. Statements
contained herein concerning the provisions of documents are necessarily
summaries of such documents, and each statement is qualified in its entirety by
reference to the copy of the applicable document filed with the Commission or
attached as an appendix hereto.
----------------
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. THIS PROXY STATEMENT-PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL, OR A SOLICITATION OF AN OFFER TO PURCHASE, THE NORWEST COMMON STOCK
OFFERED BY THIS PROXY STATEMENT-PROSPECTUS, OR 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 FOOTHILL SINCE THE DATE OF THIS PROXY STATEMENT-
PROSPECTUS.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
THIS PROXY STATEMENT-PROSPECTUS INCORPORATES BY REFERENCE DOCUMENTS WHICH ARE
NOT PRESENTED HEREIN OR DELIVERED HEREWITH. SUCH DOCUMENTS, EXCLUDING EXHIBITS,
UNLESS SPECIFICALLY INCORPORATED THEREIN, ARE AVAILABLE WITHOUT CHARGE, UPON
WRITTEN OR ORAL REQUEST, IN THE CASE OF DOCUMENTS RELATING TO NORWEST, TO
LAUREL A. HOLSCHUH, SECRETARY, NORWEST CORPORATION, NORWEST CENTER, SIXTH AND
MARQUETTE, MINNEAPOLIS, MINNESOTA 55479-1026, TELEPHONE 612-667-8655; OR, IN
THE CASE OF DOCUMENTS RELATING TO FOOTHILL, TO HENRY K. JORDAN, SECRETARY, THE
FOOTHILL GROUP, INC., 11111 SANTA MONICA BOULEVARD, LOS ANGELES, CALIFORNIA
90025, TELEPHONE 310-996-7000. IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS, ANY REQUEST SHOULD BE MADE BY OCTOBER 6, 1995.
The following documents filed with the Commission by Norwest (File No. 1-
2979) and Foothill (File No. 0-5467) pursuant to the Exchange Act are
incorporated by reference in this Proxy Statement-Prospectus:
1. Norwest's Annual Report on Form 10-K for the year ended December 31,
1994;
2. Norwest's Quarterly Reports on Form 10-Q for the quarters ended March
31, 1995, and June 30, 1995;
3. Norwest's Current Reports on Form 8-K dated January 9, 1995, January 27,
1995, February 17, 1995, April 21, 1995, July 3, 1995, and September 13,
1995;
4. Foothill's Annual Report on Form 10-K for the year ended December 31,
1994;
5. Foothill's Quarterly Reports on Form 10-Q for the quarters ended March
31, 1995, and June 30, 1995;
6. The description of Foothill Common Stock on Form 8-B filed on August 26,
1987; and
7. Foothill's Current Reports on Form 8-K dated May 15, 1995, July 10,
1995, and August 8, 1995.
All documents filed by Norwest and Foothill with the Commission 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 by
reference herein and to be a part hereof from the date of such filing. Any
statement contained in a document incorporated or deemed to be incorporated by
reference herein 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 by
reference herein 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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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 by reference
herein. As used in this Proxy Statement-Prospectus, the terms "Norwest" and
"Foothill" refer to such entities, 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 for inclusion or incorporation herein, and all information
concerning Foothill included in this Proxy Statement-Prospectus has been
furnished by Foothill to Norwest for inclusion herein.
THE COMPANIES
NORWEST CORPORATION
Norwest Corporation is a diversified financial services 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 "BHC Act"). Norwest operates
through subsidiaries engaged in banking and in a variety of 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 agency services, computer and data processing services, trust
services, and venture capital investment.
At June 30, 1995, Norwest had consolidated total assets of $66.6 billion,
total deposits of $38.2 billion, and total stockholders' equity of $4.7
billion. Based on total assets at June 30, 1995, Norwest was the 12th largest
commercial banking organization in the United States.
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 financial institutions, including Foothill, having
aggregate total assets at June 30, 1995, of $4.5 billion. Certain of these
acquisitions were consummated subsequent to June 30, 1995, and the others
remain subject to regulatory approval and are expected to be completed by the
end of the first quarter of 1996. None of these acquisitions is individually
significant or material to the financial statements of Norwest.
Norwest's principal executive offices are located at Norwest Center, Sixth
and Marquette, Minneapolis, Minnesota 55479-1000, and its telephone number is
612-667-1234.
Additional information concerning Norwest is included in the Norwest
documents incorporated by reference herein. See "INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE."
THE FOOTHILL GROUP, INC.
Foothill with its subsidiaries is a specialized financial services company
engaged in asset-based commercial lending and money management services. Since
1970, Foothill has made revolving credit and term loans to companies which are
generally unable to secure financing from traditional lending sources. The
loans are generally secured by accounts receivable and inventory, machinery,
equipment, and other assets. At June 30, 1995, Foothill had a total of
approximately $917 million in loans outstanding. Foothill generates revenues
principally from interest income as well as loan commitment, appraisal, audit,
and monitoring fees and other related services. Foothill's strategy is to
provide innovative financing solutions to borrowers who
6
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have adequate collateral in the form of accounts receivable, inventory, and
other assets, but may not meet overall credit standards generally required by
commercial banks. As part of its operations, Foothill, in conjunction with
limited partnerships managed by it, purchases loans at a discount to their
principal amounts.
In 1988, Foothill established a money management business to capitalize on
its experience in lending to and investing in debt securities of financially
troubled borrowers. Foothill operates two limited partnerships (the
"Partnerships") for investors, many of whom are institutional investors, to
invest in debt securities or claims of financially troubled companies. Many of
the Partnerships' investments are in companies that may be involved in a
restructuring or reorganization under the Federal Bankruptcy Code. Foothill
acts as a general partner of such partnerships, which have aggregate capital
commitments of $516 million. Foothill earns management fees from the
Partnerships as well as incentive compensation based on distributed profits in
excess of specified rates of return.
Foothill's principal executive offices are located at 11111 Santa Monica
Boulevard, Los Angeles, California 90025, and its telephone number is 310-996-
7000.
Additional information concerning Foothill is included in the Foothill
documents incorporated by reference herein. See "INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE."
SPECIAL MEETING AND VOTE REQUIRED
SPECIAL MEETING
The special meeting of Foothill stockholders to consider and vote on a
proposal to approve the Merger Agreement will be held on Monday, October 16,
1995, at 10:00 a.m., local time, at the Peninsula Hotel, 9882 Little Santa
Monica Boulevard, Beverly Hills, California. Only holders of record of Foothill
Capital Stock at the close of business on September 1, 1995, will be entitled
to receive notice of and to vote at the Special Meeting. At such date, there
were 16,756,115 shares of Foothill Common Stock and 100,000 shares of Foothill
Preferred outstanding. Each share of Foothill Common Stock is entitled to one
vote, and each share of Foothill Preferred is entitled to 6.66666 votes. For
additional information relating to the Special Meeting, see "MEETING
INFORMATION."
VOTE REQUIRED
Approval of the Merger Agreement requires the affirmative vote of the holders
of a majority of the outstanding shares of Foothill Common Stock and of
Foothill Preferred entitled to vote thereon, voting together as a single class.
As of the record date, directors and executive officers of Foothill and their
affiliates owned beneficially an aggregate of 2,698,743 shares, or
approximately 16.1%, of the Foothill Common Stock and 100% of the shares of
Foothill Preferred outstanding on that date. At the record date, directors and
executive officers of Norwest did not own beneficially any shares of Foothill
Common Stock. The directors and executive officers of Foothill have entered
into agreements with Norwest to vote all the shares of Foothill Common Stock
over which they have sole voting authority in favor of approval of the Merger
Agreement. The record holder of the outstanding Foothill Preferred has entered
into a similar agreement with respect to all of the outstanding shares of
Foothill Preferred. See "MEETING INFORMATION--Record Date; Vote Required" and
"--Principal Stockholders and Security Ownership of Management of Foothill."
TERMS OF THE MERGER
MERGER CONSIDERATION
In the Merger, each outstanding share of Foothill Common Stock (other than
shares owned by Norwest or its subsidiaries, all of which will be canceled)
will be automatically converted (subject to certain provisions described herein
with respect to fractional shares) into the right to receive 0.92 shares of
Norwest Common
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Stock (the "Common Stock Exchange Ratio"). Each outstanding share of Foothill
Preferred will be automatically converted (subject to certain provisions
described herein with respect to fractional shares) into the right to receive
6.1333272 shares of Norwest Common Stock (the "Preferred Exchange Ratio," and
together with the Common Stock Exchange Ratio, the "Exchange Ratios"). No
fractional shares will be issued. Norwest will pay cash in lieu of fractional
shares of Norwest Common Stock to be received in the Merger. Upon consummation
of the Merger, a newly formed wholly-owned subsidiary of Norwest will be merged
with and into Foothill and Foothill, as the surviving corporation in the
Merger, will become a wholly-owned subsidiary of Norwest. See "THE MERGER--
Terms of the Merger."
Under the terms of their respective plans, outstanding options issued
pursuant to Foothill's Amended and Restated Employee Stock Option Plan (the
"1978 Stock Option Plan") and the 1990 Foothill Performance and Equity
Incentive Plan (the "1990 Incentive Plan") will immediately vest and become
exercisable following stockholder approval of the Merger Agreement and the
Merger. Each option not exercised in full prior to the Effective Date shall
terminate and, in exchange for the consent of each holder thereof to such
termination, will be converted into and exchanged for that number of shares of
Norwest Common Stock determined by (A) dividing (1) the aggregate "Fair Market
Value" of the option shares less the aggregate exercise price of the option by
(2) the Fair Market Value of one share of Foothill Common Stock, and then (B)
multiplying the result by 0.92. "Fair Market Value" for purposes of the
foregoing formula means the per share price of Foothill Common Stock as
reported on the NYSE Composite Tape for the trading date immediately preceding
the closing date of the Merger. It is a condition precedent to Norwest's
obligation to effect the Merger that all holders of unexercised options under
the above option plans shall have consented to the termination of such options.
See "THE MERGER--Conditions to Consummation of the Merger--General."
Assuming 15,661,490 shares of Norwest Common Stock are issued as a result of
the Merger (including shares of Norwest Common Stock issuable in connection
with the exercise of all outstanding options to purchase Foothill Common Stock
but excluding, for purposes of computing such assumed number, any shares of
Foothill Common Stock held by Norwest) and further assuming that Norwest had
not issued any additional shares of Norwest Common Stock subsequent to June 30,
1995, Foothill stockholders would own an aggregate of 4.6% of the total
outstanding shares of Norwest Common Stock after the Merger.
DIVIDENDS
Each of Norwest and Foothill expects to continue to declare until the
Effective Date their respective regularly scheduled dividends; provided,
however, that dividends otherwise permitted to be paid by Foothill may not be
declared and paid in any particular quarter if the Effective Date occurs in
such quarter and former Foothill stockholders would become stockholders of
Norwest for the purpose of qualifying for the quarterly Norwest dividend
payable to stockholders of Norwest Common Stock for such quarter. See "THE
MERGER--Business Pending the Merger."
RECOMMENDATION OF THE BOARD OF DIRECTORS OF FOOTHILL
The Foothill Board believes that the terms of the Merger are fair to and in
the best interests of the Foothill stockholders and have unanimously approved
the Merger Agreement and the related transactions. The Foothill Board
unanimously recommends that its stockholders approve and adopt the Merger
Agreement. See "THE MERGER--Background of the Merger" and "--Recommendation of
the Board of Directors of Foothill; Reasons for the Merger." For information on
the interests of certain officers and directors of Foothill in the Merger, see
"THE MERGER--Interests of Certain Persons in the Merger."
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OPINION OF FOOTHILL'S FINANCIAL ADVISOR
The Chicago Corporation has delivered its written opinion to the Foothill
Board that, as of May 15, 1995, August 17, 1995, and September 13, 1995, the
consideration to be received by the Foothill stockholders was fair, from a
financial point of view, to the Foothill stockholders. The opinion of The
Chicago Corporation is attached as Appendix C to this Proxy Statement-
Prospectus. Stockholders are urged to read such opinion in its entirety for a
description of the procedures followed, matters considered, and limitations on
the reviews undertaken in connection therewith. For additional information, see
"THE MERGER--Opinion of Foothill's Financial Advisor."
CERTAIN CONSIDERATIONS
In deciding whether to approve and adopt the Merger Agreement, stockholders
of Foothill should carefully evaluate the matters set forth under "THE MERGER--
Certain Considerations." Stockholders of Foothill should consider the following
factors: (i) the relative stock prices of Norwest Common Stock and Foothill
Common Stock at the Effective Date may vary significantly from the prices as of
the date of execution of the Merger Agreement or the date of this Proxy
Statement-Prospectus or the date on which stockholders vote on the Merger; and
(ii) the Exchange Ratios are fixed and will not be adjusted based on changes in
the relative stock prices of Norwest Common Stock and Foothill Common Stock.
See "THE MERGER--Certain Considerations."
EFFECTIVE DATE AND TIME OF THE MERGER
Subject to the terms and conditions of the Merger Agreement, the Merger will
be effective on the date on which a Certificate of Merger is filed with the
Secretary of State of the State of Delaware (the "Effective Date") at 11:59
p.m., Delaware time (the "Effective Time"). Such filing will be made ten
business days following the satisfaction or waiver of all conditions set forth
in the Merger Agreement or on such other date upon which the parties may agree.
The closing of the Merger will occur on the Effective Date (the "Closing
Date"). See "THE MERGER--Effective Date and Time of the Merger," "--Conditions
to Consummation of the Merger," and "--Waiver, Amendment, and Termination."
SURRENDER OF STOCK CERTIFICATES
As soon as practicable after the Effective Date, Norwest Bank Minnesota,
National Association, in its capacity as exchange agent for the Merger, will
send a transmittal letter to each Foothill stockholder. The transmittal letter
will contain instructions with respect to the surrender of certificates
representing Foothill Capital Stock to be exchanged for Norwest Common Stock.
See "THE MERGER--Surrender of Stock Certificates."
CONDITIONS AND TERMINATION
The obligations of Norwest and Foothill to consummate the Merger are subject
to various conditions, including, but not limited to: (i) obtaining requisite
stockholder and governmental approvals; (ii) the absence of any preliminary or
permanent injunction or other order by any federal or state court which
prevents the consummation of the Merger; (iii) approval for listing on the NYSE
of the Norwest Common Stock to be issued in connection with the Merger; (iv)
receipt of an opinion of counsel at the closing of the Merger in respect of
certain federal income tax consequences of the Merger; (v) receipt of
accountants' letters to the effect that the Merger qualifies for "pooling of
interests" accounting treatment; and (vi) receipt of all necessary consents of
the general and limited partners of the Partnerships. See "THE MERGER--
Conditions to Consummation of the Merger."
9
<PAGE>
The Merger Agreement may be terminated at any time prior to the Effective
Date, whether before or after approval of the matters presented in connection
with the Merger by the stockholders of Foothill, (i) by mutual consent of the
Boards of Directors of Norwest and Foothill; (ii) by either Norwest or Foothill
if the Merger shall not have been consummated on or before March 31, 1996;
(iii) by Norwest or Foothill if any court or governmental authority of
competent jurisdiction shall have issued a final order restraining, enjoining,
or otherwise prohibiting the consummation of the Merger; or (iv) by Norwest, if
the Foothill Board withdraws, modifies, or amends its recommendation of the
Merger. See "THE MERGER--Waiver, Amendment, and Termination."
REGULATORY APPROVALS
The Merger is subject to the approval of the Board of Governors of the
Federal Reserve System (the "Federal Reserve Board"). An application for
approval of the Merger was submitted to the Federal Reserve Board on August 11,
1995. See "THE MERGER--Regulatory Approvals."
NO SOLICITATION
Foothill, subject to certain exceptions, has agreed not to solicit, initiate,
or encourage any persons concerning certain transactions with Foothill
involving the acquisition of its common stock or assets. In the event Foothill
receives a proposal concerning such a transaction, the Foothill Board is not
prevented, pursuant to its fiduciary duties with the advice of counsel, from
approving such proposal or recommending such transaction to Foothill
stockholders and, in such case, the Foothill Board may amend, withhold, or
withdraw its recommendation of the Merger, which action may result in the
exercisability of the stock option granted to Norwest under the Stock Option
Agreement described below. See "THE MERGER--No Solicitation."
ACCOUNTING TREATMENT
It is anticipated that the Merger will be accounted for as a "pooling of
interests" by Norwest under generally accepted accounting principles. The
Merger Agreement provides that a condition to consummation of the Merger is the
receipt of letters from both KPMG Peat Marwick LLP, Norwest's independent
auditors, and Ernst & Young LLP, Foothill's independent auditors, to the effect
that the Merger qualifies for pooling of interests accounting treatment. See
"THE MERGER--Conditions to Consummation of the Merger" and "--Accounting
Treatment."
MANAGEMENT AND OPERATIONS AFTER THE MERGER
Following the Merger, Norwest intends to operate Foothill as a separate
finance company in accordance with Foothill's existing business. Management of
Foothill prior to the Merger will continue as management of Foothill after the
Merger. Management of Foothill does not expect any material change in the
nature of Foothill's business or credit philosophy. See "THE MERGER--Management
and Operations After the Merger."
CERTAIN TRANSACTIONS
Norwest and Foothill have entered into a letter agreement dated May 15, 1995,
pursuant to which, among other matters, Foothill has agreed to use its best
efforts to renegotiate and amend the terms of certain covenants relating to
certain senior debt. If Foothill is unable to renegotiate such covenants,
Norwest has
10
<PAGE>
agreed that Foothill may incur additional subordinated indebtedness from
existing or new lenders in order to enable it to comply with these covenants,
provided that it gives Norwest notice of such proposed financing and allows
Norwest an opportunity to provide financing on the same or better terms.
Norwest has agreed, pursuant to the letter agreement, to provide such financing
by purchasing $15 billion of Foothill's senior subordinated notes pursuant to a
note agreement to be negotiated by the parties. It is anticipated that the
subordinated notes will bear interest at a fixed rate equal to 1.50% in excess
of the current yield on U.S. Treasury Notes with an assumed maturity of 6 1/4
years and will mature on December 1, 2023. Norwest's purchase of such
subordinated notes will also be considered as having satisfied $15 million of
Norwest's obligation to provide $25 million of subordinated debt financing in
the event of the Merger Agreement is terminated under certain circumstances.
See "THE MERGER--Waiver, Amendment, and Termination."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the Foothill Board with respect to the
Merger Agreement and the transactions contemplated thereby, stockholders should
be aware that certain members of Foothill management and the Foothill Board
have interests arising from, among other things, certain employee benefit and
bonus plans, indemnification and insurance arrangements, and other matters
which Norwest will assume or has agreed to provide after the Merger, including
executive termination agreements and employment agreements consistent with
similar agreements between Norwest and certain members of its senior
management. See "THE MERGER--Interests of Certain Persons in the Merger."
APPRAISAL RIGHTS
Under Delaware law holders of Foothill Capital Stock are not entitled to any
appraisal rights with respect to the Merger. See "THE MERGER--Rights of
Dissenting Foothill Stockholders."
STOCK OPTION AGREEMENT BETWEEN NORWEST AND FOOTHILL
As a condition to entering into the Merger Agreement, Norwest required
Foothill to enter into the Stock Option Agreement, dated as of May 15, 1995,
between Foothill and Norwest (the "Stock Option Agreement"), pursuant to which
Foothill issued to Norwest an option to purchase up to 4,156,641 shares of
Foothill Common Stock (equal to 18.89% of the issued and outstanding shares of
Foothill Common Stock as of May 15, 1995) at a price of $23.375 per share under
certain specified conditions. The option may be exercised only upon the
occurrence of certain events, which generally relate to (i) an acquisition of
control of, or a significant equity interest in or significant assets of,
Foothill by a third party, or certain proposals or offers with respect thereto;
or (ii) the withdrawal or material modification of the recommendation of the
Foothill Board with respect to the Merger. None of such events has occurred as
of the date of this Proxy Statement-Prospectus. Certain aspects of the Stock
Option Agreement could have the effect of discouraging a third party from
pursuing an acquisition transaction involving Foothill, even if such third
party was prepared to pay a higher price per share of Foothill Common Stock and
Foothill Preferred than provided for in the Merger Agreement. A copy of the
Stock Option Agreement is attached as Appendix B to this Proxy Statement-
Prospectus. See "THE MERGER--Stock Option Agreement Between Norwest and
Foothill."
CERTAIN FEDERAL INCOME TAX MATTERS
Except as more fully described in this Proxy Statement-Prospectus, no gain or
loss will be recognized by Foothill stockholders except with respect to cash
received in lieu of fractional shares and no gain or loss will be recognized by
Foothill. Consummation of the Merger is conditioned upon the delivery of an
opinion of
11
<PAGE>
counsel dated as of the Closing Date to the effect that the Merger will
constitute a "reorganization" within the meaning of Section 368 of the Internal
Revenue Code of 1986, as amended. However, the Federal income tax
considerations related to the Merger may be different to particular types of
Foothill stockholders, or in light of Foothill stockholders' personal
investment circumstances. Accordingly, stockholders are urged to consult their
own tax advisors in determining the tax considerations that may be relevant to
them in connection with the Merger under Federal, state, local and any other
applicable tax laws. See "THE MERGER--Certain U.S. Federal Income Tax Matters."
MARKET INFORMATION
On May 15, 1995, the last trading day preceding public announcement of the
Merger the closing prices of Norwest Common Stock and of Foothill Common Stock
as reported on the NYSE Composite Tape were $28.125 per share and $23.875 per
share (equivalent to $25.875 per share of Foothill Common Stock, giving effect
to the Common Stock Exchange Ratio), respectively. The public announcement of
the Merger Agreement occurred after the close of trading on that date. On
September 12, the closing prices of Norwest Common Stock and of Foothill Common
Stock as reported on the NYSE Composite Tape were $31.00 per share and $28.125
per share (equivalent to $28.52 per share of Foothill Common Stock, giving
effect to the Common Stock Exchange Ratio), respectively. Foothill stockholders
are advised to obtain current market quotations for Norwest Common Stock. The
market price for Norwest Common Stock will fluctuate between the date of this
Proxy Statement-Prospectus and the Effective Date, which may be a period of
several weeks or more. As a result, the market value per share of the Norwest
Common Stock that Foothill stockholders ultimately receive in the Merger could
be more or less than its market value on the date of this Proxy Statement-
Prospectus. No assurance can be given concerning the market price of Norwest
Common Stock before or after the Effective Date. See "COMPARATIVE PER SHARE
PRICES AND DIVIDENDS."
CERTAIN DIFFERENCES IN RIGHTS OF STOCKHOLDERS
Upon consummation of the Merger, stockholders of Foothill will become
stockholders of Norwest. As a result, such stockholders' rights will change to
some extent. See "THE MERGER--Certain Differences in Rights of Stockholders."
COMPARATIVE PER COMMON SHARE DATA
The following table presents selected comparative per common share data for
Norwest Common Stock on a historical and pro forma combined basis and for
Foothill Common Stock on a historical and a pro forma equivalent basis giving
effect to the Merger using the pooling-of-interests method of 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." This information is derived
from the consolidated historical financial statements of Norwest and Foothill,
including the related notes thereto, incorporated by reference into this Proxy
Statement-Prospectus, and should be read in conjunction with such historical
financial statements and related notes. See "INCORPORATION OF CERTAIN DOCUMENTS
BY REFERENCE." This data is not necessarily indicative of the results of the
future operations of the combined entity or the actual results that would have
occurred had the Merger been consummated prior to the periods indicated.
12
<PAGE>
COMPARATIVE PER COMMON SHARE DATA
<TABLE>
<CAPTION>
NORWEST COMMON STOCK FOOTHILL COMMON STOCK
-------------------- ---------------------
PRO FORMA PRO FORMA
HISTORICAL COMBINED HISTORICAL EQUIVALENT
---------- --------- ---------- ----------
<S> <C> <C> <C> <C>
BOOK VALUE (1):
June 30, 1995...................... $12.91 12.87 11.22 11.84
December 31, 1994.................. 10.79 10.79 10.32 9.93
DIVIDENDS DECLARED (2):
Six Months Ended June 30, 1995..... 0.420 0.420 0.160 0.386
Year Ended
December 31, 1994................ 0.765 0.765 0.220 0.704
December 31, 1993................ 0.640 0.640 0.140 0.589
December 31, 1992................ 0.540 0.540 -- 0.497
NET INCOME (3):
Six Months Ended June 30, 1995..... 1.32 1.30 1.02 1.20
Year Ended
December 31, 1994................ 2.41 2.39 1.77 2.20
December 31, 1993................ 1.86 1.83 1.20 1.68
December 31, 1992................ 1.19 1.17 0.81 1.08
</TABLE>
--------
(1) The pro forma combined book value per share of Norwest Common Stock is
based upon the historical total combined common stockholders' equity for
Norwest and Foothill divided by total pro forma common shares of the
combined entities assuming exchange of the outstanding Foothill Common
Stock at the Common Stock Exchange Ratio of 0.92 shares of Norwest Common
Stock for each share of Foothill Common Stock. The data presented assumes
the conversion of the Foothill Preferred at the stated conversion price of
6.66666 shares of common stock for each share of preferred stock and the
exercise of all stock options, and excludes any shares of Foothill Common
Stock held by Norwest. The aggregate number of shares of Norwest Common
Stock assumed to be issued in the Merger is 15,661,490. See "THE MERGER--
Terms of the Merger." The pro forma equivalent book value per share of
Foothill represents the pro forma combined amount multiplied by the Common
Stock Exchange Ratio.
(2) Assumes no changes in cash dividends per share. The pro forma equivalent
dividends per share of Foothill Common Stock represent cash dividends
declared per share of Norwest Common Stock multiplied by the Common Stock
Exchange Ratio.
(3) The pro forma combined net income per share of Norwest Common Stock (based
on fully diluted net income and weighted average shares outstanding) is
based upon the combined historical net income for Norwest and Foothill
divided by the average pro forma common shares of the combined entities.
The historical net income per share of Foothill Common Stock is based on
fully diluted income from continuing operations, before discontinued
operations and extraordinary items. The pro forma equivalent net income per
share of Foothill Common Stock represents the pro forma combined net income
per share multiplied by the Common Stock Exchange Ratio.
SELECTED FINANCIAL DATA
The following table sets forth certain selected historical consolidated
financial information for Norwest and certain selected historical financial
information for Foothill. The income statement and balance sheet data included
in the selected financial data for the five years ended December 31, 1994, are
derived from audited consolidated financial statements of Norwest and from
audited financial statements of Foothill for the periods shown. The selected
financial data for the six-month periods ended June 30, 1995 and 1994, are
derived from the unaudited historical financial statements of Norwest and
Foothill. All financial information derived from unaudited financial statements
reflects, in the respective opinions of management of Norwest and Foothill, all
adjustments (consisting only of normal recurring adjustments) necessary for a
fair presentation of such data. Results for the six months ended June 30, 1995,
are not necessarily indicative of the results that may be expected for any
other interim period or for the year as a whole. This information should be
read in conjunction with the consolidated financial statements of Norwest and
Foothill and the related notes thereto, included in documents incorporated
herein by reference. See "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
13
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
NORWEST CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30 YEAR ENDED DECEMBER 31
------------------- --------------------------------------------------
1995 1994 1994 1993(1) 1992(2) 1991 1990(3)
--------- --------- --------- --------- --------- --------- ---------
(IN MILLIONS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Interest income......... $ 2,677.1 $ 2,066.6 $ 4,393.7 $ 3,946.3 $ 3,806.4 $ 4,025.9 $ 3,885.8
Interest expense........ 1,135.2 719.4 1,590.1 1,442.9 1,610.6 2,150.3 2,320.1
--------- --------- --------- --------- --------- --------- ---------
Net interest
income............ 1,541.9 1,347.2 2,803.6 2,503.4 2,195.8 1,875.6 1,565.7
Provision for credit
losses................. 130.0 60.0 164.9 158.2 270.8 406.4 433.0
Non-interest income..... 847.9 821.0 1,638.3 1,585.0 1,273.7 1,064.0 896.3
Non-interest expenses... 1,586.9 1,528.1 3,096.4 3,050.4 2,553.1 2,041.5 1,744.5
--------- --------- --------- --------- --------- --------- ---------
Income before
income taxes...... 672.9 580.1 1,180.6 879.8 645.6 491.7 284.5
Income tax expense...... 221.8 187.6 380.2 266.7 175.6 73.4 115.1
--------- --------- --------- --------- --------- --------- ---------
Income before cumulative
effect of a change in
accounting method...... 451.1 392.5 800.4 613.1 470.0 418.3 169.4
Cumulative effect on
years prior to 1992 of
change in accounting
method................. -- -- -- -- (76.0) -- --
--------- --------- --------- --------- --------- --------- ---------
Net income......... $ 451.1 $ 392.5 $ 800.4 $ 613.1 $ 394.0 $ 418.3 $ 169.4
========= ========= ========= ========= ========= ========= =========
PER COMMON SHARE DATA
Net income per share:
Primary:
Before cumulative
effect of a change
in accounting
method.............. $ 1.34 $ 1.20 $ 2.45 $ 1.89 $ 1.44 $ 1.33 $ 0.59
Cumulative effect on
years prior to 1992
of change in
accounting method... -- -- -- -- (0.25) -- --
--------- --------- --------- --------- --------- --------- ---------
Net income......... $ 1.34 $ 1.20 $ 2.45 $ 1.89 $ 1.19 $ 1.33 $ 0.59
========= ========= ========= ========= ========= ========= =========
Fully diluted:
Before cumulative
effect of a change
in accounting
method.............. $ 1.32 $ 1.18 $ 2.41 $ 1.86 $ 1.42 $ 1.32 $ 0.59
Cumulative effect on
years prior to 1992
of change in
accounting method... -- -- -- -- (0.23) -- --
--------- --------- --------- --------- --------- --------- ---------
Net income......... $ 1.32 $ 1.18 $ 2.41 $ 1.86 $ 1.19 $ 1.32 $ 0.59
========= ========= ========= ========= ========= ========= =========
Dividends declared per
common share........... $ 0.420 0.370 0.765 0.640 0.540 0.470 0.423
BALANCE SHEET DATA
At period end:
Total assets........... $66,623.0 $55,756.8 $59,315.9 $54,665.0 $50,037.0 $45,974.5 $43,523.0
Long-term debt......... 12,382.1 7,255.2 9,186.3 6,850.9 4,553.2 3,686.6 3,066.0
Total stockholders'
equity................ 4,726.0 3,836.6 3,846.4 3,760.9 3,371.8 3,192.3 2,434.0
</TABLE>
--------
(1) On January 14, 1994, First United Bank Group, Inc. ("First United"), a $3.9
billion bank holding company headquartered in Albuquerque, New Mexico, was
acquired in a pooling transaction. Norwest's historical results have been
restated to include the historical results of First United. Appropriate
Norwest items reflect an increase in First United's provision for credit
losses of $16.5 million to conform with Norwest's credit loss reserve
practices and methods and $83.2 million in accruals and reserves for
merger-related expenses, including termination costs, systems and
operations costs, and investment banking, legal, and accounting expenses.
(2) 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.
(3) 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 an 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.
14
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
THE FOOTHILL GROUP, INC.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30 YEAR ENDED DECEMBER 31
------------ -------------------------------
1995 1994 1994 1993 1992 1991 1990
------ ----- ----- ----- ----- ----- -----
(IN MILLIONS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Interest income.................. $ 59.0 37.0 87.1 65.1 55.0 56.8 63.5
Interest expense................. 21.9 11.1 28.5 21.0 24.3 34.5 39.0
------ ----- ----- ----- ----- ----- -----
Net interest income......... 37.1 25.9 58.6 44.1 30.7 22.3 24.5
Provision for credit losses...... 9.8 4.9 9.7 12.8 8.7 7.3 3.4
Non-interest income (loss)....... 16.7 23.3 30.4 24.3 14.9 8.9 (5.1)
Non-interest expenses............ 12.6 12.7 24.8 19.7 16.2 13.7 12.6
------ ----- ----- ----- ----- ----- -----
Income before income taxes.. 31.4 31.6 54.5 35.9 20.7 10.2 3.4
Income tax expense............... 13.5 13.6 23.4 15.1 8.6 4.5 0.4
------ ----- ----- ----- ----- ----- -----
Income from continuing
operations...................... 17.9 18.0 31.1 20.8 12.1 5.7 3.0
Income (loss) from discontinued
operations...................... -- -- -- (1.6) 0.6 0.4 (5.2)
------ ----- ----- ----- ----- ----- -----
Income (loss) before
extraordinary items............. 17.9 18.0 31.1 19.2 12.7 6.1 (2.2)
Extraordinary items.............. -- -- -- (0.5) (0.6) 0.2 0.5
------ ----- ----- ----- ----- ----- -----
Net income.................. $ 17.9 18.0 31.1 18.7 12.1 6.3 (1.7)
====== ===== ===== ===== ===== ===== =====
PER COMMON SHARE DATA
Net income per share:
Primary:
Income from continuing
operations................... $ 1.05 1.06 1.83 1.23 0.89 0.55 0.30
Income (loss) from
discontinued operations (1).. -- -- -- (0.09) 0.04 0.04 (0.54)
Extraordinary items (2)....... -- -- -- (0.03) (0.04) 0.02 0.06
------ ----- ----- ----- ----- ----- -----
Net income.................. $ 1.05 1.06 1.83 1.11 0.89 0.61 (0.18)
====== ===== ===== ===== ===== ===== =====
Fully diluted:
Income from continuing
operations................... $ 1.02 1.02 1.77 1.20 0.81 0.52 0.30
Income (loss) from
discontinued operations...... -- -- -- (0.09) 0.04 0.03 (0.54)
Extraordinary items........... -- -- -- (0.03) (0.03) 0.02 0.06
------ ----- ----- ----- ----- ----- -----
Net income.................. $ 1.02 1.02 1.77 1.08 0.82 0.57 (0.18)
====== ===== ===== ===== ===== ===== =====
Dividends declared per common
share........................... $ 0.16 0.11 0.22 0.14 -- -- 0.21
BALANCE SHEET DATA
At period end:
Total assets.................... $970.0 665.0 738.2 606.5 474.4 440.9 450.9
Long-term debt.................. 322.0 278.1 319.4 291.1 265.5 208.1 213.5
Total stockholders' equity...... 190.4 167.3 172.4 152.1 129.0 74.5 63.3
</TABLE>
--------
(1) Effective December 23, 1993, Foothill completed the spin-off of a wholly-
owned subsidiary, Foothill Thrift and Loan, to the stockholders of
Foothill.
(2) The extraordinary items in fiscal years 1993, 1992, and 1990 relate to the
prepayment of certain senior and subordinated debt. The extraordinary item
in 1991 represents a state tax benefit resulting from recognition of a net
operating loss carry forward generated in 1990.
15
<PAGE>
MEETING INFORMATION
GENERAL
This Proxy Statement-Prospectus is being furnished to holders of Foothill
Capital Stock in connection with the solicitation of proxies by the Foothill
Board for use at the Special Meeting, to be held on Monday, October 16, 1995,
and any adjournments or postponements thereof, to consider and take action upon
a proposal to approve the Merger Agreement and such other business as may
properly come before the Special Meeting or any adjournments thereof. Each copy
of this Proxy Statement-Prospectus mailed to holders of Foothill Capital Stock
is accompanied by a form of proxy for use at the Special Meeting.
This Proxy Statement-Prospectus is also being furnished by Norwest to the
stockholders of Foothill as a prospectus in connection with the issuance by
Norwest of shares of Norwest Common Stock upon consummation of the Merger.
This Proxy Statement-Prospectus, the attached Notice of Special Meeting, and
the form of proxy for Foothill stockholders enclosed herewith are first being
mailed to stockholders of Foothill on or about September 15, 1995.
DATE, PLACE, AND TIME
The Special Meeting will be held at the Peninsula Hotel, 9882 Little Santa
Monica Boulevard, Beverly Hills, California, on Monday, October 16, 1995, at
10:00 a.m., local time.
RECORD DATE; VOTE REQUIRED
The Foothill Board has fixed the close of business on September 1, 1995, as
the record date for the determination of stockholders of Foothill entitled to
receive notice of and to vote at the Special Meeting. On the record date there
were 16,756,115 shares of Foothill Common Stock and 100,000 shares of Foothill
Preferred outstanding and entitled to vote at the Special Meeting. Each share
of Foothill Common Stock is entitled to one vote, and each share of Foothill
Preferred is entitled to 6.66666 votes. Approval of the Merger Agreement
requires the affirmative vote of the holders of a majority of the outstanding
shares of Foothill Common Stock and of Foothill Preferred entitled to vote
thereon, voting together as a single class. The Merger cannot be consummated
without the requisite approval of the Merger Agreement by the stockholders of
Foothill.
As of the record date for the Special Meeting, directors and officers of
Foothill and their affiliates owned beneficially an aggregate of 2,698,743
shares, or approximately 16.1%, of the Foothill Common Stock and 100% of the
shares of Foothill Preferred outstanding on that date. Information regarding
the shares of Foothill Capital Stock beneficially owned, directly or
indirectly, by certain stockholders, by each director and executive officer of
Foothill, and by all directors and officers as a group is set forth in the
table under the heading "Principal Stockholders and Security Ownership of
Management of Foothill" below. The directors and executive officers of Foothill
have entered into agreements with Norwest to vote all the shares of Foothill
Common Stock over which they have sole voting authority in favor of approval of
the Merger Agreement. The record holder of the outstanding Foothill Preferred
has entered into a similar agreement with respect to all of the outstanding
shares of Foothill Preferred.
At the record date, directors and executive officers of Norwest did not own
beneficially any shares of Foothill Capital Stock.
16
<PAGE>
PRINCIPAL STOCKHOLDERS AND SECURITY OWNERSHIP OF MANAGEMENT OF FOOTHILL
The following table indicates the number of shares of Foothill Common Stock
and Foothill Preferred owned beneficially as of July 31, 1995, by (i) each
person known to Foothill to own more than 5% of the Foothill's outstanding
Common Stock or Preferred, (ii) directors of Foothill and (iii) all executive
officers and directors as a group.
<TABLE>
<CAPTION>
TITLE OF NAME AND ADDRESS OF AMOUNT PERCENT
CLASS BENEFICIAL OWNER BENEFICIALLY OWNED (1) OF CLASS
-------- ------------------- --------------------- --------
<C> <S> <C> <C>
COMMON STOCK John F. Nickoll............... 1,057,388(2) 6.3%
The Foothill Group, Inc.
11111 Santa Monica Blvd.
Los Angeles, CA 90025
Don L. Gevirtz................ 654,904(3) 3.9%
Dr. Warren Bennis............. 1,700 *
Arthur Malin, M.D............. 53,294(4) *
Steven L. Volla............... -- --
Joseph J. Finn-Egan........... 666,666(5) 3.9%
Jeffrey A. Lipkin............. 666,666(5) 3.9%
Peter E. Schwab............... 109,665(6) *
David C. Hilton............... 91,118(7) *
Henry K. Jordan............... 21,286(8) *
All Executive Officers and 2,656,021(5)(9) 14.9%
Directors as a Group (10
individuals).................
PREFERRED Recovery Equity Investors, 100,000(5) 100%
L.P..........................
901 Mariners Island Blvd.
Suite 465
San Mateo, CA 94404
Joseph J. Finn-Egan........... 100,000(5) 100%
Jeffrey A. Lipkin............. 100,000(5) 100%
</TABLE>
--------
* Less than 1%
(1) Except as indicated in other notes to this table, each stockholder listed
has sole voting and dispositive power with respect to the shares
beneficially owned, subject to any limitations on such power arising under
community property and similar laws.
(2) Includes 10,370 shares owned by Mr. Nickoll's wife and children and 38,334
shares acquirable within 60 days after July 31, 1995, through exercise of
employee stock options. Of the 1,057,388 shares, Mr. Nickoll has sole
voting and dispositive power with respect to 1,027,018 shares and shared
voting and dispositive power with respect to 30,370 shares.
(3) Includes 299,388 shares owned by MDG Corporation, a corporation wholly
owned by Mr. Gevirtz and his wife, and 70,434 shares acquirable within 60
days after July 31, 1995, through exercise of employee stock options.
(4) Includes 2,910 shares held by a pension plan for the benefit of Dr. Malin.
(5) Recovery Equity Investors, L.P. ("Recovery Investors") is a Delaware
limited partnership whose general partner is Recovery Equity Partners,
L.P., a Delaware limited partnership ("Recovery Partners"). Messrs. Finn-
Egan and Lipkin are general partners of Recovery Partners. As reported in
the Schedule 13D filed by Recovery Investors, Recovery Partners, and
Messrs. Finn-Egan and Lipkin with the
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Commission on July 5, 1991, Recovery Investors has claimed sole voting and
dispositive power and full beneficial ownership with respect to all such
shares. The Schedule 13D also states that Recovery Partners and Messrs.
Finn-Egan and Lipkin may be deemed to possess voting and dispositive power
and full beneficial ownership with respect to all such shares under the
definition of "beneficial owner" provided in Rule 13d-3 promulgated under
the Exchange Act. Each share of Foothill Preferred is currently convertible
into 6.66666 shares of Foothill Common Stock.
(6) Includes 34,260 shares acquirable within 60 days after July 31, 1995,
through the exercise of employee stock options.
(7) Includes 26,050 shares acquirable within 60 days after July 31, 1995,
through the exercise of employee stock options.
(8) Includes 10,000 shares acquirable within 60 days after July 31, 1995,
through the exercise of employee stock options.
(9) Includes 179,078 shares acquirable within 60 days after July 31, 1995,
through exercise of employee stock options.
VOTING AND REVOCATION OF PROXIES
Shares of Foothill Common Stock or Foothill Preferred 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 in accordance with
the instructions thereon. If a proxy is signed and returned without indicating
any voting instructions, shares of Foothill Capital Stock represented by such
proxy will be voted FOR approval of the Merger Agreement. Any proxy given
pursuant to this solicitation may be revoked by the person giving it at any
time before the proxy is voted by filing either an instrument revoking it or a
duly executed proxy bearing a later date with the Secretary of Foothill prior
to or at the Special Meeting or by voting the shares subject to the proxy in
person at the Special Meeting. Attendance at the Special Meeting will not in
and of itself constitute a revocation of a proxy.
A proxy may indicate that all or a portion of the shares represented thereby
are not being voted with respect to a specific proposal. This could occur, for
example, when a broker is not permitted to vote shares held in street name on
certain proposals in the absence of instructions from the beneficial owner.
Shares that are not voted with respect to a specific proposal will be
considered as not present for such proposal, even though such shares will be
considered present for purposes of determining a quorum and voting on other
proposals. Abstentions on a specific proposal will be considered as present,
but not as voting in favor of such proposal. The proposal to adopt the Merger
Agreement must be approved by the holders of a majority of the outstanding
Foothill Common Stock and Foothill Preferred, voting together as a single
class. Because this proposal requires the affirmative vote of a specified
percentage of outstanding shares, the nonvoting of shares or abstentions with
regard to this proposal will have the same effect as votes against the
proposal.
The Foothill Board is not aware of any business to be acted upon at the
Special Meeting other than the business described herein. If, however, other
matters are properly brought before the Special Meeting, or any adjournments or
postponements thereof, the persons appointed as proxies will have discretion to
vote or act on such matters according to their best judgment.
SOLICITATION OF PROXIES
In addition to solicitation by mail, directors, officers, and employees of
Foothill may solicit proxies from the stockholders of Foothill, either
personally or by telephone, telegram, or other form of communication. None of
the foregoing persons who solicit proxies will be specifically compensated for
such services. Brokerage houses, nominees, fiduciaries, and other custodians
will be requested to forward soliciting materials to beneficial owners and will
be reimbursed for their reasonable expenses incurred in sending proxy material
to beneficial owners. In addition, Foothill has engaged Corporate Investor
Communications, Inc. ("CIC") to assist in distributing proxy materials and
contacting record and beneficial owners of Foothill Capital Stock.
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<PAGE>
Foothill has agreed to pay CIC approximately $6,000, plus out-of-pocket
expenses, for services CIC will render on behalf of Foothill. Foothill will
bear its own expenses in connection with the solicitation of proxies for the
Special Meeting. See "THE MERGER--Expenses."
THE MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING ARE OF GREAT IMPORTANCE
TO THE STOCKHOLDERS OF FOOTHILL. ACCORDINGLY, STOCKHOLDERS ARE URGED TO READ
AND CAREFULLY CONSIDER THE INFORMATION PRESENTED IN THIS PROXY STATEMENT, AND
TO COMPLETE, DATE, AND SIGN THE ACCOMPANYING PROXY AND RETURN IT PROMPTLY TO
FOOTHILL IN THE ENCLOSED POSTAGE-PREPAID ENVELOPE.
THE MERGER
This section of the Proxy Statement-Prospectus describes certain aspects of
the Merger. The following description does not purport to be complete and is
qualified in its entirety by reference to the Merger Agreement, which is
attached as Appendix A to this Proxy Statement-Prospectus and is incorporated
by reference herein. All stockholders are urged to read the Merger Agreement in
its entirety.
TERMS OF THE MERGER
The Merger Agreement provides that the Merger will be consummated if the
approval of the Foothill stockholders required therefor is obtained and all
other conditions to the Merger are satisfied or waived. At the Effective Time,
a wholly owned subsidiary of Norwest ("Merger Co.") will be merged with and
into Foothill, and Foothill will become a wholly-owned subsidiary of Norwest.
At the Effective Time, each outstanding share of Foothill Common Stock (other
than shares owned by Norwest or its subsidiaries, all of which will be
canceled) will be automatically converted (subject to provisions with respect
to fractional shares) into the right to receive 0.92 shares of Norwest Common
Stock, and each outstanding share of Foothill Preferred will be automatically
converted into the right to receive 6.1333272 shares of Norwest Common Stock.
At the Effective Time, each outstanding stock option issued pursuant to the
1978 Stock Option Plan and the 1990 Incentive Plan (the "Foothill Options")
will terminate and, in exchange for each option holder's consent to such
termination, will be converted into and exchanged for a number of shares of
Norwest Common Stock determined as follows: (i) by dividing (x) the aggregate
Fair Market Value of the shares underlying the Foothill Options less the
aggregate exercise price thereof by (y) the Fair Market Value of one share of
Foothill Common Stock, and then (ii) multiplying the quotient thereof by 0.92.
"Fair Market Value" means the per share price of Foothill Common Stock as
reported on the consolidated tape of the NYSE for the trading day immediately
preceding the closing date for the Merger. It is a condition precedent to
Norwest's obligation to effect the Merger that all holders of outstanding
options under the 1978 Stock Option Plan and the 1990 Incentive Plan shall have
consented to the termination of such options. See "Conditions to Consummation
of the Merger--General."
The market price for Norwest Common Stock will fluctuate between the date of
this Proxy Statement-Prospectus and the Effective Date, which may be a period
of several weeks. As a result, the market value of the Norwest Common Stock
that stockholders of Foothill ultimately receive in the Merger could be more or
less than its market value on the date of this Proxy Statement-Prospectus.
The Merger Agreement provides that if, between the date of the Merger
Agreement and the Effective Time, shares of Norwest Common Stock are changed
into a different number or class of shares by reason of any reclassification,
recapitalization, split-up, combination, exchange of shares, or readjustment,
or if a stock dividend thereon is declared with a record date within the same
period, the Exchange Ratios will be adjusted accordingly.
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<PAGE>
No fractional shares of Norwest Common Stock will be issued in the Merger.
Instead, Norwest will pay to each holder of Foothill Capital Stock who would
otherwise be entitled to a fractional share an amount of cash equal to the
fraction of a share of Norwest Common Stock to which the Foothill stockholder
would otherwise be entitled multiplied by the average of the closing prices of
a share of Norwest Common Stock on the NYSE for each of the five trading days
immediately preceding the day on which the Special Meeting will be held.
Shares of Norwest Common Stock issued and outstanding immediately prior to
the Effective Date will remain issued and outstanding.
Based upon the capitalization of Norwest and Foothill as of June 30, 1995,
the stockholders of Foothill will own approximately 4.6% of the outstanding
Norwest Common Stock following consummation of the Merger (assuming all
Foothill Options are exercised for Norwest Common Stock).
BACKGROUND OF THE MERGER
Norwest first approached senior executives of Foothill in January 1995 to
express an interest in discussing a possible business combination with
Foothill. General discussions regarding the possibility of a strategic merger
and the terms on which they might merge continued through February and March.
The Foothill Board were informed of discussions with Norwest at their meeting
on February 14, 1995. In April Norwest's management and legal counsel commenced
a due diligence review of the Foothill business. Further discussions were held
on May 3, 1995. Shortly thereafter representatives of Foothill and Norwest and
their legal advisers began to negotiate and draft terms of a possible stock-
for-stock merger. On May 9, 1995, a telephonic meeting of the Foothill Board
was held to discuss the progress of the negotiations and the preliminary terms
for a merger with Norwest.
On May 15, 1995, the Foothill Board met to consider and approve the Merger
Agreement. The Foothill Board determined that the Merger Agreement and Stock
Option Agreement and the transactions contemplated by those agreements were in
the best interests of the stockholders of Foothill and unanimously approved
those agreements and transactions. At their meeting, the Board of Directors
received an oral opinion from The Chicago Corporation to the effect that the
terms of the merger were fair to the Foothill stockholders from a financial
point of view. Subsequently, on May 15, 1995, Foothill and Norwest entered into
the Merger Agreement and the Stock Option Agreement.
RECOMMENDATION OF THE BOARD OF DIRECTORS OF FOOTHILL; REASONS FOR THE MERGER
The Foothill Board has approved unanimously the Merger Agreement, has
determined unanimously that the Merger is advisable, fair, and in the best
interests of Foothill and its stockholders, and unanimously recommends that
holders of shares of Foothill Common Stock and Foothill Preferred vote FOR
approval and adoption of the Merger Agreement.
In reaching its decision to approve the Merger Agreement and to recommend
that Foothill stockholders vote to approve the Merger Agreement, the Foothill
Board considered, among other things, the following factors: (i) its knowledge
of the business, operations, properties, assets, financial condition, and
operating results of Foothill; (ii) judgments as to Foothill's future
prospects; (iii) presentations by Foothill's management and by The Chicago
Corporation, Foothill's financial advisor, with respect to Foothill and
Norwest; (iv) the opinion of The Chicago Corporation as to the fairness of the
consideration to be received by stockholders of Foothill in the Merger (see
"Opinion of Foothill's Financial Advisor"); (v) the terms of the Merger
Agreement, which were the product of extensive arms' length negotiations; (vi)
the historical trading prices and dividend rates for Foothill Common Stock; and
(viii) the opportunity for Foothill stockholders to participate, as holders of
Norwest Common Stock, in a larger, more diversified company, and to do so by
means of a transaction which is designed to be tax-free to Foothill's
stockholders (other than in respect of cash received in lieu of fractional
shares). In view of the wide variety of factors considered by
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<PAGE>
the Foothill Board, the Board did not find it practical to, and did not,
qualify or otherwise assign relative weights to the specific factors
considered.
In reaching the conclusion that the holders of Foothill Capital Stock will
receive fair value in the Merger, in shares of Norwest Common Stock, the
Foothill Board considered the financial analyses described under "Opinion of
Foothill's Financial Advisor," its knowledge of Foothill's businesses, and
discussions with Foothill's management of their views concerning the
businesses, financial condition, and prospects of Norwest. The analyses and
opinion of Foothill's financial advisor were important elements of the Foothill
Board's evaluation of the financial terms of the proposed transaction and its
conclusion that those terms are fair to Foothill stockholders. The Foothill
Board, with the assistance of Foothill's financial advisor, also considered
recent and current market prices of the Norwest Common Stock, on which the
Exchange Ratios for the Merger were based, and concluded that Norwest Common
Stock was trading in a reasonable range prior to announcement of the
transaction. The Foothill Board additionally considered that the Merger would
be tax-free to Foothill stockholders for federal income tax purposes.
The Foothill Board took account of the terms and conditions of the Merger
Agreement and the Stock Option Agreement, as well as its belief that the
interests of Foothill's customers and employees will be well served after the
consummation of the Merger because it is intended that Foothill will operate as
a separate business unit with Foothill management and that it will maintain its
current credit philosophy without significant changes in its nature and conduct
of its business.
Foothill did not receive any other substantive proposals other than the
proposal submitted by Norwest and, therefore, the decision of whether or not
Foothill should enter into the Merger Agreement and the related transactions
was the only substantive matter before the Foothill Board at the meetings
described in "Background of the Merger."
The foregoing discussion of the information and factors considered and given
weight by the Foothill Board is not intended to be exhaustive. In view of the
variety of factors considered in connection with its evaluation of the Merger,
the Foothill Board did not find it practicable to and did not quantify or
otherwise assign relative weights to the specific factors considered in
reaching its determination. In addition, individual members of the Foothill
Board may have given different weights to different factors. For a discussion
of the interests of certain members of Foothill's management and the Foothill
Board in the Merger, see "Interests of Certain Persons in the Merger."
THE FOOTHILL BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE HOLDERS OF
FOOTHILL COMMON STOCK AND FOOTHILL PREFERRED VOTE FOR APPROVAL AND ADOPTION OF
THE MERGER AGREEMENT.
OPINION OF FOOTHILL'S FINANCIAL ADVISOR
The Chicago Corporation has delivered a written opinion to the Foothill Board
that, as of May 15, 1995, August 17, 1995, and September 13, 1995, the
consideration to be received by the Foothill stockholders in the Merger was
fair, from a financial point of view, to the Foothill stockholders. No
limitations were imposed by the Foothill Board upon The Chicago Corporation
with respect to the investigations made or procedures followed by The Chicago
Corporation in rendering its opinion.
THE FULL TEXT OF THE OPINION OF THE CHICAGO CORPORATION, WHICH SETS FORTH THE
ASSUMPTIONS MADE, MATTERS CONSIDERED, AND LIMITS ON THE REVIEW UNDERTAKEN, IS
ATTACHED AS APPENDIX C TO THIS PROXY STATEMENT-PROSPECTUS. FOOTHILL
STOCKHOLDERS ARE URGED TO READ THIS OPINION IN ITS ENTIRETY FOR INFORMATION
WITH RESPECT TO THE PROCEDURES FOLLOWED, ASSUMPTIONS MADE, AND MATTERS
CONSIDERED BY THE CHICAGO CORPORATION IN RENDERING SUCH OPINION. THE CHICAGO
CORPORATION'S OPINION IS DIRECTED ONLY TO THE CONSIDERATION TO BE RECEIVED BY
FOOTHILL STOCKHOLDERS PURSUANT TO THE MERGER AGREEMENT AND DOES NOT CONSTITUTE
A RECOMMENDATION TO ANY FOOTHILL STOCKHOLDER AS TO HOW SUCH STOCKHOLDER SHOULD
VOTE AT THE SPECIAL MEETING.
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<PAGE>
THE SUMMARY OF THE OPINION OF THE CHICAGO CORPORATION SET FORTH IN THIS PROXY
STATEMENT-PROSPECTUS IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT
OF SUCH OPINION.
In rendering its opinion, The Chicago Corporation, among other things,
reviewed the Merger Agreement and certain business and financial information
relating to Foothill and its subsidiaries, including certain financial
projections, estimates, and analyses provided to it by Foothill, and reviewed
and discussed the businesses and prospects of Foothill and its subsidiaries
with representatives of Foothill's management. The Chicago Corporation also
considered certain financial and stock market data of Foothill and compared
that information to similar data for other publicly-held companies in
businesses similar to those of Foothill.
In addition, The Chicago Corporation reviewed certain publicly available
business and financial information relating to Norwest, as well as certain
financial projections, estimates, and analyses provided to it by Norwest, and
had discussions with certain representatives of management of Norwest. The
Chicago Corporation also considered certain financial and stock market data of
Norwest and compared that information to similar data for other publicly-held
companies in businesses similar to that of Norwest.
In arriving at its opinion, The Chicago Corporation did not independently
verify any of the foregoing information and relied on its being complete and
accurate in all material respects. The Chicago Corporation did not make an
independent evaluation or appraisal of any assets or liabilities (contingent or
otherwise) of Foothill or Norwest or any of their respective subsidiaries, nor
was The Chicago Corporation furnished with any such evaluation or appraisal
that has not been publicly disclosed. With respect to the financial
projections, estimates, and analyses provided to The Chicago Corporation by
Foothill and Norwest, The Chicago Corporation assumed, with Foothill's
permission, that such information was reasonably prepared on bases reflecting
the best currently available estimates, and judgment of management of Foothill
and of Norwest and that such projections will be realized in amounts and in the
time periods currently estimated by such managements. The Chicago Corporation's
opinion is based on economic, monetary, and market conditions existing on the
dates thereof.
The Chicago Corporation considered such financial and other factors as it
deemed appropriate under the circumstances, including, among others, the
following: (i) the historical and current financial position and results of
operations of Foothill and Norwest, including interest income, interest
expense, net interest income, net interest margin, non-interest income, non-
interest expense, earnings, dividends, internal capital generation, book value,
intangible assets, return on assets, return on stockholders' equity, the amount
and type of non-performing assets, the reserve for loan losses, and
capitalization, all as set forth in the financial statements for Foothill and
Norwest; (ii) the assets and liabilities of Foothill and Norwest, including the
loan and investment portfolios, deposits, other liabilities, historical and
current liability sources and costs and liquidity; (iii) certain pro forma
combined financial information of Foothill and Norwest; (iv) historical and
current market data for Foothill Common Stock and Norwest Common Stock; and (v)
the nature and terms of certain other comparable merger transactions involving
finance companies. The Chicago Corporation also took into account its
assessment of general economic, market, and financial conditions and its
experience in similar transactions, as well as its experience in securities
valuation and its knowledge of the banking industry generally. The Chicago
Corporation's opinion is necessarily based upon conditions as they currently
exist and can be evaluated on the date of its opinion and the information made
available to it through the date thereof.
In rendering its opinion, The Chicago Corporation did not render any opinion
as to the value of the Norwest Common Stock or make any recommendation to the
stockholders of Foothill in respect of the advisability of disposing of or
retaining shares of Norwest Common Stock received pursuant to the Merger. In
addition, The Chicago Corporation was not requested to, and did not, solicit
third party indications of interest in acquiring all or any part of Foothill.
The Chicago Corporation is an investment banking firm engaged, among other
things, in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings,
22
<PAGE>
competitive biddings, secondary distributions of listed and unlisted
securities, and private placements. In the ordinary course of its business, The
Chicago Corporation has traded debt and equity securities of Foothill and
Norwest for its own account and for the accounts of its customers and,
accordingly, may at any time hold a long or short position in such securities.
The Chicago Corporation is also a dealer in Foothill's commercial paper.
The Foothill Board selected The Chicago Corporation as its financial advisor
because of its experience with transactions similar to the Merger and its
familiarity with Foothill and its business.
Pursuant to a letter agreement between Foothill and The Chicago Corporation,
if the Merger is successfully consummated, Foothill will pay The Chicago
Corporation a transaction fee of 0.50% of the Aggregate Value (as defined) of
the transaction which amount includes $200,000 whether the Merger is completed
or not and the balance payable upon consummation of the Merger. The Aggregate
Value of the transaction is generally defined as the consideration paid per
share of Foothill Common Stock times the total number of fully diluted shares
of Foothill. Foothill has also agreed to reimburse The Chicago Corporation for
its out-of-pocket expenses. Foothill has also agreed to indemnify The Chicago
Corporation and its affiliates, their respective directors, officers, agents,
and employees, and each person, if any, controlling The Chicago Corporation, or
any of its affiliates against certain liabilities, including liabilities under
federal securities laws, and expenses, related to The Chicago Corporation's
engagement.
CERTAIN CONSIDERATIONS
In considering whether to approve the Merger Agreement and the transactions
contemplated thereby, stockholders should consider the following factors: (i)
the relative stock prices of Norwest Common Stock and Foothill Common Stock at
the Effective Date may vary significantly from the prices as of the date of
execution of the Merger Agreement or the date hereof or the date on which
stockholders vote on the Merger due to changes in the business, operations, and
prospects of Norwest or Foothill, market assessments of the likelihood that the
Merger will be consummated and the timing thereof, the effect of any conditions
or restrictions imposed on or proposed with respect to the combined companies
by regulatory agencies in connection with or following consummation of the
Merger, general market and economic conditions, and other factors; and (ii) the
Exchange Ratios are fixed and will not be adjusted for changes in the relative
prices of Norwest Common Stock and Foothill Common Stock.
EFFECTIVE DATE AND TIME OF THE MERGER
Subject to the terms and conditions of the Merger Agreement, the Effective
Date will be the date on which a Certificate of Merger is filed with the
Secretary of State of the State of Delaware. The filing will be made within ten
business days following the satisfaction or waiver of all conditions of the
Merger Agreement or on such other date upon which the parties agree, and the
time at which such filing will be made is hereinafter referred to as the "Time
of Filing." The Effective Time will be 11:59 p.m., Delaware time, on the
Effective Date. Norwest and Foothill anticipate that the closing will occur as
soon as practicable following the Special Meeting. See "Terms of the Merger,"
"Conditions to the Merger," and "Regulatory Approvals."
SURRENDER OF STOCK CERTIFICATES
As soon as practicable after the Effective Time, Norwest Bank Minnesota,
National Association, acting in the capacity of exchange agent for Norwest (the
"Exchange Agent"), will mail to each former holder of record of shares of
Foothill Capital Stock a form of letter of transmittal, together with
instructions for the exchange of such holder's stock certificates for a
certificate representing Norwest Common Stock.
STOCKHOLDERS OF FOOTHILL SHOULD NOT SEND IN THEIR CERTIFICATES UNTIL THEY
RECEIVE THE LETTER OF TRANSMITTAL FORM AND INSTRUCTIONS.
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<PAGE>
Upon surrender to the Exchange Agent of one or more certificates for Foothill
Capital Stock, together with a properly completed letter of transmittal, there
will be issued and mailed to the holder a certificate representing the number
of whole shares of Norwest Common Stock to which such holder is entitled and,
where applicable, a check for the amount representing any fractional share. A
certificate for Norwest Common Stock 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 and otherwise in proper form for
transfer and (ii) the person requesting the issuance of such certificate either
pays to the Exchange Agent any transfer or other taxes required by reason of
the issuance of a certificate 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 dividends in respect of the Norwest Common Stock
with a record date after the Effective Time will be paid to the former
stockholders of Foothill entitled to receive certificates for shares of Norwest
Common Stock until such stockholders surrender their certificates representing
shares of Foothill Capital Stock. Upon such surrender, there shall be paid to
the stockholder 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 certificate representing such shares of Norwest Common Stock is
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, as the case may be, 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 CONSUMMATION OF THE MERGER
General
Consummation of the Merger is subject to the satisfaction of certain
conditions, most of which are customary in transactions such as the Merger. The
obligation of Foothill to consummate the Merger is subject to the satisfaction
of the following conditions (unless waived by Foothill): (i) the approval and
adoption of the Merger Agreement and the transactions contemplated thereby by a
majority of the outstanding shares of Foothill Capital Stock; (ii) Norwest and
Merger Co. shall have performed in all material respects all of its agreements
contained in the Merger Agreement required to be performed on or prior to the
Effective Date, and the representations and warranties of Norwest and Merger
Co. contained in the Merger Agreement shall be true in all material respects,
when made and as of the Effective Date except as contemplated or permitted by
the Merger Agreement; (iii) Foothill shall have received the opinion of
Buchalter, Nemer, Fields & Younger, a professional corporation, counsel to
Foothill, to the effect that as of the closing date of the Merger, the Merger
will be treated for federal income tax purposes as a reorganization within the
meaning of Section 368(a) of the Code; (iv) Norwest shall have received all
regulatory approvals for the Merger; (v) the absence of any order restraining,
enjoining or otherwise prohibiting the consummation of the transactions
contemplated by the Merger Agreement; (vi) the authorization for listing on the
NYSE and the CHX of the Norwest Common Stock; and (vii) Norwest shall have
obtained any and all material permits, authorizations, consents, waivers and
approvals.
The obligations of Norwest to consummate the Merger are subject to the
satisfaction of the following conditions (unless waived by Norwest): (i)
Foothill shall have performed in all material respects all of its obligations
contained in the Merger Agreement required to be performed by it prior to the
Effective Date, and the representations and warranties of Foothill contained in
the Merger Agreement shall be true in all material respects, when made and as
of the closing date of the Merger except as contemplated or permitted by the
Merger Agreement; (ii) the approval and adoption of the Merger Agreement and
the transactions contemplated thereby by a majority of the outstanding shares
of Foothill Capital Stock, voting together as a single class; (iii) Norwest
shall have received all regulatory approvals for the Merger and all waiting and
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appeal periods shall have expired; (iv) Foothill shall have obtained any and
all material consents or waivers; (v) absence of any order restraining,
enjoining or otherwise prohibiting the consummation of the transactions
contemplated by the Merger Agreement shall be in effect; (vi) receipt of
opinions from KPMG Peat Marwick, LLP and Ernst & Young LLP that the Merger will
qualify as a "pooling of interests"; (vii) receipt of a letter from Foothill's
Chief Executive Officer and Chief Financial Officer concerning the accuracy and
completeness of Foothill's financial information presented or incorporated by
reference into this Proxy Statement-Prospectus; (viii) absence of any
environmental proceeding, claim, or action seeking to impose liability on
Foothill or any of its subsidiaries relating to the release of hazardous
substances; (ix) since March 31, 1995, absence of any material adverse change
in the financial condition, results of operations or business of Foothill and
its subsidiaries taken as a whole; (x) Foothill shall have terminated the 1978
Stock Option Plan and the 1990 Incentive Plan, and shall have obtained the
consent of all holders of outstanding options thereunder to the termination of
such options upon the Merger in exchange for shares of Norwest Common Stock
computed based on the Common Stock Exchange Ratio; and shall have terminated
the Directors Pension Plan, the Executive Supplement Retirement Plan, and the
Stock Purchase Plan; (xi) the total number of shares of Foothill Common Stock
outstanding (including all common share equivalents) shall not have exceeded
17,843,359; and (xii) certain persons shall have entered into employment and
non-competition agreements with Norwest.
Consent to Merger by Limited Partners of Certain Partnerships
Foothill is the corporate general partner of Foothill Partners, L.P.
("Partners I"), and Foothill Partners II, L.P. ("Partners II") (collectively,
the "Partnerships"), limited partnerships formed under Delaware law in which
institutional investors hold all the limited partnership interests. The primary
businesses (and stated partnership purposes) of the Partnerships is to acquire
debt at a discount from its stated principal amount. Such investments include
both secured and unsecured debt in the form of bank loans, privately placed as
well as publicly-traded debt instruments, including bonds, notes and
debentures, and discounted receivables. The Partnerships' debt investments
include those of companies that may be contemplating, involved in, or recently
have completed, a negotiated restructuring of their outstanding debt or a
reorganization under Chapter 11 of the Federal Bankruptcy Code. The
Partnerships acquire such indebtedness by making direct loans to the borrowers,
by acquiring the interest of the existing holders of such debt, or by
participation in syndicates with other lenders, including banks and bank
holding company affiliates.
Foothill, as corporate general partner, is registered as an investment
advisor under the Investment Advisors Act of 1940 and provides administrative
and custodial services to the Partnerships for which it receives a management
fee. Certain executive officers and employees of Foothill (the "Individual
Affiliates") also act as the managing general partners of the Partnerships.
It is a condition to the consummation of the Merger that Foothill have
obtained all necessary consents to the Merger from the Partnerships and/or the
limited partners of the Partnerships that may be required by the terms of the
partnership agreements or by law. Under the partnership agreements, unless the
consent of all of the managing general partners and of at least 66 2/3% in
interest (based on capital subscriptions) of the limited partners to Norwest's
acquisition of Foothill in the Merger and to the continued operation of the
Partnerships under Foothill's management subsequent thereto is obtained, the
change in control of Foothill as a result of the Merger could be deemed to
constitute a transfer of Foothill's interest or the resignation or withdrawal
of Foothill as corporate general partner of the Partnerships, or to entitle the
remaining general and limited partners to remove Foothill as corporate general
partner, or to cause the termination of the Partnerships. In addition, under
the express terms of the Partners II Partnership Agreement, the Merger also
constitutes a "Corporate Change in Control" of Foothill, which would entitle
the managing general partners to remove Foothill as corporate general partner,
unless the consent of all the managing general partners and those limited
partners holding not less than 66 2/3% of the limited partnerships interests is
obtained. Although Foothill intends to actively solicit and reasonably expects
to obtain any necessary consents from the Partnerships and their general and
limited partners, there can be no assurance that such
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consents will be received. The Merger may also constitute an effective
amendment to the partnership agreements requiring similar consents of the
partners. As a result, and notwithstanding any approval of the Merger by
Foothill stockholders, failure to obtain the requisite partnership consents
would entitle Norwest to terminate the Merger Agreement.
REGULATORY APPROVALS
The Merger is subject to prior approval by the Federal Reserve Board under
the Bank Holding Company Act of 1956, as amended (the "BHC Act"), which
requires that the Federal Reserve Board approve the acquisition by a bank
holding company of a company engaged in a business closely related to banking.
Norwest filed with the Federal Reserve Board the required notification seeking
approval on August 11, 1995. By letter dated August 16, 1995, the Federal
Reserve Board informed Norwest that the filing was informationally complete and
had been accepted for processing. There can be no assurance that the Federal
Reserve Board will approve the Merger or as to the date of any such approval.
The approval of any application merely implies satisfaction of regulatory
criteria for approval, which do not include review of the Merger from the
standpoint of the adequacy of the consideration to be received by, or fairness
to, stockholders. Regulatory approvals do not constitute an endorsement or
recommendation of the proposed Merger.
Norwest and Foothill are not aware of any governmental approvals or
compliance with banking laws and regulations that are required for consummation
of the Merger other than those 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 that any such approval or action, if
needed, could be obtained and, if such approvals or actions are obtained, there
can be no assurance as to the timing thereof. The Merger cannot proceed in the
absence of all requisite regulatory approvals. See "Conditions to the Merger,"
"Effective Date and Time of the Merger," and "Waiver, Amendment, and
Termination."
BUSINESS PENDING THE MERGER
By entering into the Merger Agreement, Foothill has agreed to maintain its
corporate existence in good standing and to conduct its business in the
ordinary and usual manner, including the extension of credit in accordance with
existing lending policies, except that Foothill has agreed not to make, without
the prior written consent of Norwest, any new loan or modify, restructure, or
renew any existing loan (except pursuant to commitments made prior to May 15,
1995) if the amount of the resulting loan, when aggregated with all other loans
or extensions of credit to such person, would exceed $20 million. In the Merger
Agreement, Foothill has also agreed, among other things, that it will not,
without the prior written consent of Norwest: (i) enter into any material
agreement, contract, or commitment in excess of $200,000 except lending
transactions in the ordinary course of business and in accordance with policies
and procedures in effect on May 15, 1995; (ii) make any equity investments
except investments required to be made by the "Co-Investor" provisions of the
several limited partnerships of which Foothill is the general partner; (iii)
declare, set aside, make, or pay any dividend or other distribution with
respect to its capital stock, except with respect to the payment prior to the
Effective Date of cash dividends paid on a quarterly basis in accordance with
past practice and except for quarterly cash dividends of not more than $2.70
per share of Foothill Preferred, provided that dividends otherwise permitted to
be paid under the Merger Agreement may not be declared and paid in any
particular quarter if the Effective Date occurs in such quarter and former
Foothill stockholders would become stockholders of record of Norwest for the
purpose of qualifying for the quarterly Norwest dividend payable to
stockholders of Norwest Common Stock for such quarter; (iv) sell or otherwise
dispose of any of its assets or properties other than in the ordinary course of
business; (v) fail to maintain proper business and accounting records in
accordance with generally accepted accounting principles; and (vi) issue or
sell or authorize for issuance or sale or grant options or other rights with
respect to the issuance, sale, or conversion of shares of capital stock.
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CERTAIN COVENANTS
The Merger Agreement includes a number of covenants of Foothill which are
customary in transactions such as the Merger. The Merger Agreement provides,
among other things, that, prior to the Effective Date, Foothill will (i)
establish such additional accruals and reserves as may be necessary to conform
Foothill's accounting and credit loss practices to those of Norwest and
Norwest's plans with respect to the conduct of Foothill's business following
the Merger and to provide for costs and expenses related to the consummation of
the transactions contemplated by the Merger Agreement; (ii) obtain, at its own
expense, and deliver environmental assessment reports on certain properties;
(iii) not take any action with respect to Foothill which would disqualify the
Merger as a "pooling of interests" for accounting purposes; and (iv) take all
necessary corporate and other action and use its best efforts to obtain all
approvals of regulatory authorities, consents, and other approvals to carry out
the transactions contemplated by the Merger Agreement.
The Merger Agreement also includes a number of covenants of Norwest which are
customary in transactions such as the Merger. The Merger Agreement provides,
among other things, that, prior to the Effective Date, Norwest will (i) give
Foothill written notice of the receipt of all regulatory approvals; (ii) permit
Foothill and its representatives to examine Norwest's books, records, and
properties, and to interview Norwest's officers, employees, and agents, for a
period of up to 15 days prior to the Effective Date; (iii) file all documents
necessary to list the Norwest Common Stock to be issued in the Merger on the
NYSE and the CHX and use its best efforts to effect such listings; (iv) take
all necessary corporate and other action and use its best efforts to obtain all
approvals of regulatory authorities, consents, and other approvals to carry out
the transactions contemplated by the Merger Agreement; and (v) not take any
action with respect to Norwest that would disqualify the Merger as a "pooling
of interests" for accounting purposes.
NO SOLICITATION
Foothill has agreed in the Merger Agreement that neither it nor any of its
subsidiaries, nor any director, officer, representative, or agent of Foothill
or any of its subsidiaries, will solicit, authorize the solicitation of, or,
except to the extent, based on advice of counsel, legally advisable for the
discharge of the fiduciary duties of the Foothill Board under applicable law,
enter into any discussions with any party 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 common stock, or any other equity security of Foothill or
any of its subsidiaries; (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 Foothill or any of its subsidiaries except in
the ordinary course of business; or (iv) to merge, consolidate, or otherwise
combine with Foothill or any of its subsidiaries.
WAIVER, AMENDMENT, AND TERMINATION
The parties may, in writing, give any consent, take any action with respect
to termination of the Merger Agreement, or waive any inaccuracies in the
representations and warranties of the other party or compliance by the other
party with any of the covenants and conditions in the Merger Agreement.
The Merger Agreement provides that it may be amended by the parties thereto,
by or pursuant to action taken by the respective Boards of Directors, at any
time before or after approval thereof by the stockholders of Foothill, but,
after such approval, no amendment shall be made which changes the Exchange
Ratios. The Merger Agreement may not be amended except by an instrument in
writing signed on behalf of each of Norwest and Foothill.
The Merger Agreement may be terminated at any time prior to the Effective
Date, whether before or after approval of the matters presented in connection
with the Merger by the stockholders of Foothill: (i) by mutual consent of the
Boards of Directors of Norwest and Foothill; (ii) by either Norwest or Foothill
if the Merger shall not have been consummated on or before March 31, 1996
(provided the terminating party is
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<PAGE>
not otherwise in material breach of its representations, warranties, or
obligations under the Merger Agreement); (iii) by Foothill or Norwest if any
court or governmental authority issues a final order restraining, enjoining, or
otherwise prohibiting the consummation of the transactions contemplated by the
Merger Agreement; or (iv) by Norwest, if the Foothill Board does not publicly
recommend approval of the Merger Agreement or withdraws, modifies, or amends
its recommendation in any respect adverse to Norwest.
By letter agreement dated May 15, 1995, Norwest agreed that if Foothill
terminates the Merger Agreement because of the failure of Norwest to perform
its obligations under the Merger Agreement, and Foothill has otherwise
performed or is in position to perform its obligation under the Merger
Agreement, Norwest will provide to Foothill within ten business days of written
demand by Foothill up to $25 million of subordinated debt on the same terms as
Foothill's existing subordinated debt, but at the prevailing market rates.
Under the terms of the letter agreement, Foothill also has the right to incur
additional subordinated indebtedness from existing or new lenders in order to
enable it to comply with certain senior debt covenants, provided that it gives
Norwest an opportunity to provide such financing on the same or better terms.
Norwest has agreed, pursuant to the letter agreement, to provide such financing
by purchasing $15 billion of Foothill's senior subordinated notes. Norwest and
Foothill have further agreed that, if Foothill terminates the Merger Agreement
due to Norwest's failure to perform its obligations thereunder as described
above, Norwest's purchase of such subordinated notes will be considered to have
satisfied $15 million of Norwest's agreement to provide $25 million of
subordinated debt in the event of such termination. See "Certain Transactions"
below.
EFFECT ON EMPLOYEE BENEFIT PLANS
All of Foothill's employee benefit plans will be terminated, and, subject to
any eligibility requirements applicable to Norwest's employee benefit and
welfare plans, employees of Foothill will be eligible to participate in Norwest
employee benefit and welfare plans. Foothill employees will receive full credit
for past service to Foothill and its subsidiaries under certain of these plans.
CERTAIN TRANSACTIONS
Pursuant to the terms of the letter agreement dated May 15, 1995, described
above under "Waiver, Amendment, and Termination," Foothill has agreed to use
its best efforts to renegotiate and amend the terms of certain covenants
relating to its senior debt. If Foothill is unable to renegotiate such
covenants, Norwest has agreed that Foothill may incur additional subordinated
indebtedness from existing or new lenders in order to enable it to comply with
these covenants, provided that it gives Norwest notice of such proposed
financing and allows Norwest an opportunity to provide such financing on the
same or better terms. Norwest has agreed, pursuant to the letter agreement, to
provide financing by purchasing $15 billion of Foothill's senior subordinated
notes pursuant to a note agreement currently being negotiated by the parties.
It is anticipated that the subordinated notes will bear interest at a fixed
rate equal to 1.50% in excess of the current yield on U.S. Treasury Notes with
an assumed maturity of 6 1/4 years and will mature on December 1, 2023.
Norwest's purchase of such subordinated notes will also be considered as having
satisfied $15 million of Norwest's obligation to provide $25 million of
subordinated debt financing in the event of the Merger Agreement is terminated
under the circumstances described above under the heading "Waiver, Amendment,
and Termination."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Don L. Gevirtz's employment agreement with Foothill expires on December 31,
1996, and provides for an annual base salary for 1995 of $349,592, to be
increased in subsequent years by a factor based on the Consumer Price Index.
Mr. Gevirtz intends to retire from Foothill prior to the end of the year.
Norwest has agreed to pay in a lump sum the present value equivalent of Mr.
Gevirtz's base salary under his employment agreement through 1996 and Mr.
Gevirtz's prorated bonus up through his retirement date under the Foothill
Management Incentive Plan. The total of this payment, to be made within a week
of the Effective Date, is approximately $696,300.
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John F. Nickoll has an employment agreement with Foothill which expires on
December 31, 1996, and provides for an annual base salary for 1995 of $349,592,
to be increased in subsequent years by a factor based on the Consumer Price
Index. Upon consummation of the merger, Mr. Nickoll will enter into a new
three-year employment contract with a subsidiary of Foothill and Norwest for a
base salary of $400,000 as of January 1, 1996, to be increased in subsequent
years by a factor based on the Consumer Price Index. The agreement also
provides for the payment to Mr. Nickoll, within a week of the Effective Date,
of a one-time bonus of $125,000.
Peter E. Schwab and David C. Hilton have employment agreements with a
subsidiary of Foothill which expire December 31, 1995, or two years after a
change of control. The Merger would constitute a change in control under these
agreements. Under the contracts Mr. Schwab and Mr. Hilton earned base salaries
of $261,170 and $223,860, respectively, for 1994. Messrs. Schwab and Hilton
have agreed to enter into new two-year employment agreements with a subsidiary
of Foothill and Norwest for base salaries of $263,782 and $226,099,
respectively. The agreements also provide for the payment to each of Messrs.
Schwab and Hilton, within a week of the Effective Date, of a one-time bonus of
$100,000.
Messrs. Nickoll, Schwab, and Hilton have also agreed to enter into non-
competition agreements with Norwest for a period of two years following the
termination of their employment with Norwest. In exchange Messrs. Nickoll,
Schwab, and Hilton will receive an amount equal to twice their respective
salaries, determined at the time the payments commence, payable one-third on
the date their employment agreement term ends or their employment is otherwise
terminated, whichever is later ("Termination Date"), one third on the first
anniversary of the Termination Date, and one third on the second anniversary of
the Termination Date.
Foothill executive officers participate with Foothill's other key employees
in the 1978 Stock Option Plan and 1990 Incentive Plan. Under the terms of those
plans outstanding and unexercised options (the "Foothill Options") will
immediately vest and become exercisable as a result of the merger.
The following table sets forth information relating to the number of shares
of Foothill Common Stock underlying unexercised options as of September 1,
1995:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF
UNDERLYING UNEXERCISED UNEXERCISED
OPTIONS OPTIONS UPON
----------------------------- CHANGE OF
EXERCISABLE UNEXERCISABLE (1) CONTROL (2)
----------- ----------------- ------------
<S> <C> <C> <C>
Don L. Gevirtz................. 70,434 36,666 $2,032,350
John F. Nickoll................ 14,610 36,668 $ 834,770
Peter E. Schwab................ 21,760 15,000 $ 731,310
David C. Hilton................ 16,216 8,334 $ 466,525
Henry K. Jordan................ 10,000 10,000 $ 337,801
Mark Rosenbaum................. 10,000 10,000 $ 337,801
</TABLE>
--------
(1) All options become exercisable on change of control.
(2) Value calculated by subtracting the exercise price from the Foothill
equivalent price of $28.52 (based on the closing price of Norwest Common
Stock on September 12, 1995).
As a result of the immediate vesting of the Foothill Options, some
optionholders will exceed the annual $100,000 vesting maximum required for
incentive stock options by virtue of section 422(d) of the Code. Of the options
available for exercise as a result of the Merger, Messrs. Nickoll, Schwab,
Jordan, Rosenbaum, and Hilton have 17,870, 8,037, 2,300, 2,300, and 47 options,
respectively, which as a result of the Merger and immediate vesting will no
longer constitute incentive stock options under the Code. To compensate these
individuals for the increase in taxes payable as a result of losing the tax
benefits accorded incentive stock options, Norwest has agreed to grant to those
individuals non-qualified options to acquire Norwest Common
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<PAGE>
Stock pursuant to the Norwest Corporation 1985 Long-Term Incentive Compensation
Plan in an amount determined by the following formula: (i) the product of 0.11
multiplied by the amount of compensation income for federal income tax purposes
resulting from the exchange or exercise of the options, divided by (ii) the
product of 0.36 multiplied by the fair market value of Norwest Common Stock at
the time of grant. Assuming the fair market value of Norwest Common Stock is
$31.00 per share at the time of grant, Messrs. Nickoll, Schwab, Jordan,
Rosenbaum, and Hilton will receive 3,052, 1,295, 332, 332, and 7 options,
respectively, for Norwest Common Stock with an exercise price of $31.00 per
share.
Under Foothill's 1979 Employee Stock Purchase Plan (the "1979 Plan"), as
amended, eligible employees of Foothill and its subsidiaries are afforded the
opportunity to participate in the ownership of Foothill by acquiring a right to
purchase shares of Foothill Common Stock. Purchases are made on December 31
with respect to that year at the lower of the fair market value of the Foothill
Common Stock on the prior January 1 or 90% of the fair market value of the
Foothill Common Stock on December 31. Purchases are funded through payroll
deductions elected by such participants.
At the earlier of the closing of the Merger or September 30, 1995, Foothill
will terminate the 1979 Plan effective as of December 31, 1995. In connection
with that termination, Foothill will establish a revocable grantor trust which
will purchase 26,750 shares of Foothill Common Stock for the purpose of funding
Foothill's obligation to issue shares of Foothill Common Stock to participants
in the 1979 Plan for the plan period ending December 31, 1995. In the event
that the Closing Date is prior to December 31, 1995, Foothill will also take
all action necessary pursuant to the 1979 Plan to provide for the issuance of
shares of Norwest Common Stock on December 31, 1995, in substitution for shares
of Foothill Common Stock issuable to participants in the 1979 Plan.
Foothill adopted The Foothill Group, Inc. Supplemental Executive Retirement
Plan (the "Supplemental Plan") effective January 1, 1991. The Supplemental Plan
is designed to provide benefits to participants upon their retirement from
Foothill's service. The Supplemental Plan covers a designated group of
Foothill's and its subsidiaries' management or highly compensated employees.
Participants are determined by the Board of Directors. Prior to the Effective
Date, Foothill will terminate the Supplemental Plan and will pay the lump sum
present value of the benefit to each participant. Messrs. Gevirtz, Nickoll,
Schwab, and Hilton will receive lump sum payments of $1,319,110, $1,414,024,
$91,490, and $44,682, respectively. Mr. Gevirtz has the option of receiving
$178,642 annually in lieu of a lump sum payment.
Foothill adopted the Retirement Plan for Outside Directors (the "Directors'
Plan") effective January 1, 1991. Participation in the Directors' Plan is
limited to those members of the Board of Directors who are not employees of
Foothill or its subsidiaries ("Outside Directors"). The Directors' Plan is
designed to provide benefits to participants upon their termination of service
as an Outside Director. Administration of the Directors' Plan is the
responsibility of the Board of Directors or its delegate. Participants in the
Directors' Plan are not permitted to make contributions to the Directors' Plan.
Outside Directors become eligible for participation in the Directors' Plan
following the completion of at least 7 years of service as an Outside Director.
Outside Directors receive credit for a year of service for each 12-month period
of service on the Board of Directors as an Outside Director and are given
credit for years of service prior to the effective date of the Directors' Plan.
Separate periods of service as an Outside Director are aggregated. Prior to the
Effective Date, Foothill will terminate the Directors Plan and will pay the
lump sum present value of the benefit to each vested participant. Directors Dr.
Warren Bennis and Arthur Malin will receive payments of $152,201 and $210,868,
respectively. In addition, Richard J. Riordan, a former director, will receive
a lump sum payment of $75,106.
In April 1995 Foothill deviated from its established practice and did not
grant options under the 1990 Incentive Plan because of the ongoing negotiations
with Norwest. Management of Norwest has agreed to recommend to the Human
Resources Committee of the Norwest Board of Directors that up to 300,000
options to purchase Norwest Common Stock be granted to certain Foothill
employees. Of these options, it is proposed that Messrs. Nickoll, Schwab,
Jordan, and Hilton receive 100,000, 40,000, 12,000, and 22,000 options,
respectively.
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The Merger Agreement provides that, after the Effective Date, Norwest will
indemnify and hold harmless the directors, officers, and employees of Foothill
against any losses, claims, damages, expenses, or obligations arising out of
the transactions contemplated by the Merger Agreement. Norwest agreed in the
Merger Agreement that all rights to indemnification existing in favor of
directors, officers, or employees of Foothill as provided in Foothill's
Certificate of Incorporation or By-Laws, or the articles of incorporation or
bylaws of a Foothill subsidiary, in effect on the date of the Merger Agreement
with respect to matters occurring through the Effective Date, shall survive the
Merger and shall continue in full force and effect for a period of not less
than six years from the Effective Date. The Merger Agreement provides that,
with respect to matters occurring prior to the Effective Date, Norwest will
cause Foothill, as the surviving corporation, to maintain indemnification for
directors, officers, and employees under Foothill's Certificate of
Incorporation and By-Laws, or the articles of incorporation or bylaws of a
Foothill subsidiary. See "Indemnification."
Norwest has also agreed to adopt incentive plans similar to those currently
provided to Foothill officers.
INDEMNIFICATION
The Merger Agreement provides that, after the Effective Date, Norwest will
indemnify and hold harmless the directors, officers, and employees of Foothill
against all losses, expenses, claims, damages, or liabilities arising out of
the transactions contemplated by the Merger Agreement to the fullest extent
permitted or required under Foothill's Certificate of Incorporation and By-
Laws, or the articles of incorporation or bylaws of a Foothill subsidiary, in
effect as of the Effective Date. All rights to indemnification existing in
favor of directors, officers, or employees of Foothill as provided in
Foothill's Certificate of Incorporation or By-Laws, or the articles of
incorporation or bylaws of a Foothill subsidiary, in effect on the date of the
Merger Agreement, with respect to matters occurring up to the Effective Time,
shall survive the Merger and shall continue in full force and effect for a
period of not less than six years from the Effective Date.
MANAGEMENT AND OPERATIONS AFTER THE MERGER
Following the Merger, Norwest intends to operate Foothill as a separate
subsidiary in accordance with Foothill's existing business. Management of
Foothill prior to the Merger will continue as management of Foothill after the
Merger. Management of Foothill does not expect any material change in the
nature of Foothill's business or credit philosophy.
STOCK OPTION AGREEMENT BETWEEN NORWEST AND FOOTHILL
As a condition to entering into the Merger Agreement, Norwest required
Foothill to enter into the Stock Option Agreement pursuant to which Foothill
issued to Norwest an option (the "Option") to purchase up to 4,156,641 ("Option
Shares") at an exercise price of $23.375 ("Option Price"). The following is a
brief summary of certain provisions of the Stock Option Agreement which is
attached as Appendix B to this Proxy Statement-Prospectus and is incorporated
herein by reference. The following summary is qualified in its entirety by
reference to the Stock Option Agreement.
Exercise of the Option
The Option is exercisable, in whole or in part, only upon the occurrence of
one of the following events (each a "Purchase Event"):
(a) Foothill or any of its subsidiaries shall have entered into an
agreement with any person (other than Norwest or any of its subsidiaries),
or the Foothill Board shall have recommended that the Foothill stockholders
approve or accept a transaction to: (i) effect a merger, consolidation, or
similar transaction, involving Foothill or any of its subsidiaries; (ii)
purchase, lease, or otherwise acquire all or substantially all the assets
of Foothill or any subsidiary; or (iii) purchase or otherwise acquire
(including by way of
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<PAGE>
merger, consolidation, share exchange, or otherwise) securities
representing 20% or more of the voting power of Foothill or any subsidiary
("Acquisition Transaction");
(b) Any person (other than Norwest or any of its subsidiaries) shall have
commenced (as defined in Rule 14d-2 of the Exchange Act), or shall have
filed a registration statement under the Securities Act with respect to, a
tender offer or exchange offer for shares of Foothill Common Stock such
that, upon consummation of such offer, such person would own or control 20%
or more of the outstanding Foothill Common Stock;
(c) The Foothill Board shall have withdrawn or modified in a manner
adverse to Norwest the recommendation of the Foothill Board that the
holders of Foothill Common Stock approve the Merger Agreement and the
Merger; or
(d) After a proposal is made by a third party to Foothill or its
stockholders to engage in an Acquisition Transaction (i) Foothill shall
have breached any covenant or obligation contained in the Merger Agreement
entitling Norwest to terminate the Merger Agreement, (ii) the Foothill
Board does not recommend that the Foothill stockholders approve the Merger
Agreement, (iii) the holders of Foothill Common Stock shall not have
approved the Merger Agreement at a meeting held for purposes of voting on
the Merger Agreement, (iv) such meetings shall not have been held or shall
have been canceled prior to termination of the Merger Agreement, or (v) the
Foothill Board shall have withdrawn or modified in a manner adverse to
Norwest the recommendation of the Foothill Board with respect to the Merger
Agreement.
The Option expires upon the earliest to occur of: (i) immediately prior to the
Effective Time, (ii) twelve months after the occurrence of a Purchase Event,
(iii) termination of the Merger Agreement prior to the occurrence of a Purchase
Event, or (iv) twelve months after termination of the Merger Agreement because
(A) of Foothill's failure to perform in all material respects the covenants and
agreements required to be performed, or (B) the Board of Directors of Foothill
have withdrawn, modified or amended its recommendations in any respect
material, adverse to Norwest.
Adjustment of Number of Shares Subject to Option
The number and type of securities subject to the Option and the purchase
price of the shares will be adjusted for any change in the Foothill Common
Stock by reason of stock dividends, stock splits, mergers, recapitalizations,
combinations, subdivisions, conversions, exchange of shares, or similar
transaction, such that Norwest will receive (upon exercise of the Option) the
same number and type of securities as if the Option had been exercised
immediately prior to the occurrence of such event (or the record date therefor)
so that the number of shares of Common Stock that remain subject to the Option
(together with the shares of Common Stock previously issued pursuant to the
exercise of the Option) equals 18.89% of the number of shares of Foothill
Common Stock then issued and outstanding. Whenever the number of shares of
Foothill Common Stock purchasable upon exercise of the Option is adjusted
pursuant to the foregoing, the Option Price shall be adjusted by multiplying
the Option Price by a fraction, the numerator of which shall be equal to the
number of shares of Common Stock purchasable prior to the adjustment and the
denominator of which shall be equal to the number of shares of Common Stock
purchasable after the adjustment. Notwithstanding the foregoing, the number of
shares subject to the Option will not be increased to the extent authorized but
unissued and unreserved shares are not available. In the event Foothill enters
into any agreement to (a) merge or consolidate with any person other than
Norwest or one of its subsidiaries such that Foothill is not the surviving
corporation, (b) permit any person, other than Norwest or one of its
subsidiaries, to merge into Foothill and Foothill shall be the surviving
corporation, but, in connection with such merger, the then outstanding shares
of Foothill Common Stock are exchanged for any stock or other securities of
Foothill or any other person or cash or other property or the outstanding
shares of Foothill Common Stock prior to such merger or consolidation represent
less than 50% of the Foothill Common Stock following such merger or
consolidation, or (c) sell or otherwise transfer all or substantially all of
its assets to a person other than Norwest or one of its subsidiaries, the
agreement governing the transaction must provide, upon
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consummation of the transaction, the Option will be converted into or exchanged
for an option to purchase securities of either the acquiring person, or a
person that controls the acquiring person, in all cases at the option of
Norwest.
Repurchase at the Option of Norwest
Norwest has the right to require Foothill to repurchase the Option and any
shares acquired by exercise of the Option at any time commencing upon the
occurrence of a Repurchase Event (as defined below).
A "Repurchase Event" means (i) any person (other than Norwest or its
subsidiaries) shall have acquired "beneficial ownership" (as defined by Section
13(d) of the Exchange Act) of 50% or more of the then outstanding shares of
Foothill Common Stock, (ii) or the consummation of an Acquisition Transaction
(except that the percentage referred to in clause (iii) of such definition
shall be 50%).
Such repurchase, if required by Norwest, shall be at a price equal to the
amount by which (A) the market/offer price (as defined in the Stock Option
Agreement) exceeds (B) the Option Price, multiplied by the number of shares for
which the Option may be exercised, plus (C) the amount of documented expenses
incurred by Norwest in connection with the Merger Agreement and the
transactions contemplated thereby, including reasonable accounting and legal
fees. Such repurchase, if requested by the owner of Option Shares, shall be at
a price equal to the market/offer price multiplied by the number of Option
Shares so designated.
Registration Rights
Norwest has the right within three years of a Purchase Event to require
Foothill to prepare and file up to two registration statements under the
Securities Act for the shares issued or issuable upon exercise of the Option
and to use its best efforts to qualify the shares under any applicable state
securities laws if necessary or desirable for Norwest to be able to sell the
shares.
CERTAIN DIFFERENCES IN RIGHTS OF STOCKHOLDERS
If the holders of Foothill Common Stock approve the Merger Agreement and the
Merger is subsequently consummated, all stockholders of Foothill will become
stockholders of Norwest. Each of Norwest and Foothill is a corporation
organized under and governed by the Delaware General Corporation Law (the
"DGCL"). The following summary describes certain differences between holding
Norwest Common Stock and Foothill Common Stock to the extent such differences
arise because of differences between Norwest's Certificate of Incorporation
(the "Norwest Certificate"), By-Laws (the "Norwest By-Laws"), and rights plan,
and Foothill's Certificate of Incorporation (the "Foothill Certificate") and
By-Laws (the "Foothill By-Laws"). This summary is qualified in its entirety by
reference to the DGCL, the Norwest Certificate, the Norwest By-Laws, and
Norwest's rights plan, and the Foothill Certificate and the Foothill By-Laws.
Authorized Stock
Foothill. The Foothill Certificate authorizes the issuance of 22,000,000
shares of Class A Common Stock, no par value per share, and 1,000,000 shares of
preferred stock, par value $1.00 per share. At July 31, 1995, 16,708,958 shares
of Foothill Common Stock were issued, and 100,000 shares of Foothill Preferred
were issued. The relative rights and preferences of any preferred stock issued
in the future may be established by the Foothill Board without stockholder
action. Although Foothill has no current plans for the issuance of preferred
stock, except as disclosed in this prospectus, such shares, when and if issued,
could have dividend, liquidation, voting, and other rights superior to those of
the Foothill Common Stock.
Subject to any prior rights of any preferred stock then outstanding, holders
of common stock are entitled to receive such dividends as are declared by the
Foothill Board out of funds legally available for that purpose. Subject to the
rights, if any, of any preferred stock then outstanding, all voting rights are
vested in the holders
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of common stock, each share being entitled to one vote. Subject to any prior
rights of any preferred stock, in the event of liquidation, dissolution, or
winding up of Foothill, holders of shares of common stock are entitled to
receive pro rata any assets distributable to shareholders in respect of shares
held by them. Holders of shares of common stock do not have any preemptive
right to subscribe for any additional securities which may be issued by
Foothill. The outstanding shares of Foothill Common Stock are fully paid and
nonassessable.
Norwest. The Norwest Certificate authorizes the issuance of 500,000,000
shares of common stock, par value $1 2/3 per share, 5,000,000 shares of
preferred stock, without par value, and 4,000,000 shares of preference stock.
At June 30, 1995, 338,450,558 shares of Norwest Common Stock were issued, of
which 325,026,015 were outstanding and 13,424,543 were held as treasury shares,
and 3,304,666 shares of preferred stock were outstanding, consisting of
1,127,125 shares of 10.24% Cumulative Preferred Stock, 980,000 shares of
Cumulative Tracking Preferred Stock (of which 25,000 shares are held by a
subsidiary of Norwest), 1,140,875 shares of Cumulative Convertible Preferred
Stock, Series B, (the "Norwest Series B Preferred") 13,647 shares of ESOP
Cumulative Convertible Preferred Stock, and 43,019 shares of 1995 ESOP
Cumulative Convertible Preferred Stock. On July 28, 1995, Norwest gave notice
to the holders of the Norwest Series B Preferred that the Norwest Series B
Preferred would be redeemed by Norwest on September 1, 1995. Pursuant to the
terms of the Norwest Series B Preferred, the holders of substantially all of
the Norwest Series B Preferred converted such Preferred Stock into Norwest
Common Stock on or prior to September 1, 1995. The shares of Norwest Series B
Preferred that remained outstanding on September 1, 1995, were redeemed by
Norwest. In addition, 1,250,000 shares of preferred stock are reserved for
issuance under the Rights Agreement dated as of November 22, 1988, between
Citibank, N.A. as Rights Agent, and Norwest (the "Rights Agreement"). Norwest
has also authorized for issuance from time to time and registered with the
Commission an additional 1,700,000 shares of preferred stock. Norwest has also
authorized for issuance from time to time and registered or filed for
registration with the SEC, pursuant to two universal shelf registration
statements, an indeterminate number of securities (the "Shelf Securities") with
an aggregate initial offering price, as of the date of this Proxy Statement-
Prospectus, not to exceed $3,025,000,000. 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 and
preference stock authorized for issuance under the Norwest Certificate, the
maximum number of shares of preferred stock, preference stock, and common
stock, respectively, that could be issued pursuant to the 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, 4,000,000 shares of
preference stock, and 500,000,000 shares of common stock. All or any portion of
the authorized but unissued preferred stock, preference stock, or Shelf
Securities issuable as preferred stock or convertible into preferred stock or
common stock, may be issued by the Board of Directors of Norwest without
further action by shareholders. Holders of preferred stock or preference stock
have certain rights and preferences with respect to dividends and upon
liquidation that are superior to those of holders of common stock. The relative
rights and preferences of any preferred stock or preference stock issued in the
future may be established by the Board of Directors of Norwest (the "Norwest
Board") without shareholder action, provided that each share of preference
stock will not be entitled to more than one vote per share. Although Norwest
has no current plans for the issuance of any shares of preferred stock or
preference 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 the common stock.
Subject to any prior rights of any preferred stock or preference stock then
outstanding, holders of common stock are entitled to receive such dividends as
are declared by the Norwest Board out of funds legally available for that
purpose. For information concerning legal limitations on the ability of
Norwest's banking subsidiaries to supply funds to Norwest, see "CERTAIN
REGULATORY CONSIDERATIONS." Subject to the rights, if any, of any preferred
stock or preference stock then outstanding, all voting rights are vested in the
holders of common stock, each share being entitled to one vote. Subject to any
prior rights of any preferred stock or preference stock, in the event of
liquidation, dissolution, or winding up of Norwest, holders of shares of common
stock are entitled to receive pro rata any assets distributable to shareholders
in respect of shares held by them. Holders of shares of common stock do not
have any preemptive right to subscribe for
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any additional securities which may be issued by Norwest. The outstanding
shares of Norwest Common Stock are, and the shares offered hereby will be,
fully paid and nonassessable. The transfer agent and registrar for Norwest
Common Stock is Norwest Bank Minnesota, N.A. Each share of common stock also
includes, and each share offered hereby will include, a right to purchase
certain preferred stock. See "Rights Plans--Norwest" below.
The foregoing description of the material terms of Norwest's common stock
does not purport to be complete and is qualified in its entirety by reference
to Article Fourth of the Norwest Certificate.
Election and Removal of Directors
The DGCL provides that directors are elected by a plurality of the votes of
the shares entitled to vote on such election present in person or by proxy at
the meeting at which directors are elected. In addition, stockholders of a
Delaware corporation, unless the corporation's Certificate of Incorporation
otherwise provides, are entitled to one vote for each share of capital stock
held, and are also entitled to exercise cumulative voting rights for directors,
if the corporation's Certificate of Incorporation permits such cumulative
voting. The DGCL also permits removal of any director or all directors of a
Delaware corporation by the holders of a majority of the shares entitled to
vote for directors and permits vacancies on the board of directors to be filled
by a majority of the directors then in office.
Foothill. Foothill currently has seven directors who serve for one-year
terms. The Foothill Certificate does not permit cumulative voting in the
election of directors to the Foothill Board, and each shareholder of Foothill
may cast one vote in the election of directors for each share held of record by
such shareholder. Under the Foothill By-Laws, any or all directors may be
removed only for cause, by the holders of 67% of the Voting Stock (as defined
in the Foothill Certificate) of the shares then entitled to vote at an election
of directors, provided, however, where such removal is approved by a majority
of the Disinterested Directors (as defined in the Foothill Certificate). A
majority of the voting power shall be required for removal. Vacancies on the
Foothill Board may be filled by a majority vote of the directors then in
office.
Norwest. Norwest currently has 14 directors who serve for one-year terms. The
Norwest Certificate does not permit cumulative voting in the election of
directors to the Norwest 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 the Norwest By-Laws, any or all directors 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 Norwest Board may be
filled by a majority vote of the directors then in office.
Rights Plans
Foothill. Unlike Norwest, Foothill has not adopted any shareholder rights
plan or issued any similar rights to the holders of Foothill Common Stock. One
Norwest Right (as defined below) will be attached to each share of Norwest
Common Stock issued in the Merger to Foothill stockholders.
Norwest. On November 22, 1988, the Norwest Board 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
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 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 Norwest 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 exercised, the Norwest Rights, in and of themselves, do not confer any
rights on their holders as stockholders 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
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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 Norwest Board 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 shares of Norwest
Common Stock at 50% of such shares' 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
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
Norwest Board 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 Norwest Board without the consent of the holders of the Norwest
Rights.
Required Vote for Authorization of Certain Actions
Under the DGCL, the vote of a majority of the outstanding shares of the
capital stock of a Delaware corporation entitled to vote thereon generally is
required to approve certain fundamental changes to the corporation, including a
merger or consolidation (except in certain limited circumstances described
below),
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the sale, lease, or exchange of all or substantially all of the corporation's
assets, a dissolution, or an amendment to the corporation's certificate of
incorporation, unless such certificate requires the vote of a greater
percentage of the corporation's outstanding capital stock entitled to vote on
such matters. With respect to a merger, no vote of the stockholders of a
Delaware corporation is required if such corporation is the surviving
corporation in the merger and (1) the related agreement of merger does not
amend the corporation's certificate of incorporation, (2) each share of capital
stock outstanding immediately before the merger is to be an identical
outstanding or treasury share of the corporation after the merger, and (3) the
number of shares of capital 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 such corporation's capital stock outstanding
immediately before the merger. Set forth below is a summary of the voting
rights of stockholders of Foothill and Norwest, respectively, and of the
required vote for authorization of the foregoing actions and other matters,
pursuant to the DGCL, the Foothill Certificate and the Norwest Certificate.
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. See
"CERTAIN REGULATORY CONSIDERATIONS."
Foothill. As described above with respect to Delaware law, the vote of a
majority of the outstanding shares of Foothill Common Stock entitled to vote
thereon is required to approve a merger or consolidation involving Foothill,
the sale, lease, or exchange of substantially all of Foothill's corporate
assets; provided, however, that in the case of certain business combinations
with an Interested Stockholder (as defined in the Foothill Certificate) the
affirmative vote of 67% of the Voting Power and a majority vote of all
outstanding shares of Voting Stock, other than shares held by an Interested
Stockholder is required. Certain provisions of the Foothill Certificate may be
amended only by the affirmative vote of 67% of the Voting Power.
Norwest. As described above with respect to Delaware law, the vote of a
majority of the outstanding shares of Norwest Common Stock entitled to vote
thereon is required to approve a merger or consolidation involving Norwest, the
sale, lease, or exchange of substantially all of Norwest's corporate assets, or
an amendment to the Norwest Certificate. Furthermore, no vote of the
stockholders of Norwest is required in connection with a merger if Norwest is
the survivor and the conditions stated above are met.
Appraisal Rights
Pursuant to Section 262 of the DGCL, a holder of capital stock of a Delaware
corporation is generally entitled to receive payment of the appraised value of
his or her shares if such stockholder dissents from a merger or consolidation
and complies with the procedures set forth in Section 262 of the DGCL for
exercising such rights. However, appraisal rights are not available in merger
or consolidation transactions to holders of (a) shares either listed on a
national stock exchange or designated as a national market system security on
an interdealer quotation system by the National Association of Securities
Dealers, Inc. 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 a sale of assets or an
amendment to the certificate.
Foothill. Because Foothill Common Stock is traded on the NYSE, holders of
Foothill Common Stock are not, subject to such express exceptions, entitled to
appraisal rights; provided however, that the Foothill Certificate provides
appraisal rights notwithstanding any exemptions provided by law for any
Business Combination with an Interested Shareholder.
Norwest. Similarly, shares of Norwest Common stock are listed on the NYSE and
the CHX (both of which are national securities exchanges), and Norwest
currently has more than 2,000 stockholders of record. Accordingly, holders of
Norwest Common Stock are not, subject to the express exceptions noted above,
currently entitled to any rights of appraisal in connection with proposed
mergers or consolidations involving Norwest.
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Special Meetings
The DGCL provides that special meetings of stockholders may be called by the
board of directors of the corporation, or by the person or persons authorized
by the corporation's certificate of incorporation or by-laws.
Foothill. The Foothill By-Laws provide that a special meeting of stockholders
may be called only by the Chairman of the Board, the President, or a majority
of the Board of Directors. Accordingly, holders of Foothill Common Stock do not
have the right to call a special meeting.
Norwest. The Norwest By-Laws provide that 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. Accordingly, holders of
Norwest Common Stock do not have the right to call a special meeting.
Limitation of Director Liability and Indemnification
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
extends only to expenses (including attorneys' fees) incurred in connection
with the defense or settlement of such actions. In the case of derivative
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. Both Foothill and Norwest have
provisions in their respective Certificates of Incorporation limiting the
liability of directors for monetary damages for breach of their fiduciary duty
and providing for indemnification of such director in certain circumstances.
Descriptions of these provisions in the Foothill Certificate and the Norwest
Certificate are set forth below.
Foothill. The Foothill Certificate provides that a director (including an
officer who is also a director) of Foothill shall not be liable personally to
Foothill 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 or loyalty to Foothill or its stockholders, (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 174 of the DGCL, or (d) any transaction from
which the director derived an improper personal benefit. This provision
protects Foothill 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 the Foothill
Certificate has no effect on the availability of equitable remedies, such as an
injunction or rescission, based upon a director's breach of his duty of care.
The Foothill By-Laws provide that Foothill 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 Foothill (or was
serving at the request of Foothill 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.
The Foothill By-Laws also provide that Foothill 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.
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The Foothill Certificate authorizes Foothill to provide similar
indemnification to employees or agents of Foothill.
Pursuant to the Foothill By-Laws, Foothill may maintain insurance, at its
expense, to protect itself and any directors, officers, employees, or agents of
Foothill or another entity against any expense, liability, or loss, regardless
of whether Foothill 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 the Foothill By-
Laws, agreement, vote of stockholders, or disinterested directors, or
otherwise.
Norwest. The Norwest Certificate 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 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 the Norwest Certificate has no
effect on the availability of equitable remedies, such as an injunction or
rescission, based upon a director's breach of his duty of care.
The Norwest Certificate further 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 the Norwest Board.
The Norwest Certificate 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.
The Norwest Certificate authorizes Norwest to provide similar indemnification
to employees or agents of Norwest.
Pursuant to the Norwest Certificate, 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 the Norwest
Certificate or By-Laws, agreement, vote of stockholders or disinterested
directors, or otherwise.
Action Without a Meeting
Section 228 of the DGCL permits any action required or permitted to be taken
at a stockholders' 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. The DGCL also provides that a
corporation's certificate of incorporation may restrict or even prohibit
stockholders' action without a meeting. The Foothill
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By-Laws provide that any action required or permitted to be taken by the
Foothill stockholders must be effected at a duly called Annual Meeting or at a
special meeting, unless such an action requiring or permitting stockholder
approval is approved by a majority of Disinterested Directors (as defined in
the Foothill Certificate) in which case such action may be authorized by
written consent. The Norwest Certificate restricts or prohibits stockholders'
action without a meeting.
By-Laws
Section 109 of the DGCL places the power to adopt, amend, or repeal by-laws
in the corporation's stockholders, but permits the corporation, in its
certificate of incorporation, also to vest such power with the board of
directors. A summary of the provisions in the by-laws of Foothill and Norwest,
respectively, as to adoption, amendment, and repeal of such by-laws is set
forth below.
Foothill. The Foothill Certificate provides that the Foothill By-Laws may be
adopted, repealed, rescinded, altered, or amended by Foothill stockholders, but
only by the affirmative vote of the holders of 67% of all Voting Stock (as
defined in the Foothill Certificate), and where such action is proposed by an
Interested Stockholder by a majority of the Voting Power of all Voting Stock
other than shares held by such Interested Stockholder; provided, however, that
if such action is approved by a majority of Disinterested Directors in the case
of action proposed by an Interested Stockholder or by a majority of the Board
in the case of action by other than an Interested Stockholder, then the action
may be taken by a majority of the Voting Power of all outstanding shares of
Voting Stock.
Norwest. The Norwest Certificate also contains provisions empowering the
Norwest Board to adopt, amend, and repeal by-laws. Although the Norwest Board
has been vested with such authority, Norwest's stockholders' power to adopt,
amend, or repeal by-laws remains unrestricted.
Preemptive Rights
Under Section 102 of the DGCL, stockholders have no statutory preemptive
rights, unless a corporation's certificate of incorporation specifies
otherwise. Neither the Norwest Certificate nor the Foothill Certificate
provides for any such preemptive rights.
Dividends
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 also subject to the policies of the Federal Reserve Board
regarding payment of dividends, which generally limit dividends to operating
earnings. See "CERTAIN REGULATORY CONSIDERATIONS."
Proposal of Business, Nomination of Directors
The Norwest By-Laws contain detailed advance notice and informational
procedures which must be complied with in order for a stockholder to nominate a
person to serve as a director. The Norwest By-Laws generally require a
stockholder to give notice of a proposed nominee in advance of the stockholder
meeting at which directors will be elected. In addition, the Norwest By-Laws
contain detailed advance notice and informational procedures which must be
followed in order for a Norwest stockholder to propose an item of business for
consideration at a meeting of Norwest stockholders. There are no similar
provisions in the Foothill By-Laws.
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RIGHTS OF DISSENTING FOOTHILL STOCKHOLDERS
Section 262 of the DGCL provides that a stockholder of a Delaware corporation
is generally entitled to receive payment of the appraised value of his stock if
such stockholder dissents from a merger or consolidation. The statute does not,
however, generally afford such appraisal rights to stockholders whose shares
have been designated as a "national market system security" on an interdealer
quotation system by the National Association of Securities Dealers, Inc. with
respect to a merger or plan of share exchange involving that corporation.
Because Foothill Common Stock is traded on the NYSE, holders of Foothill Common
Stock will not be entitled to appraisal rights with respect to their shares and
cannot dissent from the Merger.
CERTAIN U.S. FEDERAL INCOME TAX MATTERS
The following is a discussion of certain U.S. federal income tax consequences
of the Merger that are generally applicable to Foothill and Foothill
stockholders. This discussion is based on currently existing provisions of the
Internal Revenue Code of 1986, as amended (the "Code"), existing regulations
thereunder (including final, temporary, or proposed), and current
administrative rulings and court decisions, all of which are subject to change.
Any such change, which may or may not be retroactive, could alter the tax
consequences described herein.
The following discussion is intended only as a summary of certain principal
U.S. federal income tax consequences of the Merger and does not purport to be a
complete analysis or listing of all of the potential tax effects relevant to a
decision on whether to vote in favor of approval and adoption of the Merger
Agreement and the Merger. In particular, this discussion does not deal with all
U.S. federal income tax considerations that may be relevant to particular
Foothill stockholders in light of their particular circumstances, such as
stockholders who are dealers in securities, who are subject to the alternative
minimum tax provisions of the Code, who are foreign persons, or who acquired
their shares in connection with stock warrants, stock option, or stock purchase
plans, or in other compensatory transactions. The discussion also does not
address the effects of the Merger on holders of Foothill Options. In addition,
the following discussion does not address the tax consequences of the Merger
under foreign, state, or local tax laws or the tax consequences of transactions
effectuated prior to or after the Merger (whether or not such transactions are
in connection with the Merger), including without limitation transactions in
which Foothill Common Stock or Foothill Preferred is acquired or Norwest Common
Stock is disposed of.
ACCORDINGLY, FOOTHILL STOCKHOLDERS AND OTHERS AFFECTED BY THE MERGER ARE
URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE TAX CONSEQUENCES OF THE
MERGER, INCLUDING APPLICABLE U.S. FEDERAL, STATE, LOCAL, AND FOREIGN TAX
CONSEQUENCES TO THEM.
The Merger has been structured with the intent that it will qualify as a tax
free reorganization under Section 368(a) of the Code and except as discussed
herein, it will be tax free to Foothill and the Foothill stockholders for U.S.
federal income tax purposes. Buchalter, Nemer, Fields & Younger, A Professional
Corporation, counsel to Foothill, will render an opinion (the "Tax Opinion")
that the Merger, if consummated on the terms described in this Proxy Statement-
Prospectus, will constitute a reorganization under Section 368(a) of the Code
(a "Reorganization"). The Tax Opinion will be based on and will be subject to
certain assumptions and limitations as well as representations received from
Norwest, Merger Co., and Foothill, discussed below. An opinion of counsel only
represents counsel's best legal judgment, and has no binding effect or official
status of any kind, and no assurance can be given that contrary positions may
not be taken by the Internal Revenue Service (the "IRS") or a court considering
the issues. Neither Foothill nor Norwest has requested or will request a ruling
from the IRS with regard to any of the U.S. federal income tax consequences of
the Merger.
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Tax Consequences Generally Applicable to Foothill and Foothill Stockholders
Subject to the limitations, qualifications and assumptions referred to
herein, the following U.S. federal income tax consequences will result from the
Merger. The Merger will constitute a Reorganization if carried out in the
manner set forth in the Merger Agreement, and the agreements referred to
therein. In such event:
(1) No gain or loss will be recognized by holders of Foothill Common
Stock or Foothill Preferred upon exchange of such shares solely for Norwest
Common Stock in the Merger, except for cash received in lieu of a
fractional share of Norwest Common Stock.
(2) Cash payments received by holders of Foothill Common Stock and
Foothill Preferred in lieu of a fractional share of Norwest Common Stock
will be treated as if such fractional share of Norwest Common Stock had
been issued in the Merger and then redeemed by Norwest.
(3) A Foothill stockholder receiving such cash will recognize gain or
loss, upon such payment, measured by the difference (if any) between the
amount of cash received and the stockholder's adjusted tax basis in such
fractional share. Such gain or loss generally would be treated as capital
gain or capital loss for each such stockholder if he or she held his or her
Foothill Common Stock or Foothill Preferred, whichever is the case, as a
capital asset at the time of the Merger.
(4) The aggregate tax basis of the Norwest Common Stock received by
Foothill stockholders in the Merger will be the same as the aggregate tax
basis of the Foothill Common Stock or Foothill Preferred, whichever is the
case, surrendered in exchange for the Norwest Common Stock. The aggregate
tax basis of the whole shares of Norwest Common Stock actually received by
Foothill stockholders will be the total aggregate basis described in the
immediately preceding sentence, reduced by the basis allocable to
fractional shares.
(5) The holding period of the Norwest Common Stock received by each
Foothill stockholder in the Merger will include the period during which the
Foothill Common Stock or Foothill Preferred, whichever is the case,
surrendered in exchange therefore was considered to be held, provided that
the Foothill Common Stock or Foothill Preferred, whichever is the case, so
surrendered is held as a capital asset at the time of the Merger.
(6) No gain or loss will be recognized by Foothill in connection with the
Merger.
Limitations on Discussion and Opinion
The discussion of certain U.S. federal income tax consequences presented
above and the Tax Opinion which will be delivered by Foothill's counsel will be
subject to certain assumptions and will be based on the accuracy of the
representations in the Merger Agreement, exhibits thereto, the agreements and
documents referred to therein, and certain representations made by Foothill and
Norwest. Among the principal assumptions upon which the above tax discussion
and the Tax Opinion will be based include that the Merger will be consummated
pursuant to the Merger Agreement, that Foothill after the Merger will have
retained substantially all of its assets, that Foothill will continue its
business as a wholly-owned subsidiary of Norwest, at least 80% of each class of
Foothill Capital Stock outstanding at the time of the Merger will be exchanged
for Norwest Common Stock, that all the significant historic stockholders of
Foothill shall not have disposed of Foothill Capital Stock in contemplation of
the Merger and do not have any plan or intention, existing at or prior to the
time of the Merger, to dispose of the Norwest Common Stock to be received in
the Merger such that they would not have a sufficient continuing equity
interest in Foothill after the Merger by virtue of their ownership of Norwest
Common Stock, and that Norwest does not have a plan or intention to dispose of
Foothill Capital Stock received in exchange or cause Foothill to issue
additional stock such that Norwest would relinquish its "control" of Foothill
obtained in the Merger.
A successful IRS challenge to the status of the Merger as a Reorganization
would result in Foothill stockholders being treated as if they sold their
Foothill Common Stock or Foothill Preferred, whichever is the case, in a
taxable transaction. In such event, each Foothill stockholder would be required
to recognize all of his or her realized gain or loss with respect to the
disposition of each of his or her shares of Foothill
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<PAGE>
Common Stock or Foothill Preferred equal to the difference between the Foothill
stockholder's basis in such shares and the fair market value, as of the date
the Merger becomes effective, of the Norwest Common Stock received in exchange
therefor (plus any cash received for fractional shares). Such gain or loss
generally would be treated as capital gain or capital loss for each such
stockholder if he or she held his or her Foothill Common Stock or Foothill
Preferred, whichever is the case, as a capital asset at the time of the Merger.
In such event, a Foothill stockholder's aggregate basis in the Norwest Common
Stock so received would equal the fair market value of such stock as of the
Effective Time, and the Foothill stockholder's holding period for such Norwest
Common Stock would begin the day after the Merger.
Even if the Merger qualifies as a Reorganization, a recipient of Norwest
Common Stock at the time of the Merger would recognize gain to the extent that
such shares were considered to be received in exchange for services or property
(other than solely in exchange for Norwest Common Stock). Gain would also have
to be recognized to the extent that a Foothill stockholder was treated as
receiving (directly or indirectly) consideration other than Norwest Common
Stock in exchange for Foothill Common Stock or Foothill Preferred. All or a
portion of such gain amounts may be taxable as ordinary income.
RESALE OF NORWEST COMMON STOCK
The shares of Norwest Common Stock issuable to stockholders of Foothill upon
consummation of the Merger have been registered under the Securities Act. Such
shares may be traded freely and without restriction by those stockholders not
deemed to be "affiliates" of Foothill or Norwest as that term is defined in the
rules under the Securities Act. Norwest Common Stock received by those
stockholders of Foothill who are deemed to be "affiliates" of Foothill may be
resold without registration as provided for by Rule 145, or as otherwise
permitted under the Securities Act. Persons who may be deemed to be affiliates
of Foothill generally include individuals or entities that control, are
controlled by or are under common control with, Foothill, and may include the
executive officers and directors of Foothill as well as certain principal
stockholders of Foothill. In the Merger Agreement, Foothill has agreed to use
its best efforts to cause each Foothill stockholder who is an executive officer
or director of Foothill or who may otherwise reasonably be deemed to be an
affiliate of Foothill 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 (i) except in
compliance with the applicable provisions of the Securities Act and the rules
and regulations promulgated thereunder, and (ii) during the periods when any
such sale, transfer, or other disposition would, under generally accepted
accounting principles or the rules, regulations, or interpretations of the
Commission, disqualify the Merger from pooling-of-interests accounting
treatment. See "THE MERGER--Accounting Treatment." In general, such periods
encompass the period commencing 30 days prior to the Merger and ending at the
time of the publication of financial results covering at least 30 days of
combined operations of Norwest and Foothill. This Proxy Statement-Prospectus
does not cover any resales of Norwest Common Stock received by affiliates of
Foothill.
STOCK EXCHANGE LISTING
The Merger Agreement provides for the filing by Norwest of listing
applications with the NYSE and the CHX 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 CHX.
ACCOUNTING TREATMENT
It is anticipated that the Merger will be accounted for as a "pooling of
interests" transaction in accordance with generally accepted accounting
principles.
Under the pooling-of-interests method of accounting, the historical basis of
the assets and liabilities of Norwest and Foothill will be combined at the
Effective Time and carried forward at their previously recorded amounts, and
the stockholders' equity accounts of Foothill will be combined with Norwest's
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.
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In order for the Merger to qualify for pooling-of-interests accounting
treatment, among other things, Substantially all (90% or more) of the
outstanding Foothill Common Stock must be exchanged for Norwest Common Stock.
Foothill has agreed not to take any action (other than actions required under
the Merger Agreement or requested by Norwest) that would disqualify the Merger
from pooling-of-interests treatment by Norwest.
The unaudited per share data contained in this Proxy Statement-Prospectus has
been prepared using the pooling-of-interests method of accounting to account
for the Merger. See "SUMMARY--Comparative Per Common Share Data."
EXPENSES
Except as otherwise provided in the Merger Agreement, Norwest and Foothill
will each pay their own expenses in connection with the Merger, including fees
and expenses of their respective accountants and counsel.
DIVIDEND REINVESTMENT AND OPTIONAL CASH PAYMENT PLAN
Norwest currently has an automatic 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 in the plan). 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 in the plan) of such stock at the time of
purchase. It is anticipated that after the Effective Time of the Merger,
Norwest will continue to offer its Dividend Reinvestment and Optional Cash
Payment Plan and that stockholders of Foothill who receive Norwest Common Stock
in the Merger will have the right to participate therein.
COMPARATIVE PER SHARE PRICES AND DIVIDENDS
Norwest Common Stock and Foothill Common Stock are listed on the NYSE. The
following table sets forth the high and low sales prices per share of the
Norwest Common Stock and Foothill Common Stock as reported on the NYSE
Composite Tape, and the dividends paid on such Norwest Common Stock and
Foothill Common Stock, for the below quarterly periods, which correspond to the
companies' respective quarterly fiscal periods for financial reporting
purposes.
<TABLE>
<CAPTION>
NORWEST COMMON STOCK FOOTHILL COMMON STOCK
------------------------- -------------------------
HIGH LOW DIVIDENDS HIGH LOW DIVIDENDS
------- ------- --------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
1993
First Quarter......... $26.000 $20.625 $.145 $ 9.875 $ 7.500 $.030
Second Quarter........ 28.375 22.875 .165 11.375 8.875 .030
Third Quarter......... 28.000 25.625 .165 13.375 10.625 .030
Fourth Quarter........ 29.000 22.50 .165 17.500 12.125 .050
1994
First Quarter......... $27.375 $22.250 $.185 $17.875 $12.750 $.050
Second Quarter........ 28.250 23.125 .185 14.625 11.750 .050
Third Quarter......... 27.500 24.750 .185 15.875 11.750 .060
Fourth Quarter........ 25.000 21.000 .210 15.750 14.375 .060
1995
First Quarter......... $26.250 $22.625 $.210 $20.125 $14.625 $.080
Second Quarter........ 29.375 25.125 .210 25.750 19.250 .080
Third Quarter......... 31.125 26.875 .240 28.125 23.875 .010
(through September
12, 1995)
</TABLE>
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The following table sets forth the closing prices per share of Norwest Common
Stock and of Foothill Common Stock on (i) May 15, 1995, the last trading day
preceding the execution of the Merger Agreement, and (ii) September 12, 1995.
The table also sets forth the equivalent per share prices for Foothill Common
Stock, based on the Common Stock Exchange Ratio of 0.92.
<TABLE>
<CAPTION>
NORWEST FOOTHILL EQUIVALENT
COMMON STOCK COMMON STOCK PER SHARE PRICE
------------ ------------ ---------------
<S> <C> <C> <C>
MARKET VALUE PER SHARE:
May 15, 1995.................. $28.125 $23.875 $25.875
September 12, 1995............ $31.00 $28.125 $28.52
</TABLE>
CERTAIN REGULATORY CONSIDERATIONS
GENERAL
As a bank holding company, Norwest is subject to supervision and examination
by the Federal Reserve Board. Norwest's banking subsidiaries are subject to
supervision and examination by applicable federal and state banking agencies.
The deposits of Norwest's banking subsidiaries are insured by the Bank
Insurance Fund of the Federal Deposit Insurance Corporation ("FDIC"), and
therefore such banking subsidiaries are subject to regulation by 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.
DIVIDEND RESTRICTIONS
Various federal and state statutes and regulations limit the amount of
dividends the subsidiary banks can pay to Norwest without regulatory approval.
The approval of 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 June
30, 1995, aggregate dividends of at least $231.9 million without obtaining
prior regulatory approval and without reducing the capital of the banks below
minimum regulatory levels. Norwest also has several state bank subsidiaries
that are subject to state regulations limiting dividends; however, the amount
of dividends payable by Norwest's state bank subsidiaries, with or without
state regulatory approval, would represent an immaterial contribution to
Norwest's revenues.
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 FDIC-insured banks and bank holding companies should generally pay
dividends only out of current operating earnings.
HOLDING COMPANY STRUCTURE
Norwest is a legal entity separate and distinct from its banking and
nonbanking subsidiaries. Accordingly, the right of Norwest, and thus the rights
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.
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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
nonbank subsidiaries, whether in the form of loans, extensions of credit,
investments, or asset purchases. Such transfers by any subsidiary bank to
Norwest or any nonbank subsidiary are limited in amount to 10% of the bank's
capital and surplus and, with respect to Norwest and all such nonbank
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. (S)55) permits the OCC to order the pro rata
assessment of shareholders 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 shareholders of such national bank to cover such
impairment of capital stock by sale, to the extent necessary, of the capital
stock of any assessed shareholder failing to pay the assessment. Similarly, the
laws of certain states provide for such assessment and sale with respect to
banks chartered by such states. Norwest, as the sole shareholder of most of its
subsidiary banks, is subject to such provisions.
CAPITAL REQUIREMENTS
Under the Federal Reserve Board's risk-based capital guidelines for bank
holding companies, 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 stock,
minority interests, and noncumulative 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 the
allowance for credit losses. In addition, the Federal Reserve Board's minimum
"leverage ratio" (the ratio of Tier 1 capital to quarterly average total
assets) guidelines for bank holding companies provide for a minimum leverage
ratio of 3% for bank holding companies that meet certain specified criteria,
including that they have the highest regulatory rating. All other bank holding
companies are required to maintain a leverage ratio of 3% plus an additional
cushion of 1% to 2%. The guidelines also provide that banking organizations
experiencing internal growth or making acquisitions are 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 regulatory agencies which are substantially similar to
the foregoing. At June 30, 1995, Norwest's Tier 1 and total capital (the sum of
Tier 1 and Tier 2 capital) to risk-adjusted assets ratios were 8.04% and
10.18%, respectively, and Norwest's leverage ratio was 5.85%. Neither Norwest
nor any subsidiary bank has been advised by the appropriate federal regulatory
agency of any specific leverage ratio applicable to it.
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FEDERAL DEPOSIT INSURANCE CORPORATION IMPROVEMENT ACT OF 1991
In December 1991, Congress enacted the Federal Deposit Insurance Corporation
Improvement Act of 1991 ("FDICIA"), which substantially revised 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 regulators to take "prompt corrective
action" in respect of FDIC-insured depository institutions that do not meet
minimum capital requirements. FDICIA establishes five capital tiers: "well
capitalized," "adequately capitalized," "undercapitalized," "significantly
undercapitalized," and "critically undercapitalized." Under applicable
regulations, an FDIC-insured depository institution is defined to be well
capitalized if it maintains a leverage ratio of at least 5%, a risk-adjusted
Tier 1 capital ratio of at least 6%, and a risk-adjusted total capital ratio of
at least 10%, and is not subject to a directive, order, or written agreement to
meet and maintain specific capital levels. An insured depository institution is
defined to be adequately capitalized if it meets all of its minimum capital
requirements as described above. An insured depository institution will be
considered undercapitalized if it fails to meet any minimum required measure,
significantly undercapitalized if it has a risk-adjusted total capital ratio of
less than 6%, risk-adjusted Tier 1 capital ratio of less than 3%, or a leverage
ratio of less than 3%, and critically undercapitalized if it fails to maintain
a level of tangible equity equal to at least 2% of total assets. An insured
depository institution may be deemed to be in a capitalization category that is
lower than is indicated by its actual capital position if it receives an
unsatisfactory examination rating.
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 were 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, as amended by the Reigle Community Development and Regulatory
Improvement Act of 1994 enacted on August 22, 1994, directs that each federal
banking agency prescribe standards, by regulation or guideline, for depository
institutions relating to internal controls, information systems, internal audit
systems, loan documentation, credit underwriting, interest rate exposure, asset
growth, compensation, asset quality, earnings, stock valuation, and such other
operational and managerial standards as the agency deems appropriate. The FDIC,
in consultation with the other federal banking agencies, has adopted a final
rule and guidelines with respect to internal and external audit procedures and
internal controls in order to implement those provisions of FDICIA intended to
facilitate the early identification of problems in financial management of
depository institutions. On July 10, 1995, the federal banking agencies
published the final rules implementing three of the safety and soundness
standards required by FDICIA, including operational and managerial standards,
asset quality and earnings standards, and compensation standards. The impact of
such standards on Norwest has not yet been fully determined, but management
does not believe it will be material.
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<PAGE>
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 (that is, 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 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 that 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. At June 30, 1995, 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") 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 member institution was assigned an annual FDIC
assessment rate ranging from 23 cents per $100 of domestic deposits (for well
capitalized Subgroup A institutions) to 31 cents (for undercapitalized Subgroup
C institutions). Adequately capitalized institutions were assigned assessment
rates ranging from 26 cents to 30 cents. The FDIC has issued regulations that,
effective September 30, 1995, assign an annual FDIC assessment rate for BIF
member institutions ranging from 4 cents per $100 of domestic deposits (for
well capitalized Subgroup A institutions) to 31 cents (for undercapitalized
Subgroup C institutions). Norwest incurred $79.2 million of FDIC insurance
expense in 1994.
EXPERTS
The consolidated financial statements of Norwest and subsidiaries as of
December 31, 1994 and 1993, and for each of the years in the three-year period
ended December 31, 1994, incorporated by reference herein, have been
incorporated herein in reliance upon the report of KPMG Peat Marwick LLP,
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 Foothill as of December 31, 1994 and
1993, and for each of the years in the three-year period ended December 31,
1994, incorporated by reference in the Proxy Statement of Foothill, which is
referred to and made a part of this Registration Statement, have been audited
by Ernst & Young LLP, independent auditors, as set forth in their report
thereon included therein, and incorporated herein by reference. Such
consolidated financial statements are incorporated herein by reference in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
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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 Corporation. At
March 31, 1995, Mr. Stroup was the beneficial owner of 108,607 shares and held
options to acquire 179,931 additional shares of Norwest Common Stock.
Certain legal matters in connection with the Merger will be passed upon for
Foothill by Buchalter, Nemer, Fields & Younger, A Professional Corporation, 601
South Figueroa Street, Los Angeles, California. Certain members and employees
of Buchalter, Nemer, Fields & Younger own shares of Foothill Common Stock.
MANAGEMENT OF NORWEST 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 its Annual Report on Form 10-K for the year ended
December 31, 1994, which are incorporated in this Proxy Statement-Prospectus by
reference. See "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE." Shareholders
of Foothill desiring copies of such documents may contact Norwest at its
address or phone number indicated under "AVAILABLE INFORMATION" above.
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APPENDIX A
AMENDED
AGREEMENT AND PLAN OF REORGANIZATION,
AND
AGREEMENT AND PLAN OF MERGER
<PAGE>
AGREEMENT
AND
PLAN OF REORGANIZATION
Agreement and Plan of Reorganization (the "Agreement") entered into as of the
15th day of May, 1995, by and between FOOTHILL GROUP, INC. ("Foothill"), a
Delaware corporation, and NORWEST CORPORATION ("Norwest"), a Delaware
corporation.
Whereas, the parties hereto desire to effect a reorganization whereby a
wholly-owned subsidiary of Norwest will merge with and into Foothill (the
"Merger") pursuant to an agreement and plan of merger (the "Merger Agreement")
in substantially the form attached hereto as Exhibit A, which provides, among
other things, for the conversion and exchange of the shares of Series A Common
Stock of Foothill, no par value ("Foothill Common Stock"), including, subject
to the terms and conditions set forth herein, options convertible into shares
of Foothill Common Stock and Foothill Series A convertible Preferred Stock,
$1.00 par value per share ("Preferred Stock") outstanding immediately prior to
the time the Merger becomes effective in accordance with the provisions of the
Merger Agreement into shares of voting Common Stock of Norwest of the par value
of $1 2/3 per share ("Norwest Common Stock"),
Now, Therefore, to effect such reorganization and in consideration of the
premises and the mutual covenants and agreements contained herein, the parties
hereto do hereby represent, warrant, covenant and agree as follows:
1. BASIC PLAN OF REORGANIZATION
(a) Merger. Subject to the terms and conditions contained herein, a wholly-
owned subsidiary of Norwest (the "Merger Co.") will be merged by statutory
merger with and into Foothill pursuant to the Merger Agreement, with Foothill
as the surviving corporation and the separate existence of Merger Co. shall
thereupon cease, in which merger (i) each share of Foothill Common Stock
outstanding immediately prior to the Effective Time of the Merger (as defined
below) (other than shares as to which statutory dissenters' appraisal rights
have been exercised) shall, by virtue of the Merger and without any action on
the part of the holder thereof, be converted into and exchanged for .920 fully
paid and nonassessable shares of Norwest Common Stock, (ii) each share of the
Preferred Stock of Foothill issued and outstanding immediately prior to the
Effective Time of the Merger (other than shares of Preferred Stock held in
Foothill's treasury) shall, by virtue of the Merger and without any action on
the part of the holder thereof, be converted into and exchanged for 6.1333272
fully paid and nonassessable shares of Norwest Common Stock, (iii) the shares
of Foothill Common Stock subject to each unexercised Option (as defined in
paragraph 4(o) of the Reorganization Agreement) having an exercise price that
is less than the "Fair Market Value" (as defined below) per share of Foothill
Common Stock and whose holder shall have entered into an agreement with
Foothill pursuant to paragraph 4(o) hereof (the "Option Shares"), shall be
converted into and exchanged for that number of fully paid and nonassessable
shares of Norwest Common Stock determined as follows: (A) by dividing (1) the
aggregate Fair Market Value of the Option Shares less the aggregate exercise
price thereof by (2) the Fair Market Value of one share of Foothill Common
Stock, and then (B) multiplying the number obtained as the result of such
division by .920, and (iv) all shares of Foothill Common Stock owed by Foothill
or any subsidiary thereof, or by Norwest, or Merger Co. shall be canceled. Each
share of Merger Co. common stock shall be converted into and exchanged by
virtue of the Merger into shares of the surviving corporation. For purposes of
clause (iii), the term "Fair Market Value" with respect to Foothill Common
Stock shall mean the per share price of Foothill Common Stock as reported by
the consolidated tape of the New York Stock Exchange for the trading day
immediately preceding the "Closing Date" (as that term is defined in the
Reorganization Agreement).
(b) Norwest Common Stock Adjustments. If, between the date hereof and the
Effective Time of the Merger, shares of Norwest Common Stock shall be changed
into a different number of shares or a different class of shares by reason of
any reclassification, recapitalization, split-up, combination, exchange of
shares or
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readjustment, or if a stock dividend thereon shall be declared with a record
date within such period (a "Common Stock Adjustment"), then the number of
shares of Norwest Common Stock into which a share of Foothill Common Stock or
Preferred Stock or Option Shares shall be converted pursuant to subparagraph
(a), above, will be appropriately and proportionately adjusted so that the
number of such shares of Norwest Common Stock into which a share of Foothill
Common Stock or Preferred Stock or Option Shares shall be converted will equal
the number of shares of Norwest Common Stock which holders of shares of
Foothill Common Stock or Preferred Stock or Option Shares would have received
pursuant to such Common Stock Adjustment had the record date therefor been
immediately following the Effective Time of the Merger.
(c) Fractional Shares. No fractional shares of Norwest Common Stock and no
certificates or scrip certificates therefor shall be issued for exchange of
certificates representing Foothill Common Stock or Preferred Stock or Option
Shares pursuant to Section 1(a) to represent any such fractional interest, and
any holder thereof shall be paid upon such surrender an amount of cash (without
interest) in an amount equal to the product obtained by multiplying the
fractional share interest to which such holder is entitled by the average of
the closing prices of a share of Norwest Common Stock as reported by the
consolidated tape of the New York Stock Exchange for each of the five (5)
trading days ending on the day immediately preceding the meeting of
shareholders required by paragraph 4(c) of this Agreement.
(d) Mechanics of Closing Merger. Subject to the terms and conditions set
forth herein, the Merger Agreement shall be executed and it or Articles of
Merger or a Certificate of Merger shall be filed with the Secretary of State of
the State of Delaware within ten (10) business days following the satisfaction
or waiver of all conditions precedent set forth in Sections 6 and 7 of this
Agreement or on such other date as may be agreed to by the parties (the
"Closing Date"). Each of the parties agrees to use its best efforts to cause
the Merger to be completed as soon as practicable after the receipt of final
regulatory approval of the Merger and the expiration of all required waiting
periods. The time that the filing referred to in the first sentence of this
paragraph is made is herein referred to as the "Time of Filing". The day on
which such filing is made and accepted is herein referred to as the "Effective
Date of the Merger". The "Effective Time of the Merger" shall be 11:59 p.m.
Delaware time on the Effective Date of the Merger. At the Effective Time of the
Merger on the Effective Date of the Merger, the separate existence of Merger
Co. shall cease and Merger Co. will be merged with and into Foothill pursuant
to the Merger Agreement.
Each of Norwest, Merger Co. and Foothill shall provide all reasonable
assistance to, and shall cooperate with each other to bring about the
consummation of the Merger as soon as possible in accordance with and subject
to the terms of this Agreement. Norwest shall cause Merger Co. to perform all
covenants and obligations required to be performed by it in connection with
this Agreement and the Merger Agreement.
The closing of the transactions contemplated by this Agreement and the Merger
Agreement (the "Closing") shall take place on the Closing Date at the offices
of Norwest, Norwest Center, Sixth and Marquette, Minneapolis, Minnesota.
2. REPRESENTATIONS AND WARRANTIES OF FOOTHILL. Foothill represents and
warrants to Norwest as follows:
(a) Organization and Authority. Foothill is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
is duly qualified to do business and are in good standing in all jurisdictions
where its ownership or leasing of property or the conduct of its business
requires it to be so qualified and failure to be so qualified would have a
material adverse effect on Foothill and its subsidiaries taken as a whole and
Foothill has the corporate power and authority to own its properties and assets
and to carry on its business as it is now being conducted. Foothill has
furnished Norwest true and correct copies of its articles of incorporation and
by-laws, as amended.
(b) Foothill's Subsidiaries. Schedule 2(b) sets forth a complete and correct
list of all of Foothill's direct and indirect subsidiaries and partnerships of
which Foothill is a general partner as of the date hereof (individually a
"Foothill Subsidiary" and collectively the "Foothill Subsidiaries"), all shares
of the
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outstanding capital stock or voting securities of each of which, except as set
forth on Schedule 2(b), are owned directly or indirectly by Foothill. No equity
security of any Foothill Subsidiary is or may be required to be issued by
reason of any option, warrant, scrip, preemptive right, right to subscribe to,
call or commitment of any character whatsoever relating to, or security or
right convertible into, shares of any capital stock of such subsidiary, and
there are no contracts, commitments, understandings or arrangements by which
any Foothill Subsidiary is bound to issue additional shares of its capital
stock, or any option, warrant or right to purchase or acquire any additional
shares of its capital stock. Subject to the Delaware General Corporation Law,
all of such shares so owned by Foothill are fully paid and nonassessable and
are owned by it free and clear of any lien, claim, charge, option, encumbrance
or agreement with respect thereto. Each Foothill Subsidiary is a corporation or
partnership duly organized, validly existing, duly qualified to do business and
in good standing under the laws of its jurisdiction of incorporation or
organization, and has corporate power and authority to own or lease its
properties and assets and to carry on its business as it is now being
conducted. Except for Foothill Partners, L.P. ("FPI") and Foothill Partners,
II. ("FPII") (collectively, the "Partnerships") and except as set forth on
Schedule 2(b), Foothill does not own beneficially, directly or indirectly, more
than 5% of any class of equity securities or similar interests of any
corporation, bank, business trust, association or similar organization, and is
not, directly or indirectly, a partner in any partnership or party to any joint
venture. Schedule 2(b) sets forth the partnership interests of the Partnerships
owned by Foothill.
(c) Capitalization. The authorized capital stock of Foothill consists of
22,000,000 shares of Common Stock, no par value, 1,000,000 shares of Preferred
Stock, $1.00 par value, of which as of the close of business on March 31, 1995,
16,705,594 shares of Foothill Common Stock and 100,000 shares of Preferred
Stock were issued and outstanding and no shares were held in the treasury. The
maximum number of shares of Foothill Common Stock (assuming for this purpose
that phantom shares and other share-equivalents constitute Foothill Common
Stock) that would be outstanding as of the Effective Date of the Merger if all
options, warrants, conversion rights and other rights with respect thereto,
except the option to purchase Foothill Common Stock granted pursuant to the
Stock Option Agreement dated the date hereof between Foothill and Norwest (the
"Stock Option Agreement"), were exercised is 17,843,359. All of the outstanding
shares of capital stock of Foothill have been duly and validly authorized and
issued and are fully paid and nonassessable. Except as set forth in Schedule
2(c) and except for the option granted pursuant to the Stock Option Agreement,
there are no outstanding subscriptions, contracts, conversion privileges,
options, warrants, calls, preemptive rights or other rights obligating Foothill
or any Foothill Subsidiary to issue, sell or otherwise dispose of, or to
purchase, redeem or otherwise acquire, any shares of capital stock of Foothill
or any Foothill Subsidiary. Except as set forth on Schedule 2(c) hereof, since
December 31, 1994, no shares of Foothill capital stock have been purchased,
redeemed or otherwise acquired, directly or indirectly, by Foothill or any
Foothill Subsidiary and no dividends or other distributions have been declared,
set aside, made or paid to the shareholders of Foothill.
As of the date of this Agreement, there are no cumulated and unpaid dividends
with respect to the Preferred Stock. The Conversion Price, as defined in
Paragraph F of the Certificate of Designation, Voting Powers, Preferences,
Rights, Qualifications, Limitations and Restrictions of the Preferred Stock
(the "Foothill Certificate of Designation"), has not been adjusted and the
Conversion Price for each share of Preferred Stock, as defined in Paragraph F
of the Certificate of Designation is 6.66666 per share of Preferred Stock.
(d) Authorization. Foothill has the corporate power and authority to enter
into this Agreement and the Merger Agreement and, subject to any required
approvals of its shareholders, to carry out its obligations hereunder and
thereunder. The execution, delivery and performance of this Agreement and the
Merger Agreement by Foothill and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by the Board of
Directors of Foothill. Subject to such approvals of shareholders and of
government agencies and other governing boards having regulatory authority over
Foothill as may be required by statute or regulation, this Agreement and the
Merger Agreement are valid and binding obligations of Foothill enforceable
against Foothill in accordance with their respective terms, except as
enforceability may be limited by bankruptcy, insolvency or other similar laws
affecting the enforcement of creditors' rights and the availability of
equitable remedies, including specific performance.
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Except as set forth on Schedule 2(d), neither the execution, delivery and
performance by Foothill of this Agreement or the Merger Agreement, nor the
consummation of the transactions contemplated hereby and thereby, nor
compliance by Foothill with any of the provisions hereof or thereof, will (i)
violate, conflict with, or result in a breach of any provision of, or
constitute a default (or an event which, with notice or lapse of time or both,
would constitute a default) under, or result in the termination of, or
accelerate the performance required by, or result in a right of termination or
acceleration of, or result in the creation of, any lien, security interest,
charge or encumbrance upon any of the properties or assets of Foothill or any
Foothill Subsidiary under any of the terms, conditions or provisions of (x) its
certificate of incorporation or by-laws or (y) any material note, bond,
mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which Foothill or any Foothill Subsidiary is a
party or by which it may be bound, or to which Foothill or any Foothill
Subsidiary or any of the properties or assets of Foothill or any Foothill
Subsidiary may be subject, or (ii) subject to compliance with the statutes and
regulations referred to in the next paragraph, to the best knowledge of
Foothill, violate any judgment, ruling, order, writ, injunction, decree,
statute, rule or regulation applicable to Foothill or any Foothill Subsidiary
or any of their respective properties or assets.
Other than in connection or in compliance with the provisions of the
Securities Act of 1933 and the rules and regulations thereunder (the
"Securities Act"), the Securities Exchange Act of 1934 and the rules and
regulations thereunder (the "Exchange Act"), the securities or blue sky laws of
the various states, the Investment Advisors Act of 1940, as amended (the "IAA")
or filings, consents, reviews, authorizations, approvals or exemptions required
to be made with the New York and Chicago Stock Exchange or under the Bank
Holding Company Act of 1956, as amended (the "BHC Act") or the Hart-Scott-
Rodino Antitrust Improvements Act of 1976 (the "HSR Act"), and filings required
to effect the Merger under Delaware law, no notice to, filing with, exemption
or review by, or authorization, consent or approval of, any public body or
authority is necessary for the consummation by Foothill of the transactions
contemplated by this Agreement and the Merger Agreement.
(e) Foothill Financial Statements. The consolidated balance sheets of
Foothill and its consolidated subsidiaries as of December 31, 1994 and 1993 and
related consolidated statements of income, shareholders' equity and cash flows
for the three years ended December 31, 1994, together with the notes thereto,
certified by Ernst & Young and included in Foothill's Annual Report on Form 10-
K for the fiscal year ended December 31, 1994 (the "Foothill 10-K") as filed
with the Securities and Exchange Commission (the "SEC"), and the unaudited
consolidated statements of financial condition of Foothill and its consolidated
subsidiaries as of March 31, 1995 and the related unaudited consolidated
statements of income, shareholders' equity and cash flows for the three months
then ended included in Foothill's Quarterly Report on Form 10-Q for the fiscal
quarter ended March 31, 1995 as filed with the SEC (collectively, the "Foothill
Financial Statements"), have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis (except as may be
indicated therein or in the notes thereto) and present fairly (subject, in the
case of financial statements for interim periods, to normal recurring
adjustments) the consolidated financial position of Foothill and its
consolidated subsidiaries as of the dates thereof and the consolidated results
of operations and cash flows of Foothill and its consolidated subsidiaries for
the periods then ended.
(f) Reports. Since December 31, 1990, Foothill and each Foothill Subsidiary
has filed all reports, registrations and statements, together with any required
amendments thereto, that it was required to file with (i) the SEC, including,
but not limited to, Forms 10-K, Forms 10-Q and proxy statements and other
filings required under the IAA, and (ii) any applicable state securities
authorities. All such reports and statements filed with any such regulatory
body or authority are collectively referred to herein as the "Foothill
Reports". As of their respective dates, the Foothill Reports complied in all
material respects with all the rules and regulations promulgated by the SEC
applicable to such Foothills Reports and applicable state securities
authorities, as the case may be, and did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. Copies of all the
Foothill Reports have been made available to Norwest by Foothill.
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(g) Properties and Leases. Except as may be reflected in the Foothill
Financial Statements and except for any lien for current taxes not yet
delinquent, Foothill and each Foothill Subsidiary have good title free and
clear of any material liens, claims, charges, options, encumbrances or similar
restrictions to all the real and personal property reflected in Foothill's
consolidated balance sheet as of December 31, 1994 included in Foothill's
Annual Report on Form 10-K for the period then ended, and all real and personal
property acquired since such date, except such real and personal property as
has been disposed of in the ordinary course of business. All leases of real
property and all other leases material to Foothill or any Foothill Subsidiary
pursuant to which Foothill or such Foothill Subsidiary, as lessee, leases real
or personal property, which leases are described on Schedule 2(g), are valid
and effective in accordance with their respective terms, and there is not,
under any such lease, any material existing default by Foothill or such
Foothill Subsidiary or any event which, with notice or lapse of time or both,
would constitute such a material default.
(h) Taxes. Each of Foothill and the Foothill Subsidiaries has filed all
federal, state, county, local and foreign tax returns, including information
returns, required to be filed by it, and paid or has set up an adequate reserve
for the payment of all taxes owed by it required to be paid in respect of the
periods covered by such returns, including those with respect to income,
withholding, social security, unemployment, workers compensation, franchise, ad
valorem, premium, excise and sales taxes, and no taxes shown on such returns to
be owed by it or assessments received by it are delinquent. The federal income
tax returns of Foothill and the Foothill Subsidiaries for the fiscal year ended
December 31, 1990, and for all fiscal years prior thereto, are for the purposes
of routine audit by the Internal Revenue Service closed because of the statute
of limitations, and no claims for additional taxes for such fiscal years are
pending. Except only as set forth on Schedule 2(h), (i) neither Foothill nor
any Foothill Subsidiary is a party to any pending action or proceeding, nor is
any such action or proceeding threatened by any governmental authority, for the
assessment or collection of taxes, interest, penalties, assessments or
deficiencies and (ii) no issue has been raised by any federal, state, local or
foreign taxing authority in connection with an audit or examination of the tax
returns, business or properties of Foothill or any Foothill Subsidiary which
has not been settled, resolved and fully satisfied. Each of Foothill and the
Foothill Subsidiaries has paid all taxes owed or which it is required to
withhold from amounts owing to employees, creditors or other third parties. The
consolidated balance sheet as of March 31, 1995, referred to in paragraph 2(e)
hereof, includes, in accordance with generally accepted accounting principles,
adequate provision for all accrued but unpaid federal, state, county, local and
foreign taxes, interest, penalties, assessments or deficiencies of Foothill and
the Foothill Subsidiaries with respect to all periods through the date thereof.
(i) Absence of Certain Changes. Except as contemplated in this Agreement, the
Merger Agreement, and the Stock Option Agreement, since December 31, 1994 there
has been no change in the business, financial condition or results of
operations of Foothill or any Foothill Subsidiary, which has had, or may
reasonably be expected to have, a material adverse effect on the business,
financial condition or results of operations of Foothill and the Foothill
Subsidiaries taken as a whole.
(j) Commitments and Contracts. Except as disclosed in Foothill Reports or as
set forth on Schedule 2(j), and except for commitments and contracts authorized
or required to be entered into between the date hereof and the closing date
neither Foothill nor any Foothill Subsidiary is a party or subject to any of
the following (whether written or oral, express or implied):
(i) any employment contract or understanding (including any
understandings or obligations with respect to severance or termination pay
liabilities or fringe benefits) with any present or former officer,
director, employee or consultant (other than those which are terminable at
will by Foothill or such Foothill Subsidiary);
(ii) any plan, contract or understanding providing for any bonus,
pension, option, deferred compensation, retirement payment, profit sharing
or similar arrangement with respect to any present or former officer,
director, employee or consultant;
(iii) any labor contract or agreement with any labor union;
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(iv) any contract not made in the ordinary course of business containing
covenants which limit the ability of Foothill or any Foothill Subsidiary to
compete in any line of business or with any person or which involve any
restriction of the geographical area in which, or method by which, Foothill
or any Foothill Subsidiary may carry on its business (other than as may be
required by law or applicable regulatory authorities);
(v) any other contract or agreement which is a "material contract" within
the meaning of Item 601(b)(10) of Regulation S-K; or
(vi) any lease with annual rental payments aggregating $150,000 or more.
(k) Litigation and Other Proceedings. Foothill has furnished Norwest copies
of (i) all attorney responses to the request of the independent auditors for
Foothill with respect to loss contingencies as of December 31, 1994 in
connection with the Foothill financial statements included in the Foothill 10-
K, and (ii) a written list of legal and regulatory proceedings filed against
Foothill or any Foothill Subsidiary since said date. Neither Foothill nor any
Foothill Subsidiary is a party to any pending or, to the best knowledge of any
senior officer of Foothill, after diligent inquiry, threatened, claim, action,
suit, investigation or proceeding, or is subject to any order, judgment or
decree, except for matters which, in the aggregate, will not have, or cannot
reasonably be expected to have, a material adverse effect on the business,
financial condition or results of operations of Foothill and the Foothill
Subsidiaries taken as a whole.
(l) Insurance. Foothill and each Foothill Subsidiary is presently insured,
and during each of the past five calendar years (or during such lesser period
of time as Foothill has owned such Foothill Subsidiary) has been insured, for
reasonable amounts against such risks as companies engaged in a similar
business would, in accordance with good business practice, customarily be
insured and has maintained all insurance required by applicable law and
regulation.
(m) Compliance with Laws. Foothill and each Foothill Subsidiary have complied
with all applicable federal, state or local laws, statutes and ordinances, and
any applicable rule, regulation or order thereunder, except for possible
violations which individually or in the aggregate do not and would not have a
material adverse effect on Foothill and the Foothill Subsidiaries taken as a
whole. Foothill and each Foothill Subsidiary has all permits, licenses,
authorizations, orders and approvals of, and has made all filings, applications
and registrations with, federal, state, local or foreign governmental or
regulatory bodies that are required in order to permit it to own or lease its
properties and assets and to carry on its business as presently conducted and
that are material to the business of Foothill and the Foothill Subsidiaries
taken as a whole; all such permits, licenses, certificates of authority, orders
and approvals are in full force and effect and, to the best knowledge of
Foothill, no suspension or cancellation of any of them is threatened; and all
such filings, applications and registrations are current. The conduct by
Foothill and each Foothill Subsidiary of its business and the condition and use
of its properties does not violate or infringe, in any respect material to the
business of Foothill and the Foothill Subsidiaries taken as a whole, any
applicable domestic (federal, state or local) or foreign law, statute,
ordinance, license or regulation, including but not limited to state usury
laws. To the best of Foothill's knowledge, neither Foothill nor any Foothill
Subsidiary is in default under any order, license, regulation or demand of any
federal, state, municipal or other governmental agency or with respect to any
order, writ, injunction or decree of any court. Except for statutory or
regulatory restrictions of general application and except as set forth on
Schedule 2(m), no federal, state, municipal or other governmental authority has
placed any restriction on the business or properties of Foothill or any
Foothill Subsidiary which reasonably could be expected to have a material
adverse effect on the business or properties of Foothill and the Foothill
Subsidiaries taken as a whole. Neither Foothill nor any Foothill Subsidiary is
subject to any cease and desist order, written agreement or memorandum of
understanding with, or a party to any commitment letter or similar undertaking
to, or is subject to any order or directive by, or is a recipient of any
extraordinary supervisory letter from, or has adopted any continuing board
resolutions at the request of, federal or state governmental authorities
charged with the supervision or regulation of thrifts or savings and loan or
thrift holding companies or engaged in the insurance of bank deposits with
respect to Pacific Crest Capital, Inc. or Pacific Crest Investment and Loan
(formerly known as Foothill Thrift and Loan).
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(n) Labor. No work stoppage involving Foothill or any Foothill Subsidiary is
pending or, to the best knowledge of any senior officer of Foothill, after
diligent inquiry, threatened. Neither Foothill nor any Foothill Subsidiary is
involved in, or threatened with or affected by, any labor dispute, arbitration,
lawsuit or administrative proceeding which could materially and adversely
affect the business of Foothill and the Foothill Subsidiaries taken as a whole.
Employees of Foothill and the Foothill Subsidiaries are not represented by any
labor union nor are any collective bargaining agreements otherwise in effect
with respect to such employees.
(o) Material Interests of Certain Persons. Except as set forth in the
Foothill Reports, to the best knowledge of Foothill, no officer or director of
Foothill or any Foothill Subsidiary, or any "associate" (as such term is
defined in Rule 14a-1 under the Exchange Act) of any such officer or director,
has any interest in any material contract or property (real or personal),
tangible or intangible, used in or pertaining to the business of Foothill or
any Foothill Subsidiary.
(p) Foothill Benefit Plans.
(i) The only "employee benefit plans" within the meaning of Section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), for which Foothill or any Foothill Subsidiary acts as the plan
sponsor as defined in ERISA Section 3(16)(B), and with respect to which any
liability under ERISA or otherwise exists or may be incurred by Foothill or
any Foothill Subsidiary are those set forth on Schedule 2(p) (the "Plans").
No Plan is a "multi-employer plan" within the meaning of Section 3(37) of
ERISA.
(ii) Each Plan is and has been in all material respects operated and
administered in accordance with its provisions and applicable law. Except
as set forth on Schedule 2(p), Foothill or the Foothill subsidiaries have
received favorable determination letters from the Internal Revenue Service
under the provisions of the Tax Equity and Fiscal Responsibility Act
("TEFRA"), the Deficit Reduction Act ("DEFRA") and the Retirement Equity
Act ("REA") for each of the Plans to which the qualification requirements
of Section 401(a) of the Internal Revenue Code of 1986, as amended (the
"Code"), apply. Foothill does not know of the existence of a fact which is
likely to have an adverse effect on the qualified status of any plan within
the meaning of Section 401(a) of the Code or that its related trust is not
exempt from taxation under Section 501(a) of the Code.
(iii) The present value of all benefits vested and all benefits accrued
under each Plan which is subject to Title IV of ERISA did not, in each
case, as determined for purposes of reporting on Schedule B to the Annual
Report on Form 5500 of each such Plan as of the end of the most recent Plan
year exceed the value of the assets of the Plan allocable to such vested or
accrued benefits.
(iv) Except as disclosed in Schedule 2(p), and to the best knowledge of
Foothill, no Plan or any trust created thereunder, nor any trustee,
fiduciary or administrator thereof, has engaged in a "prohibited
transaction", as such term is defined in Section 4975 of the Code or
Section 406 of ERISA or violated any of the fiduciary standards under Part
4 of Title I of ERISA which could subject, to the best knowledge of
Foothill, such Plan or trust, or any trustee, fiduciary or administrator
thereof, or any party dealing with any such Plan or trust, to the tax or
penalty on prohibited transactions imposed by said Section 4975 or would
result in material liability to Foothill and the Foothill Subsidiaries
taken as a whole.
(v) No Plan which is subject to Title IV of ERISA or any trust created
thereunder has been terminated, nor have there been any "reportable events"
as that term is defined in Section 4043 of ERISA, with respect to any Plan,
other than those events which may result from the transactions contemplated
by this Agreement and the Merger Agreement.
(vi) No Plan or any trust created thereunder has incurred any
"accumulated funding deficiency", as such term is defined in Section 412 of
the Code (whether or not waived), since the effective date of ERISA.
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(vii) Except as disclosed in Schedule 2(p), neither the execution and
delivery of this Agreement and the Merger Agreement nor the consummation of
the transactions contemplated hereby and thereby will (i) result in any
material payment (including, without limitation, severance, unemployment
compensation, golden parachute or otherwise) becoming due to any director
or employee or former employee of Foothill or any Foothill Subsidiary under
any Plan or otherwise, (ii) materially increase any benefits otherwise
payable under any Plan or (iii) result in the acceleration of the time of
payment or vesting of any such benefits to any material extent.
(q) Proxy Statement, etc. None of the information regarding Foothill and the
Foothill Subsidiaries supplied or to be supplied by Foothill to Norwest for
inclusion in (i) a Registration Statement on Form S-4 to be filed with the SEC
by Norwest for the purpose of registering the shares of Norwest Common Stock to
be exchanged for shares of Foothill Common Stock pursuant to the provisions of
the Merger Agreement (the "Registration Statement"), (ii) the proxy statement
to be mailed to Foothill's shareholders in connection with the meeting to be
called to consider the Merger (the "Proxy Statement") and (iii) any other
documents to be filed with the SEC or any regulatory authority in connection
with the transactions contemplated hereby or by the Merger Agreement will, at
the respective times such documents are filed with the SEC or any regulatory
authority and, in the case of the Registration Statement, when it becomes
effective and, with respect to the Proxy Statement, when mailed, be false or
misleading with respect to any material fact, or omit to state any material
fact necessary in order to make the statements therein not misleading or, in
the case of the Proxy Statement or any amendment thereof or supplement thereto,
at the time of the meeting of shareholders referred to in paragraph 4(c), be
false or misleading with respect to any material fact, or omit to state any
material fact necessary to correct any statement in any earlier communication
with respect to the solicitation of any proxy for such meeting. All documents
which Foothill and the Foothill Subsidiaries are responsible for filing with
the SEC and any other regulatory authority in connection with the Merger will
comply as to form in all material respects with the provisions of applicable
law.
(r) Registration Obligations. Except as set forth on Schedule 2(r), neither
Foothill nor any Foothill Subsidiary is under any obligation, contingent or
otherwise, which will survive the Merger by reason of any agreement to register
any of its securities under the Securities Act.
(s) Brokers and Finders. Except as set forth on Schedule 2(s), neither
Foothill nor any Foothill Subsidiary nor any of their respective officers,
directors or employees has employed any broker or finder or incurred any
liability for any financial advisory fees, brokerage fees, commissions or
finder's fees, and no broker or finder has acted directly or indirectly for
Foothill or any Foothill Subsidiary in connection with this Agreement and the
Merger Agreement or the transactions contemplated hereby and thereby.
(t) Fiduciary Activities. Foothill and each Foothill Subsidiary has properly
administered in all respects material and which could reasonably be expected to
be material to the financial condition of Foothill and the Foothill
Subsidiaries taken as a whole all accounts for which it acts as a fiduciary,
including but not limited to accounts for which it serves as a trustee, agent,
custodian, personal representative, guardian, conservator or investment
advisor, in accordance with the terms of the governing documents and applicable
state and federal law and regulation and common law. Neither Foothill, any
Foothill Subsidiary, nor, to the knowledge of the senior officers of Foothill,
after diligent inquiry, any director, officer or employee of Foothill or any
Foothill Subsidiary has committed any breach of trust with respect to any such
fiduciary account which is material to or could reasonably be expected to be
material to the financial condition of Foothill and the Foothill Subsidiaries
taken as a whole, and the accountings for each such fiduciary account are true
and correct in all material respects and accurately reflect the assets of such
fiduciary account.
(u) No Defaults. Neither Foothill nor any Foothill Subsidiary is in default,
nor has any event occurred which, with the passage of time or the giving of
notice, or both, would constitute a default, under any material agreement,
indenture, loan agreement or other instrument to which it is a party or by
which it or any of its assets is bound or to which any of its assets is
subject, the result of which has had or could reasonably be expected to have a
material adverse effect upon Foothill and the Foothill Subsidiaries, taken as a
whole. To
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the best of Foothill's knowledge, all parties with whom Foothill or any
Foothill Subsidiary has material leases, agreements or contracts or who owe to
Foothill or any Foothill Subsidiary material obligations other than with
respect to those arising in the ordinary course of the lending business of the
Foothill Subsidiaries are in compliance therewith in all material respects.
(v) Environmental Liability. There is no legal, administrative, or other
proceeding, or action of any nature seeking to impose, or that could result in
the imposition of, on Foothill or any Foothill Subsidiary, any liability
relating to the release of hazardous substances as defined under any local,
state or federal environmental statute, regulation or ordinance including,
without limitation, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, pending or to the best of Foothill's
knowledge, threatened against Foothill or any Foothill Subsidiary the result of
which has had or could reasonably be expected to have a material adverse effect
upon Foothill and Foothill's Subsidiaries taken as a whole; to the best of
Foothill's knowledge there is no reasonable basis for any such proceeding,
claim or action; and to the best knowledge of any senior officer of Foothill,
after diligent inquiry, neither Foothill nor any Foothill Subsidiary is subject
to any agreement, order, judgment, or decree by or with any court, governmental
authority or third party imposing any such environmental liability. Foothill
has provided Norwest with copies of all environmental assessments, reports,
studies and other related information in its possession with respect to each
owned facility and each non-residential OREO property.
(w) Antitakeover Provisions Not Applicable. The provisions of Section 203 of
the Delaware General Corporation Law as they relate to Foothill do not and will
not apply to the Stock Option Agreement, this Agreement, the Merger or the
transactions contemplated hereby or thereby.
(x) Registered Investment Advisor. Foothill is a registered investment
advisor under the IAA.
(y) Registered Investment Company. Neither Foothill, nor either of the
Partnerships, is an "investment company" within the meaning of Section 3(a) of
the Investment Company Act of 1940, as amended (the "1940 Act"), by virtue of
one or more exclusions therefrom provided for in the 1940 Act, and specifically
with respect to each of the Partnerships, by virtue of the exclusion from such
definition provided for under Section 3(c)(1) of the 1940 Act for an issuer
whose outstanding securities are "beneficially owned" (determined pursuant to
Section 3(c)(1) of the 1940 Act) by not more than 100 persons and who does not
presently propose to make a public offering of its securities; and to the
extent Foothill or either of the Partnerships may be deemed to be an investment
company under the 1940 Act, they are each exempt from registration under the
1940 Act pursuant to one or more exemptions from such registration provided for
under the 1940 Act.
3. REPRESENTATIONS AND WARRANTIES OF NORWEST. Norwest represents and warrants
to Foothill as follows:
(a) Organization and Authority. Norwest is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
is duly qualified to do business and is in good standing in all jurisdictions
where its ownership or leasing of property or the conduct of its business
requires it to be so qualified and failure to be so qualified would have a
material adverse effect on Norwest and its subsidiaries taken as a whole and
has corporate power and authority to own its properties and assets and to carry
on its business as it is now being conducted. Norwest has furnished to Foothill
true copies of its Certificate of Incorporation and By-laws. Norwest is
registered as a bank holding company with the Board of Governors of the Federal
Reserve System (the "Federal Reserve Board") under the BHC Act.
(b) Norwest Subsidiaries. Schedule 3(b) sets forth a complete and correct
list as of December 31, 1994, of Norwest's Significant Subsidiaries (as defined
in Regulation S-X promulgated by the SEC) (individually a "Norwest Subsidiary"
and collectively the "Norwest Subsidiaries"), all shares of the outstanding
capital stock of each of which, except as set forth in Schedule 3(b), are owned
directly or indirectly by Norwest. No equity security of any Norwest Subsidiary
is or may be required to be issued to any person or entity other than Norwest
by reason of any option, warrant, scrip, right to subscribe to, call or
commitment of any character
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whatsoever relating to, or security or right convertible into, shares of any
capital stock of such subsidiary, and there are no contracts, commitments,
understandings or arrangements by which any Norwest Subsidiary is bound to
issue additional shares of its capital stock, or options, warrants or rights to
purchase or acquire any additional shares of its capital stock. Subject to 12
U.S.C. (S) 55 (1982), all of such shares so owned by Norwest are fully paid and
nonassessable and are owned by it free and clear of any lien, claim, charge,
option, encumbrance or agreement with respect thereto. Each Norwest Subsidiary
is a corporation or national banking association duly organized, validly
existing, duly qualified to do business and in good standing under the laws of
its jurisdiction of incorporation, and has corporate power and authority to own
or lease its properties and assets and to carry on its business as it is now
being conducted.
(c) Norwest Capitalization. The authorized capital stock of Norwest consists
of (i) 5,000,000 shares of Preferred Stock, without par value, of which as of
the close of business on December 31, 1994, 1,127,125 shares of 10.24%
Cumulative Preferred Stock at $100 stated value, 980,000 shares of Cumulative
Tracking Preferred Stock, and 1,143,675 shares of Cumulative Convertible
Preferred Stock, Series B, at $200 stated value and 14,265 shares of ESOP
Cumulative Convertible Preferred Stock, at $1,000 stated value were
outstanding, (ii) 500,000,000 shares of Common Stock, $1 2/3 par value, of
which as of the close of business on December 31, 1994, 309,144,857 shares were
outstanding and 13,939,617 shares were held in the treasury, and (iii)
4,000,000 shares of Preference Stock, no par value, of which as of the close of
business on April 30, 1995, no shares were outstanding.
(d) Authorization. Norwest has the corporate power and authority to enter
into this Agreement and to carry out its obligations hereunder. The execution,
delivery and performance of this Agreement by Norwest and the consummation of
the transactions contemplated hereby have been duly authorized by the Board of
Directors of Norwest. No approval or consent by the stockholders of Norwest is
necessary for the execution and delivery of this Agreement and the Merger
Agreement and the consummation of the transactions contemplated hereby and
thereby. The shares of Norwest Common Stock to be issued in the Merger when
issued as contemplated by this Agreement, will be legally and validly issued,
fully paid, and nonassessable. Subject to such approvals of government agencies
and other governing boards having regulatory authority over Norwest as may be
required by statute or regulation, this Agreement is a valid and binding
obligation of Norwest enforceable against Norwest in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency or other
similar laws affecting the enforcement of creditors' rights and the
availability of equitable remedies, including specific performance.
Neither the execution, delivery and performance by Norwest of this Agreement
or the Merger Agreement, nor the consummation of the transactions contemplated
hereby and thereby, nor compliance by Norwest with any of the provisions hereof
or thereof, will (i) violate, conflict with, or result in a breach of any
provision of, or constitute a default (or an event which, with notice or lapse
of time or both, would constitute a default) under, or result in the
termination of, or accelerate the performance required by, or result in a right
of termination or acceleration of, or result in the creation of, any lien,
security interest, charge or encumbrance upon any of the properties or assets
of Norwest or any Norwest Subsidiary under any of the terms, conditions or
provisions of (x) its certificate of incorporation or by-laws or (y) any
material note, bond, mortgage, indenture, deed of trust, license, lease,
agreement or other instrument or obligation to which Norwest or any Norwest
Subsidiary is a party or by which it may be bound, or to which Norwest or any
Norwest Subsidiary or any of the properties or assets of Norwest or any Norwest
Subsidiary may be subject, or (ii) subject to compliance with the statutes and
regulations referred to in the next paragraph, to the best knowledge of
Norwest, violate any judgment, ruling, order, writ, injunction, decree,
statute, rule or regulation applicable to Norwest or any Norwest Subsidiary or
any of their respective properties or assets.
Other than in connection with or in compliance with the provisions of the
Securities Act, the Exchange Act, the securities or blue sky laws of the
various states, the IAA, or filings, consents, reviews, authorizations,
approvals or exemptions required to be made with the New York and Chicago Stock
Exchanges or under the BHC Act or the HSR Act, and filings required to effect
the Merger under Delaware law, no notice to, filing
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with, exemption or review by, or authorization, consent or approval of, any
public body or authority is necessary for the consummation by Norwest of the
transactions contemplated by this Agreement and the Merger Agreement.
(e) Norwest Financial Statements. The consolidated balance sheets of Norwest
and Norwest's subsidiaries as of December 31, 1994 and 1993 and related
consolidated statements of income, stockholders' equity and cash flows for the
three years ended December 31, 1994, together with the notes thereto, certified
by KPMG Peat Marwick, L.L.P. and included in Norwest's Annual Report on Form
10-K for the fiscal year ended December 31, 1994 (the "Norwest 10-K") as filed
with the SEC, and the unaudited consolidated balance sheets of Norwest and its
subsidiaries as of March 31, 1995 and the related unaudited consolidated
statements of income and cash flows for the three months then ended included in
Norwest's Quarterly Report on Form 10-Q for the fiscal quarter ended March 31,
1995, as filed with the SEC (collectively, the "Norwest Financial Statements"),
have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis and present fairly (subject, in the case of
financial statements for interim periods, to normal recurring adjustments) the
consolidated financial position of Norwest and its subsidiaries at the dates
and the consolidated results of operations, changes in financial position and
cash flows of Norwest and its subsidiaries for the periods stated therein.
(f) Reports. Since December 31, 1990, Norwest and each Norwest Subsidiary has
filed all reports, registrations and statements, together with any required
amendments thereto, that it was required to file with (i) the SEC, including,
but not limited to, Forms 10-K, Forms 10-Q and proxy statements, (ii) the
Federal Reserve Board, (iii) the Federal Deposit Insurance Corporation (the
"FDIC"), (iv) the United States Comptroller of the Currency (the "Comptroller")
and (v) any applicable state securities or banking authorities. All such
reports and statements filed with any such regulatory body or authority are
collectively referred to herein as the "Norwest Reports". As of their
respective dates, the Norwest Reports complied in all material respects with
all the rules and regulations promulgated by the SEC, the Federal Reserve
Board, the FDIC, the Comptroller and any applicable state securities or banking
authorities, as the case may be, and did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(g) Properties and Leases. Except as may be reflected in the Norwest
Financial Statements and except for any lien for current taxes not yet
delinquent, Norwest and each Norwest Subsidiary has good title free and clear
of any material liens, claims, charges, options, encumbrances or similar
restrictions to all the real and personal property reflected in Norwest's
consolidated balance sheet as of December 31, 1994 included in Norwest's Annual
Report on Form 10-K for the period then ended, and all real and personal
property acquired since such date, except such real and personal property has
been disposed of in the ordinary course of business. All leases of real
property and all other leases material to Norwest or any Norwest Subsidiary
pursuant to which Norwest or such Norwest Subsidiary, as lessee, leases real or
personal property, are valid and effective in accordance with their respective
terms, and there is not, under any such lease, any material existing default by
Norwest or such Norwest Subsidiary or any event which, with notice or lapse of
time or both, would constitute such a material default. Substantially all
Norwest's and each Norwest Subsidiary's buildings and equipment in regular use
have been well maintained and are in good and serviceable condition, reasonable
wear and tear excepted.
(h) Taxes. Each of Norwest and the Norwest Subsidiaries has filed all
material federal, state, county, local and foreign tax returns, including
information returns, required to be filed by it, and paid or made adequate
provision for the payment of all taxes owed by it, including those with respect
to income, withholding, social security, unemployment, workers compensation,
franchise, ad valorem, premium, excise and sales taxes, and no taxes shown on
such returns to be owed by it or assessments received by it are delinquent. The
federal income tax returns of Norwest and the Norwest Subsidiaries for the
fiscal year ended December 31, 1979, and for all fiscal years prior thereto,
are for the purposes of routine audit by the Internal Revenue Service closed
because of the statute of limitations, and no claims for additional taxes for
such fiscal
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years are pending. Except only as set forth on Schedule 3(h), (i) neither
Norwest nor any Norwest Subsidiary is a party to any pending action or
proceeding, nor to Norwest's knowledge is any such action or proceeding
threatened by any governmental authority, for the assessment or collection of
taxes, interest, penalties, assessments or deficiencies which could reasonably
be expected to have any material adverse effect on Norwest and its subsidiaries
taken as a whole, and (ii) no issue has been raised by any federal, state,
local or foreign taxing authority in connection with an audit or examination of
the tax returns, business or properties of Norwest or any Norwest Subsidiary
which has not been settled, resolved and fully satisfied, or adequately
reserved for. Each of Norwest and the Norwest Subsidiaries has paid all taxes
owed or which it is required to withhold from amounts owing to employees,
creditors or other third parties.
(i) Absence of Certain Changes. Since December 31, 1994, there has been no
change in the business, financial condition or results of operations of Norwest
or any Norwest Subsidiary which has had, or may reasonably be expected to have,
a material adverse effect on the business, financial condition or results of
operations of Norwest and its subsidiaries taken as a whole.
(j) Commitments and Contracts. Except as set forth on Schedule 3(j), as of
December 31, 1994 neither Norwest nor any Norwest Subsidiary is a party or
subject to any of the following (whether written or oral, express or implied):
(i) any labor contract or agreement with any labor union;
(ii) any contract not made in the ordinary course of business containing
covenants which materially limit the ability of Norwest or any Norwest
Subsidiary to compete in any line of business or with any person or which
involve any material restriction of the geographical area in which, or
method by which, Norwest or any Norwest Subsidiary may carry on its
business (other than as may be required by law or applicable regulatory
authorities);
(iii) any other contract or agreement which is a "material contract"
within the meaning of Item 601(b)(10) of Regulation S-K.
(k) Litigation and Other Proceedings. Neither Norwest nor any Norwest
Subsidiary is a party to any pending or, to the best knowledge of Norwest,
threatened, claim, action, suit, investigation or proceeding, or is subject to
any order, judgment or decree, except for matters which, in the aggregate, will
not have, or cannot reasonably be expected to have, a material adverse effect
on the business, financial condition or results of operations of Norwest and
its subsidiaries taken as a whole.
(l) Insurance. Norwest and each Norwest Subsidiary is presently insured or
self insured, and during each of the past five calendar years (or during such
lesser period of time as Norwest has owned such Norwest Subsidiary) has been
insured or self-insured, against such risks as companies engaged in a similar
business would, in accordance with good business practice, customarily be
insured and has maintained all insurance required by applicable law and
regulation.
(m) Compliance with Laws. Norwest and each Norwest Subsidiary has all
permits, licenses, authorizations, orders and approvals of, and has made all
filings, applications and registrations with, federal, state, local or foreign
governmental or regulatory bodies that are required in order to permit it to
own or lease its properties or assets and to carry on its business as presently
conducted and that are material to the business of Norwest and the Norwest
Subsidiaries, taken as a whole; all such permits, licenses, certificates of
authority, orders and approvals are in full force and effect, and to the best
knowledge of Norwest, no suspension or cancellation of any of them is
threatened; and all such filings, applications and registrations are current.
The conduct by Norwest and each Norwest Subsidiary of its business and the
condition and use of its properties does not violate or infringe, in any
respect material to Norwest and the Norwest Subsidiaries taken as a whole,
business, any applicable domestic (federal, state or local) or foreign law,
statute, ordinance, license or regulation. To the best of Norwest's knowledge,
neither Norwest nor any Norwest Subsidiary is in default under any order,
license, regulation or demand of any federal, state, municipal or other
governmental
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agency or with respect to any order, writ, injunction or decree of any court.
Except for statutory or regulatory restrictions of general application, no
federal, state, municipal or other governmental authority has placed any
restrictions on the business or properties of Norwest or any Norwest Subsidiary
which reasonably could be expected to have a material adverse effect on the
business or properties of Norwest and its subsidiaries taken as a whole.
(n) Labor. No work stoppage involving Norwest or any Norwest Subsidiary is
pending or, to the best knowledge of Norwest, threatened. Neither Norwest nor
any Norwest Subsidiary is involved in, or threatened with or affected by, any
labor dispute, arbitration, lawsuit or administrative proceeding which could
materially and adversely affect the business of Norwest or such Norwest
Subsidiary. Except as set forth on Schedule 3(j), employees of Norwest and the
Norwest Subsidiaries are not represented by any labor union nor are any
collective bargaining agreements otherwise in effect with respect to such
employees.
(o) Norwest Benefit Plans.
(i) As of September 1, 1994, the only "employee benefit plans" within the
meaning of Section 3(3) of ERISA for which Norwest or any Norwest
Subsidiary acts as plan sponsor as defined in ERISA Section 3(16)(B) with
respect to which any liability under ERISA or otherwise exists or may be
incurred by Norwest or any Norwest Subsidiary are those set forth on
Schedule 3(o) (the "Norwest Plans"). No Norwest Plan is a "multi-employer
plan" within the meaning of Section 3(37) of ERISA.
(ii) Each Norwest Plan is and has been in all material respects operated
and administered in accordance with its provisions and applicable law.
Except as set forth on Schedule 3(o), Norwest or the Norwest Subsidiaries
have received favorable determination letters from the Internal Revenue
Service under the provisions of TEFRA, DEFRA and REA for each of the
Norwest Plans to which the qualification requirements of Section 401(a) of
the Code apply. Norwest knows of no reason that any Norwest Plan which is
subject to the qualification provisions of Section 401(a) of the Code is
not "qualified" within the meaning of Section 401(a) of the Code and that
each related trust is not exempt from taxation under Section 501(a) of the
Code, except that any such Norwest Plan may not have been amended to comply
with TRA and other recent legislation and regulations, although each such
Norwest Plan is within the remedial amendment period during which
retroactive amendment may be made.
(iii) The present value of all benefits vested and all benefits accrued
under each Norwest Plan which is subject to Title IV of ERISA did not, in
each case, as determined for purposes of reporting on Schedule B to the
Annual Report on Form 5500 of each such Norwest Plan as of the end of the
most recent Plan year, exceed the value of the assets of the Norwest Plans
allocable to such vested or accrued benefits.
(iv) Except as set forth on Schedule 3(o), and to the best knowledge of
Norwest, no Norwest Plan or any trust created thereunder, nor any trustee,
fiduciary or administrator thereof, has engaged in a "prohibited
transaction", as such term is defined in Section 4975 of the Code or
Section 406 of ERISA or violated fiduciary standards under Part 4 of Title
I of ERISA, which could subject, to the best knowledge of Norwest, such
Norwest Plan or trust, or any trustee, fiduciary or administrator thereof,
or any party dealing with any such Norwest Plan or trust, to the tax or
penalty on prohibited transactions imposed by said Section 4975 or would
result in material liability to Norwest and its subsidiaries taken as a
whole.
(v) Except as set forth on Schedule 3(o), no Norwest Plan which is
subject to Title IV of ERISA or any trust created thereunder has been
terminated, nor have there been any "reportable events" as that term is
defined in Section 4043 of ERISA with respect to any Norwest Plan, other
than those events which may result from the transactions contemplated by
this Agreement and the Merger Agreement.
(vi) No Norwest Plan or any trust created thereunder has incurred any
"accumulated funding deficiency", as such term is defined in Section 412 of
the Code (whether or not waived), during the last five Norwest Plan years
which would result in a material liability.
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(vii) Neither the execution and delivery of this Agreement and the Merger
Agreement nor the consummation of the transactions contemplated hereby and
thereby will (i) result in any material payment (including, without
limitation, severance, unemployment compensation, golden parachute or
otherwise) becoming due to any director or employee or former employee of
Norwest under any Norwest Plan or otherwise, (ii) materially increase any
benefits otherwise payable under any Norwest Plan or (iii) result in the
acceleration of the time of payment or vesting of any such benefits to any
material extent.
(p) Registration Statement, etc. None of the information regarding Norwest
and its subsidiaries supplied or to be supplied by Norwest for inclusion in (i)
the Registration Statement, (ii) the Proxy Statement, or (iii) any other
documents to be filed with the SEC or any regulatory authority in connection
with the transactions contemplated hereby or by the Merger Agreement will, at
the respective times such documents are filed with the SEC or any regulatory
authority and, in the case of the Registration Statement, when it becomes
effective and, with respect to the Proxy Statement, when mailed, be false or
misleading with respect to any material fact, or omit to state any material
fact necessary in order to make the statements therein not misleading or, in
the case of the Proxy Statement or any amendment thereof or supplement thereto,
at the time of the meeting of shareholders referred to in paragraph 4(c), be
false or misleading with respect to any material fact, or omit to state any
material fact necessary to correct any statement in any earlier communication
with respect to the solicitation of any proxy for such meeting. All documents
which Norwest and the Norwest Subsidiaries are responsible for filing with the
SEC and any other regulatory authority in connection with the Merger will
comply as to form in all material respects with the provisions of applicable
law.
(q) Brokers and Finders. Neither Norwest nor any Norwest Subsidiary nor any
of their respective officers, directors or employees has employed any broker or
finder or incurred any liability for any financial advisory fees, brokerage
fees, commissions or finder's fees, and no broker or finder has acted directly
or indirectly for Norwest or any Norwest Subsidiary in connection with this
Agreement and the Merger Agreement or the transactions contemplated hereby and
thereby.
(r) No Defaults. Neither Norwest nor any Norwest Subsidiary is in default,
nor has any event occurred which, with the passage of time or the giving of
notice, or both, would constitute a default under any material agreement,
indenture, loan agreement or other instrument to which it is a party or by
which it or any of its assets is bound or to which any of its assets is
subject, the result of which has had or could reasonably be expected to have a
material adverse effect upon Norwest and its subsidiaries taken as a whole. To
the best of Norwest's knowledge, all parties with whom Norwest or any Norwest
Subsidiary has material leases, agreements or contracts or who owe to Norwest
or any Norwest Subsidiary material obligations other than with respect to those
arising in the ordinary course of the banking business of the Norwest
Subsidiaries are in compliance therewith in all material respects.
(s) Environmental Liability. There is no legal, administrative, or other
proceeding, claim, or action of any nature seeking to impose, or that could
result in the imposition, on Norwest or any Norwest Subsidiary of any liability
relating to the release of hazardous substances as defined under any local,
state or federal environmental statute, regulation or ordinance including,
without limitation, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, pending or to the best of Norwest's
knowledge, threatened against Norwest or any Norwest Subsidiary, the result of
which has had or could reasonably be expected to have a material adverse effect
upon Norwest and its subsidiaries taken as a whole; to the best of Norwest's
knowledge there is no reasonable basis for any such proceeding, claim or
action; and to the best of Norwest's knowledge neither Norwest nor any Norwest
Subsidiary is subject to any agreement, order, judgment, or decree by or with
any court, governmental authority or third party imposing any such
environmental liability.
(t) Merger Co. As of the Closing Date, Merger Co. will be a corporation duly
organized, validly existing, duly qualified to do business and in good standing
under the laws of its jurisdiction of incorporation, and will have corporate
power and authority to own or lease its properties and assets and to carry on
its business and
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enter into and perform its obligations under the Merger Agreement, and the
execution and delivery by Merger Co. of the Merger Agreement shall have been
duly authorized by the Board of Directors and shareholders of Merger Co.
(u) Operations of Foothill. Subject to any changes authorized, required or
contemplated by this Agreement, or as disclosed by Norwest to Foothill, Norwest
does not have any current plans following the Effective Time to (i) materially
change the operations, nature of business or location of operations of Foothill
as conducted immediately prior to the Effective Time, (ii) cause Foothill to
sell, transfer or otherwise dispose of all or substantially all of its assets,
except for dispositions made in the ordinary course of business, (iii)
liquidate Foothill, (iv) merge Foothill with or into another corporation,
including Norwest or its affiliates, (v) sell, distribute, or otherwise dispose
of the common stock of Foothill owned by Norwest, or (vi) issue additional
shares of stock, (or rights to acquire shares of stock) of Foothill that would
result in Norwest losing control of Foothill within the meaning of Section
368(c) of the Code.
4. COVENANTS OF FOOTHILL. Foothill covenants and agrees with Norwest as
follows:
(a) Except as otherwise permitted or required by this Agreement, from the
date hereof until the Effective Time of the Merger, Foothill shall, and shall
cause each Foothill Subsidiary to: (i) maintain its corporate existence in good
standing; (ii) maintain the general character of its business and conduct its
business in its ordinary and usual manner; (iii) extend credit in accordance
with existing lending policies, except that Foothill and each Foothill
Subsidiary (other than the Partnerships) shall not, without the prior written
consent of Norwest, make any new loan or, except for the loans set forth on
Schedule 4(a)(iii), modify, restructure or renew any existing loan (except
pursuant to commitments made prior to the date of this Agreement) to any
borrower if the amount of the resulting loan, when aggregated with all other
loans or extensions of credit to such person, would be in excess of
$20,000,000; (iv) maintain proper business and accounting records in accordance
with generally accepted principles; (v) maintain its properties in good repair
and condition, ordinary wear and tear excepted; (vi) maintain in all material
respects presently existing insurance coverage; (vii) use its best efforts to
preserve its business organization intact, to keep the services of its present
principal employees and to preserve its good will and the good will of its
suppliers, customers and others having business relationships with it; (viii)
use its best efforts to obtain any approvals or consents required to maintain
existing material leases and other material contracts in effect following the
Merger; (ix) comply in all material respects with all laws, regulations,
ordinances, codes, orders, licenses and permits applicable to the properties
and operations of Foothill and each Foothill Subsidiary the non-compliance with
which reasonably could be expected to have a material adverse effect on
Foothill and the Foothill Subsidiaries taken as a whole; and (x) permit Norwest
and its representatives (including KPMG Peat Marwick, L.L.P.) to examine its
and its subsidiaries books, records and properties and to interview officers,
employees and agents at all reasonable times when it is open for business. No
such examination by Norwest or its representatives either before or after the
date of this Agreement shall in any way affect, diminish or terminate any of
the representations, warranties or covenants of Foothill herein expressed.
(b) Except as otherwise contemplated or required by this Agreement, from the
date hereof until the Effective Time of the Merger, Foothill and each Foothill
Subsidiary (other than the Partnerships, except with respect to (i), (iii),
(iv) or (xiv)) will not (without the prior written consent of Norwest): (i)
amend or otherwise change its articles of incorporation or association or by-
laws or Partnership Agreements; (ii) issue or sell or authorize for issuance or
sale, or grant any options, stock appreciation rights, warrants or awards or
make other agreements with respect to the issuance or sale or conversion of,
any shares of its capital stock, phantom shares or other share-equivalents, or
any other of its securities, except that Foothill may issue shares of Foothill
Common Stock upon the exercise of the option granted under the Stock Option
Agreement or upon the exercise of outstanding stock options described in
Schedule 4(b); (iii) authorize or incur any long-term debt, except as required
in the normal course of its business and, in the case of the Partnerships, as
required or authorized by the FPI and FPII partnership agreements; (iv)
mortgage, pledge or subject to lien or other encumbrance any of its properties,
except in the ordinary course of business and, in the case of the Partnerships,
as required or authorized by the FPI and FPII partnership agreements; (v) enter
into any
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material agreement, contract or commitment in excess of $200,000 except lending
transactions in the ordinary course of business and in accordance with policies
and procedures in effect on the date hereof; (vi) make any equity security
investments except investments required to be made by the "Co-Investor"
provisions of the FPI and FPII partnership agreements ; (vii) amend or
terminate any Plan except as required by law; (viii) make any contributions to
any Plan except as required by the terms of such Plan in effect as of the date
hereof; (ix) except with respect to the payment prior to the closing date of
cash dividends paid on a quarterly basis in accordance with past practices
(including up to a $.08 per share dividend for Foothill's 1995 second quarter
record date and up to $.10 per share for third and fourth quarter record date
dividends and first quarter 1996 record date dividends of up to $.12 per share)
and except for quarterly cash dividends of no more than $2.70 per share of
Preferred Stock, pursuant to the Certificate of Designation, Voting Powers,
Preferences, Rights, Qualifications, Limitations and Restrictions of the
Preferred Stock, declare, set aside, make or pay any dividend or other
distribution with respect to its capital stock and except for any dividend
declared by a subsidiary's Board of Directors in accordance with applicable law
and regulation; provided that the dividends otherwise permitted to be paid
hereunder may not be declared and paid in any particular quarter if the Closing
of the Merger occurs in such quarter and former shareholders of Foothill would
become shareholders of record of Norwest for the purposes of qualifying for the
quarterly Norwest dividend payable to shareholders of Norwest Common Stock for
such quarter; (x) redeem, purchase or otherwise acquire, directly or
indirectly, any of the capital stock of Foothill; (xi) except for increases of
salaries in the ordinary course of business consistent with past practice, and
except for the payment to participants in Foothill's Stock Purchase Plan of up
to $8.00 per share of Foothill Common Stock allocated to such participant as of
the earliest to occur of the Closing Date or September 30, 1995 upon
termination of such plan, increase in any manner the compensation or fringe
benefits of, or pay any benefit not required by any Plan or agreement as in
effect as of the date of this Agreement (including, without limitation, the
granting of stock options, stock appreciation rights, warrants, or awards to
any director, officer, or employee); (xii) enter into or modify any contract,
agreement, commitment or arrangement providing for the payment to or
indemnification of any director, officer, employee or consultant of Foothill or
any Foothill Subsidiary of compensation or benefits, except for the entering
into of employment agreements in substantially the form of Exhibit C2 with the
persons listed on Exhibit C1; (xiii) sell or otherwise dispose of any shares of
the capital stock of any Foothill Subsidiary or sell or otherwise dispose of
Foothill's partnership interest in the Partnerships; (xiv) sell or otherwise
dispose of any of its assets or properties, other than in the ordinary course
of business, and, in the case of the Partnerships, as required or authorized by
the FPI and FPII partnership agreements; (xv) take any action that is intended
or may reasonably be expected to result in any of its representations and
warranties set forth in this Agreement being or becoming untrue in any material
respect at any time prior to the Effective Time of the Merger, or in any of the
conditions to the Merger set forth in Section 7 not being satisfied, or in a
violation of any provision of this Agreement, except, in every case, as may be
required by applicable law; and (xvi) become a general partner in any
partnership (except for the Partnerships).
(c) The Board of Directors of Foothill will duly call, and will cause to be
held not later than the later of thirty (30) calendar days or twenty-five (25)
business days following the effective date of the Registration Statement
referred to in paragraph 5(c) hereof, a meeting of its shareholders and will
direct that this Agreement and the Merger Agreement be submitted to a vote at
such meeting. The Board of Directors of Foothill will cause proper notice of
such meeting to be given to its shareholders in compliance with the Delaware
General Corporation Law and other applicable law and regulation. The Board of
Directors of Foothill will recommend the affirmative vote in favor of approval
of this Agreement and the Merger Agreement, and use its best efforts to solicit
from its shareholders proxies in favor thereof, provided, however, that if the
Board of Directors determine in good faith based on the advice of Foothill's
outside counsel that failure to take such action would result in a breach of
its fiduciary duties and is legally advisable as determined by Foothill's Board
of Directors after consultation with Foothill's outside counsel, then in such
case, the Board of Directors may amend or withdraw its recommendation regarding
the Merger and withhold soliciting proxies in favor thereof.
(d) Foothill will furnish or cause to be furnished to Norwest all the
information concerning Foothill and its subsidiaries required for inclusion in
the Registration Statement referred to in paragraph 5(c) hereof, or
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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 Ernst & Young to use such opinion in such
Registration Statement.
(e) Foothill will take all necessary corporate and other action and use its
best efforts to obtain all approvals of regulatory authorities, consents and
other approvals required of Foothill to carry out the transactions contemplated
by this Agreement and will cooperate with Norwest to obtain all such approvals
and consents required of Norwest.
(f) Foothill will deliver to Norwest at the Closing all opinions,
certificates and other documents required to be delivered by it at the Closing.
(g) Foothill will hold in confidence all documents and information concerning
Norwest and its subsidiaries furnished to Foothill and its representatives in
connection with the transactions contemplated by this Agreement and will not
release or disclose such information to any other person, except as required by
law and except to Foothill's outside professional advisers in connection with
this Agreement, with the same undertaking from such professional advisers. If
the transactions contemplated by this Agreement shall not be consummated, such
confidence shall be maintained and such information shall not be used in
competition with Norwest (except to the extent that such information can be
shown to be previously known to Foothill, in the public domain, or later
acquired by Foothill from other legitimate sources) and, upon request, all such
documents, any copies thereof and extracts therefrom shall immediately
thereafter be returned to Norwest.
(h) Neither Foothill, nor any Foothill Subsidiary, nor any director, officer,
representative or agent thereof, will, directly or indirectly, (i) solicit,
authorize the solicitation of, or (ii), except to the extent, based on the
advice of counsel, legally advisable by the Board of Directors in the discharge
of their fiduciary duties under applicable law, enter into any discussions with
any corporation, partnership, person or other entity or group (other than
Norwest) concerning any offer or possible offer (A) to purchase any shares of
common stock, any option or warrant to purchase any shares of common stock, any
securities convertible into any shares of such common stock, or any other
equity security of Foothill or any Foothill Subsidiary, (B) to make a tender or
exchange offer for any shares of such common stock or other equity security,
(C) to purchase, lease or otherwise acquire the assets of Foothill or any
Foothill Subsidiary except in the ordinary course of business, or (D) to merge,
consolidate or otherwise combine with Foothill or any Foothill Subsidiary. If
any corporation, partnership, person or other entity or group makes an offer or
inquiry to Foothill or any Foothill Subsidiary concerning any of the foregoing,
Foothill or such Foothill Subsidiary will promptly disclose such offer or
inquiry, including the terms thereof, to Norwest.
(i) Foothill shall consult with Norwest as to the form and substance of any
proposed press release or other proposed public disclosure of matters related
to this Agreement or any of the transactions contemplated hereby.
(j) Foothill and each Foothill Subsidiary will take all action necessary or
required (i) to terminate or amend, if requested by Norwest, all qualified
pension and welfare benefit plans and all non-qualified benefit plans and
compensation arrangements as of the Effective Date of the Merger, (ii) to amend
the Plans to comply with the provisions of the TRA and regulations thereunder
and other applicable law, and (iii) to submit application to the Internal
Revenue Service for a favorable determination letter for each of the Plans
which is subject to the qualification requirements of Section 401(a) of the
Code prior to the Effective Date of the Merger.
(k) Neither Foothill nor any Foothill Subsidiary shall take any action which
with respect to Foothill would disqualify the Merger as a "pooling of
interests" for accounting purposes.
(l) Foothill shall use its best efforts to obtain and deliver at least 32
days prior to the Effective Date of the Merger signed representations
substantially in the form attached hereto as Exhibit B to Norwest by each
executive officer, director or shareholder of Foothill who may reasonably be
deemed an "affiliate" of Foothill within the meaning of such term as used in
Rule 145 under the Securities Act.
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(m) Foothill shall establish such additional accruals and reserves as may be
necessary to conform Foothill's accounting and credit loss reserve practices
and methods to those of Norwest and Norwest's plans with respect to the conduct
of Foothill's business following the Merger and to provide for the costs and
expenses relating to the consummation by Foothill of the Merger and the other
transactions contemplated by this Agreement.
(n) Foothill shall obtain, at its sole expense, Phase I environmental
assessments for each facility and each non-residential OREO property. Oral
reports of such environmental assessments shall be delivered to Norwest no
later than four (4) weeks and written reports shall be delivered to Norwest no
later than eight (8) weeks from the date of this Agreement. Foothill shall
obtain, at its sole expense, Phase II environmental assessments for properties
identified by Norwest on the basis of the results of such Phase I environmental
assessments.
(o) Foothill shall take all action necessary to terminate Foothill's 1978
Amended and Restated Stock Option Plan (the "Option Plan") and 1990 Performance
and Equity Incentive Plan ("Incentive Plan") to provide for the acceleration of
the vesting rights of the options ("Options") issued thereunder to permit such
Options to be immediately exercisable and to provide for the termination of any
unexercised Options prior to the Effective Time of the Merger and shall obtain
the written consent or acknowledgment of the holders of such Options to such
termination in exchange for (i) the acceleration of such Options in accordance
with the terms of the Option Plan and Incentive Plan and (ii) the exchange of
such Options for shares of Norwest Common Stock as set forth in paragraph
1(a)(iii).
(p) Foothill shall use its best efforts to obtain any required consents
required to be given by the general and limited partners of FPI and FPII to the
Merger and as may be necessary or required in order to conform the activities
of FPI and FPII to those permissible for bank holding companies and their
subsidiaries under the BHC Act and other applicable banking laws and
regulations and to such conditions and requirements imposed in the approvals
contemplated under paragraphs 6(e) and 7(e).
(q) Foothill agrees, if requested by Norwest, to cancel or, in the
alternative, to transfer to Foothill's employees in exchange for payment to
Foothill of the policy premiums paid by Foothill, the split dollar insurance
policies maintained by Foothill on its employees.
(r) Foothill shall use its best efforts to cause the employees listed on
Exhibit C1 to execute the Employment and Non-Competition Agreements
substantially in the form of Exhibit C2 hereof prior to the Closing Date.
(s) Foothill shall take all action necessary to terminate Foothill's
Director's Pension Plan and Executive Supplement Retirement Plan as of no later
than the Effective Time of Merger.
(t) Foothill shall take all action necessary to terminate Foothill's Stock
Purchase Plan as of no later than the earliest to occur of the Effective Time
of the Merger or September 30, 1995 and distribute to the participants therein
the amount contributed by such participants to such plan from January 1, 1995
to the date of termination, plus the amount referred to in paragraph 4(b)(xi).
(u) Foothill shall execute and deliver the Merger Agreement prior to the
Closing Date.
(v) Subject to the terms and conditions herein provided, Foothill agrees to
use all reasonable efforts to take, or cause to be taken, all actions and to
do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement , the Merger Agreement and the
Stock Option Agreement, including using all reasonable efforts to obtain all
necessary waivers, consents and approvals, to effect all necessary
registrations and filings (including, but not limited to, filings under the BHC
Act and HSR Act and with all applicable governmental entities) and to lift any
injunction or other legal bar to the Merger (and, in such case, to proceed with
the Merger as expeditiously as possible) or the Stock Option Agreement.
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(w) Foothill shall use its best efforts to terminate, effective prior to the
Closing Date, that certain Preferred Stock Purchase Agreement between Foothill
and Recovery Equity Investors, L.P. ("REI") dated May 10, 1991 ("Preferred
Stock Agreement") and that certain Registration Rights Agreement between
Foothill and REI dated June 27, 1991 ("Registration Agreement").
5. COVENANTS OF NORWEST. Norwest covenants and agrees with Foothill as
follows:
(a) From the date hereof until the Effective Time of the Merger, Norwest will
maintain its corporate existence in good standing; conduct, and cause the
Norwest Subsidiaries to conduct, their respective businesses in compliance with
all material obligations and duties imposed on them by all laws, governmental
regulations, rules and ordinances, and judicial orders, judgments and decrees
applicable to Norwest or the Norwest Subsidiaries, their businesses or their
properties; maintain all books and records of it and the Norwest Subsidiaries,
including all financial statements, in accordance with the accounting
principles and practices consistent with those used for the Norwest Financial
Statements, except for changes in such principles and practices required under
generally accepted accounting principles.
(b) Norwest will furnish to Foothill all the information concerning Norwest
required for inclusion in a proxy statement or statements to be sent to the
shareholders of Foothill, or in any statement or application made by Foothill
to any governmental body in connection with the transactions contemplated by
this Agreement.
(c) As promptly as practicable after the execution of this Agreement, Norwest
will prepare, with the assistance of Foothill, as appropriate (including, but
not limited to preparation by Foothill and its counsel of applicable disclosure
in the registration Statement relating to Foothill) and file with the SEC a
registration statement on Form S-4 (the "Registration Statement") together with
the Prospectus/Proxy Statement to be included therein under the Securities Act
and any other applicable documents, relating to the shares of Norwest Common
Stock to be delivered to the shareholders of Foothill pursuant to the Merger
Agreement. Each of Norwest (and Foothill) shall use its best efforts to respond
promptly as is practicable to comments from the SEC, if any and will use its
best efforts to cause the Registration Statement to become effective. At the
time the Registration Statement becomes effective, the Registration Statement
will comply in all material respects with the provisions of the Securities Act
and the published rules and regulations thereunder, and will not contain any
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not false or
misleading, and at the time of mailing thereof to the Foothill shareholders, at
the time of the Foothill shareholders' meeting referred to in paragraph 4(c)
hereof and at the Effective Time of the Merger the prospectus included as part
of the Registration Statement, as amended or supplemented by any amendment or
supplement filed by Norwest (hereinafter the "Prospectus"), will not contain
any untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein not false or misleading; provided,
however, that none of the provisions of this subparagraph shall apply to
statements in or omissions from the Registration Statement or the Prospectus
made in reliance upon and in conformity with information furnished by Foothill
or any Foothill subsidiary for use in the Registration Statement or the
Prospectus. Each of Norwest and Foothill will notify the other promptly as is
practicable of the receipt of any comments from the SEC or its staff and of any
request by the SEC or its staff for amendments or supplements to the S-4 or
Prospectus/Proxy Statement or for additional information and will supply the
other with copies of all correspondence with the SEC or its staff with respect
to the S-4 or the Prospectus/Proxy Statement. Whenever any event occurs which
should be set forth in an amendment or supplement to the S-4 or the
Prospectus/Proxy Statement, Norwest or Foothill, as the case may be, shall
promptly inform the other of such occurrence and cooperate in filing with the
SEC or its staff, and/or mailing to stockholders of Foothill, of such amendment
or supplement.
(d) Norwest will file all documents required to be filed to list the Norwest
Common Stock to be issued pursuant to the Merger Agreement on the New York
Stock Exchange and the Chicago Stock Exchange and use its best efforts to
effect said listings.
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(e) The shares of Norwest Common Stock to be issued by Norwest to the
shareholders of Foothill 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 Foothill pursuant to the Merger Agreement are and will be free
of any preemptive rights of the stockholders of Norwest.
(f) Norwest will file all documents required to obtain, prior to the
Effective Time of the Merger, all necessary Blue Sky permits and approvals, if
any, required to carry out the transactions contemplated by this Agreement,
will pay all expenses incident thereto and will use its best efforts to obtain
such permits and approvals.
(g) Norwest will take all necessary corporate and other action and file all
documents required to obtain and will use its best efforts to obtain all
approvals of regulatory authorities, consents and approvals required of it to
carry out the transactions contemplated by this Agreement and will cooperate
with Foothill to obtain all such approval and consents required by Foothill.
Norwest will respond as promptly as practicable to any inquiries received from
any regulatory agency.
(h) Norwest will hold in confidence all documents and information concerning
Foothill and Foothill's Subsidiaries furnished to it and its representatives in
connection with the transactions contemplated by this Agreement and will not
release or disclose such information to any other person, except as required by
law and except to its outside professional advisers in connection with this
Agreement, with the same undertaking from such professional advisers. If the
transactions contemplated by this Agreement shall not be consummated, such
confidence shall be maintained and such information shall not be used in
competition with Foothill (except to the extent that such information can be
shown to be previously known to Norwest, in the public domain, or later
acquired by Norwest from other legitimate sources) and, upon request, all such
documents, copies thereof or extracts therefrom shall immediately thereafter be
returned to Foothill.
(i) Norwest will file any documents or agreements required to be filed in
connection with the Merger under the Delaware General Corporation Law.
(j) Norwest will deliver to Foothill at the Closing all opinions,
certificates and other documents required to be delivered by it at the Closing.
(k) Norwest shall consult with Foothill as to the form and substance of any
proposed press release or other proposed public disclosure of matters related
to this Agreement or any of the transactions contemplated hereby.
(l) Norwest shall give Foothill written notice of receipt of the regulatory
approvals referred to in paragraph 7(e).
(m) Neither Norwest nor any Norwest Subsidiary shall take any action which
with respect to Norwest would disqualify the Merger as a "pooling of interests"
for accounting purposes.
(n) For a period not exceeding fifteen (15) days prior to the Closing Date,
Norwest will permit Foothill and its representatives to examine its books,
records and properties and interview officers, employees and agents of Norwest
at all reasonable times when it is open for business. No such examination by
Foothill or its representatives shall in any way affect, diminish or terminate
any of the representations, warranties or covenants of Norwest herein
expressed.
(o) Subject to the terms and conditions herein provided, Norwest agrees to
use all reasonable efforts to take, or cause to be taken, all actions and to
do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement , the Merger Agreement and the
Stock Option Agreement, including using all reasonable efforts to obtain all
necessary waivers, consents and approvals, to effect all necessary
registrations and filings (including, but not limited to, filings under the BHC
Act and HSR Act and with all applicable governmental entities) and to lift any
injunction or other legal bar to the Merger (and, in such case, to proceed with
the Merger as expeditiously as possible) or the Stock Option Agreement.
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(p) Merger Co. shall execute and deliver the Merger Agreement prior to the
Closing Date.
(q) From and after the Effective Time of Merger: (i) Norwest shall indemnify,
defend and hold harmless the officers, directors and employees of Foothill and
the Foothill Subsidiaries (the "Indemnified Parties") against all losses,
expenses, claims, damages or liabilities arising out of the transactions
contemplated by this Agreement to the fullest extent permitted or required
under Foothill's or a Foothill Subsidiary's Certificate of Incorporation or
Articles of Incorporation and By-laws as in effect as of the Effective Time of
the Merger; and (ii) Norwest shall ensure that all rights to indemnification
and all limitations of liability existing in favor of an Indemnified Party in
Foothill's Certificate of Incorporation or By-laws or similar governing
documents of any Foothill Subsidiary, as applicable in the particular case and
as in effect on the date hereof, shall, with respect to claims arising from
facts or events that occurred before the Effective Time of the Merger, survive
the Merger and shall continue in full force and effect. Nothing contained in
this paragraph 5(q) shall be deemed to preclude the liquidation, consolidation
or merger of Foothill or any Foothill Subsidiary, in which case all of such
rights to indemnification and limitations on liability shall be deemed to so
survive and continue as contractual rights notwithstanding any such liquidation
or consolidation or merger. Notwithstanding anything to the contrary contained
in this paragraph 5(q), nothing contained herein shall require Norwest or
Foothill to indemnify any person who was a director or officer of Foothill or
any Foothill Subsidiary to a greater extent than Foothill or any Foothill
Subsidiary is, as of the date of this Agreement, required to indemnify any such
person.
(r) With respect to the persons listed on Schedule 5(r) hereof and who
currently hold Options which constitute "Incentive Stock Options" for purposes
of the Code ("ISO"), which Options as a result of the transactions contemplated
by this Agreement will not be treated as ISO's by virtue of (S)422(d) of the
Code, Norwest agrees to grant to such person non-qualified options to acquire
Norwest Common Stock pursuant and subject to the terms and conditions of the
Norwest Corporation 1985 Long-Term Incentive Compensation Plan. Said Norwest
options will be granted at the first meeting of the Human Resources Committee
of the Norwest Board of Directors following the Closing and shall be determined
pursuant to the following formula (rounded up to the next nearest whole share):
<TABLE>
<S> <C> <C> <C> <C>
.11(G)
---------
.36 (FMV) = X
</TABLE>
Where
(i) G = the amount of the compensation income for federal income tax
purposes resulting from the exchange or exercise of such ISO's;
(ii) FMV = the fair market value of Norwest Common Stock at the time of
grant; and
(iii) x = the total number of Norwest options to be granted.
6. CONDITIONS PRECEDENT TO OBLIGATION OF FOOTHILL. The obligation of Foothill
to effect the Merger shall be subject to the satisfaction at or before the Time
of Filing of the following further conditions, which may be waived in whole or
in part in writing by Foothill:
(a) Except as they may be affected by transactions contemplated hereby and
except to the extent such representations and warranties are by their express
provisions made as of a specified date and except for activities or
transactions after the date of this Agreement made in the ordinary course of
business and not expressly prohibited by this Agreement, the representations
and warranties contained in paragraph 3 hereof shall be true and correct in all
respects material. For purposes of this section, "material" shall mean that the
untruth or incorrectness of such representation or warranty would cause a
material adverse effect on the business, financial condition or assets of
Norwest and the Norwest Subsidiaries taken as a whole.
(b) Norwest shall have, or shall have caused to be, performed and observed in
all material respects all covenants, agreements and conditions hereof to be
performed or observed by it and Merger Co. at or before the Time of Filing.
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<PAGE>
(c) Foothill shall have received a favorable certificate, dated as of the
Effective Date of the Merger, signed by the Chairman, the President or any
Executive Vice President or Senior Vice President and by the Secretary or
Assistant Secretary of Norwest, as to the matters set forth in subparagraphs
(a) and (b) of this paragraph 6.
(d) This Agreement and the Merger Agreement shall have been approved by the
affirmative vote of the holders of the percentage of the outstanding shares of
Foothill required for approval of a plan of merger in accordance with the
provisions of Foothill's Certificate of Incorporation and the Delaware General
Corporation Law.
(e) Norwest shall have received approval by the Federal Reserve Board and by
such other governmental agencies as may be required by law of the transactions
contemplated by this Agreement and the Merger Agreement and all waiting and
appeal periods prescribed by applicable law or regulation shall have expired.
(f) No court or governmental authority of competent jurisdiction shall have
issued an order restraining, enjoining or otherwise prohibiting the
consummation of the transactions contemplated by this Agreement.
(g) The shares of Norwest Common Stock to be delivered to the stockholders of
Foothill pursuant to this Agreement and the Merger Agreement shall have been
authorized for listing on the New York Stock Exchange and the Chicago Stock
Exchange.
(h) Foothill shall have received an opinion, dated the Closing Date, of
counsel to Foothill, substantially to the effect that, for federal income tax
purposes: (i) the Merger will constitute a reorganization within the meaning of
Sections 368(a)(1)(A) and 368(a)(2)(E) of the Code; (ii) no gain or loss will
be recognized by the holders of Foothill Common Stock or Preferred Stock upon
the conversion of their shares into Norwest Common Stock pursuant to the terms
of the Merger (except to the extent cash is received in lieu of fractional
shares); (iii) the tax basis of the shares of Norwest Common Stock received by
the shareholders of Foothill on the conversion of the Foothill Common Stock and
Preferred Stock pursuant to the Merger will be the same as the basis of
Foothill Common Stock or Preferred Stock converted (less any portion of such
basis allocable to any fractional interest in any shares of Foothill Common
Stock or Preferred Stock); and (iv) the holding period of the shares of Norwest
Common Stock into which the Foothill Common Stock and Preferred Stock are
converted will include the holding period of the Foothill Common Stock or
Preferred Stock, provided such shares of Foothill Common Stock or Preferred
Stock were held as a capital asset as of the Effective Time of the Merger.
(i) The Registration Statement (as amended or supplemented) shall have become
effective under the Securities Act and shall not be subject to any stop order,
and no action, suit, proceeding or investigation by the SEC to suspend the
effectiveness of the Registration Statement shall have been initiated and be
continuing, or have been threatened and be unresolved. Norwest shall have
received all state securities law or blue sky authorizations necessary to carry
out the transactions contemplated by this Agreement.
(j) Merger Co. shall have executed and delivered the Merger Agreement.
(k) Norwest and each Norwest Subsidiary shall have obtained any and all
material permits, authorizations, consents, waivers and approvals required for
the lawful consummation by it of the Merger.
(l) Foothill shall have received the opinion of Norwest's counsel dated the
Closing Date in form and substance reasonably satisfactory to Foothill to the
effect that (i) Norwest is duly organized and existing under the laws of the
State of Delaware and (ii) all necessary corporate action on the part of
Norwest has been taken to authorize the issuance of the shares of Norwest
Common Stock in connection with the Merger, and when issued as described in the
Registration Statement, such shares will be legally and validly issued, fully
paid, and nonassessable.
7. CONDITIONS PRECEDENT TO OBLIGATION OF NORWEST. The obligation of Norwest
to effect the Merger shall be subject to the satisfaction at or before the Time
of Filing of the following conditions, which may be waived in writing by
Norwest:
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(a) Except as they may be affected by transactions contemplated hereby and
except to the extent such representations and warranties are by their express
provisions made as of a specified date and except for activities or
transactions or events occurring after the date of this Agreement made in the
ordinary course of business and not expressly prohibited by this Agreement, the
representations and warranties contained in paragraph 2 hereof shall be true
and correct in all respects material to Foothill and the Foothill Subsidiaries
taken as a whole as if made at the Time of Filing. For purposes of this
section, "material" shall mean that the untruth or incorrectness of such
representation or warranty would cause a material adverse effect on the
business, financial condition or results of operation of Foothill and the
Foothill Subsidiaries taken as a whole.
(b) Foothill shall have, or shall have caused to be, performed and observed
in all material respects all covenants, agreements and conditions hereof to be
performed or observed by it at or before the Time of Filing.
(c) This Agreement and the Merger Agreement shall have been approved by the
affirmative vote of the holders of the percentage of the outstanding shares of
Foothill required for approval of a plan of merger in accordance with the
provisions of Foothill's Certificate of Incorporation and the Delaware General
Corporation Law.
(d) Norwest shall have received a favorable certificate dated as of the
Effective Date of the Merger signed by the Chairman or President and by the
Secretary or Assistant Secretary of Foothill, as to the matters set forth in
subparagraphs (a) through (c) of this paragraph 7.
(e) Norwest shall have received approval by all governmental agencies as may
be required by law of the transactions contemplated by this Agreement and the
Merger Agreement and all waiting and appeal periods prescribed by applicable
law or regulation shall have expired. No approvals, licenses or consents
granted by any regulatory authority shall contain any condition or requirement
relating to Foothill or any Foothill Subsidiary that, in the good faith
judgment of Norwest, is unreasonably burdensome to Norwest. For purposes of the
foregoing, "unreasonably burdensome" shall mean any condition which could
reasonably be expected to have a material adverse effect on the business,
financial condition, capital requirements or results of operation (including,
with respect to Foothill, Foothill's operating plans) of Norwest or the Norwest
Subsidiaries taken as a whole or Foothill or the Foothill Subsidiaries taken as
a whole or which would result in the inability of Foothill to continue to act
as an investment advisor to the Partnerships or requiring divestiture by
Foothill of any or all of its general partnership interest in the Partnerships
or the liquidation or dissolution of the Partnerships.
(f) Foothill and each Foothill Subsidiary shall have obtained any and all
material consents or waivers from other parties to loan agreements, leases or
other contracts material to Foothill's or such subsidiary's business required
for the consummation of the Merger, and Foothill and each Foothill Subsidiary
shall have obtained any and all material permits, authorizations, consents,
waivers and approvals required for the lawful consummation by it of the Merger.
(g) No court or governmental authority of competent jurisdiction shall have
issued an order restraining, enjoining or otherwise prohibiting the
consummation of the transactions contemplated by this Agreement.
(h) The Merger shall qualify as a "pooling of interests" for accounting
purposes and Norwest shall have received from KPMG Peat Marwick, L.L.P. and
Ernst & Young opinions to that effect.
(i) At any time since the date hereof the total number of shares of Foothill
Common Stock outstanding and subject to issuance upon exercise (assuming for
this purpose that phantom shares, if any, and other share-equivalents
constitute Foothill Common Stock) of all warrants, options, conversion rights,
phantom shares, if any, or other share-equivalents, other than any option held
by Norwest, shall not have exceeded 17,843,359.
(j) The Registration Statement (as amended or supplemented) shall have become
effective under the Securities Act and shall not be subject to any stop order,
and no action, suit, proceeding or investigation by the SEC to suspend the
effectiveness of the Registration Statement shall have been initiated and be
continuing, or have been threatened or be unresolved. Norwest shall have
received all state securities law or blue sky authorizations necessary to carry
out the transactions contemplated by this Agreement.
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<PAGE>
(k) Norwest shall have received from the Chief Executive Officer and Chief
Financial Officer of Foothill a letter, dated as of the effective date of the
Registration Statement and updated through the date of Closing, in form and
substance reasonably satisfactory to Norwest, to the effect that:
(i) the interim quarterly financial statements of Foothill included or
incorporated by reference in the Registration Statement are prepared in
accordance with generally accepted accounting principles applied on a basis
consistent with the audited financial statements of Foothill;
(ii) the amounts reported in the interim quarterly financial statements
of Foothill agree with the general ledger of Foothill;
(iii) the annual and quarterly financial statements of Foothill and the
Foothill Subsidiaries included in, or incorporated by reference in, the
Registration Statement comply as to form in all material respects with the
applicable accounting requirements of the Securities Act and the published
rules and regulations thereunder;
(iv) from March 31, 1995 (or, if later, since the date of the most recent
unaudited consolidated financial statements of Foothill and the Foothill
Subsidiaries as may be included in the Registration Statement) to the last
day of the month immediately preceding the effective date of the
Registration Statement or the last day of the month immediately preceding
the Closing, there are no increases in long-term debt, changes in the
capital stock or decreases in stockholders' equity of Foothill and the
Foothill Subsidiaries, except in each case for changes, increases or
decreases which the Registration Statement discloses have occurred or may
occur or which are described in such letters. For the same period, there
have been no decreases in consolidated net interest income, consolidated
net interest income after provision for credit losses, consolidated income
before income taxes, consolidated net income and net income per share
amounts of Foothill and the Foothill Subsidiaries, or in income before
equity in undistributed income of subsidiaries, in each case as compared
with the comparable period of the preceding year, except in each case for
changes, increases or decreases which the Registration Statement discloses
have occurred or may occur or which are described in such letters;
(v) they have reviewed certain amounts, percentages, numbers of shares
and financial information which are derived from the general accounting
records of Foothill and the Foothill Subsidiaries, which appear in the
Registration Statement under the certain captions to be specified by
Norwest, and have compared certain of such amounts, percentages, numbers
and financial information with the accounting records of Foothill and the
Foothill Subsidiaries and have found them to be in agreement with financial
records and analyses prepared by Foothill included in the annual and
quarterly financial statements, except as disclosed in such letters.
(l) Notice shall not have been received by Foothill relating to, or any
senior officer of Foothill, after diligent inquiry, shall become aware of, a
basis for any proceeding, claim or action of any nature seeking to impose, or
that could result in the imposition on Foothill or any Foothill Subsidiary of,
any liability relating to the release of hazardous substances as defined under
any local, state or federal environmental statute, regulation or ordinance
including, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 as amended, which has had or could
reasonably be expected to have a material adverse effect upon Foothill and its
subsidiaries taken as a whole.
(m) Since March 31, 1995, no change shall have occurred and no circumstances
shall exist which has had or might reasonably be expected to have a material
adverse effect on the financial condition, results of operations or business of
Foothill and the Foothill Subsidiaries taken as a whole.
(n) Foothill shall have obtained all necessary or required consents of the
general and limited partners of FPI and FPII to the Merger and to the matters
referred to in paragraph 4(p).
(o) Foothill shall have terminated the Option Plan and Incentive Plan and all
outstanding Options shall have exercised or terminated as required in paragraph
4(o).
A-24
<PAGE>
(p) Foothill shall have terminated Foothill's Directors Pension Plan and
Executive Supplement Retirement Plan effective as of no later than the
Effective Time of Merger.
(q) The persons listed on Exhibit C1 shall have entered into the Employment
and Non-Competition Agreements in substantially the form of Exhibit C2 hereto.
(r) Foothill shall have executed and delivered the Merger Agreement.
(s) The Foothill Stock Purchase Plan shall have been terminated as provided
in paragraph 4(t).
(t) Norwest shall have received an opinion of counsel to Foothill dated the
Closing Date, in form and substance reasonably satisfactory to Norwest to the
effect that (i) Foothill is duly organized and existing under the State of
Delaware and (ii) that the execution, delivery and performance of the Agreement
and the Merger Agreement has been duly and validly authorized by all necessary
corporate action.
(u) The Preferred Stock Agreement and Registration Agreement shall have been
terminated.
8. EMPLOYEE BENEFIT PLANS. Each person who is an employee of Foothill or any
Foothill Subsidiary as of the Effective Date of the Merger ("Foothill
Employees") shall be eligible for participation in the employee welfare and
retirement plans of Norwest, as in effect from time to time, as follows:
(a) Employee Welfare Benefit Plans. Each Foothill employee shall be eligible
for participation in the employee welfare benefit plans of Norwest listed below
subject to any eligibility requirements applicable to such plans (but not
subject to any pre-existing conditions exclusions except for the Norwest Long
Term Care Plan) and shall enter each plan not later than the first day of the
calendar quarter which begins at least 32 days after the Effective Date of the
Merger:
Medical Plan
Dental Plan
Vision Plan
Short Term Disability Plan
Long Term Disability Plan
Long Term Care Plan
Flexible Benefits Plan
Basic Group Life Insurance Plan
Group Universal Life Insurance Plan
Dependent Group Life Insurance Plan
Business Travel Accident Insurance Plan
Accidental Death and Dismemberment Plan
Severance Pay Plan
Vacation Program
For the purpose of determining each Foothill Employee's benefit for the year in
which the Merger occurs under the Norwest vacation program, vacation taken by
an Foothill Employee in the year in which the Merger occurs will be deducted
from the total Norwest benefit. Each Foothill Employee will be credited under
the Norwest Medical Plan for the amount of any deductible already satisfied
under Foothill's Plan prior to Closing. After the Effective Date of the Merger,
Foothill Employees will be subject to Norwest's Vacation Program in accordance
with the terms of that Program, with full credit for years of past service to
Foothill and the Foothill Subsidiaries. For purposes of the Short Term
Disability Plan and Severance Policy, Foothill Employees will receive full
credit for years of past service with Foothill and the Foothill Subsidiaries.
Foothill Employees shall not be entitled to past service credit with regard
to retiree medical benefits.
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<PAGE>
(b) Employee Retirement Benefit Plans.
Each Foothill Employee shall be eligible for participation in the Norwest
Savings-Investment Plan (the "SIP"), subject to any eligibility requirements
applicable to the SIP (with full credit for years of past service to Foothill
and the Foothill Subsidiaries for the purpose of satisfying any eligibility and
vesting periods applicable to the SIP), and shall enter the SIP not later than
the first day of the calendar quarter which begins at least 32 days after the
Effective Date of the Merger.
Each Foothill Employee shall be eligible for participation, as a new
employee, in the Norwest Pension Plan under the terms thereof.
9. TERMINATION OF AGREEMENT.
(a) This Agreement may be terminated at any time prior to the Time of Filing:
(i) by mutual written consent of the parties hereto;
(ii) by either of the parties hereto upon written notice to the other
party if the Merger shall not have been consummated by March 31, 1996
unless such failure of consummation shall be due to the failure of the
party seeking to terminate to perform or observe in all material respects
the covenants and agreements hereof to be performed or observed by such
party;
(iii) by Foothill or Norwest upon written notice to the other party if
any court or governmental authority of competent jurisdiction shall have
issued a final order restraining, enjoining or otherwise prohibiting the
consummation of the transactions contemplated by this Agreement or;
(iv) by Norwest, if the Board of Directors of Foothill does not publicly
recommend in the Proxy Statement that the holders of the Foothill Common
Stock approve and adopt this Agreement, or if after recommending in the
Proxy Statement that stockholders approve and adopt this Agreement, the
Board of Directors of Foothill shall have withdrawn, modified or amended
such recommendation in any respect materially adverse to Norwest.
(b) In the event of termination of this Agreement by either Norwest or
Foothill as provided in paragraph (a), this Agreement shall forthwith become
void and have no effect except that (i) termination of this Agreement under
this paragraph 9 shall not release, or be construed as so releasing, Foothill
from any liability or damage to Norwest arising out of Foothill's willful and
material breach of the warranties and representations made by it, or willful
and material failure in performance of any of its covenants, agreements, duties
or obligations arising hereunder, (ii) the obligations under paragraphs 4(g),
5(h) and 10 shall survive such termination; and (iii) in the event that this
Agreement shall have been terminated by Foothill pursuant to paragraph 9(a)(ii)
because of the failure of Norwest to perform or observe in all material
respects the covenants and agreements to be performed by Norwest or such other
willful action that results in a material breach of the warranties and
representations made by Norwest, or willful and material failure in performance
of any of Norwest's covenants, agreements, duties or obligations arising
hereunder, and all of the conditions to consummation of the Merger set forth in
Section 7 have been satisfied or, with respect to conditions relating to the
delivery of officers' certificates and opinions, would have been satisfied had
the Closing actually occurred, Norwest agrees, at the request of Foothill, to
purchase Foothill Senior Subordinated Debt in an amount and pursuant to the
terms and conditions of that certain Funding Agreement of even date herewith
between Norwest and Foothill and Foothill Capital Corporation ("Funding
Agreement") which purchase shall be in lieu of liquidated damages and in full
and complete satisfaction of any further liability of Norwest for any claims,
damages or losses incurred or alleged to have been incurred by Foothill by
virtue of or arising out of such termination.
10. EXPENSES. All expenses in connection with this Agreement and the
transactions contemplated hereby, including without limitation legal and
accounting fees, incurred by Foothill and Foothill Subsidiaries shall be borne
by Foothill, and all such expenses incurred by Norwest shall be borne by
Norwest.
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<PAGE>
11. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and assigns,
but shall not be assignable by either party hereto without the prior written
consent of the other party hereto.
12. THIRD PARTY BENEFICIARIES. Each party hereto intends that this Agreement
shall not benefit or create any right or cause of action in or on behalf of any
person other than the parties hereto.
13. NOTICES. Any notice or other communication provided for herein or given
hereunder to a party hereto shall be in writing and shall be delivered in
person or shall be mailed by first class registered or certified mail, postage
prepaid, addressed as follows:
If to Norwest:
Norwest Corporation
Sixth and Marquette
Minneapolis, Minnesota 55479-1026
Attention: Secretary
If to Foothill:
The Foothill Group, Inc.
11111 Santa Monica Boulevard
15th Floor
Los Angeles, CA 90025
Attention: Henry Jordan, Chief Financial Officer
With a copy to:
Buchalter, Nemer, Fields & Younger
601 South Figueroa Street
Los Angeles, CA 90017
Attention: Mark A. Bonenfant
or to such other address with respect to a party as such party shall notify the
other in writing as above provided.
14. COMPLETE AGREEMENT. This Agreement, the Merger Agreement, the Stock
Option Agreement and the Funding Agreement contain the complete agreement
between the parties hereto with respect to the Merger and other transactions
contemplated hereby and supersede all prior agreements and understandings
between the parties hereto with respect thereto.
15. CAPTIONS. The captions contained in this Agreement are for convenience of
reference only and do not form a part of this Agreement.
16. WAIVER AND OTHER ACTION. Either party hereto may, by a signed writing,
give any consent, take any action pursuant to paragraph 9 hereof or otherwise,
or waive any inaccuracies in the representations and warranties by the other
party and compliance by the other party with any of the covenants and
conditions herein.
17. AMENDMENT. At any time before the Time of Filing, the parties hereto, by
action taken by their respective Boards of Directors or pursuant to authority
delegated by their respective Boards of Directors, may amend this Agreement;
provided, however, that no amendment after approval by the shareholders of
Foothill shall be made which changes in a manner adverse to such shareholders
the consideration to be provided to said shareholders pursuant to this
Agreement and the Merger Agreement.
18. GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with the laws of the State of Delaware.
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<PAGE>
19. NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES. No representation or
warranty contained in the Agreement or the Merger Agreement shall survive the
Merger or except as set forth in paragraph 9(b), the termination of this
Agreement. Paragraph 10 shall survive the Merger.
20. COUNTERPARTS. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original but all of which shall constitute but
one instrument.
In Witness Whereof, the parties hereto have executed this Agreement as of the
day and year first above written.
Norwest Corporation
Foothill Group, Inc.
By: /s/ James R. Campbell By: /s/ Don L. Gervirtz
---------------------------------- ----------------------------------
Its: Executive Vice President Its: Chairman of the Board and Chief
---------------------------------- Executive Officer
----------------------------------
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<PAGE>
EXHIBIT A
AGREEMENT AND PLAN OF MERGER
BETWEEN
FOOTHILL GROUP, INC.
A DELAWARE CORPORATION
(THE SURVIVING CORPORATION)
AND
MERGER CO.
A DELAWARE CORPORATION
(THE MERGED CORPORATION)
This Agreement and Plan of Merger dated as of , 19 , between
FOOTHILL GROUP, INC., a Delaware corporation (hereinafter sometimes called
"Foothill" and sometimes called the "surviving corporation") and MERGER CO., a
Delaware 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 Delaware on , 19 , and said corporation is now
a corporation subject to and governed by the provisions of the Delaware General
Corporation Law. Merger Co. has authorized capital stock of shares of
common stock having a par value of $ per share ("Merger Co. Common
Stock"), of which shares were outstanding as of the date hereof; and
Whereas, Foothill was incorporated by Articles of Incorporation filed in the
office of the Secretary of State of the State of Delaware on , 19 and
said corporation is now a corporation subject to and governed by the provisions
of the Delaware General Corporation Law. Foothill has authorized capital stock
of 22,000,000 shares of Common Stock, no par value ("Foothill Common Stock"),
of which shares were outstanding and shares were held in the
treasury as of 19 , 1,000,000 shares of Series A convertible
Preferred Stock, $1.00 par value per share ("Preferred Stock") of which
shares were outstanding and no shares were held in the treasury as of
, 19 ; and
Whereas, Norwest Corporation and Foothill are parties to an Agreement and
Plan of Reorganization dated as of May , 1995 (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 Foothill, with Foothill continuing as the surviving corporation,
on the terms and conditions hereinafter set forth in accordance with the
provisions of the Delaware General Corporation Law, 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) of the Internal
Revenue Code, as amended, by virtue of the provisions of Section 368(a)(2)(E)
of the Code and that as a condition to the obligations of the parties hereunder
that the Merger be treated as a "pooling" for accounting purposes;
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 Foothill pursuant to the laws of the State of Delaware, and do
hereby agree upon, prescribe and set forth the terms and conditions of the
merger of Merger Co. with and into Foothill, the mode of carrying said merger
into effect, the manner and basis of converting the shares of Foothill Common
Stock and Preferred Stock and unexercised options of Foothill convertible into
Foothill Common Stock ("Options") 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:
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<PAGE>
First: At the time of merger Merger Co. shall be merged with and into
Foothill, 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 be Foothill Group, Inc.
Second: The Articles of Incorporation of Foothill at the time of merger shall
be amended as set forth below and, as so amended, shall be the Articles of
Incorporation of the surviving corporation until further amended according to
law:
[Amend to change name, number of directors, etc.]
Third: The By-Laws of Foothill at the time of merger shall be and remain the
By-Laws of the surviving corporation until amended according to the provisions
of the Articles of Incorporation of the surviving corporation or of said By-
Laws.
Fourth: The following persons at the time of merger shall be and remain the
directors of the surviving corporation and shall hold office from the time of
merger until their respective successors are elected and qualify:
[List Names]
Fifth: The following persons at the time of merger shall be and 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:
[List Names]
Sixth: The manner and basis of converting the shares of Foothill Common Stock
and Preferred Stock and Options into cash or shares of Norwest Common Stock
shall be as follows:
1. (a) Each of the shares of Foothill 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 .920 shares
of Norwest Common Stock.
(b) Each of the shares of Preferred 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 6.1333272 shares of Norwest Common
Stock.
(c) the shares of Foothill Common Stock subject to each unexercised
Option (as defined in paragraph 4(o) of the Reorganization Agreement)
having an exercise price that is less than the "Fair Market Value" (as
defined below) per share of Foothill Common Stock and whose holder shall
have entered into an agreement with Foothill pursuant to paragraph 4(o)
hereof (the "Option Shares"), shall be converted into and exchanged for
that number of fully paid and nonassessable shares of Norwest Common Stock
determined as follows: (i) by dividing (A) the aggregate Fair Market Value
of the Option Shares less the aggregate exercise price thereof by (B) the
Fair Market Value of one share of Foothill Common Stock, and then (ii)
multiplying the number obtained as the result of such division by .920. For
purposes of this paragraph 1(c), the term "Fair Market Value" with respect
to Foothill Common Stock shall mean the per share price of Foothill Common
Stock as reported by the consolidated tape of the New York Stock Exchange
for the trading day immediately preceding the "Closing Date" (as that term
is defined in the Reorganization Agreement).
2. As soon as practicable after the merger becomes effective, each holder
of a certificate for shares of Foothill Common Stock or Preferred Stock
outstanding immediately prior to the time of merger and of Options
unexercised prior to the time of merger, the holder of which shall have
entered into the Agreement referred to in 1(c) above, shall be entitled,
upon surrender of such certificate or instrument
representing Options 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
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<PAGE>
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 Foothill Common Stock and
Preferred Stock or instrument representing an Option shall not be
transferable on the books of the surviving corporation but shall be deemed
to evidence the right to receive (except for the payment of dividends as
provided below) ownership of the number of whole shares of Norwest Common
Stock into which such shares of Foothill Common Stock or Preferred Stock or
Options have been converted on the basis above set forth; provided,
however, until the holder of such certificate for Foothill Common Stock or
Preferred Stock or instrument representing Options 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
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, split-up, combination, exchange of
shares or readjustment, or if a stock dividend thereon shall be declared
with a record date within such period (a "Common Stock Adjustment"), then
(i) the number of shares of Norwest Common Stock, if any, into which a
share of Foothill Common Stock or Preferred Stock or an Option 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 Foothill Common Stock or Preferred Stock
or Options shall be converted will equal the number of shares of Norwest
Common Stock which the the holders of a share of Foothill Common Stock or
Preferred Stock or Options would have received pursuant to such Common
Stock Adjustment had the record date therefor been immediately following
the time of merger and (ii) if a Norwest Common Stock Adjustment occurs
between the date of the Reorganization Agreement and any date that the
closing price of a share of Norwest Common Stock is used for purposes of
the Reorganization Agreement or this Agreement, the closing price of a
share of Norwest Common Stock for such purposes shall be the sum of the
closing prices on the date of each such determination of the number of
shares of Norwest Common Stock and/or other securities, if any, (in each
case as reported on the consolidated tape of the New York Stock Exchange on
such date) issued with respect to one share of Norwest Common Stock as a
result of the Norwest Common Stock Adjustment.
4. No fractional shares of Norwest Common Stock and no certificates or
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 meeting of shareholders held to vote
on the 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.
6. At the Effective Date the stock transfer agent books of Foothill shall
be closed and no transfer of shares of Foothill Common Stock or Preferred
Stock or Options shall be made thereafter. In the event that after the
Effective Date, certificates or Options are presented to Foothill they
shall be canceled and exchanged for Norwest Common Stock.
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 Delaware;
provided, however, that all of the following actions shall have been taken
in the following order:
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<PAGE>
a. This Agreement shall be approved and adopted on behalf of Merger
Co. and Foothill in accordance with the Delaware General Corporation
Law; and
b. Articles of merger (with this Agreement attached as part thereof)
with respect to the merger, setting forth the information required by
the Delaware General Corporation Law, 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 Foothill and by the Secretary or an Assistant Secretary of
Foothill, and shall be filed in the office of the Secretary of State of
the State of Delaware in accordance with the Delaware General
Corporation Law.
2. The merger shall become effective as of 11:59 p.m., Minneapolis,
Minnesota time (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 Foothill shall continue as the surviving
corporation.
2. The merger shall have the other effects prescribed by Section
of the Delaware General Corporation Law.
NINTH: The following provisions shall apply with respect to the merger
provided for by this Agreement:
1. The surviving corporation shall (i) file with the Secretary of State
of the State of Delaware an agreement that it may be served with process
within or without the State of Delaware in the courts of the State of
Delaware in any proceeding for the enforcement of any obligation of Merger
Co. and in any proceeding for the enforcement of the rights of a dissenting
shareholder of Merger Co. against Foothill, and (ii) file with said
Secretary of State an agreement that it will promptly pay to the dissenting
shareholders of Merger Co. the amount, if any, to which such dissenting
shareholders will be entitled under the provisions of the Delaware General
Corporation Law with respect to the rights of dissenting shareholders.
2. The registered office of the surviving corporation in the State of
Delaware shall be , and the name of the registered agent of
Foothill at such address is The Corporation Trust Company.
3. 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 Foothill 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.
4. 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.
5. 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
Delaware.
6. This Agreement cannot be altered or amended except pursuant to an
instrument in writing signed by both of the parties hereto.
7. At any time prior to the filing of Articles of Merger with the
Secretary of State of the State of Delaware, subject to the provisions of
the Reorganization Agreement this Agreement may be terminated upon approval
by the Boards of Directors of either of the constituent corporations
notwithstanding the approval of the shareholders of either constituent
corporation.
A-32
<PAGE>
IN WITNESS WHEREOF, the parties hereto have cause 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.
Foothill Group, Inc.
By: _________________________________
Its: ________________________________
(Corporate Seal)
Attest:
-------------------------------------
Secretary
Merger Co.
By: _________________________________
Its: ________________________________
(Corporate Seal)
Attest:
-------------------------------------
Secretary
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<PAGE>
EXHIBIT B
Norwest Corporation
Norwest Center
Sixth and Marquette
Minneapolis, MN 55479-1026
Attn: Secretary
Gentlemen:
I have been advised that I might be considered to be an "affiliate," as that
term is defined for purposes of paragraphs (c) and (d) of Rule 145 ("Rule 145")
promulgated by the Securities and Exchange Commission (the "Commission") under
the Securities Act of 1933, as amended (the "Securities Act") of Foothill
Group, Inc., a Delaware corporation ("Foothill").
Pursuant to an Agreement and Plan of Reorganization, dated as of ,
1995, (the "Reorganization Agreement"), between Foothill and Norwest
Corporation, a Delaware corporation ("Norwest") it is contemplated that a
wholly-owned subsidiary of Norwest will merge with and into Foothill (the
"Merger") and as a result, I will receive in exchange for each share of Series
A Common Stock, no par value, of Foothill ("Foothill Common Stock") and Series
A Convertible Preferred Stock, $1.00 par value per share of Foothill owned by
me immediately prior to the Effective Time of the Merger (as defined in the
Reorganization Agreement), a number of shares of Common Stock, par value $1 2/3
per share, of Norwest ("Norwest Common Stock"), as more specifically set forth
in the Reorganization Agreement.
I hereby agree as follows:
I will not offer to sell, transfer or otherwise dispose of any of the shares
of Foothill Common Stock or Norwest Common Stock held by me during the 30 days
prior to the Effective Time of the Merger.
I will not offer to sell, transfer or otherwise dispose of any of the shares
of Norwest Common Stock issued to me pursuant to the Merger (the "Stock")
except (a) in compliance with the applicable provisions of Rule 145, (b) in a
transaction that is otherwise exempt from the registration requirements of the
Securities Act, or (c) in an offering registered under the Securities Act.
I will not sell, transfer or otherwise dispose of the Stock or in any way
reduce my risk relative to any shares of the Stock issued to me pursuant to the
Merger until such time as financial results covering at least 30 days of post-
Merger combined operations of Foothill and Norwest have been published.
I consent to the endorsement of the Stock issued to me pursuant to the Merger
with a restrictive legend which will read substantially as follows:
"The shares represented by this certificate were issued in a transaction
to which Rule 145 promulgated under the Securities Act of 1933, as amended
(the "Act"), applies, and may be sold or otherwise transferred only in
compliance with the limitations of such Rule 145, or upon receipt by
Norwest Corporation of an opinion of counsel reasonably satisfactory to it
that some other exemption from registration under the Act is available, or
pursuant to a registration statement under the Act."
Norwest's transfer agent shall be given an appropriate stop transfer order
and shall not be required to register any attempted transfer of the shares of
the Stock, unless the transfer has been effected in compliance with the terms
of this letter agreement.
It is understood and agreed that this letter agreement shall terminate and be
of no further force and effect and the restrictive legend set forth above shall
be removed by delivery of substitute certificates without
A-34
<PAGE>
such legend, and the related stop transfer restrictions shall be lifted
forthwith, if (a) (i) any such shares of Stock shall have been registered under
the Securities Act for sale, transfer or other disposition by me or on my
behalf and are sold, transferred or otherwise disposed of, or (ii) any such
shares of Stock are sold in accordance with the provisions of paragraphs (c),
(e), (f) and (g) of Rule 144 promulgated under the Securities Act, or (iii) I
am not at the time an affiliate of Norwest and have been the beneficial owner
of the Stock for at least two years (or such other period as may be prescribed
thereunder) and Norwest has filed with the Commission all of the reports it is
required to file under the Securities Exchange Act of 1934, as amended, during
the preceding twelve months, or (iv) I am not and have not been for at least
three months an affiliate of Norwest and have been the beneficial owner of the
Stock for at least three years (or such other period as may be prescribed by
the Securities Act, and the rules and regulations promulgated thereunder), or
(v) Norwest shall have received an opinion of counsel acceptable to Norwest to
the effect that the stock transfer restrictions and the legend are not
required, and (b) financial results covering at least 30 days of post-Merger
combined operations have been published.
I have carefully read this letter agreement and the Reorganization Agreement
and have discussed their requirements and other applicable limitations upon my
ability to offer to sell, transfer or otherwise dispose of shares of the Stock,
to the extent I felt necessary, with my counsel or counsel for Foothill.
Sincerely,
-------------------------------------
A-35
<PAGE>
EXHIBIT C 1
Norwest, Foothill and the persons listed below shall use all reasonable
efforts to enter into employment agreements mutually agreeable to all parties.
In addition, the persons listed below shall enter into the non-compete
agreement in substantially the form shown on Exhibit C2, with the Lump Sum
payment referred to in Exhibit C2 to be as set forth below, opposite such
person's name.
<TABLE>
<CAPTION>
LUMP
NAME SUM
---- -------
<S> <C>
Peter Schwab..................... 527,564
John Nickoll..................... 699,184
David Hilton..................... 452,198
Mark Rosenbaum................... 313,000
Scott Diehl...................... 250,000
</TABLE>
A-36
<PAGE>
EXHIBIT C 2
1. LUMP SUM PAYMENT. Norwest shall cause to be paid Dollars
($ ) to Employee pursuant to the schedule set forth in paragraph 2. This
amount shall be referred to herein as the Lump Sum Payment and is subject to
all regular tax withholding. It is not certified earnings for purposes of
Foothill's or Norwest's benefit plans.
2. NON-COMPETE. In consideration for the payment described in paragraph 1,
Employee agrees for a period of Two (2) Years following the date on which the
Employee's employment with Norwest terminates, he will not, by himself or
through associates, agents, employees, or others, directly or indirectly, do
any of the following:
i. attempt to divert any of the business or business which Norwest or
Foothill has a reasonable expectation of obtaining by soliciting,
contacting, or communicating with any Norwest or Foothill customer,
potential customer, or referral source utilized by Norwest or Foothill
within the last thirty-six (36) months, for its products or service.
Employee agrees that he may be enjoined by a court of law should he attempt
to violate those restrictions; and
ii. solicit directly or indirectly an employee of Foothill or Norwest for
the purpose of encouraging that employee to leave employment with Foothill
or Norwest.
The Lump Sum Payment in paragraph 1 shall be made in the following manner:
i. one-third ( 1/3) of the Lump Sum Payment shall be paid on the date of
the end of the Term or the date of the termination of the Employee's
employment with Norwest, whichever is later; and
ii. one-third ( 1/3) of the Lump Sum Payment shall be made on the first
anniversary of the end of the Term or the date of the termination of the
Employee's employment with Norwest, whichever is later; and
iii. one-third ( 1/3) of the Lump Sum Payment shall be made on the second
anniversary of the end of the Term or the date of the termination of the
Employee's employment with Norwest, whichever is later.
3. BREACH OF NON-COMPETE. Employee agrees he will not be entitled to any of
the Lump Sum Payment described in paragraphs 1 and 2 if he violates any of the
terms of paragraph 2.
IN WITNESS WHEREOF, the undersigned have set their hands as of the date first
written above.
Foothill Capital Corporation
By: _________________________________
Its President
_____________________________________
, individually
Norwest Corporation
By: _________________________________
Its: ______________________________
A-37
<PAGE>
AMENDMENT TO AGREEMENT
AND
PLAN OF REORGANIZATION
THIS AMENDMENT dated as of August 23, 1995, to that certain AGREEMENT AND
PLAN OF REORGANIZATION (the "Agreement") entered into as of the 15th day of
May, 1995, by and between THE FOOTHILL GROUP, INC. ("Foothill"), a Delaware
corporation, and NORWEST CORPORATION ("Norwest"), a Delaware corporation.
Whereas, the parties hereto desire to effect a reorganization whereby a
wholly-owned subsidiary of Norwest will merge with and into Foothill (the
"Merger") pursuant to an agreement and plan of merger ("Merger Agreement"),
which provides, among other things, for the conversion and exchange of the
shares of Series A Common Stock of Foothill, no par value ("Foothill Common
Stock"), including, subject to the terms and conditions set forth herein,
options convertible into shares of Foothill Common Stock and Foothill Series A
convertible Preferred Stock, $1.00 par value per share ("Preferred Stock")
outstanding immediately prior to the time the Merger becomes effective in
accordance with the provisions of the Merger Agreement into shares of voting
Common Stock of Norwest of the par value of $1 2/3 per share ("Norwest Common
Stock"),
Whereas, the parties hereto desire to amend the Agreement as provided herein,
and
Whereas, capitalized terms used herein shall, unless otherwise defined, have
the meaning given them in the Agreement.
Now, Therefore, to effect such amendment 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. Schedule 5R to the Agreement is hereby deleted in its entirety and
Schedule 5R attached hereto is substituted therefor.
2. Paragraph 4(b) is deleted in its entirety and the following is substituted
therefor:
"(b) Except as otherwise contemplated or required by this Agreement, from
the date hereof until the Effective Time of the Merger, Foothill and each
Foothill Subsidiary (other than the Partnerships, except with respect to
(i), (iii), (iv) or (xiv)) will not (without the prior written consent of
Norwest): (i) amend or otherwise change its articles of incorporation or
association or by-laws or Partnership Agreements; (ii) issue or sell or
authorize for issuance or sale, or grant any options, stock appreciation
rights, warrants or awards or make other agreements with respect to the
issuance or sale or conversion of, any shares of its capital stock, phantom
shares or other share-equivalents, or any other of its securities, except
that Foothill may issue shares of Foothill Common Stock upon the exercise
of the option granted under the Stock Option Agreement or upon the exercise
of outstanding stock options described in Schedule 4(b); (iii) authorize or
incur any long-term debt, except as required in the normal course of its
business and, in the case of the Partnerships, as required or authorized by
the FPI and FPII partnership agreements; (iv) mortgage, pledge or subject
to lien or other encumbrance any of its properties, except in the ordinary
course of business and, in the case of the Partnerships, as required or
authorized by the FPI and FPII partnership agreements; (v) enter into any
material agreement, contract or commitment in excess of $200,000 except
lending transactions in the ordinary course of business and in accordance
with policies and procedures in effect on the date hereof; (vi) make any
equity security investments except investments required to be made by the
"Co-Investor" provisions of the FPI and FPII partnership agreements ; (vii)
amend or terminate any Plan except as required by law; (viii) make any
contributions to any Plan except as required by the terms of such Plan in
effect as of the date hereof; (ix) except with respect to the payment prior
to the closing date of cash dividends paid on a quarterly basis in
accordance with past practices (including up to a $.08 per share dividend
for Foothill's 1995
A-38
<PAGE>
second quarter record date and up to $.10 per share for third and fourth
quarter record date dividends and first quarter 1996 record date dividends
of up to $.12 per share) and except for quarterly cash dividends of no more
than $2.70 per share of Preferred Stock, pursuant to the Certificate of
Designation, Voting Powers, Preferences, Rights, Qualifications,
Limitations and Restrictions of the Preferred Stock, declare, set aside,
make or pay any dividend or other distribution with respect to its capital
stock and except for any dividend declared by a subsidiary's Board of
Directors in accordance with applicable law and regulation; provided that
the dividends otherwise permitted to be paid hereunder may not be declared
and paid in any particular quarter if the Closing of the Merger occurs in
such quarter and former shareholders of Foothill would become shareholders
of record of Norwest for the purposes of qualifying for the quarterly
Norwest dividend payable to shareholders of Norwest Common Stock for such
quarter; (x) redeem, purchase or otherwise acquire, directly or indirectly,
any of the capital stock of Foothill except as contemplated by Paragraph
4(t); (xi) except for increases of salaries in the ordinary course of
business consistent with past practice, increase in any manner the
compensation or fringe benefits of, or pay any benefit not required by any
Plan or agreement as in effect as of the date of this Agreement (including,
without limitation, the granting of stock options, stock appreciation
rights, warrants, or awards to any director, officer, or employee); (xii)
enter into or modify any contract, agreement, commitment or arrangement
providing for the payment to or indemnification of any director, officer,
employee or consultant of Foothill or any Foothill Subsidiary of
compensation or benefits, except for the entering into of employment
agreements in substantially the form of Exhibit C2 with the persons listed
on Exhibit C1; (xiii) sell or otherwise dispose of any shares of the
capital stock of any Foothill Subsidiary or sell or otherwise dispose of
Foothill's partnership interest in the Partnerships; (xiv) sell or
otherwise dispose of any of its assets or properties, other than in the
ordinary course of business, and, in the case of the Partnerships, as
required or authorized by the FPI and FPII partnership agreements; (xv)
take any action that is intended or may reasonably be expected to result in
any of its representations and warranties set forth in this Agreement being
or becoming untrue in any material respect at any time prior to the
Effective Time of the Merger, or in any of the conditions to the Merger set
forth in Section 7 not being satisfied, or in a violation of any provision
of this Agreement, except, in every case, as may be required by applicable
law; and (xvi) become a general partner in any partnership (except for the
Partnerships)."
3. Paragraph 4(t) is deleted in its entirety and the following is substituted
therefor:
"(t) Foothill shall take all action necessary to terminate Foothill's
1979 Employee Stock Purchase Plan, restated and amended as of January 1,
1992 (the "Stock Purchase Plan") as of December 31, 1995. In addition,
Foothill shall amend the Stock Purchase Plan or take such other action as
is necessary to provide for the establishment of a revocable grantor trust
("Trust") which shall purchase the maximum number of shares of Foothill
Common Stock which may be issued pursuant to the Stock Purchase Plan for
the "Option Period" (as defined in the Stock Purchase Plan) ending on
December 31, 1995 (the "Maximum Shares"), for the purpose of funding
Foothill's obligations to issue shares of Foothill Common Stock to
"Participants" (as defined in the Stock Purchase Plan) on the last day of
the Option Period ending December 31, 1995, which Maxiumum Shares shall not
exceed 26,750 shares of Foothill Common Stock. In the event that the
Closing Date is prior to December 31, 1995, Foothill shall also take all
necessary action pursuant to the Stock Purchase Plan to provide for the
issuance on December 31, 1995 of shares of Norwest Common Stock to
Participants upon exercise of the "Options" granted under the Stock
Purchase Plan in substitution for shares of Foothill Common Stock and to
make any other necessary adjustments to accomplish the same. Foothill
agrees to review the terms of the Trust and the actions contemplated by
this paragraph with Norwest prior to establishing the Trust and taking such
actions."
4. Paragraph 7(s) is deleted in its entirety and the following is substituted
therefor:
"(s) The Stock Purchase Plan shall have been terminated effective as of
December 31, 1995 and all other actions with respect thereto required by
paragraph 4(t) shall have been taken."
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<PAGE>
5. Except as specifically amended hereby, the Agreement remains in full force
and effect. Each of the parties hereto represents and warrants that this
Amendment has been duly and validly authorized and executed and represents the
valid and binding obligation of such party, except as enforceability may be
limited by bankruptcy, insolvency, or other similar laws affecting the
enforcement of creditors' rights and the availability of equitable remedies,
including specific performance.
6. This Amendment 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 Amendment to
Agreement as of the day and year first above written.
Norwest Corporation
The Foothill Group, Inc.
By: /s/ James R. Campbell By: /s/ John Nickoll
---------------------------------- ----------------------------------
Its: Executive Vice President Its: Chairman and Chief Executive
---------------------------------- Officer
----------------------------------
A-40
<PAGE>
APPENDIX B
STOCK OPTION AGREEMENT
<PAGE>
STOCK OPTION AGREEMENT
Stock Option Agreement, dated as of the 15th day of May, 1995 (this
"Agreement"), between Norwest Corporation, a Delaware corporation ("Grantee"),
and Foothill Group, Inc., a Delaware corporation ("Issuer").
WITNESSETH:
Whereas, Grantee and Issuer are entering into an Agreement and Plan of
Reorganization, dated as of the 15th day of May, 1995 (the "Plan"), which is
being executed by the parties hereto simultaneously with the execution of this
Agreement;
Whereas, as a condition and inducement to Grantee's entering into the Plan
and in consideration therefor, Issuer has agreed to grant Grantee the Option
(as defined below); and
Whereas, capitalized terms used herein shall have the same meanings given
them in the Plan;
Now, Therefore, in consideration of the foregoing and the mutual covenants
and agreements set forth herein and in the Plan, the parties hereto agree as
follows:
Section 1. Issuer hereby grants to Grantee an unconditional, irrevocable
option (the "Option") to purchase, subject to the terms hereof, up to 4,156,641
fully paid and nonassessable shares of Series A Common Stock, no par value
("Common Stock"), of Issuer at a price per share equal to $23.375 per share
(the "Initial Price"); provided, however, that in the event Issuer issues or
agrees to issue (other than pursuant to options to issue Common Stock in effect
as of the date hereof) any shares of Common Stock at a price less than the
Initial Price (as adjusted pursuant to Section 5(b)), such price shall be equal
to such lesser price (such price, as adjusted as hereinafter provided, the
"Option Price"). The number of shares of Common Stock that may be received upon
the exercise of the Option and the Option Price are subject to adjustment as
herein set forth.
Section 2. (a) Grantee may exercise the Option, in whole or part, at any time
and from time to time following the occurrence of a Purchase Event (as defined
below); provided that the Option shall terminate and be of no further force and
effect upon the earliest to occur of (i) the time immediately prior to the
Effective Time, (ii) 12 months after the first occurrence of a Purchase Event,
(iii) termination of the Plan in accordance with the terms thereof prior to the
occurrence of a Purchase Event (other than a termination of the Plan by Grantee
pursuant to paragraph 9 (a) (ii) due to the failure of Issuer to perform or
observe in all material respects the covenants and agreements to be performed
or observed by Issuer or pursuant to paragraph 9(a) (iv) thereof), or (iv) 12
months after the termination of the Plan by Grantee pursuant to paragraph 9(a)
(ii) due to the failure of Issuer to perform or observe in all material
respects the covenants and agreements to be performed or observed by Issuer or
pursuant to paragraph 9 (a) (iv) thereof. The events described in clauses (i)-
(iv) in the preceding sentence are hereinafter collectively referred to as an
"Exercise Termination Event."
(b) The term "Purchase Event" shall mean any of the following events or
transactions occurring after the date hereof:
(i) Issuer or any of its subsidiaries (each an "Issuer Subsidiary")
without having received Grantee's prior written consent, shall have entered
into an agreement to engage in an Acquisition Transaction (as defined
below) with any person (the term "person" for purposes of this Agreement
having the meaning assigned thereto in Sections 3 (a) (9) and 13 (d) (3) of
the Securities Exchange Act of 1934 and the rules and regulations
thereunder (the "Securities Exchange Act"), and the rules and regulations
thereunder) other than Grantee or any of its subsidiaries (each a "Grantee
Subsidiary") or the Board of Directors of Issuer shall have recommended
that the shareholders of Issuer approve or accept any Acquisition
Transaction with any person other than Grantee or any Grantee Subsidiary.
For purposes of this
B-1
<PAGE>
Agreement, "Acquisition Transaction" shall mean (x) a merger or
consolidation, or any similar transaction, involving Issuer or any of
Issuer's subsidiaries, (y) a purchase, lease or other acquisition of all or
substantially all of the assets of Issuer or any subsidiary or (z) a
purchase or other acquisition (including by way of merger, consolidation,
share exchange or otherwise) of securities representing 20% or more of the
voting power of Issuer or any Issuer Subsidiary; provided that the term
"Acquisition Transaction" does not include any internal merger or
consolidation involving only Issuer and/or Issuer Subsidiaries;
(ii) Any person other than Grantee or any Grantee Subsidiary shall have
commenced (as such term is defined in Rule 14d-2 under the Exchange Act) or
shall have filed a registration statement under the Securities Act of 1933,
as amended (the "Securities Act"), with respect to, a tender offer or
exchange offer to purchase any shares of Issuer Common Stock such that,
upon consummation of such offer, such person would own or control 20% or
more of the then outstanding shares of Issuer Common Stock (such an offer
being referred to herein as a "Tender Offer" or an "Exchange Offer",
respectively)); or
(iii) After a proposal is made by a third party to Issuer or its
shareholders to engage in an Acquisition Transaction, Issuer shall have
breached any covenant or obligation contained in the Plan and such breach
would entitle Grantee to terminate the Plan or the Board of Directors of
Issuer does not recommend that the stockholders of Issuer approve the Plan
or the holders of Issuer Common Stock shall not have approved the Plan at
the meeting of such stockholders held for the purpose of voting on the
Plan, such meeting shall not have been held or shall have been cancelled
prior to termination of the Plan or Issuer's Board of Directors shall have
withdrawn or modified in a manner adverse to Grantee the recommendation of
Issuer's Board of Directors with respect to the Plan; or
(iv) If the Board of Directors of Issuer does not publicly recommend in
the Proxy Statement that the holders of the Issuer Common Stock approve and
adopt the Plan, or shall have withdrawn, modified or amended such
recommendation in any respect materially adverse to Grantee.
(c) Issuer shall notify Grantee promptly in writing of the occurrence of any
Purchase Event; provided, however, that the giving of such notice by Issuer
shall not be a condition to the right of Grantee to exercise the Option.
(d) In the event that Grantee is entitled to and wishes to exercise the
Option, it shall send to Issuer a written notice (the "Option Notice" and the
date of which being hereinafter referred to as the "Notice Date") specifying
(i) the total number of shares of Common Stock it will purchase pursuant to
such exercise and (ii) a period of time (that shall not be less than three
business days nor more than thirty business days) running from the Notice Date
(the "Closing Date") and a place at which the closing of such purchase shall
take place; provided, that, if prior notification to or approval of the Federal
Reserve Board or any other Governmental Authority is required in connection
with such purchase (each, a "Notification" or an "Approval," as the case may
be), (a) Grantee shall promptly file the required notice or application for
approval ("Notice/Application"), (b) Grantee shall expeditiously process the
Notice/Application and (c) for the purpose of determining the Closing Date
pursuant to clause (ii) of this sentence, the period of time that otherwise
would run from the Notice Date shall instead run from the later of (x) in
connection with any Notification, the date on which any required notification
periods have expired or been terminated and (y) in connection with any
Approval, the date on which such approval has been obtained and any requisite
waiting period or periods shall have expired. For purposes of Section 2(a), any
exercise of the Option shall be deemed to occur on the Notice Date relating
thereto. On or prior to the Closing Date, Grantee shall have the right to
revoke its exercise of the Option in the event that the transaction
constituting a Purchase Event that gives rise to such right to exercise shall
not have been consummated.
(e) At the closing referred to in Section 2(d), Grantee shall pay to Issuer
the aggregate purchase price for the shares of Common Stock specified in the
Option Notice in immediately available funds by wire transfer to a bank account
designated by Issuer; provided, however, that failure or refusal of Issuer to
designate such a bank account shall not preclude Grantee from exercising the
Option.
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(f) At such closing, simultaneously with the delivery of immediately
available funds as provided in Section 2(e), Issuer shall deliver to Grantee a
certificate or certificates representing the number of shares of Common Stock
specified in the Option Notice and, if the Option should be exercised in part
only, a new Option evidencing the rights of Grantee thereof to purchase the
balance of the shares of Common Stock purchasable hereunder.
(g) Certificates for Common Stock delivered at a closing hereunder shall be
endorsed with a restrictive legend substantially as follows:
The transfer of the shares represented by this certificate is subject to
resale restrictions arising under the Securities Act of 1933, as amended,
and to certain provisions of an agreement between Norwest Corporation and
Foothill Group, Inc. ("Issuer") dated as of the day of ,
1995. A copy of such agreement is on file at the principal office of Issuer
and will be provided to the holder hereof without charge upon receipt by
Issuer of a written request therefor.
It is understood and agreed that: (i) the reference to the resale
restrictions of the Securities Act in the above legend shall be removed by
delivery of substitute certificate(s) without such reference if Grantee shall
have delivered to Issuer a copy of a letter from the staff of the Securities
and Exchange Commission (the "SEC"), or an opinion of counsel, in form and
substance satisfactory to Issuer, to the effect that such legend is not
required for purposes of the Securities Act; (ii) the reference to the
provisions of this Agreement in the above legend shall be removed by delivery
of substitute certificate(s) without such reference if the shares have been
sold or transferred in compliance with the provisions of this Agreement and
under circumstances that do not require the retention of such reference; and
(iii) the legend shall be removed in its entirety if the conditions in the
preceding clauses (i) and (ii) are both satisfied. In addition, such
certificates shall bear any other legend as may be required by law.
(h) Upon the giving by Grantee to Issuer of an Option Notice and the tender
of the applicable purchase price in immediately available funds on the Closing
Date, Grantee shall be deemed to be the holder of record of the number of
shares of Common Stock specified in the Option Notice, notwithstanding that the
stock transfer books of Issuer shall then be closed or that certificates
representing such shares of Common Stock shall not then actually be delivered
to Grantee. Issuer shall pay all expenses and any and all United States
federal, state and local taxes and other charges that may be payable in
connection with the preparation, issue and delivery of stock certificates under
this Section 2 in the name of Grantee.
Section 3. Issuer agrees: (i) that it shall at all times until the
termination of this Agreement have reserved for issuance upon the exercise of
the Option that number of authorized and reserved shares of Common Stock equal
to the maximum number of shares of Common Stock at any time and from time to
time issuable hereunder, all of which shares will, upon issuance pursuant
hereto, be duly authorized, validly issued, fully paid, nonassessable, and
delivered free and clear of all claims, liens, encumbrances and security
interests and not subject to any preemptive rights; (ii) that it will not, by
amendment of its certificate of incorporation or through reorganization,
consolidation, merger, dissolution or sale of assets, or by any other voluntary
act, avoid or seek to avoid the observance or performance of any of the
covenants, stipulations or conditions to be observed or performed hereunder by
Issuer; (iii) promptly to take all action as may from time to time be required
(including (x) complying with all premerger notification, reporting and waiting
period requirements specified in 15 U.S.C. (S) 18a and regulations promulgated
thereunder and (y) in the event, under the Bank Holding Company Act of 1956, as
amended ("BHC Act"), or any other federal or state banking law, prior approval
of or notice to the Federal Reserve Board or to any other Governmental
Authority is necessary before the Option may be exercised, cooperating with
Grantee in preparing such applications or notices and providing such
information to each such Governmental Authority as it may require) in order to
permit Grantee to exercise the Option and Issuer duly and effectively to issue
shares of Common Stock pursuant hereto; and (iv) to take all action provided
herein to protect the rights of Grantee against dilution.
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Section 4. This Agreement (and the Option granted hereby) are exchangeable,
without expense, at the option of Grantee, upon presentation and surrender of
this Agreement at the principal office of Issuer, for other agreements
providing for Options of different denominations entitling the holder thereof
to purchase, on the same terms and subject to the same conditions as are set
forth herein, in the aggregate the same number of shares of Common Stock
purchasable hereunder. The terms "Agreement" and "Option" as used herein
include any agreements and related options for which this Agreement (and the
Option granted hereby) may be exchanged. Upon receipt by Issuer of evidence
reasonably satisfactory to it of the loss, theft, destruction or mutilation of
this Agreement and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement if mutilated, Issuer will execute and deliver a new Agreement of like
tenor and date. Any such new Agreement executed and delivered shall constitute
an additional contractual obligation on the part of Issuer, whether or not the
Agreement so lost, stolen, destroyed or mutilated shall at any time be
enforceable by anyone.
Section 5. The number of shares of Common Stock purchasable upon the exercise
of the Option shall be subject to adjustment from time to time as follows:
(a) In the event of any change in the Common Stock by reason of stock
dividends, split-ups, mergers, recapitalizations, combinations,
subdivisions, conversions, exchanges of shares or the like, the type and
number of shares of Common Stock purchasable upon exercise hereof shall be
appropriately adjusted and proper provision shall be made so that, in the
event that any additional shares of Common Stock are to be issued or
otherwise to become outstanding as a result of any such change (other than
pursuant to an exercise of the Option), the number of shares of Common
Stock that remain subject to the Option shall be increased so that, after
such issuance and together with shares of Common Stock previously issued
pursuant to the exercise of the Option (as adjusted on account of any of
the foregoing changes in the Common Stock), it equals 18.89% of the number
of shares of Common Stock then issued and outstanding.
(b) Whenever the number of shares of Common Stock purchasable upon
exercise hereof is adjusted as provided in this Section 5, the Option Price
shall be adjusted by multiplying the Option Price by a fraction, the
numerator of which shall be equal to the number of shares of Common Stock
purchasable prior to the adjustment and the denominator of which shall be
equal to the number of shares of Common Stock purchasable after the
adjustment.
Section 6. (a) Upon the occurrence of a Purchase Event that occurs prior to
an Exercise Termination Event, Issuer shall, at the request of Grantee made
within three years of a Purchase Event (whether on its own behalf or on behalf
of any subsequent holder of the Option (or part thereof) or any of the shares
of Common Stock issued pursuant hereto), promptly prepare, file and keep
current a registration statement under the Securities Act covering any shares
issued and issuable pursuant to the Option and shall use its best efforts to
cause such registration statement to become effective, and to remain current
and effective for a period not in excess of 180 days from the day such
registration statement first becomes effective, in order to permit the sale or
other disposition of any shares of Common Stock issued upon total or partial
exercise of the Option ("Option Shares") in accordance with any plan of
disposition requested by Grantee; provided, however, that Issuer may postpone
filing a registration statement relating to a registration request by Grantee
under this Section 6 for a period of time (not in excess of 30 days) if in its
judgment such filing would require the disclosure of material information that
Issuer has a bona fide business purpose for preserving as confidential. Grantee
shall have the right to demand two such registrations. The foregoing
notwithstanding, if, at the time of any request by Grantee for registration of
Option Shares as provided above, Issuer is in the process of registration with
respect to an underwritten public offering of shares of Common Stock, and if in
the good faith judgment of the managing underwriter or managing underwriters,
or, if none, the sole underwriter or underwriters, of such offering the
offering or inclusion of the Option Shares would interfere materially with the
successful marketing of the shares of Common Stock offered by Issuer, the
number of Option Shares otherwise to be covered in the registration statement
contemplated hereby may be reduced; provided, however, that after any such
required reduction the number of Option Shares to be included in such
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offering for the account of Grantee shall constitute at least 33 1/3% of the
total number of shares of Grantee and Issuer covered in such registration
statement; provided further, however, that if such reduction occurs, then
Issuer shall file a registration statement for the balance as promptly as
practicable thereafter as to which no reduction pursuant to this Section 6(a)
shall be permitted or occur and the Grantee shall thereafter be entitled to one
additional registration statement. Grantee shall provide all information
reasonably requested by Issuer for inclusion in any registration statement to
be filed hereunder. In connection with any such registration, Issuer and
Grantee shall provide each other with representations, warranties, indemnities
and other agreements customarily given in connection with such registration. If
requested by Grantee in connection with such registration, Issuer and Grantee
shall become a party to any underwriting agreement relating to the sale of such
shares, but only to the extent of obligating themselves in respect of
representations, warranties, indemnities and other agreements customarily
included in such underwriting agreements. Notwithstanding the foregoing, if
Grantee revokes any exercise notice or fails to exercise any Option with
respect to any exercise notice pursuant to Section 2(e), Issuer shall not be
obligated to continue any registration process with respect to the sale of
Option Shares issuable upon the exercise of such Option and Grantee shall not
be deemed to have demanded registration of Option Shares.
(b) In the event that Grantee requests Issuer to file a registration
statement following the failure to obtain any approval required to exercise the
Option as described in Section 9, the closing of the sale or other disposition
of the Common Stock or other securities pursuant to such registration statement
shall occur substantially simultaneously with the exercise of the Option.
Section 7. (a) Upon the occurrence of a "Repurchase Event" (as defined in
Section 7(e) below) that occurs prior to an Exercise Termination Event, (i) at
the request (the date of such request being the "Option Repurchase Request
Date") of Grantee, Issuer shall repurchase the Option from Grantee at a price
(the "Option Repurchase Price") equal to the amount by which (A) the
market/offer price (as defined below) exceeds (B) the Option Price, multiplied
by the number of shares for which the Option may then be exercised, plus (C)
the amount of the documented expenses incurred by Grantee in connection with
the Plan and the transactions contemplated thereby, including reasonable
accounting and legal fees and (ii) at the request (the date of such request
being the "Option Share Repurchase Request Date") of the owner of Option Shares
from time to time (the "Owner"), Issuer shall repurchase such number of the
Option Shares from the Owner as the Owner shall designate at a price (the
"Option Share Repurchase Price") equal to the market/offer price multiplied by
the number of Option Shares so designated. The term "market/offer price" shall
mean the highest of (i) the price per share of Common Stock at which a tender
offer or exchange offer therefor has been made after the date hereof and on or
prior to the Option Repurchase Request Date or the Option Share Repurchase
Request Date, as the case may be, (ii) the price per share of Common Stock paid
or to be paid by any third party pursuant to an agreement with Issuer (whether
by way of a merger, consolidation or otherwise), (iii) the highest last sale
price for shares of Common Stock within the 360-day period ending on the Option
Repurchase Request Date or the Option Share Repurchase Request Date, as the
case may be, which is reported by The Wall Street Journal or, if not reported
thereby, another authoritative source, (iv) in the event of a sale of all or
substantially all of Issuer's assets, the sum of the price paid in such sale
for such assets and the current market value of the remaining assets of Issuer
as determined by a nationally recognized independent investment banking firm
selected by Grantee or the Owner, as the case may be, divided by the number of
shares of Common Stock of Issuer outstanding at the time of such sale. In
determining the market/offer price, the value of consideration other than cash
shall be the value determined by a nationally recognized independent investment
banking firm selected by Grantee or the Owner, as the case may be, whose
determination shall be conclusive and binding on all parties.
(b) Grantee or the Owner, as the case may be, may exercise its right to
require Issuer to repurchase the Option and/or any Option Shares pursuant to
this Section 7 by surrendering for such purpose to Issuer, at its principal
office, a copy of this Agreement or certificates for Option Shares, as
applicable, accompanied by a written notice or notices stating that Grantee or
the Owner, as the case may be, elects to require Issuer to repurchase the
Option and/or the Option Shares in accordance with the provisions of this
Section 7. As
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promptly as practicable, and in any event within five business days after the
surrender of the Option and/or certificates representing Option Shares and the
receipt of such notice or notices relating thereto, Issuer shall deliver or
cause to be delivered to Grantee the Option Repurchase Price to the Owner the
Option Share Repurchase Price or the portion thereof that Issuer is not then
prohibited from so delivering under applicable law and regulation or as a
consequence of administrative policy.
(c) Issuer hereby undertakes to use its best efforts to obtain all required
regulatory and legal approvals and to file any required notices as promptly as
practicable in order to accomplish any repurchase contemplated by this Section
7. Nonetheless, to the extent that Issuer is prohibited under applicable law or
regulation, or as a consequence of administrative policy, from repurchasing any
Option and/or any Option Shares in full, Issuer shall promptly so notify
Grantee and/or the Owner and thereafter deliver or cause to be delivered, from
time to time, to Grantee and/or the Owner, as appropriate, the portion of the
Option Repurchase Price and the Option Share Repurchase Price, respectively,
that it is no longer prohibited from delivering, within five business days
after the date on which Issuer is no longer so prohibited; provided, however,
that if Issuer at any time after delivery of a notice of repurchase pursuant to
Section 7(b) is prohibited under applicable law or regulation, or as a
consequence of administrative policy, from delivering to Grantee and/or the
Owner, as appropriate, the Option Repurchase Price or the Option Share
Repurchase Price, respectively, in full, Grantee or the Owner, as appropriate,
may revoke its notice of repurchase of the Option or the Option Shares either
in whole or in part whereupon, in the case of a revocation in part, Issuer
shall promptly (i) deliver to Grantee and/or the Owner, as appropriate, that
portion of the Option Purchase Price or the Option Share Repurchase Price that
Issuer is not prohibited from delivering after taking into account any such
revocation and (ii) deliver, as appropriate, either (A) to Grantee, a new
Agreement evidencing the right of Grantee to purchase that number of shares of
Common Stock equal to the number of shares of Common Stock purchasable
immediately prior to the delivery of the notice of repurchase less than the
number of shares of Common Stock covered by the portion of the Option
repurchased or (B) to the Owner, a certificate for the number of Option Shares
covered by the revocation.
(d) Issuer shall not enter into any agreement with any party (other than
Grantee or a Grantee Subsidiary) for an Acquisition Transaction unless the
other party thereto assumes all the obligations of Issuer pursuant to this
Section 7 in the event that Grantee or the Owner elects, in its sole
discretion, to require such other party to perform such obligations.
(e) The term "Repurchase Event" shall mean (i) any person (other than Grantee
or a Grantee Subsidiary) shall have acquired "Beneficial Ownership," as that
term has the meaning set forth in Section 13(d) of the Securities Exchange Act,
of 50% or more of the then outstanding shares of Common Stock of Foothill, or
(ii) the consummation of an Acquisition Transaction, except that the percentage
referred to in clause (z) of Section 2(b)(i) shall be 50%.
Section 8. (a) In the event that prior to an Exercise Termination Event,
Issuer shall enter into an agreement (i) to consolidate or merge with any
person, other than Grantee or a Grantee Subsidiary, and shall not be the
continuing or surviving corporation of such consolidation or merger, (ii) to
permit any person, other than Grantee or a Grantee Subsidiary, to merge into
Issuer and Issuer shall be the continuing or surviving corporation, but, in
connection with such merger, the then outstanding shares of Common Stock shall
be changed into or exchanged for stock or other securities of any other person
or cash or any other property or the then outstanding shares of Common Stock
shall after such merger represent less than 50% of the outstanding shares and
share equivalents of the merged company, or (iii) to sell or otherwise transfer
all or substantially all of its or any Material Subsidiary's assets to any
person, other than Grantee or a Grantee Subsidiary, then, and in each such
case, the agreement governing such transaction shall make proper provision so
that the Option shall, upon the consummation of such transaction and upon the
terms and conditions set forth herein, be converted into, or exchanged for, an
option (the "Substitute Option"), at the election of Grantee, of either (x) the
Acquiring Corporation (as defined below) or (y) any person that controls the
Acquiring Corporation (the Acquiring Corporation and any such controlling
person being hereinafter referred to as the "Substitute Option Issuer").
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(b) The Substitute Option shall be exercisable for such number of shares of
the Substitute Common Stock (as is hereinafter defined) as is equal to the
market/offer price (as defined in Section 7) multiplied by the number of shares
of the Issuer Common Stock for which the Option was theretofore exercisable,
divided by the Average Price (as is hereinafter defined). The exercise price of
the Substitute Option per share of the Substitute Common Stock (the "Substitute
Purchase Price") shall then be equal to the Option Price multiplied by a
fraction in which the numerator is the number of shares of the Issuer Common
Stock for which the Option was theretofore exercisable and the denominator is
the number of shares for which the Substitute Option is exercisable.
(c) The Substitute Option shall otherwise have the same terms as the Option,
provided that if the terms of the Substitute Option cannot, for legal reasons,
be the same as the Option, such terms shall be as similar as possible and in no
event less advantageous to Grantee, provided further that the terms of the
Substitute Option shall include (by way of example and not limitation)
provisions for the repurchase of the Substitute Option and Substitute Common
Stock by the Substitute Option Issuer on the same terms and conditions as
provided in Section 7.
(d) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean (i) the continuing or surviving
corporation of a consolidation or merger with Issuer (if other than
Issuer), (ii) Issuer in a merger in which Issuer is the continuing or
surviving person, and (iii) the transferee of all or any substantial part
of the Issuer's assets (or the assets of any Issuer subsidiary);
(ii) "Substitute Common Stock" shall mean the common stock issued by the
Substitute Option Issuer upon exercise of the Substitute Option; and
(iii) "Average Price" shall mean the average closing price of a share of
the Substitute Common Stock for the one year immediately preceding the
consolidation, merger or sale in question, but in no event higher than the
closing price of the shares of the Substitute Common Stock on the day
preceding such consolidation, merger or sale; provided that if Issuer is
the issuer of the Substitute Option, the Average Price shall be computed
with respect to a share of common stock issued by Issuer, the person
merging into Issuer or by any company which controls or is controlled by
such merging person, as Grantee may elect.
(e) In no event, pursuant to any of the foregoing paragraphs, shall the
Substitute Option be exerciseable for more than 18.89% of the aggregate of the
shares of the Substitute Common Stock outstanding immediately prior to the
issuance of the Substitute Option. In the event that the Substitute Option
would be exercisable for more than 18.89% of the aggregate of the shares of
Substitute Common Stock but for this clause (e), the Substitute Option Issuer
shall make a cash payment to Grantee equal to the excess of (i) the value of
the Substitute Option without giving effect to the limitation in this clause
(e) over (ii) the value of the Substitute Option after giving effect to the
limitation in the clause (e). This difference in value shall be determined by a
nationally recognized investment banking firm selected by Grantee and the
Substitute Option Issuer.
Section 9. Notwithstanding Sections 2, 6 and 7, if Grantee has given the
notice referred to in one or more of such Sections, the exercise of the rights
specified in any such Section shall be extended (a) if the exercise of such
rights requires obtaining regulatory approvals (including any required waiting
periods) to the extent necessary to obtain all regulatory approvals for the
exercise of such rights, and (b) to the extent necessary to avoid liability
under Section 16(b) of the Securities Exchange Act by reason of such exercise;
provided that in no event shall any closing date occur more than 18 months
after the related Notice Date, and, if the closing date shall not have occurred
within such period due to the failure to obtain any required approval by the
Federal Reserve Board or any other Governmental Authority despite the best
efforts of Issuer or the Substitute Option Issuer, as the case may be, to
obtain such approvals, the exercise of the Option shall be deemed to have been
rescinded as of the related Notice Date. In the event (a) Grantee receives
official
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notice that an approval of the Federal Reserve Board or any other Governmental
Authority required for the purchase and sale of the Option Shares will not be
issued or granted or (b) a closing date has not occurred within 18 months after
the related Notice Date due to the failure to obtain any such required
approval, Grantee shall be entitled to exercise the Option in connection with
the resale of the Option Shares pursuant to a registration statement as
provided in Section 6. Nothing contained in this Agreement shall restrict
Grantee from specifying alternative means of exercising rights pursuant to
Sections 2, 6 or 7 hereof in the event that the exercising of any such rights
shall not have occurred due to the failure to obtain any required approval
referred to in this Section 9.
Section 10. Issuer hereby represents and warrants to Grantee as follows:
(a) Issuer has the requisite corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly approved by the Board of
Directors of Issuer and no other corporate proceedings on the part of Issuer
are necessary to authorize this Agreement or to consummate the transactions so
contemplated. This Agreement has been duly executed and delivered by, and
constitutes a valid and binding obligation of, Issuer, enforceable against
Issuer in accordance with its terms, except as enforceability thereof may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium and
other similar laws affecting the enforcement of creditors' rights generally and
except that the availability of the equitable remedy of specific performance or
injunctive relief is subject to the discretion of the court before which any
proceeding may be brought; and
(b) Issuer has taken all necessary corporate action to authorize and reserve
and to permit it to issue, and at all times from the date hereof through the
termination of this Agreement in accordance with its terms will have reserved
for issuance upon the exercise or the Option, that number of shares of Common
Stock equal to the maximum number of shares of Common Stock at any time and
from time to time issuable hereunder, at all such shares, upon issuance
pursuant hereto, will be duly authorized, validly issued, fully paid, non-
assessable, and will be delivered free and clear of all claims, liens,
encumbrances and security interests and not subject to any preemptive rights.
Section 11. (a) Neither of the parties hereto may assign any of its rights or
delegate any of its obligations under this Agreement or the Option created
hereunder to any other person without the express written consent of the other
party, except that Grantee may assign this Agreement to a wholly owned
subsidiary of Grantee and Grantee may assign its rights hereunder in whole or
in part after the occurrence of a Preliminary Purchase Event.
(b) Any assignment of rights of Grantee to any permitted assignee of Grantee
hereunder shall bear the restrictive legend at the beginning thereof
substantially as follows:
The transfer of the option represented by this assignment and the related
option agreement is subject to resale restrictions arising under the
Securities Act of 1933, as amended, and to certain provisions of an
agreement between Norwest Corporation and Foothill Group, Inc. ("Issuer"),
dated as of the day of , 1995. A copy of such agreement
is on file at the principal office of Issuer and will be provided to any
permitted assignee of the Option without change upon receipt by Issuer of a
written request therefor.
It is understood and agreed that (i) the reference to the resale restrictions
of the Securities Act in the above legend shall be removed by delivery of
substitute assignments without such reference if Grantee shall have delivered
to Issuer a copy of a letter from the staff of the SEC, or an opinion of
counsel, in form and substance satisfactory to Issuer, to the effect that such
legend is not required for purposes of the Securities Act; (ii) the reference
to the provisions of this Agreement in the above legend shall be removed by
delivery of substitute assignments without such reference if the Option has
been sold or transferred in compliance with the provisions of this Agreement
and under circumstances that do not require the retention of such reference;
and (iii) the legend shall be removed in its entirety if the conditions in the
preceding clauses (i) and (ii) are both satisfied. In addition, such
assignments shall bear any other legend as may be required by law.
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Section 12. Each of Grantee and Issuer will use its reasonable efforts to
make all filings with, and to obtain consents of, all third parties and
Governmental Authorities necessary to the consummation of the transactions
contemplated by this Agreement, including, without limitation, if necessary,
applying to the Federal Reserve Board under the BHC Act for approval to acquire
the shares issuable hereunder.
Section 13. The parties hereto acknowledge that damages would be an
inadequate remedy for a breach of this Agreement by either party hereto and
that the obligations of the parties shall hereto be enforceable by either party
hereto through injunctive or other equitable relief. Both parties further agree
to waive any requirement for the securing or posting of any bond in connection
with the obtaining of any such equitable relief and that this provision is
without prejudice to any other rights that the parties hereto may have for any
failure to perform this Agreement.
Section 14. If any term, provision, covenant or restriction contained in this
Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions and covenants and restrictions contained in this
Agreement shall remain in full force and effect, and shall in no way be
affected, impaired or invalidated. If for any reason such court or regulatory
agency determines that Grantee is not permitted to acquire, or Issuer is not
permitted to repurchase pursuant to Section 7, the full number of shares of
Common Stock provided in Section 1(a) (as adjusted pursuant hereto), it is the
express intention of Issuer to allow Grantee to acquire or to require Issuer to
repurchase such lesser number of shares as may be permissible, without any
amendment or modification hereof.
Section 15. All notices, requests, claims, demands and other communications
hereunder shall be deemed to have been duly given when delivered in person, by
cable, telegram, telecopy or telex, or by registered or certified mail (postage
prepaid, return receipt requested) at the respective addresses of the parties
set forth in the Plan.
Section 16. This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware.
Section 17. This Agreement may be executed in two or more counterparts, each
of which shall be deemed to be an original, but all of which shall constitute
one and the same agreement and shall be effective at the time of execution.
Section 18. Except as otherwise expressly provided herein, each of the
parties hereto shall bear and pay all costs and expenses incurred by it or on
its behalf in connection with the transactions contemplated hereunder,
including fees and expenses of its own financial consultants, investment
bankers, accountants and counsel.
Section 19. Except as otherwise expressly provided herein or in the Plan,
this Agreement contains the entire agreement between the parties with respect
to the transactions contemplated hereunder and supersedes all prior
arrangements or understandings with respect thereof, written or oral. The terms
and conditions of this Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and permitted assigns.
Nothing in this Agreement, expressed or implied, is intended to confer upon any
party, other than the parties hereto, and their respective successors except as
assigns, any rights, remedies, obligations or liabilities under or by reason of
this Agreement, except as expressly provided herein.
Section 20. Capitalized terms used in this Agreement and not defined herein
but defined in the Plan shall have the meanings assigned thereto in the Plan.
Section 21. Nothing contained in this Agreement shall be deemed to authorize
Issuer or Grantee to breach any provision of the Plan.
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Section 22. In the event that any selection or determination is to be made by
Grantee or the Owner hereunder and at the time of such selection or
determination there is more than one Grantee or Owner, such selection shall be
made by a majority in interest of such Grantee or Owners.
Section 23. In the event of any exercise of the option by Grantee, Issuer and
such Grantee shall execute and deliver all other documents and instruments and
take all other action that may be reasonably necessary in order to consummate
the transactions provided for by such exercise.
Section 24. Except to the extent Grantee exercises the Option, Grantee shall
have no rights to vote or receive dividends or have any other rights as a
shareholder with respect to shares of Common Stock covered hereby.
In Witness Whereof, each of the parties has caused this Stock Option
Agreement to be executed on its behalf by their officers thereunto duly
authorized, all as of the date first above written.
Norwest Corporation
/s/ James R. Campbell
By: _________________________________
Name: James R. Campbell
Title:Executive Vice President
Foothill Group, Inc.
/s/ Don L. Gervirtz
By: _________________________________
Name: Don L. Gervirtz
Title:Chairman of the Board and
Chief Executive Officer
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APPENDIX C
OPINION OF THE CHICAGO CORPORATION
<PAGE>
[LETTERHEAD OF THE CHICAGO CORPORATION]
September 13, 1995
Board of Directors
The Foothill Group, Inc.
11111 Santa Monica Boulevard
Suite 1500
Los Angeles, CA 90025
Members of the Board:
You have requested our opinion as investment bankers as to the fairness, from
a financial point of view, to the common stockholders of The Foothill Group,
Inc. ("Foothill" or the "Company") of the exchange ratio for the exchange of
shares of Foothill common stock (the "Exchange Ratio") in the proposed merger
(the "Merger") of Foothill with a wholly-owned subsidiary of Norwest
Corporation ("Norwest"), pursuant to the Agreement and Plan of Reorganization
dated May 15, 1995 (the "Agreement"). Under the terms of the Agreement, each
outstanding share of common stock, no par value ("Foothill Common Stock"),
outstanding immediately prior to the time the Merger becomes effective, will be
converted into and exchanged for .920 fully-paid and nonassessable shares of
voting Common Stock of Norwest of the par value of $1 2/3 per share.
Pursuant to the Agreement, Foothill and Norwest entered into a separate stock
option agreement (the "Stock Option Agreement") by which Foothill granted
Norwest an option to purchase up to 4,156,641 shares of Foothill Common Stock,
at a price per share and on the terms and conditions set forth herein.
We understand that the Merger is conditioned upon, among other things,
receipt of a letter from Foothill's and Norwest's independent public
accountants to the effect that the Merger will qualify for pooling-of-interests
accounting treatment and an opinion of counsel or favorable ruling from the
Internal Revenue Service to the effect that the Merger constitutes a tax-free
transaction under the Internal Revenue Code. The terms of the Merger are more
fully set forth in the Agreement.
As you are aware, The Chicago Corporation has had a long-term relationship
with Foothill for which it has received customary compensation. Our services to
date have been primarily as a dealer in Foothill's commercial paper.
In arriving at our opinion, we have reviewed and analyzed, among other
things, the following: (i) the Agreement; (ii) the Stock Option Agreements;
(iii) the Annual Reports on Form 10-K of Foothill and Norwest for each year in
the three year period ended December 31, 1994, and the unaudited Reports on
Form 10-Q for the six months ended June 30, 1995; (iv) certain other publicly
available financial and other information concerning Foothill and Norwest and
the trading markets for the publicly traded securities of Foothill and Norwest;
(v) certain other internal information, including projections relating to
Foothill and Norwest prepared by the managements of Foothill and Norwest and
furnished to us for the purpose of our analysis; and (vi) publicly available
information concerning other banks and bank holding companies and finance
companies, the trading markets for their securities and the nature and terms of
certain other merger transactions we believe relevant to our inquiry. We have
also met with certain officers and representatives of Foothill and Norwest to
discuss the foregoing as well as other matters we believe relevant to our
inquiry.
In conducting our review and in arriving at our opinion, we have relied upon
and assumed the accuracy and completeness of the financial and other
information provided to us by the Company and available from public sources and
have not attempted independently to verify the same. We have relied upon the
managements of Foothill and Norwest as to the reasonableness and achievability
of the projections (and the assumptions and bases thereof) provided to us, and
we have assumed that such projections reflect the best
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currently available estimates and judgements of such managements and that such
projections will be realized in the amounts and in the time periods currently
estimated by such managements. We have also assumed, without independent
verification, that the aggregate allowances for loan losses for Foothill and
Norwest are adequate to cover such losses. We have not made or obtained any
evaluations or appraisals of the assets of Foothill or Norwest, nor have we
examined any individual loan credit files. It is understood that we were
retained by the Board of Directors of Foothill and that our opinion as
expressed herein is limited to the fairness, from a financial point of view, to
the common stockholders of Foothill of the Exchange Ratio in the Merger and
does not address Foothill's underlying business decision to proceed with the
Merger.
We did not introduce Foothill to any other potential merger partner nor did
we participate in any such discussions which may have occurred.
We have considered such financial and other factors as we have deemed
appropriate under the circumstances, including, among others, the following:
(i) the historical and current financial position and results of operations of
Foothill and Norwest, including interest income, interest expense, net interest
income, net interest margin, non-interest income, non-interest expense,
earnings, dividends, internal capital generation, book value, intangible
assets, return on assets, return on stockholders' equity, the amount and type
of non-performing assets, the reserve for loan losses and capitalization all as
set forth in the financial statements for Foothill and Norwest; (ii) the assets
and liabilities of Foothill and Norwest, including the loan and investment
portfolios, deposits, other liabilities, historical and currently liability
sources and costs and liquidity; (iii) certain pro forma combined financial
information of Foothill and Norwest; (iv) historical and current market data
for Foothill Common Stock and Norwest Common Stock; and (v) the nature and
terms of certain other comparable merger transactions involving finance
companies. We have also taken into account our assessment of general economic,
market and financial conditions and our experience in similar transactions, as
well as our experience in securities valuation and our knowledge of the
financial services industry generally. Our opinion is necessarily based upon
conditions as they currently exist and can be evaluated on the date hereof and
the information made available to us through the date hereof. This letter does
not constitute a recommendation to the Board of Directors or to any common
stockholder of Foothill with respect to any approval of the Merger.
In connection with the rendering of our services, including delivery of this
opinion, the Company will pay The Chicago Corporation a fee and will indemnify
us against certain liabilities.
Based upon and subject to the foregoing, it is our opinion as investment
bankers, that, as of September 13, 1995 and as of the date hereof, the Exchange
Ratio was and is fair, from a financial point of view, to the common
stockholders of Foothill.
Sincerely,
The Chicago Corporation
/s/ The Chicago Corporation
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