EXHIBIT 10.2
TAX INDEMNIFICATION AGREEMENT
This Tax Indemnification Agreement ("Tax Agreement") is entered into as of
this 31st day of July, 1995, by and between the undersigned shareholders
(collectively, the "Shareholders") of Valley-Hi Investment Company ("Valley-Hi")
and Norwest Corporation ("Norwest").
WHEREAS, Valley-Hi and Norwest are parties to that certain Agreement and
Plan of Reorganization dated March 21, 1995 (the "Reorganization Agreement")
under which it is contemplated that a wholly-owned subsidiary of Norwest will
merge with and into Valley-Hi and as a result the Shareholders will receive in
exchange for each share of common stock of Valley-Hi, no par value ("Valley-Hi
Common Stock") owned by such Shareholder immediately prior to the Effective Time
of the Merger (as defined in the Reorganization Agreement), a number of shares
of common stock of Norwest, par value $1-2/3 per share ("Norwest Common Stock")
as more specifically set forth in the Reorganization Agreement, and
WHEREAS, the Shareholders will derive substantial benefit from the
transactions contemplated by the Reorganization Agreement, and
WHEREAS, the Shareholders have agreed to indemnify Norwest for certain
matters; and
WHEREAS, the Shareholders, Norwest and Norwest Bank Minnesota, N.A. have
entered into an escrow agreement of even date herewith (the "Escrow Agreement")
pursuant to which a number of shares of Norwest Common Stock will be held in
escrow as more specifically set forth in the Escrow Agreement.
NOW, THEREFORE, in consideration of the foregoing, and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:
AGREEMENT
1.0 DEFINITIONS. For purposes of this Tax Agreement, unless the context
clearly requires otherwise, the following capitalized terms will have the
meanings set forth below; terms defined elsewhere in this Tax Agreement will
have the same meaning throughout this Tax Agreement; and capitalized terms used
in this Tax Agreement but not specifically defined will have the meanings set
forth in the Reorganization Agreement or Escrow Agreement.
1.1 "TAX CLAIM" means notice from the Internal Revenue Service: (a)
assessing or proposing to assess liability for any federal taxes with
respect to a Tax Loss, whether such notice is in the form of a revenue
agent's report (e.g., Forms 4549 or 4549-A), a preliminary notice of
deficiency (e.g., a thirty (30)-day letter) or a statutory notice of
deficiency (e.g., a ninety (90)-day letter) or otherwise; or (b) adjusting
or proposing to make any adjustments which result or may result in a Tax
Loss.
1.2 "CODE" means the Internal Revenue Code of 1986, and the final and
temporary Treasury Regulations promulgated thereunder, all as amended and
in effect on the Closing Date; provided, however, that the definition of
Code as it relates directly to a Tax Loss shall also include all
retroactive amendments, modifications, additions, deletions or other
changes adopted, enacted, promulgated or effective after the Closing Date.
1.3 "FINAL DETERMINATION" means the earlier to occur of: (a) a final
decision of a court of competent jurisdiction regarding a Tax Claim with
respect to which all rights of appeal have lapsed or been exercised in
which case a Final Determination means a final decision of an appellate
court of competent jurisdiction with respect to such appeal; (b) notice by
Shareholders of their decision not to take action with respect to a Tax
Claim pursuant to Section 3.2(b)(ii) of this Tax Agreement; or (c) the
expiration or lapse of the ability to contest a Tax Claim in all courts of
competent jurisdiction without Shareholders having commenced such contest
for the Taxable Year.
1.4 "TAX YEAR" means the tax year or partial tax year ending on the
Closing Date (as that term is defined in the Reorganization Agreement).
1.5 "TAX LOSS" means the sum of the Base Amount, plus Supplemental
Damages, plus Penalties, plus Expenses, determined as follows:
(a) BASE AMOUNT. For the Tax Year, the aggregate dollar amount of any
Company federal tax increase as a result of a Final Determination
disallowing all or any part of the deductions taken by Company
including, but not limited to those available under Sections 162 and
83(h) of the Code, relating to the issuance by Valley-Hi to Xxxx
Xxxxxxx, Xxxx Xxxxxxx and Xxxx Xxxxxxxx of 26,250 shares of Valley-Hi
Common Stock, no par value per share ("Deduction").
(b) SUPPLEMENTAL DAMAGES. The amount of Supplemental Damages will be
equal to the actual interest on any actual federal tax liabilities
attributable to the Tax Loss portion of a Tax Claim.
(c) PENALTIES. All penalties and additions to tax payable to any taxing
authority to the extent attributable to the Tax Loss portion of a Tax
Claim.
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(d) EXPENSES. All out-of-pocket expenses, including, without limitation,
reasonable expenses and fees of counsel, costs, claims, judgments,
assessments and losses incurred by Norwest in connection with the
contest or resolution of the Tax Loss portion of a Tax Claim and any
corrective action taken by Norwest in connection therewith including,
for example, but not by way of limitation, costs of preparing amended
federal, state and local income tax returns. To the extent that
Norwest incurs Expenses attributable to both the Tax Loss and non-Tax
Loss portion of the Tax Claim, Shareholders will only be responsible
for an amount of such Expenses allocable to the Tax Loss portion of
the Tax Claim. For purposes of this Section 1.5(d), Norwest's
Expenses may include costs associated with activities of Norwest's
internal personnel.
1.6 ESCROW AMOUNT. Means 23,000 shares of Norwest Common Stock multiplied
by $23 or $529,000.
2.0 INDEMNIFICATION.
2.1 INDEMNIFICATION. Subject to the terms and conditions of this Tax
Agreement, Shareholders, severally, agree to indemnify and hold harmless,
Norwest, its affiliates (including, as of the Closing Date, Valley-Hi and
its affiliates) and their respective directors, officers, employees and
agents and to assume liability for any Tax Loss related to a Tax Claim up
to a maximum amount equal to the Escrow Amount; provided, however, that
Shareholders' liability hereunder shall be limited to the disbursement to
Norwest of the Escrow Shares (as defined in the Escrow Agreement) in
accordance with the terms and conditions of this Tax Agreement and the
Escrow Agreement.
2.2 VERIFICATION OF CALCULATIONS. Norwest shall provide Shareholders with
an itemized statement in reasonable detail (substantiated to the reasonable
satisfaction of Shareholders) certified by an officer of Norwest, to
support all requests for indemnification under this Tax Agreement.
2.3 NON-INDEMNIFIED EVENTS. The failure of Norwest and/or its affiliates
(including, after Closing, Valley-Hi) to timely file and properly claim the
Deductions shall eliminate Norwest's rights to indemnification hereunder.
3.0 CONTEST PROCEDURES.
3.1 NOTICE OF TAX CLAIMS. If the Internal Revenue Service makes a Tax
Claim and, if all or any part of that Tax Claim could result in a Tax Loss
for which indemnification would be required under this Tax Agreement, then
Norwest will provide notice (including a copy of the Tax Claim related to a
Tax Loss) to Shareholders within a reasonable time after first receiving
notice of such Tax Claim
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related to a Tax Loss, but, in the case of a preliminary or statutory
notice of deficiency, in no event later than twenty (20) business days
after the date of the notice of such Tax Claim. Failure to provide
Shareholders with timely notice of a Tax Claim related to a Tax Loss will,
with respect to such Tax Claim constitute a waiver, with respect to such
Tax Claim, of Norwest's right to indemnification under this Tax Agreement
for any and all incremental costs and expenses that Norwest may incur as a
result of actions necessary to, if possible, reinstate the contest rights
that would have been available had Shareholders received timely notice.
3.2 CONTROL OF CONTEST.
(a) PARTICIPATION IN DEFENSE.
(i) Subject to Section 3.2(b) below, Norwest shall have the right
to participate and assist in the defense of a Tax Claim as it
relates to a Tax Loss and to employ its own counsel in
connection therewith.
(ii) For as long as Shareholders control the defense of a Tax Claim
as it relates to a Tax Loss, Shareholders shall not be liable
to Norwest for the Expenses of Norwest's counsel or other
Expenses incurred by Norwest in connection with participating
or assisting in the defense of such a Tax Claim; provided,
however, that Shareholders shall (subject to the limitations of
Section 2.1 above) be liable for (A) any such Expenses incurred
prior to the time Shareholders assumed such defense and (B) the
reasonable costs of investigation and preparation incurred by
Norwest at the request of Shareholders.
(iii) In the event that, pending or during the defense of a Tax
Claim, or before a Final Determination, Shareholders determine
that the potential Tax Claim shall exceed the maximum Escrow
Amount for which Shareholders would be liable under Section 2.0
of the Agreement or, at their option, elect to release all of
their shares held in Escrow and turn over the defense of such
Tax Claim to Norwest, then in such event, Shareholders shall
cooperate in turning over the defense of such a Tax Claim to
Norwest and shall not thereafter settle, compromise, or take
any other action which could adversely affect Norwest's contest
of such Tax Claim and Shareholders will hold harmless Norwest
from any loss or damage resulting from any action taken in
violation of this covenant.
(b) CONTROL OF CONTEST.
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(i) Except as provided in Section 3.3 below, from the date of receipt
by Shareholders of notice of a Tax Claim, Shareholders will be
deemed to have assumed and shall assume control over the conduct
of any contest and resolution of a Tax Claim as it relates to the
Tax Loss, and such contest and all preparations therefor will be
the responsibility of, and at the cost and expense of,
Shareholders. Shareholders may determine, in their reasonable
discretion, and without consent of Norwest (subject to Section
3.3 below), the nature of all actions to be taken to contest a
Tax Claim that relates to a Tax Loss, including, without
limitation: (i) whether any action to contest such Tax Claim
initially will be by judicial or administrative proceedings or
both; (ii) whether such Tax Claim will be contested by the
payment or nonpayment of such Tax Claim in accordance with
applicable Code provisions or by seeking a refund or any
combination thereof; and (iii) if Shareholders decide to
undertake judicial action with respect to such Tax Claim, the
court or other judicial body before which the action will be
commenced. Shareholders are not obligated to pursue an appeal
from any adverse determination by any judicial or administrative
body of a Tax Claim related to a Tax Loss.
(ii) At any time, whether before or after taking any action to contest
a Tax Claim that relates to a Tax Loss, Shareholders may decline
to take any action with respect to all or any portion of the Tax
Claim. Shareholders agree to give Norwest immediate notice of
any such decision, which notice will constitute a Final
Determination under this Tax Agreement with respect to the Tax
Loss that was the subject of the Tax Claim. Shareholders may not
compromise or settle the portion of any Tax Claim that relates to
a Tax Loss if such settlement or compromise involves the payment
of an amount in excess of the Escrow Amount for which Norwest is
then entitled to indemnification hereunder, in which event the
prior consent of Norwest is required, which consent will not be
unreasonably withheld. Norwest may not compromise the Tax Loss
portion of any Tax Claim without the prior written consent of
Shareholders, which consent shall not be unreasonably withheld.
3.3 SEGREGATION OF TAX CLAIMS. To the extent that a Tax Claim relates to
issues different from or in addition to a potential Tax Loss (regardless of
whether the outcome of such portion of the Tax Claim is related to or
dependent upon the resolution of the Tax Loss portion of the Tax Claim),
the parties will use their best efforts to have the Internal Revenue
Service segregate the Tax Loss portion of the Tax Claim. Notwithstanding
the foregoing sentence, Norwest will remain responsible in all other
respects of controlling, at Norwest's cost and expense, the contest and
resolution of the non-Tax Loss portion of such Tax Claim.
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3.4 COOPERATION. Norwest will fully and timely cooperate in good faith
with Shareholders in connection with the contest and resolution of any Tax
Claim related to a Tax Loss, including, without limitation, providing
Shareholders and their agents reasonable access to review and copy all tax
returns and records relevant to such Tax Claim. To the extent feasible,
the parties agree that Shareholders may and will prosecute the contest and
resolution of any Tax Claim related to a Tax Loss in its own name.
Shareholders and Norwest agree that they will use their best efforts to act
and take positions consistent with the intention of the parties to preserve
the validity and effectiveness of the Deduction contemplated by the
Agreement.
4.0 MISCELLANEOUS.
4.1 OTHER AGREEMENTS. No agreements or representations, oral or
otherwise, express or implied, with respect to the subject matter of this
Tax Agreement have been made by any party which are not expressly set forth
in this Tax Agreement, the Reorganization Agreement, or in the Escrow
Agreement. References in this Tax Agreement to any particular sections or
provisions of the Reorganization Agreement or the Escrow Agreement are
intended to refer to those sections and provisions as the same may be
modified or amended from time to time in accordance with their terms and
those provisions are incorporated into this instrument by reference to the
same extent as if fully set forth in this instrument.
4.2 SURVIVAL OF AGREEMENT; TERMINATION. The obligations and liabilities
of the parties arising under this Tax Agreement will continue in full force
and effect, notwithstanding the Closing, until the earlier to occur of:
all such obligations having been met and such liabilities having been paid
in full, at which time all of the rights and obligations of the parties
under this Tax Agreement will terminate and become null and void. This Tax
Agreement shall survive until termination as provided above,
notwithstanding the expiration of any applicable statute of limitations
relating to Norwest's ability to enforce the provisions hereof. In the
event that, during the continuance of this Tax Agreement, Shareholders
become liable for the payment of the Escrow Amount pursuant to Section 2 of
this Tax Agreement, such liability shall continue, notwithstanding the
expiration or termination of this Tax Agreement, until all such amounts are
paid or reimbursed.
4.3 NOTICES. Any notices or consents required or permitted by this Tax
Agreement shall be in writing and shall be deemed delivered, if sent by
First Class Mail postage prepaid, delivered in person or sent by certified
mail, postage prepaid, return receipt requested, as follows, unless such
address is changed by written notice hereunder:
If to the Shareholders:
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Xxxx X. Xxxxxxx
X.X. Xxx 0000
Xxx Xxxxxxx, Xxxxx 00000
and
Xxxxxx X. Xxxxxxxx, Trustee
000 Xxxxxxx
Xxx Xxxxxxx, Xxxxx 00000
with copies to:
Xxxxx X. Xxxxx, Xx.
Xxxxxxxx & Xxxxxxxxx, P.C.
One Alamo Center
000 Xxxxx Xx. Xxxx'x, Xxxxx 000
Xxx Xxxxxxx, Xxxxx 00000
and
T. Xxxx Xxxxxxxx,
Cauthorn, Hale, Hornberger, Fuller, Xxxxxxx & Xxxxxx, Inc.
Xxx Xxxxxxxxx Xxxxx, Xxxxx 000
Xxx Xxxxxxx, Xxxxx 00000
If to Norwest:
Norwest Corporation
Sixth and Marquette
Xxxxxxxxxxx, XX 00000-0000
Attention: Secretary
4.4 AMENDMENTS AND WAIVERS. No provision of this Tax Agreement may be
modified, waived or discharged unless such modification, waiver or
discharge is agreed to in writing signed by the party against whom
enforcement of such modification, waiver or discharge is sought. Except to
the extent otherwise specifically provided in this Tax Agreement, the
failure at any time to enforce any of the provisions of this Tax Agreement
will in no way be construed as a waiver of those provisions and will not
affect the right of either party thereafter to enforce each and every
provision of this Tax Agreement in accordance with its terms.
4.5 GOVERNING LAW; CONSTRUCTION. This Tax Agreement and the legal
relations between the parties as to all matters, including, without
limitation, matters of validity, interpretation, construction, performance
and remedies, will be governed by and construed exclusively in accordance
with the internal laws of the
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State of Minnesota (without regard to the conflict of laws provisions of
any jurisdiction). Headings are for purposes of convenience only and do not
constitute a part of this Tax Agreement. The invalidity or unenforceability
of all or any part of any provision of this Tax Agreement will not affect
the validity or enforceability of the remainder of such provision or of any
other provision of this Tax Agreement or the Reorganization Agreement,
which will remain in full force and effect.
4.6 BINDING AGREEMENT; ASSIGNABILITY. This Tax Agreement will be binding
upon and inure to the benefit of and be enforceable by the parties and
their heirs, legal representatives, successors and permitted assigns, but
neither this Tax Agreement nor any of the rights, interests or obligations
hereunder may be assigned except to the extent permitted under the
Reorganization Agreement. This Tax Agreement is intended for the sole
benefit of the parties hereto, Valley-Hi, its subsidiaries and their
respective successors and assigns.
4.7 COUNTERPARTS. This Tax Agreement may be executed in several
counterparts, each of which will be deemed to be an original, but all of
which together will constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have caused this Tax Indemnification Agreement
to be duly executed by their authorized officers, effective as of the date set
forth above.
NORWEST CORPORATION SHAREHOLDERS
By: /s/ Xxxxxxx X. Xxxxxx Xxx Xxxxxxx Trust Number 1
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Its: Executive Vice President
------------------------
By: /s/ Xxxxxx X. Xxxxxxxx
------------------------
As Trustee
By: /s/ X. Xxxxx Xxxxxx
----------------------
As Trustee
By: /s/ Xxxxxx Xxxxxxx
--------------------
As Trustee
/s/ Xxxx Xxxxxxx
------------------
Xxxx Xxxxxxx
/s/ Xxxx Xxxxxxx
------------------
Xxxx Xxxxxxx
/s/ Xxxx Xxxxxxxx
-------------------
Xxxx Xxxxxxxx
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