Exhibit 2.1
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (the "Agreement") entered into as of the 9th day
of September, 1997, by and between CITYSIDE HOLDING COMPANY, a Minnesota
corporation ("Cityside"), X.X. XXXXXXXX, INC., a Minnesota corporation ("X.X.
Xxxxxxxx"), and NORWEST CORPORATION, a Delaware corporation ("Norwest").
WHEREAS, Cityside owns, beneficially and of record, all of the issued and
outstanding capital stock of (i) Cityside Financial Services of Wisconsin, Inc.,
a Wisconsin corporation, d/b/a Cityside Indirect ("Cityside Indirect"), (ii)
Cityside Savings & Financial Services Co., a Minnesota industrial loan and
thrift company ("Cityside Financial"), and (iii) Cityside Insurance Company,
Ltd., a Turks and Caicos Island corporation ("Cityside Insurance")(Cityside
Indirect, Cityside Finance Corporation I, a Delaware corporation, a wholly owned
subsidiary of Cityside Indirect ("Cityside Finance I"), Cityside Financial and
Cityside Insurance are hereinafter collectively referred to as the "Acquired
Companies", and the Acquired Companies and Cityside shall collectively be
referred to as the "Company"), consisting of (a) 100 shares of common stock of
Cityside Indirect, with a stated par value of $1.00 per share, (b) 4,020 shares
of common stock of Cityside Financial, with a stated par value of $100.00 per
share, and (c) 3,500 shares of common stock of Cityside Insurance, with a stated
par value of $1.00 per share (collectively, the "Acquired Companies Stock");
WHEREAS, Cityside wishes to sell and Norwest wishes to purchase such
Acquired Companies Stock upon the terms and subject to the conditions of this
Agreement;
NOW, THEREFORE, to effect such sale and purchase 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. Sale of Stock; Closing.
(a) Purchase and Sale. Subject to the terms and conditions of this
Agreement, at the Closing (as defined below), Cityside shall sell, convey,
transfer, and deliver to Norwest and Norwest shall purchase, the Acquired
Companies Stock.
(b) Purchase Price. The purchase price ("Purchase Price") for the Acquired
Companies Stock shall be the combined "Net Worth" of the Acquired Companies as
of the Closing Date, plus $27,300,000.00 (the "Premium"). "Net Worth" shall
mean the
combined excess of all assets of the Acquired Companies over all of the
liabilities of the Acquired Companies, determined on a combined basis as of the
Closing Date in accordance with accounting principles as historically used by
Cityside with respect to the Acquired Companies consistently applied. The
Premium paid by Norwest, will be allocated solely to the purchase of the stock
of Cityside Financial and Cityside Indirect in proportion to the net finance
receivables of those two corporations as of the Closing Date.
(c) Closing. The closing (the "Closing") of the purchase and sale of the
Acquired Companies Stock shall take place at 10:00 a.m., Minneapolis, Minnesota
time, at the main offices of Norwest in Minneapolis, Minnesota, or such other
location as may be agreed upon by the parties to this Agreement on a mutually
agreeable date within five (5) business days following the satisfaction or
waiver of all conditions precedent set forth in Paragraphs 6 and 7 of this
Agreement or at such other place, time and date as the parties may agree. Each
of the parties agrees to use commercially reasonable efforts to cause the
Closing to occur as soon as practicable following receipt of all regulatory
approvals and the expiration of all waiting periods. The date and time of the
Closing are herein referred to as the "Closing Date." The Closing shall be
deemed to be effective immediately following the close of business on the date
immediately preceding the date on which the Closing shall occur.
(d) Closing Deliveries.
(i) At the Closing, Cityside shall deliver to Norwest (or if Norwest so
elects by notice to Cityside at least five (5) days prior to the Closing
Date, to one or more of Norwest's subsidiaries):
(A) certificates representing 100% of the Acquired Companies Stock,
duly endorsed in blank or with stock powers duly endorsed in blank
which shall transfer good title to the Acquired Companies Stock, free
and clear of all claims, rights, or interests of third parties and all
liens and encumbrances whatsoever;
(B) all corporate books, records and documents of the Acquired
Companies, including, but not limited to, the corporate stock record
books and corporate minutes books, and certified resolutions of the
Company authorizing the Agreement;
(C) the signed resignations as directors or officers of the Acquired
Companies of such persons as Norwest shall request at least five (5)
business days prior to the Closing Date;
(D) the certificates required pursuant to Paragraph 7(c) hereof;
and
(E) such other documents as may be required by this Agreement or
reasonably requested by Norwest.
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(ii) At the Closing, Norwest shall:
(A) cause to be transferred to such account(s) as Cityside shall
specify, cash in an amount equal to the Net Worth of the Acquired
Companies set forth on the Preliminary Closing Statement plus the
Premium in immediately available funds;
(B) the certificates required pursuant to Paragraph 6 (c)
hereof;
(C) deliver or cause to be delivered to Cityside such other
documents as may be required by this Agreement or reasonably
requested by Cityside; and,
(D) cause to be transferred to X.X. Xxxxxxxx, to such account
as it specifies, cash in the amount of the intercompany payables (as
set forth in Paragraph 7(i)) from the Acquired Companies to X.X.
Xxxxxxxx as of the Closing Date.
(e) Preliminary Closing Statement; Adjustments. Cityside shall
prepare and deliver to Norwest at least five (5) business days prior to Closing
a Preliminary Closing Statement ("Preliminary Closing Statement") consisting of
a balance sheet and statements of income and shareholders' equity as of the
month end immediately preceding the Closing Date, in each case prepared in
accordance with generally accepted accounting principles, consistently applied,
setting forth the Acquired Companies' Net Worth in accordance with Paragraph
1(b) as of the month end immediately preceding the Closing Date.
Within sixty (60) days after the Closing Date, Cityside shall prepare a balance
sheet as of the Closing Date and statements of income and shareholders' equity
as of the Closing Date, in each case prepared in accordance with generally
accepted accounting principles, consistently applied ("Final Closing
Statement"), and will deliver the Final Closing Statement to Norwest. Cityside
shall grant Norwest and its representatives reasonable access to the books and
records of the Acquired Companies and their personnel for the purpose of
reviewing the Final Closing Statement. The amount by which the Net Worth set
forth on the Final Closing Statement is greater or less than the Net Worth as
set forth on the Preliminary Closing Statement shall be the "Adjustment Amount".
Norwest will provide a detailed objection (if any) to the Final Closing
Statement within thirty (30) days after receipt thereof. Norwest and Cityside
will use reasonable efforts to resolve any objections concerning the Final
Closing Statement themselves. If the parties do not obtain a final resolution
within ten (10) business days after Cityside has received a statement of
objections (if any), however, either Cityside or Norwest may elect to select an
accounting firm mutually acceptable to them to resolve any remaining objections
(the "Accountant"). If Norwest and Cityside are unable to agree on the choice of
an accounting firm, they will select a "big six" accounting firm by lot as the
Accountant, provided however that the
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Accountant shall not be Xxxxxx Xxxxxxxx, L.L.P., KPMG Peat Marwick L.L.P. or
Deloitte & Touche L.L.P., or any other firm having a significant relationship
with any party hereto, which shall be jointly instructed by Norwest and
Cityside to determine the amount of Net Worth as of the Closing Date. The
expenses of the Accountant shall be borne by the party whose position is not
supported by the Accountant's determination, or, if the Accountant's
determination does not support either party's position, then such expenses
shall be borne equally by Norwest and Cityside. The determinations of the
Accountant shall be final, binding and unreviewable for error. Within three
(3) business days after the parties have reached agreement on, or the
Accountant has determined the Final Closing Statement, Norwest shall pay to
Cityside in immediately available funds or Cityside shall refund to Norwest in
immediately available funds, in the same manner, the Adjustment Amount.
2. Representations and Warranties of Cityside and the Company. Cityside
represents and warrants to Norwest as follows:
(a) Organization and Authority. Cityside is a corporation duly organized,
validly existing and in good standing under the laws of Minnesota, is duly
qualified to do business and is in good standing in all jurisdictions where its
ownership or leasing of property or the conduct of its business requires it to
be so qualified and failure to be so qualified would have an adverse effect on
Cityside and has corporate power and authority to own its properties and assets
and to carry on its business as it is now being conducted. Cityside has
furnished Norwest true and correct copies of its articles of incorporation and
by-laws, as amended.
Cityside Indirect is a corporation duly organized, validly existing and in good
standing under the laws of Wisconsin, 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 an adverse effect on Cityside Indirect and has corporate
power and authority to own its properties and assets and to carry on its
business as it is now being conducted. Cityside Indirect has furnished Norwest
true and correct copies of its articles of incorporation and by-laws, as
amended.
Cityside Finance I is a corporation duly organized, validly existing and in good
standing under the laws 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 an adverse effect on Cityside Finance I and has corporate
power and authority to own its properties and assets and to carry on its
business as it is now being conducted. Cityside Finance I has furnished Norwest
true and correct copies of its articles of incorporation and by-laws, as
amended.
Cityside Financial is a corporation duly organized, validly existing and in good
standing under the laws of Minnesota, is duly qualified to do business and is in
good standing in all jurisdictions where its ownership or leasing of property or
the conduct of its business requires it to be so qualified and failure to be so
qualified would have an adverse effect on
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Cityside Financial and has corporate power and authority to own its properties
and assets and to carry on its business as it is now being conducted. Cityside
Financial has furnished Norwest true and correct copies of its articles of
incorporation and by-laws, as amended.
Cityside Insurance is a corporation duly organized, validly existing and in good
standing under the laws of Turks and Caicos Islands, 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 an adverse effect on
Cityside Insurance and has corporate power and authority to own its properties
and assets and to carry on its business as it is now being conducted. Cityside
Insurance has furnished Norwest true and correct copies of its articles of
incorporation and by-laws, as amended.
(b) The Company's Subsidiaries. Except as set forth on Schedule 2(b), the
Company does not own beneficially, directly or indirectly 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. Cityside Financial is
a Minnesota Chartered Industrial Loan and Thrift Company whose deposits are
insured by the Federal Deposit Insurance Corporation pursuant to the Federal
Deposit Insurance Act. Cityside Financial is an industrial loan company,
industrial bank or other similar institution as described in 12 U.S.C. Section
1841(c)(2)(H)(ii).
(c) Capitalization. The authorized capital stock of Cityside Indirect
(the "Cityside Indirect Stock") consists of 9,000 shares of common stock, $1.00
par value, of which as of the close of business as of the date hereof, 100
shares were outstanding and no shares were held in the treasury. The maximum
number of shares of Cityside Indirect Stock that will be outstanding as of the
Closing Date if all options, warrants, conversion rights and other rights with
respect thereto are exercised is 100. All of the outstanding shares of the
capital stock of Cityside Indirect have been duly and validly authorized and
issued and are fully paid and nonassessable. There are no outstanding
subscriptions, contracts, conversion privileges, options, warrants, phantom
shares, share equivalents calls, preemptive rights or other rights obligating
Cityside Indirect to issue, sell or otherwise dispose of, or to purchase, redeem
or otherwise acquire, any shares of capital stock of Cityside Indirect. Since
January 1, 1997, no shares of Cityside Indirect capital stock have been
purchased, redeemed or otherwise acquired, directly or indirectly, by Cityside
Indirect and no dividends or other distributions have been declared, set aside,
made or paid to any shareholder of Cityside Indirect.
The authorized capital stock of Cityside Finance I (the "Cityside Finance I
Stock") consists of 1,000 shares of common stock, $0.01 par value, of which as
of the close of business as of the date hereof, 100 shares were outstanding and
no shares were held in the treasury. The maximum number of shares of Cityside
Finance I Stock that will be outstanding as of the Closing Date if all options,
warrants, conversion rights and other rights with respect thereto are exercised
is 100. All of the outstanding shares of the capital
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stock of Cityside Finance I have been duly and validly authorized and issued
and are fully paid and nonassessable. There are no outstanding subscriptions,
contracts, conversion privileges, options, warrants, phantom shares, share
equivalents, calls, preemptive rights or other rights obligating Cityside
Finance I to issue, sell or otherwise dispose of, or to purchase, redeem or
otherwise acquire, any shares of capital stock of Cityside Finance I. Since
January 1, 1997, no shares of Cityside Finance I stock have been purchased,
redeemed or otherwise acquired, directly or indirectly, by Cityside Finance I
and no dividends or other distributions have been declared, set aside, made or
paid to any shareholder of Cityside Finance I.
The authorized capital stock of Cityside Financial (the "Cityside Financial
Stock") consists of 6,000 shares of common stock, $100.00 par value, of which as
of the close of business as of the date hereof, 4,020 shares were outstanding
and no shares were held in the treasury. The maximum number of shares of
Cityside Financial Stock that will be outstanding as of the Closing Date if all
options, warrants, conversion rights and other rights with respect thereto are
exercised is 4,020. All of the outstanding shares of the capital stock of
Cityside Financial have been duly and validly authorized and issued and are
fully paid and nonassessable. There are no outstanding subscriptions,
contracts, conversion privileges, options, warrants, phantom shares, share
equivalents, calls, preemptive rights or other rights obligating Cityside
Financial to issue, sell or otherwise dispose of, or to purchase, redeem or
otherwise acquire, any shares of capital stock of Cityside Financial . Since
January 1, 1997, no shares of Cityside Financial capital stock have been
purchased, redeemed or otherwise acquired, directly or indirectly, by Cityside
Financial and no dividends or other distributions have been declared, set aside,
made or paid to any shareholder of Cityside Financial.
The authorized capital stock of Cityside Insurance (the "Cityside Insurance
Stock") consists of 5,000 shares of common stock, $1.00 par value, of which as
of the close of business as of the date hereof, 3,500 shares were outstanding
and no shares were held in the treasury. The maximum number of shares of
Cityside Insurance Stock that will be outstanding as of the Closing Date if all
options, share equivalents, conversion rights and other rights with respect
thereto are exercised is 3,500. All of the outstanding shares of the capital
stock of Cityside Insurance have been duly and validly authorized and issued
and are fully paid and nonassessable. There are no outstanding subscriptions,
contracts, conversion privileges, options, warrants, phantom shares, share
equivalents, calls, preemptive rights or other rights obligating Cityside
Insurance to issue, sell or otherwise dispose of, or to purchase, redeem or
otherwise acquire, any shares of capital stock of Cityside Insurance. Since
January 1, 1997, no shares of Cityside Insurance capital stock have been
purchased, redeemed or otherwise acquired, directly or indirectly, by Cityside
Insurance and no dividends or other distributions have been declared, set aside,
made or paid to any shareholder of Cityside Insurance. Cityside owns all of the
Cityside Indirect Stock, the Cityside Financial Stock and the Cityside Insurance
Stock, with good and marketable title thereto, free and clear of any interests
or claims. Cityside Indirect owns all of the Cityside Finance I Stock with good
and marketable title thereto, free and clear of any interests or claims.
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(d) Authorization. The Company has the corporate power and authority to
enter into this Agreement, including the noncompetition agreement, and all other
agreements contemplated under this Agreement, and to carry out its obligations
hereunder and thereunder. The execution, delivery and performance of this
Agreement by the Company and the consummation of the transactions contemplated
hereby and thereby have been duly authorized by the Board of Directors of the
Company. This Agreement is the valid and binding obligation of the Company
enforceable against the Company in accordance with their respective terms
(except as may be limited by bankruptcy, insolvency and similar laws affecting
creditors' rights and remedies generally).
Except as set forth on Schedule 2(d), neither the execution, delivery and
performance by the Company of this Agreement, nor the consummation of the
transactions contemplated hereby and thereby, nor compliance by the Company 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 the Company under any of the terms, conditions or
provisions of (x) its articles of incorporation or by-laws or (y) any material
note, bond, mortgage, indenture, deed of trust, license, lease, agreement or
other instrument or obligation to which the Company is a party or by which it
may be bound, or to which the Company or any of the properties or assets of the
Company may be subject, or (ii) subject to compliance with the statutes and
regulations referred to in the next paragraph, violate any judgment, ruling,
order, writ, injunction, decree, statute, rule or regulation applicable to the
Company or any of its properties or assets.
Other than in connection or in compliance with all filings, consents, reviews,
authorizations, approvals or exemptions required under the Federal Deposit
Insurance Act and Minnesota Statutes Chapter 53, 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 the Company of the
transactions contemplated by this Agreement.
(e) Cityside Financial Statements. The balance sheets of Cityside
Indirect and Cityside Financial as of December 31, 1995 and December 31, 1996
and related consolidated statements of operations, retained earnings and cash
flows for the two years ended December 31, 1995 and December 31, 1996, together
with the notes thereto, audited by Xxxxxx Xxxxxxxx, L.L.P., and the unaudited
combined balance sheet and related combined statement of operations and
retained earnings of the Acquired Companies as of July 31, 1997 (collectively,
the "Cityside Financial Statements") have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis and
present fairly in all material respects the financial position of the Company at
the dates and the results of operations and cash flows of the Company for the
periods stated therein; provided however that the interim financial statements
do not
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contain notes, normal recurring adjustments or an accrual for vacation pay,
which is considered to be immaterial, and Norwest will not request or require
a vacation pay accrual in the Final Closing Statement.
(f) Reports. The Company has filed all material reports, registrations
and statements, together with any material required amendments thereto, that it
was required to file with any applicable authorities. All such reports and
statements filed with any such regulatory body or authority are collectively
referred to herein as the " Cityside Reports". As of their respective dates,
the Cityside Reports complied in all material respects with all the rules and
regulations promulgated by the applicable authorities, 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 Cityside
Financial Statements and except for any lien for current taxes not yet
delinquent, the Company has good title free and clear of any liens, claims,
charges, options, encumbrances or similar restrictions to all the real and
personal property reflected in Cityside's balance sheet as of July 31, 1997,
and all real and personal property acquired since such date, except such real
and personal property as has been disposed of in the ordinary course of
business. All leases of real property and all other leases pursuant to which
the Company, 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 existing material default by the Company or any event which, with
notice or lapse of time or both, would constitute a material default. All such
leases where the annual rental payments exceed $10,000.00 are described on
Schedule 2(g), All of the Company's buildings and equipment in regular use
have been well maintained and are in good and serviceable condition, reasonable
wear and tear excepted. The Company shall deliver assignments of such leases on
or before the Closing Date, together with the consent(s) of such landlords as
necessary.
(h) Taxes. Each of the Acquired Companies has filed all federal, state,
county, local and foreign Tax Returns, including information returns, required
to be filed by it, and paid 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 the Acquired Companies for the fiscal year ended
December 31, 1989, and for all fiscal years prior thereto, are for the purposes
of routine audit by the Internal Revenue Service closed because of the statute
of limitations, and no claims for additional taxes for such fiscal years are
pending. Except only as set Forth on Schedule 2(h), (1) the Acquired Companies
Company are not 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 (2) 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 the Acquired Companies which has not been
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settled, resolved and fully satisfied. Each of the Acquired Companies has paid
all taxes owed or which it is required to withhold from amounts owing to
employees, creditors or other third parties. The balance sheet as of December
31, 1995 and December 31, 1996, referred to in Paragraph 2(e) hereof includes
adequate provision for all accrued but unpaid federal, state, county, local
and foreign taxes, interest, penalties, assessments or deficiencies of the
Company with respect to all periods through the date thereof.
(i) Absence of Certain Changes. Since December 31, 1996, there has been
no change in the business, prospects, financial condition or results of
operations of the Company which has had, or may reasonably be expected to have,
a material adverse effect on the business, prospects, financial condition or
results of operations of the Company.
(j) Commitments and Contracts. Except as set forth on Schedule 2(j), the
Company is not a party to 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 the Company);
(ii) any plan, contract or understanding providing for any bonus,
pension, option, deferred compensation, retirement payment, profit
sharing or similar arrangement with respect to any present or former
officer, director, employee or consultant;
(iii) any labor contract or agreement with any labor union;
(iv) any contract containing covenants which limit the ability of
the Company 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, the Company 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 current or past agreement, contract or understanding with
any current or former director, officer, employee, consultant, financial
adviser, broker, dealer, or agent providing for any rights of
indemnification in favor of such person or entity.
(k) Litigation and Other Proceedings. The Company has furnished Norwest
copies of (i) all attorney responses to the request of the independent auditors
for the
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Company with respect to loss contingencies as of December 31, 1996 and (ii) a
written list of legal and regulatory proceedings filed against the Company
since said date, which is attached as Schedule 2(k). Except as set forth on
Schedule 2(k), the Company is not a party to any pending or, to the best
knowledge of the Company, threatened claim, action, suit, investigation or
proceeding. No Company shareholder or, to the best of the Company's knowledge,
employee is a party to or the subject of any pending claim, action, suit,
investigation or proceeding involving any criminal matter, breach of trust or
moral turpitude. For purposes of this Agreement, "knowledge" shall mean the
actual knowledge of the officers of the appropriate party.
(l) Insurance. Schedule 2(l) summarizes the insurance policies presently
covering the Acquired Companies, which are substantially similar to the
insurance policies covering the Acquired Companies for the past five (5) years.
(m) Compliance with Laws. The Company has all material permits, licenses,
authorizations, orders and approvals of, and has made all material 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; to the best of the Company's knowledge all such permits, licenses,
certificates of authority, orders and approvals are in full force and effect
and, to the best of the Company's knowledge, no suspension or cancellation of
any of them is threatened; and all such filings, applications and registrations
are current. The conduct by the Company and the condition and use of its
properties does not violate or infringe, in any respect material to any such
business, any applicable domestic (federal, state or local) or foreign law,
statute, ordinance, license or regulation. The Company is not 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 the Company.
(n) Labor. No work stoppage involving the Company is pending or to the
best of its knowledge, threatened. The Company is not involved in or, to the
best of its knowledge, threatened with or affected by, any strike, material
labor dispute, arbitration, lawsuit or administrative proceeding. No employee of
the Company is represented by any labor union nor are any collective bargaining
agreements otherwise in effect with respect to such employees, and, to the best
of its knowledge, there is no effort being made that, if successful, would make
the warranty contained in this sentence untrue.
(o) Material Interests of Certain Persons. Except as set forth on
Schedule 2(o), no officer or director of the Company or any "associate" (as such
term is defined in Rule l4a-1 under the Securities Exchange Act of 1934)(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 the Company.
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(p) Cityside Benefit Plans; Bonuses.
(a) Cityside has made available to Norwest a list of all employees of
the Acquired Companies ("Company Employees"), showing for each the position
held, the period employed by the Acquired Companies and current salary or rate
of pay. All Company Employees are employees at will, except as shown on
Schedule 2(p)(a). Schedule 2 (p)(a)(i) lists (i) all of the employee pension
benefit plans within the meaning of Section 3 (2) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), which the Company maintains
or has maintained, to which the Company contributes or has contributed, or
which cover or have covered employees of the Company, including all pension,
retirement, profit-sharing, and employee stock ownership plans, (ii) all
employee welfare benefit plans within the meaning of Section 3 (1) of ERISA,
which the Company maintains or has maintained, to which the Company
contributes or has contributed, or which cover or has covered employees of the
Company including all vacation, sick leave, medical, hospitalization, life
insurance and other insurance plans, and (iii) all deferred compensation,
bonus, stock option, stock purchase, incentive plans or employee benefit or
fringe benefit arrangements, which the Company maintains or has maintained, to
which the Company contributes or has contributed, or which cover or has
covered employees of the Company (collectively, the "Company Benefit Plans").
Schedule 2(p)(a)(ii) identifies each Company Benefit Plan that will be
sponsored by the Acquired Companies (and not by Cityside) as of the Closing
Date (collectively, the "Transferred Company Benefit Plans").
(b) Each Company Benefit Plan has been maintained and operated in all
material respects in compliance with its terms and with the applicable
provisions of ERISA, the Internal Revenue Code of 1986, as amended, all
regulations promulgated thereunder, and all other applicable governmental laws
and regulations. The Company has paid to all Company Benefit Plans or has
accrued on the Preliminary Closing Statement, all contributions or other
amounts payable or that may become payable under Company Benefit Plans for
periods or in respect of services rendered prior to the Closing Date. The
Company has never maintained or contributed to any Employee Pension Benefit
Plan (as defined in Section 3 (2) of ERISA) that has been terminated or
partially terminated, and no proceeding by the Pension Benefit Guaranty
Corporation ("PBGC") has been instituted or to the best of its knowledge,
threatened with respect to any such plan. The Company has never contributed to
any Multiemployer Plan or incurred any liability under any such plan. The
Company has never maintained any employee welfare benefit plan (as defined in
Section 3 (1) of ERISA) providing medical, life or other welfare type benefits
to current or future retired or terminated employees, their spouses or
dependents (other than in accordance with Internal Revenue Code Section
4980(B)). The Company does not, and has not for the past five (5) years,
maintained any defined benefit plans. Each Transferred Company Benefit Plan
that is intended to be qualified under Section 401 (a) of the Internal Revenue
Code is so qualified. With respect to each Transferred Company Benefit Plan,
there has
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been no prohibited transaction (as defined in Section 4975 of the Internal
Revenue Code or Section 406 of ERISA). No action, suit or investigation with
respect to the Transferred Company Benefit Plans (other than routine claim for
benefits) is pending or to the best of its knowledge, threatened.
(q) Brokers and Finders. Other than Xxxxx Xxxxxxx, Inc., neither the
Company nor X.X. Xxxxxxxx, nor any of their 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 the Company in connection with this
Agreement or the transactions contemplated hereby and thereby. Cityside and
X.X. Xxxxxxxx shall be solely responsible for the payment of any fees to Xxxxx
Xxxxxxx, Inc., and shall indemnify and hold Norwest harmless for any liability
for any financial advisory fees, brokerage fees, commissions or finder's fees
claimed by Xxxxx Xxxxxxx, Inc.
(r) Fiduciary Activities. The Company has not had any accounts for which
it has acted as a fiduciary including but not limited to accounts for which it
has served as trustee, agent, custodian, personal representative, guardian,
conservator or investment advisor.
(s) No Defaults. The Company is not 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. All parties with whom the
Company has material leases, agreements or contracts or who owe to the Company
obligations are in compliance therewith in all material respects.
(t) 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 of, on the Company, 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 the Company's knowledge, threatened
against the Company; the Company is not subject to any agreement, order,
judgment, or decree by or with any court, governmental authority or third party
imposing any such environmental liability. Cityside has provided Norwest with
copies of all environmental assessments, reports, studies and other related
information in its possession with respect to each of its owned properties.
(u) Receivables. Except for those claims set forth on Schedule 2(k), all
those installment sale contracts, notes, credit agreements, invoices,
indebtedness, or other obligations and any instruments securing same (herein
called "Receivables"), together with any instruments securing the same were made
for valuable considerations and now
12
constitute valid and legally enforceable obligations in accordance with their
terms of the respective persons shown as indebted thereon (except as may be
limited by bankruptcy, insolvency and similar laws affecting creditors' rights
and remedies generally). Except for those claims set forth on Schedule 2(k),
each Receivable was solicited, originated and currently exists in material
compliance with all applicable federal and state laws applicable thereto. Each
payment shown on the records relating to the Receivables was made on the date
indicated on said records and were not made by an employee of the Company.
Except as shown on the records relating to the Receivables, and except for
those claims set forth on Schedule 2(k), there are no claims or defenses with
respect to the Receivables, including but not limited to set-offs,
counterclaims, right of cancellation, lack of cancellation, lack of
consideration, fraud, forgery, alteration and/or any claims or defenses based
on or alleging the failure to provide or deliver the goods/services referred
to therein, or the providing or delivering damaged, defective or inadequate
goods/services. The amounts shown on any data provided by the Company to be
owing and unpaid on the respective Receivables represent the true and correct
outstanding balances thereon. Notwithstanding any provision in this Paragraph
2(u) to the contrary, with respect to the Receivables originated by a party
other than the Acquired Companies, all of the representations contained in
this Paragraph 2(u) shall be subject to the knowledge of Cityside to the
extent they relate to claims caused by such other parties.
(v) Bonuses. All bonuses earned, or a ratable portion of those bonuses
reasonably expected to be earned, by Company Employees (as defined in Paragraph
2(p)(a)) prior to, through and including the Closing Date, have been paid or
accrued on the books of the Acquired Companies and will be included in the
Preliminary Closing Statement as an adjustment to Net Worth.
3. Representations and Warranties of Norwest. Norwest represents and
warrants to Cityside as follows:
(a) Organization and Authority. Norwest is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
is duly qualified to do business and is in good standing in all jurisdictions
where its ownership or leasing of property or the conduct of its business
requires it to be so qualified and failure to be so qualified would have a
material adverse effect on Norwest and its subsidiaries taken as a whole and has
corporate power and authority to own its properties and assets and to carry on
its business as it is now being conducted. Norwest is registered as a bank
holding company with the Federal Reserve Board under the Bank Holding Company
Act of 1956, as amended (the "BHC Act").
(b) 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
13
delivery of this Agreement and the consummation of the transactions
contemplated hereby and thereby. Subject to such approvals of the Federal
Deposit Insurance Corporation, the Minnesota Department of Commerce, the
Federal Reserve Board, and government agencies and other governing boards
having regulatory authority over Cityside Insurance, 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.
(c) 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 or the transactions contemplated hereby and thereby.
4. Covenants of the Company. The Company covenants and agrees with Norwest
as follows:
(a) Except as otherwise permitted or required by this Agreement, from the
date hereof until the Closing Date, the Company will: maintain its corporate
existence in good standing; maintain the general character of its business and
conduct its business in its ordinary and usual manner; maintain proper business
and accounting records in accordance with generally accepted accounting
principles; maintain its properties in good repair and condition, ordinary wear
and tear excepted; maintain in all material respects presently existing
insurance coverage; use commercially reasonable efforts to preserve its business
organization intact, to keep the services of its present principal employees and
to preserve its good will and the good will of its suppliers, customers and
others having business relationships with it; use commercially reasonable
efforts to obtain any approvals or consents required to maintain existing leases
and other contracts in effect following the Closing; comply in all material
respects with all laws, regulations, ordinances, codes, orders, licenses and
permits applicable to the properties and operations of the Company; provided
that Norwest shall not unreasonably interfere with the conduct of the Company's
business, apprise Norwest and its representatives with respect to the proposal
for and negotiation of any material contracts (or extensions or renewals
thereof); and permit Norwest and its representatives (including Deloitte &
Touche L.L.P. and 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 the Company herein expressed.
(b) Except as specifically required by this Agreement, from the date
hereof until the Closing Date, the Company will not: amend or otherwise change
its articles of incorporation or association or by-laws; issue or sell or
authorize for issuance or sale, or grant any options or make other agreements
with respect to the issuance or sale or
14
conversion of, any shares of its capital stock, phantom shares or other share-
equivalents, or any other of its securities. Except as specifically required
by this Agreement, from the date hereof until the Closing Date, the Company
will not (without the prior written consent of Norwest, which consent shall
not be unreasonably withheld) authorize or incur any long-term debt; mortgage,
pledge or subject to lien or other encumbrance any of its properties, except
in the ordinary course of business; enter into any agreement, contract or
commitment in excess of $15,000 except transactions in the ordinary course of
business and in accordance with policies and procedures in effect on the date
hereof; without informing Norwest, make any investments except in the ordinary
course of business for terms of up to one year and in amounts of $100,000 or
less; amend or terminate any Plan except as required by law; make any
contributions to any Plan except as required by the terms of such Plan in
effect as of the date hereof; declare, set aside, make or pay any dividend or
other distribution with respect to its capital stock except any dividend
declared and issued by the Company in accordance with historical practice;
redeem, purchase or otherwise acquire, directly or indirectly, any of the
capital stock of the Company; increase the compensation of any officers,
directors or executive employees, except pursuant to existing compensation
plans and practices; or sell or otherwise dispose of any of its assets or
properties other than in the ordinary course of business.
(c) The Company will furnish or cause to be furnished to Norwest all the
information concerning the Company required for inclusion in any statement or
application made by Norwest to any governmental body in connection with the
transactions contemplated by this Agreement; provided, however, the Company
shall not be in breach of this paragraph (c) unless it fails to respond to
Norwest's written request for information.
(d) The Company will take all necessary corporate and other action and use
commercially reasonable efforts to obtain all approvals of regulatory
authorities, consents and other approvals required of the Company to carry out
the transactions contemplated by this Agreement and will cooperate with Norwest
to obtain all such approvals and consents required of Norwest.
(e) The Company will use commercially reasonable efforts to deliver to the
Closing all certificates and other documents required by this Agreement to be
delivered by it at the Closing.
(f) The Company will hold in confidence all documents and information
concerning Norwest and its subsidiaries furnished to the Company 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 the Company'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 or for any other reason or purpose
(except to the extent that such information can be shown to be previously known
15
to the Company, in the public domain, or later acquired by the Company from
other legitimate sources) and, upon request, all such documents, any copies
thereof and extracts therefrom shall immediately thereafter be returned to
Norwest.
(g) Neither the Company nor any director, officer, representative or agent
thereof, will, directly or indirectly, solicit, authorize the solicitation of or
enter into any discussions with any corporation, partnership, person or other
entity or group (other than Norwest) concerning any offer or possible offer (i)
to purchase any shares of common stock, any option or warrant to purchase any
shares of common stock, any securities convertible into any shares of such
common stock, or any other equity security of the Company, to make a tender or
exchange offer for any shares of such common stock or other equity security,
(ii) to purchase, lease or otherwise acquire the assets of the Company or any
portion thereof except in the ordinary course of business, or (iii) to merge,
consolidate or otherwise combine with the Company. If any corporation,
partnership, person or other entity or group makes an offer or inquiry to the
Company concerning any of the foregoing, the Company will promptly disclose such
offer or inquiry, including the terms thereof, to Norwest.
(h) The Company owns no real properties.
(i) On or before the Closing, the Acquired Companies shall terminate any
and all auto leases entered into by the Acquired Companies or on its behalf or
on behalf of any of the Company Employees (as hereinafter defined).
(j) Cityside shall cause the termination of any Company Benefit Plan
covering Company Employees effective as of the Closing Date, and pay, or assume
and adequately accrue, all necessary contribution premiums, obligations or
liabilities and corresponding assets whatsoever arising from all Company Benefit
Plans and the termination thereof.
(k) Norwest shall be permitted access by Cityside from the date of this
Agreement to negotiate with the Purchasers named in that certain Receivables
Purchase Agreement dated October 23, 1995, as amended by the First Amendment to
the Receivables Purchase Agreement and Support Agreement dated as of April 1,
1996, and the Second Amendment to Receivables Purchase Agreement and Agreement
dated as of December 11, 1996 (collectively the "Amendments") (as amended, the
"Purchase Agreement") and relating to the Revolving Receivables Purchase
Facility (the "Facility") established under the Purchase Agreement and the
agreements related thereto (collectively the "Facility Agreements") with regard
to Norwest's intent to repurchase the securitized receivables on or after the
Closing Date.
(l) Cityside shall cause to be prepaid that certain $25,000,000.00 line of
credit facility with First Bank, as agent (the "First Bank Facility"). Norwest
shall be responsible for the payment of any penalties or fees in connection with
the payment of the First Bank Facility.
16
5. Covenants of Norwest. Norwest covenants and agrees with Cityside as
follows:
(a) Norwest will take all necessary corporate and other action and file
all documents required to obtain and will use commercially reasonable efforts to
obtain all approvals of regulatory authorities, consents and approvals required
of the parties to carry out the transactions contemplated by this Agreement and
will cooperate with Cityside to obtain all such approvals and consents required
for Cityside, if any.
(b) Norwest will remain bound by the terms of the confidentiality letter
dated July 25, 1997 between Norwest and Xxxxx Xxxxxxx, Inc., provided however,
that Norwest may discuss the transactions contemplated hereunder with rating
agencies.
6. Conditions Precedent to Obligation of Cityside. The obligation of
Cityside to effect the Closing shall be subject to the satisfaction at or before
the Closing Date of the following conditions, any or all of which may be waived
in writing by Cityside:
(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, the representations and warranties
contained in paragraph 3 hereof shall be true and correct in all material
respects with respect to Norwest and its subsidiaries taken as a whole as if
made at the Closing Date.
(b) Norwest shall have, or shall have caused to be, performed and observed
in all material respects all covenants, agreements and conditions hereof to be
performed or observed by it at or before the Closing Date.
(c) Cityside shall have received a favorable certificate, dated as of the
Closing Date, signed by the Chairman, the President or any Executive Vice
President or Senior Vice President of Norwest, as to the matters set forth in
subparagraphs (a) and (b) of this paragraph 6.
(d) 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.
(e) Approval (which approval shall not be unreasonably burdensome) from
the Federal Deposit Insurance Corporation, the Minnesota Department of
Commerce, and by such other governmental agencies as may be required by law of
the transactions contemplated by this Agreement shall have been received and
all waiting and appeal periods prescribed by applicable law or regulation
shall have expired or otherwise earlier terminated.
17
7. Conditions Precedent to Obligation of Norwest. The obligation of
Norwest to effect the Closing shall be subject to the satisfaction at or before
the Closing Date of the following conditions, any or all of which may be waived
in writing by Norwest:
(a) Except as they may be affected by transactions contemplated hereby and
except to the extent such representations and warranties are by their express
provisions made as of a specified date, the representations and warranties
contained in paragraph 2 hereof shall be true and correct in all material
respects as of the date of this Agreement and as of the Closing Date and as if
made at and as of the Closing Date.
(b) The Company shall have, or shall have caused to be, performed and
complied with in all material respects all covenants, agreements and conditions
hereof to be performed or observed by it at or before the Closing Date.
(c) Norwest shall have received a favorable certificate, dated as of the
Closing Date, signed by the Chairman, the President or any Executive Vice
President or Senior Vice President of Cityside, as to the matters set forth in
subparagraphs (a) and (b) of this paragraph 7.
(d) Approvals (which approval shall not be unreasonably burdensome) from
the Federal Deposit Insurance Corporation, the Minnesota Department of Commerce,
and by such other governmental agencies as may be required by law of the
transactions contemplated by this Agreement shall have been received, and all
waiting and appeal periods prescribed by applicable law or regulation shall have
expired or otherwise earlier terminated.
(e) 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.
(f) Intentionally Deleted.
(g) Intentionally Deleted.
(h) Intentionally Deleted.
(i) That certain $10,000,000.00 credit facility with X.X. Xxxxxxxx (the
"X.X. Xxxxxxxx Facility") shall have been canceled and the liability for current
income taxes payable of the Acquired Companies shall be paid to X.X. Xxxxxxxx.
All amounts payable thereunder shall be paid using the funds delivered by
Norwest pursuant hereto and, pursuant to Paragraph 1(b), such funds shall not be
treated as a liability for purposes of determining "Net Worth" (it being agreed,
however, that the intercompany liability of the Acquired Companies to X.X.
Xxxxxxxx will be treated as a liability for purposes of determining "Net
Worth"). Cityside shall be responsible for the payment of any penalties or fees
in connection with the payment of the X.X. Xxxxxxxx Facility. The Company
18
shall have paid in full any and all other amounts owed by the Company to X.X.
Xxxxxxxx or any affiliate. X.X. Xxxxxxxx shall have paid in full any and all
other amounts owed by the X.X. Xxxxxxxx or any affiliate to the Company.
(j) The Acquired Companies shall have transferred, in accordance with
applicable laws and regulations, any and all deposits held by the Acquired
Companies for X.X. Xxxxxxxx employees; and neither Norwest nor the Acquired
Companies shall have any further liability with respect to such deposits;
provided however, Norwest shall hold such employees harmless from any penalties
associated with such transfer.
(k) Intentionally Deleted.
(l) Since the date of this Agreement, no change shall have occurred and
no circumstances shall exist which have had or might reasonably be expected to
have a material adverse effect on the financial condition, results of
operations, business or prospects of the Company.
(m) The consents of the parties to those agreements listed as item 1 on
Schedule 2(d) to the transactions contemplated by this Agreement shall have been
obtained.
8. Termination of Agreement.
(a) This Agreement may be terminated at any time prior to the Closing:
(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 Closing shall not have been consummated by December 31, 1997,
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 Cityside 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, which
order shall remain unstayed and in effect for a period of 60 days (if the
expiration of said 60 day period is after December 31, 1997, then this
paragraph (iii) shall control over paragraph 8(ii) next above); or
(iv) by Norwest if there has been a misrepresentation or breach in any
material respect on the part of Cityside in the representations and
warranties of Cityside set forth herein that has a material adverse affect
on the business of the Acquired Companies taken as a whole, and such
breach or misrepresentation, after thirty (30) days due notice, has not
been corrected, or if, after due notice,
19
there has been a failure on the part of Cityside to comply in any
material respect with its agreements or covenants herein that has a
material adverse affect on the business of the Acquired Companies taken
as a whole; or
(v) by Cityside if there has been a misrepresentation or breach in any
material respect on the part of Norwest in the representations and
warranties of Norwest set forth herein that has a material adverse affect
on the business of the Acquired Companies taken as a whole, and such breach
or misrepresentation, after thirty (30) days' due notice, has not been
corrected, or if, after due notice, there has been a failure on the part of
Norwest to comply in any material respect with its agreements or covenants
herein that has a material adverse affect on the business of the Acquired
Companies taken as a whole.
(b) Termination of this Agreement under this paragraph 8 shall not
release, or be construed as so releasing, either party hereto from any
liability or damage to the other party hereto arising out of the breaching
party's 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, and the
obligations under paragraphs 4(f), 5(b) and 9 shall survive such
termination.
9. Expenses. All expenses in connection with this Agreement and the
transactions contemplated hereby, including without limitation broker or
investment advisor, legal and accounting fees, incurred by Cityside shall be
borne by Cityside and shall not be paid by or accrued on the books of the
Acquired Companies, and all such expenses incurred by Norwest shall be borne by
Norwest.
10. Tax Matters.
(a) Definitions.
Except as otherwise provided herein or as otherwise clearly required
by the context, the following terms shall have the respective meanings
indicated when used in this Paragraph 10:
"Affiliated Group" means an affiliated group as defined in Section
1504 of the Code or any analogous combined, consolidated, or unitary group
defined under state, local, or foreign income Tax law.
"Code" means the Internal Revenue Code of 1986, as amended.
"Consolidated Returns" means any Tax Return filed on behalf of an
Affiliated Group.
20
"Income Tax" means any federal, state, or foreign income, gross
receipts, franchise, estimated, alternative minimum, add-on minimum tax or
levy based on income or gross receipts of any kind whatsoever, including
any interest, penalties or additions to tax in respect of the foregoing.
"Post-Closing Period" shall mean any period of time beginning after
the Closing Date.
"Post-Closing Period Tax Return" shall mean any Tax Return for a Post-
Closing Period.
"Pre-Closing Periods" shall mean any period of time ending on or
before the Closing Date.
"Straddle Period" means any period of time which begins prior to the
Closing Date and ends after the Closing Date.
"Straddle Period Tax Return" means any Tax Return for a Straddle
Period.
"Tax or Taxes" means any federal, state, local or foreign income,
gross receipts, franchise, estimated, alternative minimum, add-on minimum,
sales, use, transfer, registration, value added, excise, natural resources,
severance, stamp, occupation, premium, windfall profit, environmental
(including Code Section 59A), customs, duties, real property, personal
property, capital stock, intangibles, social security, employment,
unemployment, disability, payroll, license, employee, or other tax,
withholding tax or levy, of any kind whatsoever, including any interest,
penalties or additions to tax in respect of the foregoing.
"Tax Return" means any return, declaration, report, claim for refund,
information return, or other document (including any related or supporting
estimates, elections, schedules, statements, or information) filed or
required to be filed in connection with the determination, assessment, or
collection of any Tax or the administration of any laws, regulations, or
administration requirements relating to any Tax.
(b) Tax Returns and Payments.
(1) X.X. Xxxxxxxx shall be responsible for the preparation and filing
for all Consolidated Returns that include any of the Acquired Companies
with respect to Pre-Closing Periods, and for the payment of all Taxes with
respect to such returns. X.X. Xxxxxxxx shall be entitled to any refunds of
Taxes with respect to Consolidated Returns that include any of the Acquired
Companies with respect to Pre-Closing Periods.
21
(2) X.X. Xxxxxxxx shall be responsible for the preparation and filing
of all other Tax Returns with respect to Income Taxes for the Acquired
Companies with respect to Pre-Closing Periods (other than those referred to
in Section 10(b)(1)), and for the payment of all Taxes with respect to such
returns. X.X. Xxxxxxxx shall be entitled to any refunds of Taxes with
respect to such returns.
(3) Norwest and the Acquired Companies shall be responsible for the
preparation and filing of all Straddle Period Tax Returns that include any
of the Acquired Companies, and for the payment of all Taxes with respect to
such returns. X.X. Xxxxxxxx shall reimburse Norwest for the portion of any
Tax relating to a Straddle Period that is allocable, in accordance with
paragraph (6) below, to the Pre-Closing portion of such Straddle Period,
less any estimated Taxes paid by X.X. Xxxxxxxx or the Acquired Companies
with respect to such Straddle Period on or before the Closing Date. Any
refunds of Straddle Period Taxes shall be allocated between X.X. Xxxxxxxx
and Norwest based on the same principles.
(4) Norwest and the Acquired Companies shall be responsible for the
preparation and filing of all Post-Closing Period Tax Returns that include
any of the Acquired Companies, and for the payment of all Taxes with
respect to such returns. Norwest shall be entitled to any refunds of such
Taxes.
(5) To the extent permitted by law, X.X. Xxxxxxxx and Norwest shall
use their commercially reasonable efforts to cause any Taxable period to
close on the Closing Date.
(6) Taxes payable with respect to a Straddle Period shall be allocated
to the Pre-Closing and Post-Closing Period on the basis of a closing of the
books as of the Closing Date.
(7) X.X. Xxxxxxxx, Norwest and the Acquired Companies shall cooperate
in good faith and at no cost to the other party in (i) preparing and filing
all Tax Returns, (ii) maintaining and making available to each other all
records necessary in connection with Taxes, and (iii) resolving all
disputes and audits with respect to Taxes. Norwest and X.X. Xxxxxxxx
recognize that each may need access, from time to time, after the Closing
Date, to certain accounting and tax records and information held by the
other.
(8) X.X. Xxxxxxxx shall pay any stock transfer taxes due as a result
of the sale of the Acquired Companies Stock sold hereunder.
22
(9) X.X. Xxxxxxxx shall join Norwest in timely filing an election
under Section 338(h)(10) of the Code and its state, local or foreign
counterparts (collectively a "Section 338(h)(10) Election"). X.X. Xxxxxxxx
and Norwest shall fully cooperate to effect such elections. X.X. Xxxxxxxx
will pay any Taxes attributable to the making of the Section 338(h)(10)
Election. With respect to any taxing jurisdiction which does not recognize
or apply the Section 338(h)(10) Election, X.X. Xxxxxxxx will also pay any
Taxes attributable to an election under state, local, or foreign law
similar to the election available under Section 338(g) of the Code. X.X.
Xxxxxxxx and Norwest shall fully cooperate to effect such elections.
(10) X.X. Xxxxxxxx shall cause all Income Taxes relating to any Pre-
Closing Period to be settled or transferred to X.X. Xxxxxxxx prior to
Closing.
(11) X.X. Xxxxxxxx shall cause the provisions of any tax sharing
agreement to which the Acquired Companies is a party to be terminated on or
before the Closing Date.
(12) X.X. Xxxxxxxx shall have the sole and exclusive authority to file
amended Income Tax Returns and to control any Tax audits, disputes,
administrative or judicial proceedings or settlements with respect to the
Acquired Companies for any Pre-Closing Period. Norwest and the Acquired
Companies shall have the sole and exclusive authority to file any other
amended Tax Returns and to control any other Tax audits, disputes,
administrative or judicial proceedings or settlements with respect to the
Acquired Companies, except that without X.X. Xxxxxxxx'x written consent
(which shall not be unreasonably withheld or delayed), neither Norwest nor
the Acquired Companies shall take any action that will have the effect of
increasing Cityside's or X.X. Xxxxxxxx'x liability for Taxes.
(c) Indemnification.
(1) Cityside and X.X. Xxxxxxxx shall indemnify Norwest and the
Acquired Companies for (i) all liability for Taxes of the Acquired
Companies and the X.X. Xxxxxxxx Affiliated Group for all Straddle Periods
(but only to the extent allocable, in accordance with Section 10(b)(6), to
the pre-Closing portion of the Straddle Period) and all Pre-Closing Periods
except for Taxes which are accrued on the Final Closing Statement, and (ii)
all liability for reasonable legal and accounting fees and expenses
incurred with respect to any item indemnified pursuant to clause (i) of
this sentence.
(2) Norwest and the Acquired Companies shall indemnify Cityside and
X.X. Xxxxxxxx for (i) all liability for Taxes of the Norwest Affiliated
Group for any Taxable period, (ii) all liability for Taxes of the Acquired
Companies for Straddle Periods (but only to the extent allocable, in
accordance
23
with Section 10(b)(6), to the post-Closing portion of the Straddle
Period) and Post-Closing Periods, and (iii) all liability for reasonable
legal and accounting expenses incurred with respect to any item
indemnified pursuant to clauses (i) and (ii).
(3) X.X. Xxxxxxxx and Cityside shall indemnify Norwest and the
Acquired Companies from and against the entirety of any tax liability,
including interest, penalties or assessments related thereto, the Acquired
Companies may suffer resulting from, arising out of, relating to, in the
nature of, or caused by any liability of the Acquired Companies for taxes
of any person other than itself under Reg. section 1.1502-6 (or similar
provision of state, county, local or foreign law).
(d) Procedures for Indemnification.
(1) If a claim is made by any Taxing authority, which, if successful,
might result in an indemnity payment by a party ("Tax Indemnitor") to
another ("Tax Indemnitee") pursuant to Section 10(c), Tax Indemnitee shall
promptly notify Tax Indemnitor in writing of such claim (a "Tax Claim").
If notice of a Tax Claim is not given to Tax Indemnitor within a sufficient
period of time to allow Tax Indemnitor to effectively contest such Tax
Claim, or in reasonable detail to apprise Tax Indemnitor of the nature of
the Tax Claim, in each case taking into account the facts and circumstances
with respect to such Tax Claim, Tax Indemnitor shall not be liable to Tax
Indemnitee to the extent that Tax Indemnitor's ability to effectively
contest such Tax Claim is actually prejudiced as a result thereof.
(2) With respect to any Tax Claim, Tax Indemnitor shall control all
proceedings taken in connection with such Tax Claim (including, without
limitation, selection of counsel) and, without limiting the foregoing, may
in its sole discretion pursue or forego any and all administrative appeals,
proceedings, hearings and conferences with any Taxing authority with
respect thereto and may, in its sole discretion, either pay the Tax Claim
and xxx for a refund where applicable law permits such refund suits or
contest the Tax Claim in any permissible manner, provided, however, that
Tax Indemnitor shall not settle or compromise a Tax Claim without giving a
30-day notice to Tax Indemnitee and without Tax Indemnitee's consent, which
shall not be unreasonably withheld, if such settlement or compromise would
result in an increase in the Tax liabilities of Tax Indemnitee or members
of its affiliated group for any Taxable period.
(3) Cityside, X. X. Xxxxxxxx and Norwest shall cooperate with each
other in contesting any Tax Claim, which cooperation shall include, without
limitation, granting powers of attorney to the party who is entitled to
control the proceeding, retaining and providing records and information
that are reasonably relevant to such Tax Claim, and making employees
available on a
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mutually convenient basis to provide additional information
or explanation of any material provided hereunder or to testify at
proceedings relating to such Tax Claim.
(4) Any indemnification payments hereunder shall be treated as an
adjustment to Purchase Price, unless otherwise required by applicable law.
(e) Survival. The obligations of the parties set forth in this
Paragraph 10 shall remain in effect until expiration of the applicable statute
of limitations.
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, except in accordance with Paragraph
1(d)(i).
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 (a)
personally, or (b) by certified mail, return receipt requested, or (c) by
overnight courier service, or (d) by telecopy as follows:
If to Norwest:
Norwest Corporation
Sixth and Marquette
Xxxxxxxxxxx, Xxxxxxxxx 00000-0000
Attention: Secretary
Telecopier Number: 612/667-4399
and Norwest Financial, Inc.
000 Xxxxxx Xxxxxx
Xxx Xxxxxx, Xxxx 00000
Attention: Xxxxxxxx X. XxXxxxxxx
Telecopier Number: 515/237-7602
If to Cityside:
X.X. Xxxxxxxx, Inc.
0000 Xxxxxxxx Xxxx, Xxxxx 000
Xxxx Xxxxxxx, Xxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxxxx
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Telecopier Number: 612/937-7809
If to X.X. Xxxxxxxx:
X.X. Xxxxxxxx, Inc.
0000 Xxxxxxxx Xxxx, Xxxxx 000
Xxxx Xxxxxxx, Xxxxxxxxx 00000
Attention: Xxxx X. Xxxxxx
Telecopier Number: 612/937-7809
or to such other address with respect to a party as such party shall notify the
other in writing as above provided.
14. Public Statements. Except as otherwise agreed by the parties, Norwest
will not, except as required by law or regulation , in the reasonable judgment
of counsel for Norwest, make any public disclosure, or permit any public
disclosure to be made, regarding this Agreement or the transactions contemplated
hereby or thereby; neither X.X. Xxxxxxxx nor the Acquired Companies will make or
permit any such public disclosure. Provided, however, nothing herein shall
prohibit either party from making any disclosure which is a communication
directed to its rating agencies or employees or the employees of its affiliates.
15. Intentionally Deleted.
16. Complete Agreement. This Agreement contain the complete agreement
between the parties hereto with respect to the Closing and other transactions
contemplated hereby and supersede all prior agreements and understandings
between the parties hereto with respect thereto.
18. Captions. The captions contained in this Agreement are for
convenience of reference only and do not form a part of this Agreement.
19. Waiver and Other Action. Either party hereto may, by a signed writing,
give any consent, take any action pursuant to paragraph 8 hereof or otherwise,
or waive any inaccuracies in the representations and warranties by the other
party and compliance by the other party with any or all of the covenants and
conditions herein.
20. Amendment. At any time before the Closing, 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
Cityside shall be made which changes in a manner adverse to such shareholders
the consideration to be provided to said shareholders pursuant to this
Agreement.
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21. Governing Law. This Agreement shall be construed and enforced in
accordance with the laws of the State of Minnesota.
22. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
constitute but one instrument.
23. Employee Benefits.
(a) Post-Closing Date Employment. The Acquired Companies will continue to
offer employment at sufferance to all of the Company Employees who are at work
on the Closing Date, including those Company Employees on vacation, absent due
to sick or personal day, family leave, workers' compensation claim or leave of
absence and are expected or are legally eligible to be reinstated. The Company
does not have any employee who at the Closing Date is on a leave of absence
and is not expected to be reinstated. Each Acquired Companies employee's
salary and bonus (or rate of pay) shall be at least as great as his/her salary
or bonus (or rate of pay) immediately prior to the Closing Date, and the
location of the employment shall be within a twenty-five mile radius of the
location where the Acquired Companies employee is employed immediately prior
to the Closing Date. The Acquired Companies shall have no obligation to employ
any Acquired Companies employee for any specific term after the Closing Date,
provided that Acquired Companies agree that, for a period of 60 days after the
Closing Date, it will not cause any of the Company Employees to suffer
"employment loss" for purposes of the Worker Adjustment and Retraining
Notification Act and related regulations (the "Warn Act") if such employment
loss could create any liability for Cityside unless Norwest or the Acquired
Companies deliver notices under the Warn Act in such a manner and at such time
that Cityside bears no liability with respect thereto. Cityside will cause the
Acquired Companies to cooperate with Norwest in the delivery of such notices
to the extent that Norwest reasonably deems necessary hereunder.
(b) Benefits After the Closing Date. Norwest will cause the Acquired
Companies to provide employee benefits equivalent to the benefits provided by
Norwest Financial, Inc. to its employees. Norwest will waive any exclusion for
an existing condition and any waiting period under any benefit plan extended to
the Company Employees, except to the extent such exclusions or waiting periods
were in effect under the Company Benefits Plans, and will treat the service of
Company Employees with the Acquired Companies as service rendered to Norwest for
purposes of eligibility to participate, vesting and for other appropriate
benefits, but not for benefit accrual (including minimum pension amount) or
benefit payment, early retirement subsidies, minimum pension benefits or post-
retirement welfare benefits under any pension benefit plan or welfare benefit
plan of Norwest Financial, Inc. extended to Company Employees. Norwest shall
have no liability under any stock option plans sponsored by Cityside.
(c) Benefits Before the Closing Date. Before the Closing Date, Cityside
will accelerate vesting in all outstanding Cityside stock options granted to
Company
27
Employees. Effective as of the Closing Date, Cityside will cause all
outstanding restricted stock awarded to Company Employees to become free of
all restrictions. Effective as of the Closing Date, Company Employees will
cease to be active participants in the Company Benefit Plans that are not
Transferred Company Benefit Plans, and Seller will retain all liabilities with
respect to such plans (other than Transferred Company Benefit Plans).
Effective as of the Closing Date, only Company Employees will be active
participants in the Transferred Company Benefit Plans.
24. Indemnification.
(a) Survival of Representations, Warranties and Covenants. Except as
otherwise specifically provided in this Agreement, all representations,
warranties, covenants and other agreements contained in or incorporated in to
this Agreement or in any instrument delivered pursuant hereto shall survive the
Closing and any investigation or inquiry made by Cityside or Norwest, as the
case may be. Except as provided herein, a claim for indemnification must be
made within two (2) years after the Closing Date; claims for indemnification
under Paragraph 10 or in connection with the litigation listed on Schedule 2(k)
must be based on claims made against Norwest or its affiliates within the
applicable statute of limitations.
(b) Terms of Indemnification.
(1) Cityside and X.X. Xxxxxxxx jointly and severally agree to indemnify
Norwest and its affiliates (and their respective directors, officers, agents
and employees) against, and to protect, defend and hold harmless Norwest and
its affiliates (and their respective directors, officers, agents and
employees) from, and Norwest agrees to indemnify Cityside and X.X. Xxxxxxxx
and their affiliates (and their respective directors, officers, agents and
employees) against, and to protect, defend and hold harmless Cityside and
X.X. Xxxxxxxx and their affiliates (and their respective directors, officers,
agents and employees) from, all Damages (as such term is defined in Section
(d) below) arising out of or resulting from any inaccuracy in, or breach of,
any of their respective representatives, warranties, covenants or other
agreements of each of them contained in or incorporated into this Agreement
or any related agreement or in any certificate or instrument delivered in
connection herewith or therewith.
(2) In addition, Cityside and X.X. Xxxxxxxx jointly and severally agree
to indemnify Norwest and its affiliates (and their respective directors,
officers, agents and employees) against, and to protect, defend and hold
harmless Norwest and its affiliates (and their respective directors,
officers, agents and employees) from, all Damages (as such term is defined in
Section (d) below) arising out of or resulting from any claim made, or suit,
action, investigation or proceeding commenced, against the Acquired
Companies, whether pending prior to Closing or brought or made against the
Acquired Companies after the Closing, relating to
28
or arising out of any act or omission by the Company or the Company's
agents, directors, officers or employees on or before the Closing Date.
(c) Procedures. In any case under this Agreement where one party has
indemnified the other against any claim or legal action, indemnification
shall be provided in accordance with the procedure outlined below:
(1) Provided that notice is given by the indemnified party to the
indemnifying party promptly upon the commencement of a legal proceeding or
the indemnified party becoming aware of a pending or threatened material
claim for which indemnification might be claimed, except to the extent the
failure to provide such notice does not prejudice the interests of the
indemnifying party, the indemnifying party promptly will defend, contest,
or otherwise protect the indemnified party against any such claim or suit
at its own cost and expense.
(2) The indemnified party may, but will not be obligated to,
participate at its own expense in a defense thereof by counsel of its own
choosing, but the indemnifying party shall be entitled to control the defense
unless (i) in the case where only money damages are sought, the indemnified
party has relieved the indemnifying party from liability with respect to the
particular matter or (ii) in the case where equitable or other relief is
sought that would materially adversely affect the indemnified party's or any
of its subsidiaries' or affiliates' abilities to conduct future business, the
indemnified party elects to participate in and jointly control the defense
thereof; provided, that the indemnifying party may only settle or compromise
the matter subject to indemnification without the consent of the indemnified
party if such settlement includes a complete release of all indemnified
parties as to the matters in dispute and relates solely to money damages; and
provided, further, that the indemnified party will not unreasonably withhold,
condition or delay consent to any settlement or compromise that requires its
consent. It is specifically agreed that the indemnified party, its
subsidiaries or affiliates may withhold its consent to any settlement or
compromise of a matter subject to indemnification, if in its reasonable
opinion the terms of such settlement or compromise will materially adversely
affect its ability to conduct future business.
(3) In the event the indemnifying party fails to timely defend,
contest, or otherwise protect the indemnified party against any such claim or
suit, the indemnified party may, but will not be obligated to, defend,
contest, or otherwise protect against the same, and make any compromise or
settlement thereof, and in such event, or in the case where the indemnified
party jointly controls such claim or suit, the indemnified party shall be
entitled to recover its costs thereof from the indemnifying party, including
reasonable attorney's fees, disbursements and all amounts paid as a result of
such claim or suit or the compromise or settlement thereof; provided,
however, that if the indemnifying party timely undertakes the defense of such
matter and the indemnified party does
29
not jointly control such matter, the indemnified party shall not be
entitled to recover from the indemnifying party for its costs incurred in
the defense thereof other than the reasonable costs of investigation
undertaken by the indemnified party and reasonable costs of providing
assistance.
(4) The indemnified party shall cooperate and provide such assistance
as the indemnifying party may reasonably request in connection with the
defense of the matter subject to indemnification and in connection with
recovering from any third parties amounts that the indemnifying party may pay
or be required to pay by way of indemnification hereunder.
(d) Damages. As used in this Paragraph, the term "Damages" means any
and all losses, claims, damages, liabilities, obligations, judgments,
settlements, awards, demands, offsets, reasonable out-of-pocket costs,
expenses and attorney's fees (including any such reasonable costs, expenses
and attorney's fees incurred in enforcing a party's right of indemnification
against any indemnifying party or with respect to any appeal) and penalties
and interest, if any.
(e) Maximum Indemnification/Threshold. The maximum aggregate
liability of Cityside and X.X. Xxxxxxxx to Norwest, or Norwest to Cityside or
X.X. Xxxxxxxx under this Paragraph 24 shall be an amount equal to the
Purchase Price. Excluding Cityside's and X.X. Xxxxxxxx'x obligations under
Paragraphs 2(q) and 10(c) (with respect only to the potential liability
described on Schedule 2(h)), no indemnified party shall be entitled to
indemnification under this Paragraph 24 or under Paragraph 10(c) unless, and
only to the extent that, the aggregate Damages to such indemnified party
exceed $500,000.00.
25. Agreement Not to Compete. Upon the consummation of the
transactions contemplated hereby and until five (5) years after the Closing
Date, neither Cityside, X.X. Xxxxxxxx nor any of its shareholders,
subsidiaries or affiliates shall;
(a) compete anywhere in the United States with Norwest or any of
its subsidiaries or affiliates in the business of financing (including making
direct loans to consumers) or purchasing retail installment contracts from
automobile dealers relating to the sale of used automobiles to consumers;
(b) directly or indirectly, either for itself or any other person
(1) induce or attempt to induce any employee of the Acquired Companies or its
subsidiaries or affiliates to leave the employ of such Acquired Companies or
subsidiary, (2) in any way interfere with the relationship between the
Acquired Companies or its subsidiaries and any employee of such Acquired
Companies or subsidiary, (3) employ or otherwise engage as an employee,
independent contractor or otherwise, any employee of the Acquired Companies
or any of its
30
subsidiaries, or (4) (x) solicit or attempt to use any list or other
records of customers or dealers of the Acquired Companies or any of its
subsidiaries to solicit any such customers or dealers for any products or
services, or (y) in any way interfere with the relationship between any
customer, supplier, licensee, or dealer of the Acquired Companies, or (z)
specifically target the customers, suppliers, licensees or dealers of the
Acquired Companies or any of its subsidiaries for any products or services.
For purposes of this Section, "employee of the Acquired Companies or its
subsidiaries" includes any such employee who leaves the employment of the
Acquired Companies or any of its subsidiaries after the date hereof; or
(c) (i) use the name "Cityside" as the name of any business owned or
operated by Cityside or X.X. Xxxxxxxx or any of its subsidiaries or
affiliates, (ii) use the word Cityside or any derivation thereof in the
name of any consumer finance business owned or operated by Cityside or X.X.
Xxxxxxxx or any of its subsidiaries or affiliates, or (ii) use any other
trademark, trade name or service xxxx in a manner which would be
confusingly similar to the name "Cityside". The five year limitation in the
preamble of this Section does not apply to this subsection (c).
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
NORWEST CORPORATION CITYSIDE HOLDING COMPANY
By: /s/ Xxxx X. Xxxxx By: /s/ Xxxx X. Xxxxxx
------------------------ ------------------------
Title: E.V.P. Title: Treasurer
---------------------- ----------------------
X. X. XXXXXXXX, INC.
By: /s/ Xxxx X. Xxxxxx
-------------------------
Title: V.P. & C.F.O.
----------------------
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