<PAGE>
As filed with the Securities and Exchange Commission on November 22, 2000
Registration Statement No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
Zions Bancorporation
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Utah 6712 87-0227400
(State or other jurisdiction of (Primary standard industrial (I.R.S. employer
incorporation or organization) classification code number) identification number)
</TABLE>
One South Main, Suite 1380
Salt Lake City, Utah 84111
(801) 524-4787
(Address, Including Zip Code, and Telephone Number,
Including Area Code of Registrant's Principal Executive Offices)
Harris H. Simmons
President and Chief Executive Officer
Zions Bancorporation
One South Main, Suite 1380
Salt Lake City, Utah 84111
(801) 524-4787
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)
Copies to:
<TABLE>
<S> <C>
Stanley Farrar Thomas Erb
Sullivan & Cromwell Lewis, Rice & Fingersh, L.C.
1888 Century Park East, Suite 2100 500 North Broadway, Suite 2000
Los Angeles, California 90067 St. Louis, Missouri 63102
(310) 712-6600 (314) 444-7600
</TABLE>
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the registration statement is declared effective and all of
the conditions to the proposed merger of Draper Bancorp with and into Zions
Bancorporation described in the enclosed proxy statement/prospectus are
satisfied or waived.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
Amount Maximum Amount
Title of each Class of to be Proposed Maximum Aggregate of
Securities to be Registered Offering Price Offering Price Registration
Registered (2) Per Unit (3) Fee
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<S> <C> <C> <C> <C>
Common Stock, no par
value per share(1).... 1,481,818 Not applicable $26,823,000 $7,082
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</TABLE>
(1) Includes associated share purchase rights. Prior to the occurrence of
certain events, such rights will not be evidenced or traded separately from
the Zions common stock.
(2) Assumes that the average closing price on the 15 trading day period ending
on the fifth day before the closing and the weighted average price on the
day before the closing date of the merger for Zions common stock is $55.00.
This number will change depending on the price of Zions common stock as
reported on the Nasdaq National Market through the day before the closing
date of the merger.
(3) Estimated solely for the purpose of calculating the registration fee and
calculated pursuant to Rule 457(f)(2), based on the book value of the
outstanding shares of common stock, par value $10.00 per share, of Draper
Bancorp to be canceled in the transaction, computed as of September 30,
2000, the latest practicable date prior to the date of filing the
registration statement.
The Registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until this registration statement
shall become effective on such date as the Securities and Exchange Commission,
acting pursuant to said Section 8(a), may determine.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this proxy statement/prospectus is not complete and may be +
+changed. We may not issue the common stock to be issued in connection with +
+the merger described in this proxy statement/prospectus until the +
+registration statement filed with the SEC is effective. Any representation to +
+the contrary is a criminal offense. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
[LOGO OF DRAPER BANCORP]
MERGER PROPOSED -- YOUR VOTE IS VERY IMPORTANT
The board of directors of Draper Bancorp has approved the merger of Draper
Bancorp with and into Zions Bancorporation, with Zions Bancorporation as the
surviving company. Promptly following the merger of Draper Bancorp and Zions
Bancorporation, Draper Bank, the wholly-owned subsidiary of Draper Bancorp,
will merge with and into Zions First National Bank, a wholly-owned subsidiary
of Zions Bancorporation. Following the merger, Zions First National Bank will
be the surviving banking association. The Draper Bancorp Board believes that
the merger is in the best interests of the shareholders and recommends that the
shareholders vote to approve the merger agreement. We will hold a special
meeting of our shareholders to consider and vote upon the merger agreement and
the merger contemplated thereby.
In the merger, each share of Draper Bancorp common stock will be exchanged
for shares of Zions common stock based on a formula set forth in the merger
agreement. We define these terms and explain the formula more fully in the
proxy statement/prospectus under the heading "The Merger -- Merger
Consideration" on page 24. We expect the merger to be a tax-free transaction
for Draper shareholders. Zions common stock trades on the Nasdaq National
Market under the symbol "ZION".
We cannot complete the merger unless the shareholders of Draper approve the
merger agreement and the merger contemplated thereby, which requires the
affirmative vote of the holders of a majority of the outstanding shares of
Draper common stock entitled to vote. Your vote is very important. Failure to
vote is equivalent to voting against the merger agreement and the merger.
Please complete, sign, date and promptly return the accompanying proxy card in
the enclosed postage-paid envelope. No vote of Zions' shareholders is required
to approve the transaction.
The date, time and place of the Draper special meeting of shareholders are as
follows:
, 2000, 10:00 a.m. local time
Thanksgiving Point
2095 N. West Frontage Road
Lehi, Utah 84043
This proxy statement/prospectus provides you with detailed information about
the merger agreement and the merger that we will submit for shareholder
approval at the Draper special meeting of shareholders. We encourage you to
read this entire document carefully. This proxy statement/prospectus
incorporates important business and financial information about Zions that is
not included in or delivered with this document. See "Where You Can Find More
Information" on page 51.
Robert M. Daugherty
President and Chief Executive Officer ofDraper
Bancorp
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the Zions shares to be issued under
this proxy statement/prospectus or determined if this proxy
statement/prospectus is truthful or complete. Any representation to the
contrary is a criminal offense.
Proxy statement/prospectus dated , 2000, and first mailed to
shareholders on or about such date.
<PAGE>
Draper Bancorp
903 East 12300 South
P.O. Box 1000
Draper, Utah 84020
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
Draper Bancorp, a Utah banking corporation, will hold a special meeting of
shareholders at Thanksgiving Point, 2095 N. West Frontage Road, Lehi, Utah
84043 on , 2000 at 10:00 a.m. local time for the following purposes:
To consider and vote upon a proposal to approve the Agreement and Plan of
Merger, dated as of October 10, 2000, by and among Draper Bancorp, a Utah
corporation, and Zions Bancorporation, a Utah corporation, and the merger
contemplated thereby.
We describe more fully the merger agreement and the merger in the attached
proxy statement/prospectus, which includes a copy of the merger agreement as
Appendix A.
We have fixed the close of business on , 2000 as the record date for
determining the shareholders of Draper entitled to vote at the Draper special
meeting. Only holders of record of Draper common stock at the close of business
on that date are entitled to notice of and to vote at the Draper special
meeting.
The board of directors of Draper recommends that you vote "FOR" approval of
the merger agreement and the merger. The affirmative vote of a majority of the
outstanding shares of Draper common stock entitled to vote at the meeting is
required to approve the merger agreement and the merger. Draper shareholders
have a right to dissent to the merger agreement and to obtain payment in cash
for the fair value of their Draper shares by complying with the procedures
described in the accompanying proxy statement/prospectus.
The board of directors of Draper requests that you complete, date and sign
the enclosed proxy card and mail it promptly in the accompanying postage-
prepaid envelope. You may revoke any proxy that you deliver prior to the Draper
special meeting by delivering written notice to Draper stating that you have
revoked the proxy or by delivering a later dated proxy. Shareholders of record
of Draper common stock who attend the Draper special meeting may vote in
person, even if they have previously delivered a signed proxy.
By Order of the Board of Directors
of Draper Bancorp
Robert M. Daugherty
President and Chief Executive
Officer
Draper, Utah
, 2000
<PAGE>
SOURCES OF ADDITIONAL INFORMATION
This proxy statement/prospectus incorporates important business and financial
information about Zions Bancorporation that is not included or delivered with
this document. You can obtain this information from Zions Bancorporation upon
request, without charge, not including exhibits to documents unless those
exhibits are specifically incorporated by reference into this proxy
statement/prospectus. Any person can make a request for information orally or
in writing. Any request for documents should be made by , , 2000 to
ensure timely delivery.
Requests for documents relating to Zions Bancorporation should be directed
to:
Zions Bancorporation
One South Main Street
Salt Lake City, Utah 84111
Attention: Mr. Dale M. Gibbons, Secretary
Tel: (801) 524-4787.
i
<PAGE>
TABLE OF CONTENTS
<TABLE>
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Page
----
<S> <C>
QUESTIONS AND ANSWERS ABOUT THE MERGER AND RELATED TRANSACTIONS........... 1
SUMMARY................................................................... 3
The Merger.............................................................. 3
The Companies Involved in the Merger.................................... 5
The Companies After the Merger.......................................... 5
Certain members of Draper's management and directors have interests in
the merger............................................................. 6
Reasons for the Merger.................................................. 6
Completion of the Merger Requires Satisfaction of Various Conditions.... 6
We May Decide Not to Complete the Merger................................ 7
Required Regulatory Approvals........................................... 7
The Shareholders' Meeting............................................... 7
Draper Shareholders May Change Their Vote If They Wish.................. 7
Forward-Looking Statements May Prove Inaccurate......................... 8
Additional Information.................................................. 8
Selected Financial Data for Zions....................................... 9
Selected Financial Data for Draper...................................... 10
Unaudited Comparative Per Share Data.................................... 11
Share Information and Market Prices..................................... 12
Price Range of Common Stock and Dividends............................... 13
THE SHAREHOLDERS' MEETING................................................. 15
THE MERGER................................................................ 16
General................................................................. 16
Dividends............................................................... 17
Background of the Merger................................................ 17
Recommendation of the Draper Board and Draper Reasons for the Merger.... 19
Opinion of Draper's Financial Advisor................................... 21
Merger Consideration.................................................... 24
Interests of Officers and Directors in the Merger....................... 25
Accounting Treatment.................................................... 27
Regulatory Approvals.................................................... 28
Restrictions on Resales by Affiliates................................... 28
THE MERGER AGREEMENT...................................................... 29
The Merger.............................................................. 29
Exchange of Draper Certificates......................................... 29
Draper Stock Options.................................................... 30
Representations and Warranties.......................................... 30
Conduct of Business Pending Completion of the Merger.................... 30
Certain Covenants....................................................... 32
Conditions.............................................................. 33
Termination............................................................. 34
Waiver and Amendment.................................................... 34
THE COMPANIES............................................................. 35
Zions Bancorporation.................................................... 35
Draper Bancorp.......................................................... 35
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
REGULATION AND SUPERVISION............................................... 37
Support of Subsidiary Banks............................................ 38
Liability of Commonly Controlled Banks................................. 38
Capital Requirements................................................... 38
Dividend Restrictions.................................................. 40
Deposit Insurance Assessments.......................................... 40
Control Acquisitions................................................... 41
Financial Modernization................................................ 41
Future Legislation..................................................... 42
MATERIAL FEDERAL INCOME TAX CONSEQUENCES................................. 43
COMPARISON OF SHAREHOLDERS' RIGHTS....................................... 44
Comparison of Capital Stock............................................ 44
Comparison of Other Shareholder Rights................................. 45
Board of Directors..................................................... 46
Amendment of Articles and By-laws...................................... 46
Zions Shareholder Rights Plan.......................................... 47
Discussion of Certain Provisions in Zions Articles of Incorporation.... 47
Classified Board of Directors.......................................... 48
RIGHTS OF DISSENTING SHAREHOLDERS........................................ 48
BENEFICIAL OWNERSHIP OF DRAPER'S PRINCIPAL SHAREHOLDERS, EXECUTIVE
OFFICERS, AND DIRECTORS................................................. 50
OTHER MATTERS............................................................ 51
LEGAL MATTERS............................................................ 51
EXPERTS.................................................................. 51
WHERE YOU CAN FIND MORE INFORMATION...................................... 51
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS................ 52
</TABLE>
Appendix A -- Agreement and Plan of Merger, dated as of October 10, 2000, by
and between Zions Bancorporation and Draper Bancorp
Appendix B -- Agreement and Plan of Merger, dated as of November 21, 2000, by
and between Zions First National Bank and Draper Bank
Appendix C -- Fairness Opinion of Hovde Financial LLC
Appendix D -- Part 13 of the Utah Revised Business Corporation Act regarding
dissenters' rights of Draper Bancorp shareholders
iii
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE MERGER
AND RELATED TRANSACTIONS
Q: What do I need to do now?
A: After you have carefully read this proxy statement/prospectus, just
indicate on your proxy card how you want your shares to be voted, then sign
and mail it in the enclosed prepaid return envelope marked "Proxy" as soon
as possible so that your shares may be represented and voted at the Draper
special meeting. In addition, you may attend Draper's meeting in person and
vote. If you sign, date and mail in your proxy, but leave it blank, it will
be counted as a vote in favor of the merger agreement and the merger. If
you do not vote or abstain from voting, it will have the effect of a vote
against the merger agreement and the merger.
Q: If my shares are held in "street name" by my broker, will my broker vote my
shares for me?
A: No. Your broker will vote your shares only if you provide instructions on
how to vote. You should follow the directions provided by your broker. If
you fail to instruct your broker to vote, it will be the equivalent of
voting against the merger agreement and the merger.
Q: Can I change my vote after I have mailed my signed proxy card?
A: Yes. There are three ways for you to revoke your proxy and change your
vote. First, you may send a written notice to the person to whom you
submitted your proxy stating that you would like to revoke your proxy.
Second, you may complete and submit a new proxy card. Third, you may vote
in person at the special meeting. If you have instructed a broker to vote
your shares, you must follow directions received from your broker to change
your vote.
Q: What if I do not agree with the merger?
A: You are entitled to dissenters' rights in connection with the merger under
the provisions of Utah law. To exercise your statutory dissenters' rights,
you must submit a written notice of your intent to demand payment for your
shares before the vote is taken. If you vote in favor of the merger, you
may not exercise your dissenters' rights. The procedure for exercising your
dissenters' rights is detailed in "Rights of Dissenting Shareholders" on
page 48. If you do not follow the exact procedures, you will lose this
right.
Q: Should I send in my stock certificates now?
A: No. You should not send in your stock certificates at this time. Zions will
mail instructions to all former Draper shareholders for exchanging their
stock certificates promptly following the merger.
Q: Is there other information I should consider?
A: Yes. Much of the business and financial information about Zions that may be
important to you is not included in this document. Instead, this
information is incorporated by reference to documents separately filed by
Zions with the SEC. This means that Zions may satisfy its disclosure
obligations to you by referring you to one or more documents separately
filed by it with the SEC. See "Where You Can Find More Information" on page
51 for a list of documents that Zions has incorporated by reference into
this proxy statement/prospectus and for instructions on how to obtain
copies of these documents. The documents are available to you without
charge.
Q: What if there is a conflict between documents?
A: You should rely on the later filed document. Information in this proxy
statement/prospectus may update information contained in one or more of the
Zions documents incorporated by reference. Similarly, information in
documents that Zions may file after the date of this proxy
statement/prospectus may update information contained in this proxy
statement/prospectus or information contained in previously filed
documents.
1
<PAGE>
Q: When do you expect to merge?
A: We are working towards completing the merger as quickly as possible and are
obtaining all necessary regulatory approvals to complete the merger. We
expect to complete the merger during the middle of the first quarter of
2001.
Q: Whom should I call with questions or to obtain additional copies of this
proxy statement/ prospectus?
A: You should contact Draper Bancorp at 903 East 12300 South, P.O. Box 1000,
Draper, Utah 84020. Attention: Dennis L. Higbee, Secretary, telephone: (918)
571-3141.
For copies of Zions' documents that have been filed with the SEC and that
are incorporated by reference to this proxy statement/prospectus, please see
"Where You Can Find More Information" on page 51.
2
<PAGE>
SUMMARY
This brief summary does not contain all of the information that is important
to you. You should carefully read this entire document and the documents to
which we have referred you to fully understand the merger. See "Where You Can
Find More Information" on page 51.
The Merger
What Draper Shareholders Will Receive as a Result of the Merger (see page 24)
Draper shareholders will receive shares of Zions common stock in exchange for
their shares of Draper common stock. Each share of Draper common stock will
convert into that number of shares of Zions common stock calculated by dividing
the "consideration number" by the sum of the number of shares of Draper common
stock issued and outstanding at the effective time of the merger plus the
number of shares of Draper common stock issuable on exercise of stock options
prior to the merger. The merger agreement defines the "consideration number" as
follows:
. If the average closing price of Zions common stock over the 15 trading day
period ending on the 5th day before the closing date is greater than or equal
to $51.4375, then "consideration number" means $81.5 million divided by the
lesser of the average closing price over the 15-day period or the weighted
average price on the trading day before the closing date;
. If the average closing price of Zions common stock over the 15 trading day
period ending on the 5th day before the closing date is less than $51.4375,
then "consideration number" means $81.5 million divided by the greater of the
average price over the 15-day period or the weighted average price on the
trading day before the closing date.
See "The Merger -- Merger Consideration" on page 24 for a more comprehensive
discussion of this consideration formula, and for definitions of terms related
to the merger and the merger consideration.
The closing price of Zions common stock on the Nasdaq National Market, or
Nasdaq, on November 21, 2000, was $53.875 per share. Assuming that
. the average closing price for the period described above was $55,
. the weighted average price of Zions common stock as of the day before the
closing of the merger equaled $55, and
. the number of shares of common stock and stock options outstanding on the
closing date were as represented by Draper,
then each share of Draper common stock would be exchanged for 3.94 shares of
Zions common stock upon completion of the merger.
Because the market price for shares of Zions common stock will vary between
the date of this proxy statement/prospectus and the effective time of the
merger, you should not rely upon the exchange ratio set forth in this
paragraph. We have provided that exchange ratio for illustrative purposes only.
We cannot determine at this time the exchange ratio that we will use upon
completion of the merger. That exchange ratio will be calculated at the
effective time of the merger and may be greater than or less than the
illustrative exchange ratio that we have used in this paragraph. To obtain
current stock price quotations for Zions common stock, you may reference a
newspaper such as The Wall Street Journal, check the Internet, or call your
broker.
We will not issue fractional shares of Zions common stock in the merger. Any
Draper shareholder who would otherwise be entitled to receive a fraction of a
share of Zions common stock will instead receive one whole additional share for
such fractional share.
Draper shareholders should not send in their stock certificates for exchange
until instructed to do so after we complete the merger (see page 29).
3
<PAGE>
Zions Plans to Continue its Dividend Policy Following the Merger (see page 16)
The current annualized rate of cash dividends on the shares of Zions common
stock is $0.80 per share. After the merger, Zions expects that it will continue
to pay quarterly cash dividends in a manner that is consistent with its past
practices, subject to approval and declaration by its board of directors. The
payment of cash dividends by Zions in the future will depend on its financial
condition and earnings, business conditions and other factors.
Transaction Generally Tax-Free to Draper Shareholders (see page 43)
We expect the merger to be tax-free to Draper shareholders who receive shares
of Zions common stock.
Zions and Draper will have no obligation to complete the merger unless each
receives a legal opinion that the merger will qualify as a transaction that is
generally tax-free for federal income tax purposes.
Draper Shareholders Will Have Dissenters' Rights (see page 48)
Under the Utah Revised Business Corporation Act, or the URBCA, Draper
shareholders have dissenters' rights to receive cash for the fair value of
their shares of Draper common stock in connection with the merger. In order to
perfect their dissenters' rights, Draper shareholders must follow required
statutory procedures, including filing notices with Draper, and either
abstaining or voting against the merger agreement and the merger. Any
shareholders of Draper who do not vote in favor of the merger agreement and the
merger and who follow the required procedures will not have their shares of
Draper common stock become shares of Zions common stock upon completion of the
merger. Instead, their only right will be to receive the value of the shares in
cash. We have attached the applicable provisions of the URBCA related to
dissenters' rights to this proxy statement/prospectus as Appendix D.
Draper's Financial Advisor Believes the Exchange Ratio is Fair to Draper
Shareholders (see pages 21-24)
Draper received an opinion from Hovde Financial LLC, its financial advisor,
to the effect that as of October 10, 2000, the merger consideration to be
received by Draper's shareholders under the merger agreement was fair to Draper
shareholders from a financial point of view. Hovde has subsequently affirmed
its opinion as of , 2000. Should the value of Zions' common stock change
prior to the effective time of the merger, there can be no assurance that the
exchange ratio used to determine the merger consideration under those
circumstances will continue to be fair from a financial point of view to
Draper's shareholders. We attach a copy of the Hovde opinion as Appendix C.
We recommend that each Draper shareholder read the opinion carefully in its
entirety to understand the assumptions made, matters considered, and
limitations on review undertaken by the financial advisor.
Hovde will receive approximately $1 million for its services in connection
with its services rendered as discussed above and further discussed in "Opinion
of Draper's Financial Advisor" on page 21.
We Expect "Pooling of Interests" Accounting Treatment (see page 27)
We expect the merger to qualify as a "pooling of interests". This means that,
for accounting and financial reporting purposes, we will treat our companies as
if they had always been one company. We will not be required to complete the
merger unless we each receive letters from our respective independent auditors
to the effect that the merger qualifies for pooling-of-interests accounting if
it is closed and consummated in accordance with the merger agreement.
When We Expect the Merger to Close
We expect to complete the merger as soon as practicable following approval of
the merger by the shareholders of Draper at their shareholders meeting and
satisfaction of all other conditions to the merger.
4
<PAGE>
We anticipate completion of the merger during the middle of the first quarter
of 2001.
The Companies Involved in the Merger
Zions Bancorporation
One South Main, Suite 1380
Salt Lake City, Utah 84111
(801) 524-4787
Zions Bancorporation is a multi-bank holding company organized under the laws
of Utah in 1955, and registered under the Bank Holding Company Act of 1956, as
amended. Zions and its subsidiaries own and operate six commercial banks with a
total of 375 offices. Zions provides a full range of banking and related
services through its banking and other subsidiaries, primarily in Utah,
Arizona, California, Colorado, Idaho, Nevada, New Mexico and Washington. On
September 30, 2000, Zions had total assets of approximately $21.9 billion,
loans of $14.1 billion, deposits of $15.2 billion and shareholders' equity of
$1.7 billion. Active full-time equivalent employees totaled 6,881 at September
30, 2000. Zions focuses on maintaining community-minded banking by
strengthening its core business lines of retail banking, small and medium-sized
business lending, residential mortgage and investment activities. The banks
provide a wide variety of commercial and retail banking and mortgage-lending
financial services. Commercial loans, lease financing, cash management,
lockbox, customized draft processing, and other special financial services are
provided for business and other commercial banking customers. Zions provides a
wide range of personal banking services to individuals, including bank card,
student and other installment loans and home equity lines of credit, checking
accounts, savings accounts, time certificates of various types and maturities,
trust services, safe deposit facilities, direct deposit and 24-hour ATM access.
Zions First National Bank, a wholly-owned subsidiary of Zions, also provides
services to key segments through its Women's Financial, Private Banking and
Executive Banking Groups.
Draper Bancorp
903 East 12300 South
P.O. Box 1000
Draper, Utah 84020
(801) 571-3141
Draper Bancorp is a one-bank holding company located in Draper, Utah, with
six branch locations in the southern portion of Salt Lake County (Draper, West
Jordan, Sandy, South Jordan, Riverton and Murray) and one branch location in
Park City, Utah (which does business as Park City Bank). Through its wholly-
owned bank subsidiary, Draper Bank, Draper provides a full range of commercial
banking products and services (excluding trust services) to the general public,
with an emphasis on "free checking" to retail customers and commercial and real
estate loans to small and medium-sized businesses. As of September 30, 2000,
Draper had total assets of $260.7 million, total deposits of $226.7 million,
total loans of $164.6 million, shareholders' equity of $26.8 million. Active
full-time equivalent employees totaled 162 as of September 30, 2000.
The Companies After the Merger
Comparison of Draper Shareholders' Rights Before and After the Merger
As both Zions and Draper are Utah corporations, the only differences in
shareholders' rights are found in their respective articles of incorporation
and by-laws. After the merger, Draper shareholders will have the same rights as
Zions shareholders. We present a more comprehensive comparison of the
respective rights of the shareholders of each corporation under "Comparison of
Shareholders' Rights" on page 49.
Board of Directors and Management of the Combined Company Following the Merger
Following the merger, the Zions Board of Directors will continue to be the
same as it was prior to the merger and the current executive officers of Zions
will continue to hold the same offices. Additionally, immediately after the
merger, Draper Bank will merge with and into Zions First National Bank, with
Zions First National Bank surviving the merger. The current board of directors
and executive officers of Zions First National Bank will continue to serve in
those capacities following that merger. Further, Robert M. Daugherty, the
President and Chief Executive Officer of Draper and Draper Bank, will become a
Senior Vice President of Zions First National Bank.
5
<PAGE>
Certain members of Draper's management and directors have interests in the
merger (see page 25)
The directors and executive officers of Draper may have interests in the
merger in addition to their interests as shareholders generally. These
interests include, among other things:
. the President and Chief Executive Officer of Draper has entered into an
employment agreement with Zions First National Bank pursuant to which he will
receive compensation and benefits as a result of, or in connection with
employment following the merger; and
. the merger agreement provides that Zions will indemnify and provide liability
insurance for Draper officers and directors.
Reasons for the Merger (see page 19)
The Board of Directors of Draper believes that the merger with Zions is in
the best interests of Draper and its shareholders. In considering the merger,
the Draper Board determined that the Zions offer would maximize value for
Draper shareholders, while providing a favorable structure for the merger in
which Draper shareholders will receive readily marketable securities without
recognizing taxable gain or loss on the receipt of Zions' securities. Further,
the Board believes that the Zions merger will result in positive effects for
Draper's employees, customers, and the communities in which Draper operates.
The Draper Board Recommends that Draper Shareholders Approve the Merger
Agreement (see page 19)
The Draper Board believes that the merger is fair to Draper's shareholders
and is in their best interests, and recommends that Draper's shareholders vote
FOR the proposal to approve the merger agreement and the merger.
Completion of the Merger Requires Satisfaction of Various Conditions (see
page 33)
We must satisfy a number of conditions before completion of the merger,
including:
. approval of the proposed merger by Draper shareholders;
. approval by government regulators;
. receipt by each of Zions and Draper of a legal opinion regarding the
treatment of the merger as a tax-free reorganization under Section 368(a) of
the Internal Revenue Code of 1986, as amended; and
. receipt by Zions and Draper of letters from their respective independent
auditors to the effect that the merger qualifies for pooling-of-interests
accounting if it is closed and consummated in accordance with the merger
agreement.
Where the law permits, Zions or Draper may waive some of the conditions to
the merger if it deems such a waiver to be in the best interests of its
shareholders. Although we anticipate completing the merger during the middle of
the first quarter of 2001, we cannot be certain when (or whether) the
conditions to the merger will be satisfied or when we will complete the merger.
We May Amend the Terms of the Merger and Waive Some Conditions (see page 35)
We may jointly amend the terms of the merger agreement but after the Draper
shareholders approve the merger agreement and the merger, they must approve any
amendment or waiver that would reduce or change the consideration that they
will receive upon completion of the merger.
6
<PAGE>
We May Decide Not to Complete the Merger (see page 34)
We can mutually agree to terminate the merger agreement at any time, even if
Draper shareholders approve the merger. In addition, either of us may terminate
the merger agreement if either of the following occurs:
. the merger is not completed by June 30, 2001; or
. a determination that the other party has materially breached the merger
agreement, and has not cured the breach within the time allowed, or a
determination that the representations and warranties of the other company
were materially incorrect when made.
Required Regulatory Approvals
Completion of the merger requires the approval or a waiver of review from the
Board of Governors of the Federal Reserve System, or the Federal Reserve Board,
and the Commissioner of Financial Institutions of the State of Utah, or the
Utah Commissioner. Completion of the bank merger between Zions First National
Bank and Draper Bank requires approval of the Office of the Comptroller of the
Currency, or the OCC. The U.S. Department of Justice has input into this
approval process. Once the OCC approves the bank merger, we have to wait at
least 15 days and may have to wait for up to 30 days before we can complete the
bank merger.
We have filed all of the required applications and notices with the requisite
federal and state banking agencies. Zions filed the OCC application, the
Federal Reserve Board request for waiver and the application to the Utah
Commissioner on November 22, 2000.
The Shareholders' Meeting
Draper will hold a special meeting of shareholders at Thanksgiving Point,
2095 N. West Frontage Road, Lehi, Utah 84043 on , 2000 at 10:00 a.m.
local time. At the special meeting, Draper shareholders will consider and vote
upon the following proposal:
To consider and approve the merger agreement, which will approve the merger
of Draper with and into Zions, with Zions being the surviving corporation.
Only holders of record of Draper common stock at the close of business on
, 2000, which is the record date for the Draper special meeting, will be
entitled to vote at the Draper special meeting and any adjournments or
postponements of the meeting. You can cast one vote for each share of Draper
common stock that you owned on the record date.
Approval of the merger agreement and completion of the merger require, among
other things, approval by the holders of a majority of the outstanding shares
of Draper common stock entitled to vote.
As of the record date, directors and executive officers of Draper and their
affiliates were the beneficial owners of approximately 250,988 shares of Draper
common stock, or approximately 69.2% of the 362,688 outstanding shares eligible
to be voted at the Draper special meeting. Six shareholders of Draper, all of
whom are officers and/or directors of Draper or their affiliates, have signed
agreements under which they have agreed individually that they will vote all
shares of Draper common stock they beneficially own in favor of the merger
agreement and the merger and that they will use their best efforts to cause any
other shares of Draper common stock over which they share voting power to be
voted in favor of the merger agreement and the merger. The aggregate number of
shares subject to these agreements is 249,276 shares or approximately 68.7% of
the outstanding common stock of Draper entitled to vote at the meeting, which
is enough to approve the merger without the concurrence of any other Draper
shareholder.
Draper Shareholders May Change Their Vote If They Wish
Draper shareholders may change their vote at any time before the voting of
their proxy at the shareholders' meeting. Draper shareholders can change their
vote in any of the following ways:
. Send a written notice dated after the shareholder's proxy stating that he or
she would like to revoke the proxy. These written notices should be sent to
the secretary of Draper at the address below.
7
<PAGE>
. Complete a new proxy card and send it to Draper, and the new proxy card will
automatically replace any earlier dated proxy card previously returned; or
. Attend the shareholders' meeting and vote in person. Attending the special
meeting will not by itself revoke the shareholder's proxy.
Send any written notice of revocation, request for a new proxy card or a
completed new proxy card to Draper at 903 East 12300 South, P.O. Box 1000,
Draper, Utah 84020, Attention: Dennis L. Higbee, Secretary.
Forward-Looking Statements May Prove Inaccurate
This proxy statement/prospectus, including information incorporated by
reference into this document, may contain forward-looking statements about
Zions. There are a number of factors that may cause actual conditions, events
or results to differ significantly from those described in the forward-looking
statements. Some of these factors are described or referenced in "Cautionary
Statement Regarding Forward-Looking Statements" on page 52.
Additional Information
If you have questions about the merger or would like additional copies of
this proxy statement/prospectus, Draper shareholders should contact:
Draper Bancorp
903 East 12300 South
P.O. Box 1000
Draper, Utah 84020
Attn: Dennis L. Higbee, Secretary
Phone Number: (801) 571-3141
Information about Zions is available from:
Zions Bancorporation
One South Main, Suite 1380
Salt Lake City, Utah 84111
Attention: Dale M. Gibbons, Secretary
Phone number: (801) 524-4787.
8
<PAGE>
Selected Financial Data for Zions
The following table sets forth certain unaudited historical financial
information for Zions. This information is based on the historical financial
statements of Zions incorporated into this proxy statement/prospectus by
reference. Shareholders of Draper should read the financial statements and the
related notes with respect to Zions.
<TABLE>
<CAPTION>
Nine Months
Ended September 30, Year Ended December 31,
----------------------- ---------------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- ----------- ---------- ----------
(unaudited) (in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings
Net interest income..... $ 593,619 $ 549,975 $ 741,489 $ 573,942 $ 369,604 $ 297,099 $ 259,722
Provision for loan
losses................. 19,581 13,401 17,956 14,034 5,930 4,825 4,287
Net income.............. 95,735 151,515 194,064 143,353 131,403 112,776 90,794
Per Share
Net income basic........ $ 1.11 $ 1.80 $ 2.29 $ 1.77 $ 1.95 $ 1.71 $ 1.44
Net income diluted...... 1.10 1.77 2.26 1.75 1.92 1.69 1.42
Cash dividends.......... 0.69 0.72 0.72 0.54 0.47 0.43 0.35
Statement of Condition
at Period End
Assets.................. $21,924,319 $20,070,668 $20,280,900 $18,049,623 $10,793,596 $7,353,618 $6,302,231
Deposits................ 15,167,675 13,950,115 14,061,939 14,220,910 7,830,011 5,301,234 4,674,512
Long-term debt.......... 419,852 453,152 453,471 453,735 258,566 251,620 56,229
Shareholders' equity.... 1,715,695 1,541,645 1,659,838 1,452,631 856,606 568,749 479,805
</TABLE>
9
<PAGE>
Selected Financial Data for Draper
The following table sets forth certain unaudited historical financial
information for Draper. This information is based on the historical financial
statements of Draper.
<TABLE>
<CAPTION>
Nine Months
Ended September 30, Year Ended December 31,
------------------- --------------------------------------------
2000 1999 1999 1998 1997 1996 1995(1)
--------- --------- -------- -------- -------- -------- --------
(unaudited) (in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings
Net interest income..... $ 12,833 $ 11,593 $ 15,708 $ 15,768 $16, 965 $ 15,074 $ 11,621
Provision for loan
losses................. 314 576 724 704 783 1,170 282
Net income loss......... 4,533 3,807 5,151 5,133 4,451 4,248 3,373
Per Share
Net income basic........ 12.49 10.47 14.17 14.12 11.68 10.62 8.43
Net income diluted...... 12.24 10.47 14.17 14.12 11.68 10.62 8.43
Cash dividends(2)....... 6.00 6.00 8.00 8.00 4.00 2.50 1.00
Statement of Condition
at Period End
Assets.................. $ 260,674 $ 266,439 $260,646 $245,473 $226,224 $203,996 $180,327
Deposits................ 226,734 228,292 222,749 214,123 201,598 177,861 161,493
Long-term debt.......... -- 5,000 5,000 5,000 -- -- --
Shareholders' equity.... 26,823 23,994 24,469 22,760 20,513 21,154 17,937
</TABLE>
----------------
NOTES:
(1) Financial data indicated is for Draper Bank since no meaningful financial
data exists for Draper Bancorp prior to 1996.
(2) Cash dividends per share reflect a stock split of ten-for-one in September
1996 and a stock split effected in the form of a stock dividend in June
2000 in which each shareholder received one share for each share previously
held. Cash dividend amounts have been retroactively revised for all periods
presented.
10
<PAGE>
Unaudited Comparative Per Share Data
We have summarized below the per common share combined information for Zions
and Draper on a historical and pro forma combined and pro forma equivalent
basis. The pro forma information gives effect to the merger accounted for as a
pooling of interests, on the assumption that our companies had always been
combined for accounting and financial reporting purposes. In presenting the pro
forma information for the time periods shown in the table, we assumed that we
had been merged throughout those periods. You should read this information in
conjunction with our historical financial statements and related notes
contained in the reports and other information that Zions has filed with the
SEC. See "Where You Can Find More Information" on page 51. You should not rely
on the pro forma information as being indicative of the results that we will
achieve after the merger.
The combined company unaudited pro forma data represent the effect of the
merger on a share of Zions common stock. The Draper pro forma equivalent data
represent the combined company pro forma data before rounding, multiplied by an
assumed conversion ratio of 3.94 shares of Zions common stock for each share of
Draper common stock, and thereby reflect the effect of the merger on a share of
Draper common stock.
<TABLE>
<CAPTION>
Historical Pro Forma
------------- ---------
Zions Draper Combined
<S> <C> <C> <C>
Per Common Share
Basic Earnings
Nine Months Ended September 30, 2000.................... $ 1.11 $ 3.17 $ 1.15
Year Ended December 31, 1999............................ 2.29 3.60 2.31
Year Ended December 31, 1998............................ 1.77 3.58 1.81
Year Ended December 31, 1997............................ 1.95 2.96 1.97
Diluted Earnings
Nine Months Ended September 30, 2000.................... $ 1.10 $ 3.11 $ 1.14
Year Ended December 31, 1999............................ 2.26 3.60 2.29
Year Ended December 31, 1998............................ 1.75 3.58 1.78
Year Ended December 31, 1997............................ 1.92 2.96 1.95
Cash Dividend Paid
Nine Months Ended September 30, 2000.................... $ 0.69 $ 1.52 $ 0.69
Year Ended December 31, 1999............................ 0.72 2.03 0.72
Year Ended December 31, 1998............................ 0.54 2.03 0.54
Year Ended December 31, 1997............................ 0.47 1.02 0.47
Book Value
As of September 30, 2000................................ $19.73 $18.76 $19.71
As of December 31, 1999................................. 19.39 17.08 19.35
</TABLE>
11
<PAGE>
Share Information and Market Prices
The following table sets forth the closing sale price of Zions common stock
as reported on Nasdaq on November 21, 2000, the last trading day prior to the
filing of this proxy statement/prospectus with the SEC, and , 2000, the
latest practicable trading day prior to the printing of this proxy
statement/prospectus. Draper common stock is not publicly traded and no sales
prices are reported. The table also presents an implied equivalent per share
value for Draper common stock on the dates indicated, assuming an exchange
ratio of 3.94.
<TABLE>
<CAPTION>
Closing Sales Price
---------------------------
Equivalent
Price Per
Share of
Zions Draper Draper
<S> <C> <C> <C>
Price per share:
November 21, 2000................................... $53.875 $100.000 $25.381
, 2000......................................... --
</TABLE>
12
<PAGE>
Price Range of Common Stock and Dividends
Zions common stock trades on Nasdaq under the symbol "ZION". Following the
merger, the shares of Zions common stock will continue to trade on Nasdaq under
that symbol. The average monthly trading volume for Zions common stock for the
year from October 1, 1999 to October 1, 2000 was 14,967,175 shares traded per
month.
No established trading market for Draper common stock exists, and over the
years little trading in Draper common stock has occurred. Reliable information
concerning the prices at which Draper common stock has traded in private,
negotiated transactions is not publicly available or generally known to Draper.
On occasion, Draper has become aware of the trading price of its stock in
private transactions. Information concerning those trading prices has been
omitted based on Draper's belief that such prices are not necessarily
representative of a fair market price for Draper common stock during any
particular period.
The following table sets forth for the periods indicated (1) the range of
high and low sales prices of Zions common stock, and (2) the amount of cash
dividends declared per share by Zions.
<TABLE>
<CAPTION>
Sales Prices
-------------
High Low Dividends
------ ------ ---------
<S> <C> <C> <C>
1998
First Quarter.......................................... $55.69 $39.56 0.12
Second Quarter......................................... 54.00 48.06 0.14
Third Quarter.......................................... 57.25 38.38 0.14
Fourth Quarter......................................... 62.38 39.13 0.14
1999
First Quarter.......................................... $68.31 $57.00 0.14
Second Quarter......................................... 75.88 54.09 0.29
Third Quarter.......................................... 64.41 49.00 0.29
Fourth Quarter......................................... 67.56 53.19 0.00(1)
2000
First Quarter.......................................... $60.00 $32.00 0.29
Second Quarter......................................... $49.56 $39.06 0.20
Third Quarter.......................................... $52.25 $40.63 0.20
Fourth Quarter (through November 21, 2000)............. $58.56 $45.44 0.20(2)
</TABLE>
----------------
(1) No dividend was declared during the fourth quarter of 1999 because Zions
moved each of their quarterly dividend dates back, which resulted in the
dividend that normally would have been declared in the 4th quarter of 1999
to be declared instead in January 2000 and paid in February 2000.
(2) The Zions Board declared a dividend of $0.20 per share on October 15, 2000
and set the record date for November 15, 2000. This dividend will be paid
on November 29, 2000.
Draper has paid annual cash dividends aggregating $4.00, $8.00, and $8.00 per
share with respect to the years ended December 31, 1997, 1998, and 1999,
respectively, accounting for any stock dividends.
The timing and amount of future dividends will depend upon earnings, cash
requirements, the financial condition of Zions and its subsidiaries (and, prior
to completion of the merger, of Draper and Draper Bank as far as Draper
dividends are concerned), applicable government regulations, and other factors
deemed relevant by the Zions Board (and by the Draper Board prior to completion
of the merger). As described under "Regulation and Supervision -- Dividend
Restrictions" on page 40, various federal and state laws limit the ability of
affiliated banks to pay dividends to Zions and Draper. Further, the merger
agreement restricts the cash dividends payable on Draper common stock pending
completion of the merger. See "The Merger Agreement -- Conduct of Business
Pending Completion the Merger" on page 30.
13
<PAGE>
On October 10, 2000, the date of the merger agreement, the last reported
sales price of Zions common stock was $51.4375 per share. On November 21, 2000,
the most recent practicable date prior to the printing of this proxy
statement/prospectus, the last reported sales price of Zions common stock was
$53.875 per share. We urge shareholders to obtain current market quotations
prior to making any decisions with respect to the merger.
As of September 30, 2000, there were 6,704 holders of record of Zions common
stock and 324 holders of record of Draper common stock.
14
<PAGE>
THE SHAREHOLDERS' MEETING
Date, Time and Place
Draper Bancorp will hold a special meeting of shareholders at Thanksgiving
Point, 2095 N. West Frontage Road, Lehi, Utah 84043 on , 2000 at 10:00
a.m. local time.
Matters to be Considered at the Special Meeting
The purpose of the special meeting is to consider and vote upon a proposal to
approve the Agreement and Plan of Merger, dated as of October 10, 2000, by and
between Draper Bancorp, a Utah corporation, and Zions Bancorporation, a Utah
corporation, and the merger contemplated by such Agreement and Plan of Merger.
Stockholders Entitled to Vote
Draper has fixed the close of business on , 2000 as the record date to
determine which Draper shareholders will be entitled to vote at the Draper
special meeting. Only holders of record of Draper common stock at the close of
business on the record date will be entitled to receive notice of and to vote
at the Draper special meeting. As of the record date, there were 362,688 issued
and outstanding shares of Draper common stock. Each Draper shareholder on the
record date is entitled to one vote per share, and may cast such votes either
in person or by properly executed proxy.
Vote Required to Approve the Merger
Approval of the merger agreement and the merger contemplated thereby requires
the affirmative vote of at least a majority of the outstanding shares of Draper
common stock entitled to vote at the Draper special meeting. Abstentions and
broker non-votes are each included in the determination of the number of shares
present; however, they will have the same effect as votes against approval of
the merger agreement and the merger. Zions has entered into voting agreements
with several of Draper's officers and directors pursuant to which these persons
agreed to vote in favor of the merger agreement and the merger at the special
meeting. These voting agreements are described on page 26. Since these persons
have a majority of the total voting power of Draper's issued and outstanding
shares entitled to vote, the merger agreement and the merger contemplated
thereby will be approved without the vote of any other Draper shareholders.
Number of Shares that Must Be Represented for a Vote to Be Taken
In order to have a quorum, a majority of the total voting power of the issued
and outstanding shares of Draper's common stock entitled to vote at the Draper
special meeting must be represented in person or by proxy. For purposes of
determining the presence or absence of a quorum for the transaction of business
at the Draper special meeting, in addition to shares of Draper common stock
voted in person or by proxy, the following will be counted as present: (1)
shares of Draper common stock held by persons attending the Draper special
meeting but not voting, and (2) shares of Draper common stock for which Draper
has received proxies but with respect to which holders of those shares have
abstained from voting.
Voting of Proxies
The Draper Board is soliciting proxies from Draper shareholders. This will
give Draper shareholders an opportunity to vote at the Draper special meeting.
When a Draper shareholder delivers a valid proxy, the shares represented by
that proxy will be voted in accordance with his or her instructions by the
person named as the proxy. If a Draper shareholder does not vote by proxy or
attend the Draper special meeting and does not vote in person, it will have the
same effect as voting against the merger. If a shareholder votes by proxy but
makes no specification on his or her proxy card that he or she has otherwise
properly executed, the person named as the agent in the proxy will vote the
shares FOR approval of the merger agreement and the merger contemplated
thereby.
15
<PAGE>
Revocability of Proxies
Any Draper shareholder may revoke the proxy at any time before the vote at
the Draper special meeting in one or more of the following ways: (1) delivering
a written notice of revocation to the Secretary of Draper bearing a later date
than the proxy; (2) granting a later-dated proxy; or (3) appearing in person
and voting at the special meeting. Attendance at the Draper special meeting
will not by itself constitute a revocation of a proxy, unless the shareholder
completes a ballot.
Any Draper shareholder who wants to change or revoke his or her proxy should
send written notice of revocation or subsequent proxy to Draper Bancorp, 903
East 12300 South, P.O. Box 1000, Draper, Utah 84020, Attention: Secretary, or
hand deliver the notice of revocation or subsequent proxy to the Secretary of
Draper at or before the taking of the vote at the Draper special meeting.
Solicitation of Proxies
Draper will make arrangements with brokerage houses, custodians, nominees and
fiduciaries for forwarding proxy solicitation materials to beneficial owners of
shares held of record by such brokerage houses, custodians, nominees and
fiduciaries, and Draper will reimburse such brokerage houses, custodians,
nominees and fiduciaries for their reasonable expenses incurred in connection
with the solicitation. In addition to solicitation by use of the mails, Draper
may solicit from the Draper shareholders by directors, officers and employees
acting on behalf of Draper in person or by telephone, facsimile or other means
of communications. Draper will not compensate such directors, officers and
employees but may reimburse them for reasonable out-of-pocket expenses in
connection with such solicitation. Any questions or requests for assistance
regarding this proxy statement/prospectus and related proxy materials should be
directed to Dennis L. Higbee, Secretary of Draper, by telephone at
(801) 571-3141. Draper will bear its own costs of solicitation of proxies.
Regardless of the number of shares you own, your vote is important to Draper.
Please complete, sign, date and promptly return the accompanying proxy card in
the enclosed postage-paid envelope.
THE MERGER
The following summary describes the material terms and provisions of the
merger agreement and the merger. We have attached a copy of the merger
agreement to this proxy statement/prospectus as Appendix A, and we have
incorporated it into this document by reference. We urge all shareholders to
read the merger agreement carefully in its entirety. We qualify this summary in
its entirety by reference to the merger agreement.
General
We expect to complete the merger in the middle of the first quarter of 2001.
Zions will be the surviving corporation in the merger. In addition, Draper's
subsidiary, Draper Bank, will merge into Zions' subsidiary, Zions First
National Bank, with Zions First National Bank being the surviving subsidiary
bank. Each share of Draper common stock issued and outstanding at the effective
time of the merger, except any shares as to which Draper shareholders have
asserted their dissenters' rights, will convert into the right to receive
shares of Zions common stock upon completion of the merger in accordance with a
formula established in the merger agreement. See " -- Merger Consideration" on
page 24.
Upon completion of the merger, Zions will issue to the former Draper
shareholders a number of shares that depends upon fluctuating market prices of
Zions. For example, if the average closing price and the effective price were
both $55, Zions would issue an aggregate of approximately 1.48 million shares
of Zions common stock to Draper shareholders. This calculation assumes an
exchange ratio of 3.94, and it assumes that no shareholders of Draper exercise
their dissenters' rights with respect to the merger and receive cash in lieu of
Zions common stock in exchange for their dissenting shares.
16
<PAGE>
Under the merger agreement, Draper will merge with and into Zions and
following the merger the separate corporate existence of Draper will cease.
Zions will survive and continue its corporate existence as a Utah corporation
under the laws of the State of Utah. The merger of Draper with and into Zions
will become effective after articles of merger are filed with the Utah
Secretary of State or at such later time specified in the articles that we file
with the Secretary of State. Completion of the merger is subject to
satisfaction or waiver of conditions set forth in the merger agreement and
described in "The Merger Agreement -- Conditions" on page 33. We refer below to
the time of effectiveness of the merger between Draper and Zions as the
effective time of the merger, and the date on which that occurs, the effective
or the closing date.
Immediately following the merger, Draper Bank will merge with and into Zions
First National Bank, and following the bank merger, the separate corporate
existence of Draper Bank will cease. Zions First National Bank will survive and
continue its corporate existence as a national banking association under the
laws of the United States. The merger of Draper Bank with and into Zions First
National Bank will become effective after we provide a notice of consummation
to the OCC or at such later time as specified in the notice that Zions files
with the OCC.
The Zions articles of incorporation will be the articles of incorporation of
the combined company upon completion of the merger, and the Zions by-laws will
be the by-laws of the combined company.
Dividends
Zions, as the surviving corporation, expects that after completion of the
merger, subject to approval and declaration by its Board, it will continue its
current dividend policy and declare regularly scheduled quarterly cash
dividends on the shares of its common stock consistent with past practices. The
current annualized rate of cash dividends on the shares of Zions common stock
is $0.80 per share.
Draper will not declare dividends on the Draper common stock other than those
consistent with past practice, subject to the terms of the merger agreement.
The right of Draper shareholders to receive dividends from Draper will end upon
the completion of the merger when the separate corporate existence of Draper
will cease. See "Summary -- Price Range of Common Stock and Dividends" on page
13.
Background of the Merger
During the normal course of its business, Draper has historically received
inquiries regarding its willingness to consider an acquisition by, or
affiliation with, larger financial institutions. Consistent with its fiduciary
obligations to its shareholders, Draper has considered such inquiries and
evaluated them for the level and form of consideration proposed, the
seriousness and specificity which has been conveyed to Draper in terms of
consideration, the expected future operation of Draper, and other
considerations and factors deemed relevant by Draper in formulating its
business plan with the intent to provide maximum value to its shareholders by
enhancing its franchise as the pre-eminent independent bank serving its market
area. The Board of Directors of Draper consistently evaluates the cost of
providing the increasingly broad array of financial products and alternative
delivery channels to remain competitive in the marketplace, while continuing to
deliver excellent service to its customers and providing exceptional returns to
its shareholders.
In April 1999, Draper contacted Hovde Financial LLC to discuss community bank
values and the attractive prices being paid for financial institutions similar
to Draper. Based on these preliminary discussions, Draper invited Hovde to make
a presentation. Hovde is an investment banking firm focused exclusively on the
financial services industry and specializes in providing investment banking and
financial advisory services to banks and thrifts.
On May 17, 1999, representatives of Hovde delivered an analysis of Draper,
including a preliminary valuation, an evaluation of potential acquirers of
Draper, and projected amounts that such potential acquirers might be willing to
offer to acquire Draper. Hovde's preliminary analysis concluded that
shareholders of Draper
17
<PAGE>
could receive $85 million to $95 million in a 100% stock transaction with a
multi-state bank holding company interested in the Utah marketplace.
On June 6, 1999, Zions announced a merger with First Security Corporation and
its need to divest itself of $500 million to $1 billion in deposits in certain
concentrated Utah markets. Given the lack of opportunities to enter the Utah
market through an acquisition, Draper and Hovde discussed the possible
motivation of a new out-of-state acquiror wanting to enter Utah through this
large deposit sale and the potential need by such a potential acquiror to
facilitate such a branch purchase by acquiring a local community banking
operation such as Draper at the same time. The proposed merger of Zions and
First Security Corporation was terminated on April 1, 2000.
On June 21, 1999 Draper retained Hovde as its exclusive financial advisor to
assist and advise Draper in exploring merger opportunities. Draper's decision
to engage Hovde at that time was based, in part, on the Draper Board's belief
that the pending loss of pooling-of-interests accounting treatment at the end
of 2000 would be prejudicial to the Board's desire to secure a high price-to-
book for Draper's shareholders. The Board also felt that the long-term
interests of Draper's shareholders might be better served by affiliating with a
regional bank holding company which: (1) maintained a community banking focus;
(2) offered greater risk diversification; (3) had state-of-the-art technology;
(4) enjoyed marketing efficiencies; and (5) was better capable of serving the
evolving needs of Draper's customers, communities and employees.
With the assistance of Draper, Hovde prepared an information package
regarding Draper. The purpose of the information package was to educate the
recipients about Draper and gauge their level of interest regarding a merger
with, or acquisition of, Draper. Five of the eleven organizations receiving the
information package indicated a preliminary interest in acquiring Draper.
However, certain other organizations contacted by Hovde expressed a desire to
delay consideration of Draper until after the Zions branch divestiture was
announced.
In light of these timing issues and Draper's desire to be very selective with
whom they would have discussions, Draper decided to stop any formal marketing
until a later date. At certain points following the termination of the
marketing process, Hovde and representatives of Draper met with or spoke to
parties who had expressed an interest in an acquisition of Draper. These
discussions resulted in the generation of informal proposals but did not rise
to the level of a formal written offer.
On June 22, 2000, one of the principals of Draper opened communication with
principals of Zions to explore a mutually beneficial merger. During this
meeting, the principals of Draper and Zions concluded that there were good
strategic reasons for considering a merger. On July 18, 2000, principals of
Draper and Zions met again and agreed to execute non-disclosure agreements and
exchange limited due diligence materials. The Draper material was reviewed with
favorable results. On August 23, 2000 the principals again met to discuss terms
of the proposed merger and agreed that a transaction price of at least $80
million would be necessary and that to minimize unnecessary disruption at
Draper, an agreement in principal on definitive documentation should be reached
prior to Zions conducting due diligence. In connection with this meeting, Zions
and Draper signed a Confidentiality Agreement which was dated August 24, 2000.
At a board meeting on September 15, 2000, Draper's directors agreed on a
preference for a fixed-price, tax-free transaction that would provide
shareholders of Draper with shares of Zions common stock with a value
determined at closing. Shortly thereafter, legal advisors and principals of
Draper and Zions commenced the negotiation of a definitive agreement and plan
of merger. During the weekend of September 23-24, 2000, representatives of
Zions completed detailed due diligence of Draper's documents and records that
were made available at a secure, off-site location. This examination produced
results satisfactory to Zions.
On October 2, 2000, the Draper Board of Directors met to consider the terms
of the proposed transaction and to hear a presentation by management and Hovde.
Following this discussion, the Draper Board directed principals of Draper to
present to Zions certain changes to the proposed agreement and plan of merger.
These changes, which included certain price protections, were intended to
enhance the economic benefit of the proposed transaction to Draper's
shareholders. The subsequent meeting of the principals of Draper and Zions
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<PAGE>
on October 2, 2000 resulted in modifications to the terms of the proposed
transaction satisfactory to the Draper Board.
On October 10, 2000, following completion of arm's-length negotiations
between representatives of Zions and Draper, Zions and Draper entered into the
definitive agreement and plan of merger. The aggregate price to be paid to
holders of Draper common stock resulted from negotiations which considered the
historical earnings and dividends of Zions and Draper, the potential growth in
Draper's market and earnings (both as an independent entity and as a part of a
larger organization such as Zions), Draper's asset quality, and the effect of
the merger on the shareholders, customers and employees of Draper.
Recommendation of the Draper Board and Draper Reasons for the Merger
The Draper Board unanimously believes that the terms of the merger agreement
are fair and in the best interests of Draper and its shareholders. Accordingly,
the Draper Board unanimously recommends that shareholders vote FOR approval and
adoption of the merger agreement. In reaching its determination to approve and
adopt the merger agreement, the Draper Board consulted with its management,
legal counsel and Hovde, and considered a number of factors, including without
limitation, the following:
. The current and prospective economic and competitive environment facing
the financial services industry generally, including the continued rapid
consolidation in the industry, the increased importance of operational
scale and financial resources in maintaining efficiency and remaining
competitive over the long term and the ability to capitalize on
technological developments that significantly impact industry
competition.
. The fact that the merger will reduce Draper's reliance on the Utah
economy and the continuation of the rapid growth of such economy, as
experienced over the last several years, and allow Draper's shareholders,
as shareholders of the combined corporation, to share in the potential
growth and increased diversification of a multi-bank holding company.
. The knowledge and review of the Draper Board, based in part on a review
by Hovde and Draper's management, of (1) the business, operations,
financial conditions and earnings of Zions on a historical and
prospective basis, and (2) the historical stock price performance of
Zions common stock, Zions' substantially greater market capitalization
and liquidity relative to that of Draper, Zions' history of steady
dividend increases, and the superior future growth prospects of Zions
common stock.
. The competition which Draper Bank anticipated facing in the future as an
independent community bank in the markets it serves.
. The anticipated climate in the future for the acquisition of community
banks of the size and with the other characteristics of Draper Bank.
. The potential adverse consequences to Draper Bank of the loss of the
services of any of its senior management.
. The results of the due diligence investigations conducted by Draper's
senior management, including, among other things, assessments of Zions'
credit policies, asset quality, adequacy of loan loss reserves and
interest rate risk.
. The analysis of Hovde, and Hovde's oral opinion of October 2, 2000 and
fairness opinion dated October 10, 2000 that the consideration to be
received pursuant to the merger agreement was fair to the shareholders of
Draper from a financial point of view. Although Hovde noted that the
transaction would result in dilution to Draper's pro forma earnings per
share and dividends, the Draper Board noted that this dilution would
likely be offset by both the higher long-term earnings growth rates
projected by Zions and the superior price-to-earnings multiples afforded
to banks such as Zions, as compared to illiquid community banks like
Draper.
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<PAGE>
. The general impact that the merger could be expected to have on the
constituencies served by Draper Bank, including its customers, employees
and communities. In this regard, the Draper Board noted that the combined
company could be expected to offer a more extensive range of financial
products and services to Draper Bank's existing customers and could
provide its customers with the added convenience of access to Zions'
various locations.
. The expectation that the merger will be tax-free for federal income tax
purposes to Draper and its shareholders and accounted for under the
pooling-of-interests method of accounting for business combinations.
. The nature of, and likelihood of obtaining, the regulatory approvals that
would be required with respect to the merger.
. The belief by the Draper Board that Zions is committed to community
banking.
. The common business philosophy and compatibility of the management and
staff of Draper Bank and Zions First National Bank.
. The belief of the Draper Board that Zions is fully capable of
consummating the merger.
. The effect on shareholder value of Draper continuing as a stand-alone
entity or combining with other potential merger partners, compared to the
effect of its combining with Zions pursuant to the proposed merger
agreement, and the determination that the merger with Zions presented the
best opportunity for maximizing shareholder value and achieving Draper's
other strategic objectives.
. The belief that affiliating with Zions, a larger financial institution
with significantly greater resources and expertise, offered expansion
opportunities, financial products and services not otherwise available to
Draper and its customers, which would better enable Draper to compete.
. The determination that Draper's competitive position and the value of its
stock could best be enhanced through affiliation with Zions.
. The shrinking number of rational acquirors capable of paying a premium
price for high-performing community banks such as Draper.
. The volatility of the trading price of Zions' high price-to-earnings
multiple common stock and the risk versus opportunity represented by
Zions' ownership of Digital Signature Trust.
. The belief that the substantial price-to-book premium offered by Zions in
a fixed-price transaction provides Draper's shareholders the opportunity
to convert their investment into reinvestable cash following the
completion of the merger.
In reaching its determination to approve and recommend the merger agreement,
the Draper Board did not assign any relative or specific weights to the
foregoing factors, and individual directors may have weighed factors
differently. For the reasons set forth above, the Draper Board unanimously
believes that the merger is fair to, and in the best interests of, Draper and
its shareholders. Accordingly, the Draper Board unanimously approved the merger
agreement and unanimously recommends that the shareholders of Draper vote FOR
the approval and adoption of the merger agreement and the merger.
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<PAGE>
Opinion of Draper's Financial Advisor
General
The full text of the fairness opinion, which sets forth, among other things,
assumptions made, matters considered and qualifications and limitations on the
review undertaken, is attached hereto as Appendix C and is incorporated herein
by reference. Draper's shareholders are urged to read the fairness opinion in
its entirety.
The fairness opinion, which was directed to the Draper Board, addresses only
the fairness to the shareholders of Draper, from a financial point of view, of
the merger consideration, and does not constitute a recommendation to any
Draper shareholder as to how such shareholder should vote with respect to the
merger. The fairness opinion was rendered to Draper's Board for its
consideration in determining whether to approve the merger agreement. The
following summary of the fairness opinion is qualified in its entirety by
reference to the full text of the fairness opinion.
No limitations were imposed by Draper on the scope of Hovde's investigation
or the procedures to be followed by Hovde in rendering the fairness opinion.
Hovde did not make any recommendation to Draper's Board as to the form or
amount of consideration to be paid by Zions to Draper in connection with the
merger, both of which were determined through arm's-length negotiations between
the parties. In arriving at its opinion, Hovde did not ascribe a specific range
of value to Zions or Draper, but rather made its determination as to the
fairness, from a financial point of view, of the merger consideration, on the
basis of the financial and comparative analyses described below. Hovde was not
requested to opine as to, and the fairness opinion does not address, Draper's
underlying business decision to proceed with or effect the merger.
During the course of the engagement, Hovde reviewed and analyzed material
bearing upon the financial and operating condition of Zions and Draper and
material prepared in connection with the merger, including the following:
. the merger agreement;
. certain publicly available information concerning Zions and Draper,
including, as applicable, Zions' and Draper's audited consolidated
financial statements for each of the last consecutive three years ended
December 31, 1999, and unaudited consolidated financial information for
the quarters ended March 31, 2000 and June 30, 2000, and documents filed
with the SEC, the FDIC, the Federal Reserve Board and other state or
other regulatory agencies, as applicable and/or appropriate, for the
three-year period and for the quarterly periods ended March 31, 2000 and
June 30, 2000, respectively, as applicable;
. recent internal reports and/or financial projections regarding Zions and
Draper;
. the nature and terms of recent sale and merger transactions involving
banks and bank holding companies that Hovde considered relevant; and
. financial and other information provided to us by the managements of
Zions and Draper.
In rendering the fairness opinion, Hovde assumed and relied upon the accuracy
and completeness of the financial and other information provided to it by
Draper or Zions without assuming any responsibility for independent
verification of such information and further relied upon the assurances of the
managements of Zions and Draper that they were not aware of any facts or
circumstances that would make such information, provided by them, inaccurate or
misleading. With respect to financial statements and/or projections to the
extent such were provided by Zions and Draper, Hovde assumed that such
financial statements and/or projections were reasonably prepared on a basis
reflecting the best currently available estimates and judgments of the
respective management of Zions and Draper. Hovde assumed that the merger would
be accounted for using the pooling method of accounting. In rendering the
fairness opinion, Hovde did not conduct a physical inspection of the properties
and facilities of Zions or Draper and did not make or obtain any evaluations or
appraisals of the assets or liabilities of Zions or Draper. In addition, Hovde
noted that it is not an expert in the evaluation of loan
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<PAGE>
portfolios or allowances for loan, lease or real estate owned losses, and it
assumed that the allowances for loan, lease and real estate owned losses (as
currently stated or as adjusted for in connection with the merger or otherwise)
provided to it by Draper and used by it in its analysis and in rendering its
fairness opinion were in the aggregate adequate to cover all such losses. The
fairness opinion was based upon market, economic and other conditions as they
existed on, and could be evaluated as of, the date of the fairness opinion.
The following is a summary of the analyses Hovde performed in rendering its
fairness opinion. In connection with the preparation and delivery of the
fairness opinion to the Draper Board, Hovde performed a variety of financial
and comparative analyses, as described below. The preparation of a fairness
opinion involves various determinations as to the most appropriate and relevant
methods of financial and comparative analysis and the application of those
methods to the particular circumstances and, therefore, such an opinion is not
readily susceptible to summary description. Furthermore, in arriving at its
opinion, Hovde did not attribute any particular weight to any analysis or
factor considered by it, but rather made qualitative judgments as to the
significance and relevance of each analysis and factor. Accordingly, Hovde
believes that its analyses must be considered as a whole and that considering
any portion of such analyses and factors, without considering all analyses and
factors, could create a misleading or incomplete view of the process underlying
its opinion. In its analyses, Hovde made numerous assumptions with respect to
industry performance, general business and economic conditions and other
matters, many of which are beyond the control of Hovde. Any estimates contained
in these analyses were not necessarily indicative of actual values or
predictive of future results or values, which may be significantly more or less
favorable than as set forth therein. In addition, analyses relating to the
value of businesses did not purport to be appraisals or to reflect the prices
at which businesses may actually be sold.
Merger Value Analysis
Hovde calculated the price-to-book, price-to-tangible book, price-to-earnings
multiple, premium-to-assets, and deposit premium paid (defined as the merger
value less the tangible book value of Draper, divided by Draper's core
deposits), in the merger using June 30, 2000 financial data. This analysis
yielded an aggregate merger value of $80,174,000, representing a price of
$216.79 per share of Draper common stock outstanding as of September 30, 2000.
The price per share was calculated assuming 362,688 shares of common stock
outstanding, and assumed that the 13,260 options to acquire shares of Draper at
a price of $100.00 per share would be converted into options to acquire shares
of Zions. The total number of shares outstanding included the effect of a one-
for-one stock dividend declared earlier in 2000. The total merger value was
then converted into a price-to-book value, price-to-tangible book value, price-
to-normalized equity, and price to last 12 months' earnings multiple, premium
on deposits and premium on total assets. Hovde noted that the merger value was
greater than three times Draper's book value, and greater than four times
Draper's normalized book value. These levels are in excess of median pricing
levels for national and regional transactions. Additional data is presented
below in "--Comparable Transaction Analysis".
Because Draper is considered to be an overcapitalized, or under leveraged,
institution reporting common equity to assets of nearly 10%, and because most
merger partners are unwilling to reward sellers for excess equity, Hovde
elected to include price-to-normalized equity in its analysis. Hovde assumed
"normalized equity" or 7.0% of total assets.
Comparable Transaction Analysis
Using publicly available information, Hovde reviewed certain terms and
financial characteristics, including historical price-to-earnings ratio, the
price-to-tangible book ratio, and the deposit premium paid in prior commercial
banking institution merger or acquisition transactions.
The first comparable group was national and it included nationwide
transactions announced since January 1, 2000 and included high-performing
sellers with assets between $200 million and $450 million that had reported
earnings in excess of 1.50% on total assets. The national comparable group
included five
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<PAGE>
transactions. The analysis shows that shareholders of Draper are receiving a
price-to-book value well in excess of national market comparables.
The second comparable group was regional and it included transactions
announced since January 1, 2000 with sellers located in Utah, Colorado, Nevada
and New Mexico with assets between $100 million and $1 billion. The regional
comparable group included five transactions. The analysis shows that
shareholders of Draper are receiving a price to book value well in excess of
regional comparables.
The following table presents a comparison of the metrics of the proposed
merger against comparable transactions from the national comparable group and
regional comparable group, respectively. Since none of the institutions
included in the national comparable group or regional comparable group
maintained "goodwill", the price-to-book and price-to-tangible book levels were
the same. Accordingly, Hovde omitted presentation of the price-to-tangible book
comparable.
<TABLE>
<CAPTION>
Price/Last
Price/Normalized 12 Months
Price/Book Book Earnings Premium/Deposits Premium/Assets
---------- ---------------- ---------- ---------------- --------------
(%) (%) (x) (%) (%)
<S> <C> <C> <C> <C> <C>
Draper/Zions............ 310.6 427.8 13.4 38.7 21.7
National Comparable..... 245.3 309.1 12.9 17.5 18.1
Regional Comparable..... 230.5 221.0 19.3 15.9 10.9
</TABLE>
Because the reasons for and circumstances surrounding each of the
transactions analyzed were so diverse and because of the inherent differences
in the businesses, operations, financial conditions and prospects of Draper,
relative to the companies included in the comparable bank transactions groups,
Hovde believed that a purely quantitative comparable transaction analysis would
not be particularly meaningful in the context of rendering the fairness
opinion. Notwithstanding, Hovde noted that the price-to-book, price-to-tangible
book, price-to-normalized equity, premium on deposits, and premium-to-assets
computed in the proposed merger exceeded the median for all comparables in the
national and regional comparable groups.
Dilution Analysis
Hovde prepared several merger models evaluating the impact of the proposed
transaction on the earnings per share estimates for Draper and Zions. This
analysis considered EPS accretion (dilution), book-value accretion (dilution)
and changes in the dividend streams resulting from the proposed transaction. In
completing this analysis Hovde assumed that Draper's shareholders would receive
approximately 4.21 shares of Zions common stock for each share of Draper common
stock. This assumption was derived by assuming that the average closing price
per share of Zions common stock on the date the Agreement was executed. The
analysis showed that the proposed merger would not result in a significant
change in the pro forma earnings per share of Zions, but would provide nearly
20% EPS accretion of those shares issued by Zions in connection with the
proposed merger. The consideration resulted in de minimis book value dilution
for Zions of 0.5%. For Draper, Hovde concluded that the proposed transaction
would provide EPS dilution in the year 2001 of approximately 20% and would
result in a reduction in the annual dividend from an estimated $8.00 per share
to approximately $3.37 per share. The transaction provides book value accretion
to Draper of approximately 20%. Hovde noted that while the divided dilution
presented in this transaction was significant, the variance between the current
Draper dividend and equivalent Zions dividend following completion of the
merger was attributable solely to the high historic payout rate offered by
Draper in comparison with other banks. Further, Hovde noted that the dividend
rate and yields offered by Zions were fair and reasonable when compared against
other institutions with similar operating profiles.
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<PAGE>
The following table presents an overview of accretion (dilution) resulting
from the proposed merger.
<TABLE>
<CAPTION>
Draper
Stand Pro
Alone Forma Accretion
2001 2001 (Dilution)
------ ------ ----------
<S> <C> <C> <C>
Earnings Per Share.....................................
Zions.................................................. $ 3.27 $ 3.27 0.00%
Draper................................................. $17.02 $13.24 (22.20)%
Book Value Per Share
Zions.................................................. $19.24 $19.14 (0.05)%
Draper................................................. $65.07 $77.82 19.59%
Dividends Per Share
Zions.................................................. $ 0.80 $ 0.80 0.00%
Draper................................................. $ 8.00 $ 3.37 (58.00)%
</TABLE>
Hovde noted that, while no assurances can be given regarding the future
performance of shares of Zions, the impact of the earnings-per-share dilution
resulting from the proposed transaction may be offset by the higher price-to-
earnings multiples and superior long-term earnings growth rates projected by
those research analysts providing coverage on Zions.
Hovde is a nationally recognized investment banking firm. Hovde, as part of
its investment banking business, is continuously engaged in the valuation of
businesses and securities in connection with mergers and acquisitions,
competitive biddings, private placements and valuations for corporate and other
purposes. Pursuant to a letter agreement dated June 21, 1999, between Draper
and Hovde, Draper engaged Hovde to advise it with respect to a potential
business combination with Zions and, in the event such a transaction was
consummated with Zions, agreed to pay to Hovde a fee in an amount equal to
1.25% of the purchase price. Based upon the terms contained in the Hovde
agreement, Hovde will be paid a fee of $1,002,000. The Hovde agreement also
provides for Draper to provide indemnification to Hovde and its affiliates
against certain liabilities to which it may become subject to as a result of
its services to Draper under the Hovde agreement, including liabilities under
securities laws, as well as other specified conditions.
Merger Consideration
In the merger, holders of Draper common stock will receive shares of Zions
common stock as described in detail below.
Draper shareholders will receive shares of Zions common stock in exchange for
their shares of Draper common stock. Each share of Draper common stock will
convert into that number of shares of Zions common stock calculated by dividing
the "consideration number" by the sum of the number of shares of Draper common
stock issued and outstanding at the effective time of the merger plus the
number of shares of Draper common stock issuable on exercise of stock options
prior to the merger. The merger agreement defines the consideration number as
follows:
. If the average closing price of Zions common stock over the 15 trading
day period ending on the 5th day before the closing date is greater than
or equal to $51.4375, then the "consideration number" means $81.5 million
divided by the lesser of the average closing price of Zions common stock
over the 15-day period or the weighted average price of Zions common
stock on the trading day before the closing date.
. If the average closing price of Zions common stock over the 15 trading
day period ending on the 5th day before the closing date is less than
$51.4375, then the "consideration number" means $81.5 million divided by
the greater of the average price of Zions common stock over the 15-day
period or the weighted average price of Zions common stock on the trading
day before the closing date.
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<PAGE>
For purposes of determining the merger consideration, the following
definitions apply:
. The average closing price is the daily closing price at 4:00 p.m. New
York time of Zions common stock on Nasdaq as reported in The Wall Street
Journal.
. A trading day means each weekday other than any day on which Zions common
stock is not available for trading on Nasdaq.
. The weighted average price is the weighted average trading price of Zions
common stock on Nasdaq as reported on Bloomberg.
. Draper represented in the merger agreement that, as of the date of the
merger agreement, Draper had 362,688 shares of common stock outstanding
and stock options to acquire 13,260 shares of common stock outstanding.
At the effective time of the merger, holders of Draper common stock will
cease to be shareholders of Draper and will no longer have any rights as Draper
shareholders, other than the right to receive any dividend or other
distribution with respect to Draper common stock with a record date occurring
prior to the effective time of the merger and to receive the applicable
consideration in the merger. After the effective time, there will be no
transfers on Draper's stock transfer books of any shares of Draper common
stock.
Interests of Officers and Directors in the Merger
General
In considering the recommendation of the Draper Board with respect to the
merger, Draper shareholders should be aware that officers and directors of
Draper have interests in the merger that are different from, or in addition to,
the interests of the shareholders of Draper generally. The Draper Board was
aware of such interests and considered them, among other matters, in approving
the merger agreement and the matters contemplated by the merger agreement,
including the merger.
Stock Options
As of September 30, 2000, the directors and executive officers of Draper held
options to purchase an aggregate of 11,980 shares of Draper common stock at a
weighted average exercise price of approximately $100.00 per share. Options to
purchase Draper common stock, which their holders have not exercised prior to
the effective time of the merger, will automatically convert into options to
purchase shares of common stock of Zions following the merger, and Zions will
assume each such option subject to the terms and conditions set forth in
Draper's stock option plans. In accordance with Draper's stock option plans
dated July 23, 1997 and December 31, 1999, all Draper stock options that were
unexercisable prior to the effective time of the merger will become immediately
and fully exercisable upon consummation of the merger.
We describe the treatment of options more fully under "The Merger Agreement--
Draper Stock Options" on page 30.
Draper Bank Severance Plan
Zions has agreed to maintain the Draper Bank severance plan for a minimum of
three years after the effective date; however, consummation of the merger by
itself does not necessarily constitute a change of control which triggers a
requirement by Zions to make any severance payments to Draper employees. Zions
cannot amend the plan to the detriment of the employees of Draper Bank who are
party to the plan as of the effective date. Zions has no obligation to keep the
plan in place at the expiration of the three year period. The plan provides a
sliding scale of severance pay based on years in service to all Draper
employees upon
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<PAGE>
termination not for cause. Under the terms of the plan, officers of Draper
holding the position of vice president or above are guaranteed severance pay in
an amount based on their respective years of service in the banking industry;
provided, however that such amount will not be less than nine months of base
salary.
Voting Agreements
Zions has entered into voting agreements with Messrs. Robert M. Daugherty, W.
James Tozer, Jr., John M. Robertson, G. Blake Robinson and Stewart M. Hanson,
Jr., each a director and/or officer of Draper. These shareholders each agreed,
in consideration of the substantial expenses incurred by Zions in connection
with the merger agreement and as a condition to Zions entering into the merger
agreement, to vote or to cause to be voted, or execute a written consent with
respect to, all of their shares of Draper common stock or shares issuable upon
exercise of options to acquire Draper common stock in favor of adoption and
approval of the merger agreement and the merger at every meeting of Draper
shareholders at which the merger and the merger agreement are considered and at
every adjournment thereof and in connection with every proposal to take action
by written consent with respect thereto.
Each voting agreement also provides that the shareholder will not, and will
not permit any entity under its control to, deposit any of such shareholder's
shares of Draper common stock in a voting trust or subject any such shares to
any agreement, arrangement or understanding with respect to the voting of such
shares inconsistent with the voting agreement entered into by that shareholder.
In addition, the shareholders each agreed not to sell, assign, pledge,
encumber, transfer or otherwise dispose of any of their shares of Draper common
stock during the term of the relevant voting agreement.
Nothing in the voting agreements, however, will limit or otherwise interfere
with the actions of the shareholders as directors or officers of Draper or will
affect their ability to vote or dispose of their shares in the event the merger
agreement with Zions has first been terminated in accordance with its terms.
At the record date for the special meeting, the shareholders signing voting
agreements owned a total of 249,276 outstanding shares of Draper common stock,
representing approximately 68.7% of the shares of Draper common stock entitled
to vote at the special meeting and enough to approve the merger without the
concurrence of any other Draper shareholders.
Employment Agreement
In connection with the execution of the merger agreement, Robert M. Daugherty
entered into an employment agreement with Zions First National Bank pursuant to
which Mr. Daugherty will be employed by Zions First National Bank as a Senior
Vice President of Zions First National Bank for a period of one year commencing
on the effective date. Zions First National Bank agreed to pay Mr. Daugherty,
at a minimum, a base annual salary of $180,000, and to consider Mr. Daugherty
for a discretionary bonus payment at the end of the one-year period of
employment in accordance with compensation policies and practices of Zions
First National Bank then in effect. Notwithstanding the one-year period of
employment, the employment agreement provides that if Mr. Daugherty is
terminated by Zions First National Bank prior to the end of three years from
the effective date, he is entitled to participate in the benefits of the Draper
Bank severance plan described in "--Draper Bank Severance Plan" above so long
as he meets the eligibility requirements of the plan. The employment agreement
also provides that if Mr. Daugherty terminates his employment during the one-
year period for other than material breach or just cause, or if Zions First
National Bank removes or fails to appoint Mr. Daugherty as a Senior Vice
President, or if Zions First National Bank materially breaches the employment
agreement without rectifying such breach upon notice, Zions First National Bank
must pay Mr. Daugherty his base salary for the remainder of the one-year period
of employment in a manner specified in the employment agreement. In addition,
Mr. Daugherty's employment agreement grants him other employee benefits,
including paid vacation, reimbursement of business expenses and participation
in executive compensation plans available to other employees of similar rank as
Mr. Daugherty.
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<PAGE>
The employment agreement requires that Mr. Daugherty will not, at any time,
disclose, use, transfer or sell, except in the ordinary course of his
employment, any confidential information or proprietary data of Zions First
National Bank, Zions, or any of Zions' subsidiaries, so long as such
information or proprietary data remains confidential and has not been disclosed
or is not otherwise in the public domain, except as required by law or pursuant
to legal process. Further, from the effective date through the third
anniversary of the effective date, Mr. Daugherty agreed not to directly or
indirectly intentionally solicit or otherwise intentionally cause (1) any Utah-
based customer of Zions First National Bank or its affiliates to terminate,
discontinue, reduce or otherwise impair its relationship with Zions First
National Bank or its affiliates or (2) any Utah-based employee, officer or
member of the Board of Zions First National Bank or its affiliates to engage in
the banking business within the State of Utah other than on behalf of Zions
First National Bank or its affiliates, or directly or indirectly own, manage,
operate, control, be employed by or provide management or consulting services
in any capacity to any firm, corporation or other entity engaged in the banking
business in the State of Utah other than Zions First National Bank or its
affiliates.
Voting and Non-Solicitation Agreement
W. James Tozer, Jr., a director and shareholder of Draper, signed a voting
and non-solicitation agreement in connection with the merger agreement. For a
period of 18 months commencing upon the effective date, Mr. Tozer agrees not to
directly or indirectly intentionally solicit or otherwise intentionally cause
any employee, officer or member of the Boards of Zions, Zions First National
Bank or any of their affiliates to (1) directly or indirectly own, manage,
operate, control, be employed by, or provide management or consulting services
in any capacity to any firm, corporation, or other entity engaged in the
banking business in the State of Utah other than Zions, Zions First National
Bank or any of their affiliates, or (2) terminate such person's employment or
board membership, as the case may be, with Zions, Zions First National Bank or
any of their affiliates.
Accounting Treatment
We expect the merger to be accounted for as a pooling of interests in
accordance with generally accepted accounting principles. Under this method of
accounting, Zions shareholders and Draper shareholders will be deemed to have
combined their existing voting stock interests by virtue of the exchange of
shares of Draper common stock for shares of Zions common stock. Accordingly,
the book value of the assets, liabilities and shareholders' equity of each of
Zions and Draper, as reported on their respective consolidated balance sheets,
will be carried over to the consolidated balance sheet of the combined company,
and no goodwill will be created. The combined company will be able to include
in its consolidated net income the combined net income of both companies for
the entire fiscal year in which the merger occurs. However, the combined
company must treat certain expenses incurred to effect the merger as current
charges against income, rather than adjustments to the combined company balance
sheet.
It is a condition to consummation of the merger that Zions and/or Draper
receive:
. a certificate dated the effective date of the merger signed by the chief
executive officer and by the chief financial officer of Draper regarding
various information, including information as to the outstanding stock of
Draper and repurchases (if any) of its stock by Draper;
. letters from Zions' independent auditor to the effect that the merger
qualifies for pooling-of-interests accounting under APB16, if closed and
consummated in accordance with the merger agreement; and
. letters from Draper's independent auditor to the effect that the merger
qualifies for pooling-of-interests accounting, if closed and consummated
in accordance with the merger agreement.
See "The Merger Agreement--Conditions" on page 33.
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As described in "Rights of Dissenting Shareholders" on page 48, Draper
shareholders have a right to dissent to the merger and to receive cash in the
exercise of their dissenters' rights. If the dissenting shares combined with
other pooling-of-interests violations exceeds 10% of the outstanding shares of
Draper common stock, the merger will not qualify for pooling-of-interests
accounting treatment.
Regulatory Approvals
Pursuant to the Bank Holding Company Act, Zions has filed a request for
waiver of review for approval of the merger with the Federal Reserve Board. The
request for waiver was filed on November 22, 2000.
Pursuant to the National Bank Act, a national banking association must
receive approval from the OCC prior to consummation of a merger with another
bank. Zions First National Bank filed its application with the OCC on November
22, 2000 requesting approval of the bank merger.
The laws of Utah require that the approval of the Utah Commissioner be
obtained prior to the change of control a bank organized and licensed under
Utah law. The application for approval of the merger was filed with the Utah
Commissioner by Zions on November 22, 2000.
The approval of an application or confirmation of a request for waiver of
approval means only that the regulatory criteria for approval have been
satisfied or waived. It does not mean that the approving authority has
determined that the consideration to be received by Draper shareholders is
fair. Regulatory approval does not constitute an endorsement or recommendation
of the merger as being in the interest of the shareholders.
Zions, Zions First National Bank and Draper are not aware of any governmental
approvals or requirements arising under banking laws and regulations whose
receipt or satisfaction are necessary for the merger to become effective other
than those described above.
Restrictions on Resales by Affiliates
Zions has registered the shares of common stock issuable to Draper
shareholders in the merger under the Securities Act of 1933, or the Securities
Act. Holders of these securities who are not deemed to be "affiliates", as
defined in the rules promulgated under the Securities Act, of Zions or Draper
may trade their shares freely without restriction.
Any subsequent transfer of shares by any person who is an affiliate of Draper
at the time of submission of the merger agreement to the Draper shareholders
for their vote will, under existing law, require either:
. the further registration under the Securities Act of the shares of Zions
common stock to be transferred;
. compliance with Rule 145 promulgated under the Securities Act, which
permits limited sales under certain circumstances; or
. the availability of another exemption from registration of the shares.
An affiliate of Draper is a person who directly, or indirectly through one or
more intermediaries, controls, is controlled by, or is under common control
with Draper. We expect these restrictions to apply to the directors and
executive officers of Draper and the holders of 10% or more of the Draper
common stock which are comprised of the following persons: Robert M. Daugherty,
Stewart M. Hanson, Jr., John M. Robertson, G. Blake Robinson, W. James Tozer,
Jr., Douglas A. Stewart, Richard P. Coleman, Dennis L. Higbee, Holly J. Cordner
and Cristie L. Richards. The same restrictions apply to certain relatives or
the spouses of those persons and any trusts, estates, corporations or other
entities in which those persons have a 10% or greater beneficial or equity
interest. Zions will give stop transfer instructions to the transfer agent with
respect to those shares of
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Zions common stock held by persons subject to these restrictions, and Zions
will place a legend on the certificates for their shares accordingly.
SEC guidelines regarding qualifying for the pooling-of-interests method of
accounting limit sales of shares of Zions and Draper by affiliates of either
company in a business combination. SEC guidelines also indicate that the
pooling-of-interests method of accounting generally will not be challenged on
the basis of sales by affiliates of Zions and Draper if such affiliates do not
dispose of any of the shares of the corporation they own, or shares of a
corporation they receive in connection with a merger, during the period
beginning 30 days before completion of the merger and ending when Zions has
published financial results covering at least 30 days of post-merger operations
of Zions.
Draper has agreed in the merger agreement to use commercially reasonable
efforts to cause each person who is an affiliate of Draper for purposes of Rule
145 under the Securities Act and for purposes of qualifying the merger for
pooling-of-interests accounting treatment to deliver to Zions a written
agreement intended to ensure compliance with the Securities Act and to preserve
Zions' ability to treat the merger as a pooling of interests.
THE MERGER AGREEMENT
Set forth below is a description of certain of the terms and conditions of
the merger agreement and related matters. This summary of the terms and
conditions of the merger agreement is not complete and is qualified in its
entirety by reference to the full text of the merger agreement set forth in
Appendix A and the text of the merger agreement is incorporated by reference
into this proxy statement/prospectus.
The Merger
The merger agreement was entered into by and between Zions and Draper as of
October 10, 2000. Pursuant to the merger agreement, at the effective time,
Draper will merge with and into Zions, with Zions being the surviving
corporation in the merger. The separate corporate existence of Draper will then
cease.
Exchange of Draper Certificates
At or prior to the effective time, Zions will deposit with the exchange
agent, stock certificates representing the shares of Zions common stock that
are issuable in connection with the merger for shares of Draper common stock.
As soon as practicable but not more than five business days after the effective
date, Zions will cause the exchange agent to send to each holder of record of
shares of Draper common stock at the effective date of the merger transmittal
materials for use in the exchange of the merger consideration for certificates
representing Draper common stock. Zions will deliver to holders of Draper
common stock who surrender their certificates to the exchange agent, together
with properly executed transmittal materials and any other required
documentation, certificates representing the number of shares of Zions common
stock to which such holders are entitled. Any Draper shareholder otherwise
entitled to a fractional share of Zions common stock will be given a full share
of Zions common stock in its place.
Until properly surrendering their certificates, holders of unexchanged shares
of Draper common stock will not be entitled to receive any dividends or
distributions with respect to Zions common stock. After surrender of the
certificates representing Draper common stock, the record holder of such shares
will be entitled to receive any such dividends or other distributions, without
interest, which had previously become payable with respect to shares of Zions
common stock represented by such certificate.
Holders of Draper common stock should not send in certificates representing
Draper common stock until they receive transmittal materials from the exchange
agent.
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Draper Stock Options
At the effective time, Zions will assume the former Draper stock option
plans. At the effective time of the merger, all outstanding and unexercised
Draper stock options will no longer represent a right to acquire shares of
Draper common stock, but will convert automatically into options to purchase
shares of Zions common stock. Zions will assume such Draper stock options
subject to the terms and conditions of the Draper stock option or similar plans
and related option agreements as in effect immediately prior to the effective
time under which Draper issued the assumed stock options. In accordance with
Draper's stock option plans dated July 23, 1997 and December 31, 1999, all
Draper stock options that were unexercisable prior to the effective time of the
merger will become immediately and fully exercisable upon the consummation of
the merger.
After the effective time of the merger, the number of shares of Zions common
stock purchasable upon exercise of any such Draper option will equal the number
of shares of Draper common stock that were purchasable under such Draper option
immediately prior to the effective time multiplied by the exchange ratio
established for the merger, rounding down to the nearest whole share. The per
share exercise price under each such Draper stock option, rounding down to the
nearest whole cent, will equal the aggregate exercise price under the stock
options divided by the number of shares of Zions common stock issuable under
the assumed Draper stock option plans. The duration and other terms of each new
Zions stock option will be substantially the same as the prior Draper stock
option. The terms of each Draper option will be subject to further adjustment
as appropriate to reflect any stock split, stock dividend, recapitalization or
other similar transaction with respect to Zions common stock on or after the
effective time of the merger.
Representations and Warranties
The merger agreement contains customary standard representations and
warranties made by Draper and Zions with respect to their corporate authority
and good standing, capitalization, regulatory status, accounting treatment and
financial reports. Draper further made customary standard representations and
warranties regarding its tax, contractual, compliance, labor, employee benefit
plans, environmental and litigation status, among other things.
Conduct of Business Pending Completion of the Merger
Draper
Draper has agreed in the merger agreement, without the prior written consent
of Zions, not to, and to cause Draper Bank not to:
. conduct the business of Draper and Draper Bank other than in the ordinary
and usual course or fail to use reasonable best efforts to preserve
intact their business organizations and assets and maintain their rights,
franchises and existing relations with customers, suppliers, employees
and business associates, take any action that would adversely affect or
delay the ability of Draper, Zions or any of their subsidiaries to
perform any of their obligations on a timely basis under the merger
agreement, or take any action reasonably likely to have a material
adverse effect.
. make any changes to the outstanding number of shares of Draper common
stock, or rights to acquire Draper common stock, including through
employee stock benefit plans;
. declare or pay any dividend other than consistent with past practice or
dividends from Draper Bank on any shares of Draper common stock or
directly or indirectly adjust, split, combine, redeem, reclassify,
purchase or otherwise acquire, any shares of its capital stock;
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. enter into, amend or renew any employment or similar agreement with any
director, officer or employee of Draper or Draper Bank, or grant any wage
increase or increase any employee benefit, subject to customary
exceptions;
. enter into, establish, adopt or amend any benefit plan in respect of any
director, officer or employee of Draper or Draper Bank, or take any
action to accelerate the vesting or exercisability of stock options,
restricted stock or other compensation or benefits payable thereunder;
. sell, transfer, mortgage, encumber or otherwise dispose of or discontinue
any of its assets, deposits, business or properties except in the
ordinary course of business in a non-material transaction;
. acquire any portion of the assets, business, deposits or properties of
any other entity, except in the ordinary course of business in a non-
material transaction;
. make any capital expenditures other than in the ordinary course of
business consistent with past practice, subject to specified limits;
. amend its or Draper Bank's articles of incorporation or by-laws, except
to amend its par value as previously disclosed;
. implement or adopt any change in its accounting principles, practices or
methods, other than as may be required by generally accepted accounting
principles;
. enter into, materially modify or terminate any material contract, except
in the ordinary course of business consistent with past practice;
. generally settle any material claim, action or proceeding, except in the
ordinary course of business consistent with past practice;
. take any action reasonably likely to prevent or impede the merger from
qualifying for pooling-of-interests accounting treatment or as a
reorganization for tax purposes;
. knowingly take any action intended to result in any of its
representations and warranties set forth in the merger agreement not
being or becoming untrue, any of the conditions to the merger not being
satisfied, or a material violation of any provision of the merger
agreement;
. change or implement any material change in its interest rate and other
risk management policies, procedures or practices or fail to use
commercially reasonable means recommended by Zions to avoid any material
increase in its aggregate exposure to interest rate risk;
. incur any indebtedness for borrowed money other than in the ordinary
course of business; or
. agree or commit to do any of the foregoing.
Zions
Zions has agreed in the merger agreement, without the prior written consent
of Draper, not to, and cause each of its subsidiaries not to:
. take any action that would adversely affect or delay the ability of
Draper or Zions to perform any of their obligations on a timely basis
under the merger agreement, or take any action that is reasonably likely
to have a material adverse effect; or
. take any action reasonably likely to prevent or impede the merger from
qualifying for pooling-of-interests accounting treatment or as a
reorganization for tax purposes; or
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. knowingly take any action intended to result in any of its
representations and warranties set forth in the merger agreement not
being or becoming untrue, any of the conditions to the merger not being
satisfied, or a material violation of any provision of the merger
agreement.
Certain Covenants
Shareholder Meeting
Draper has agreed to take all action necessary to convene an appropriate
meeting of Draper shareholders to consider and vote upon the approval and
adoption of the merger agreement and any other matters required to be approved
by the Draper shareholders for consummation of the merger. Except to the extent
legally required for the discharge by the Draper Board of its fiduciary duties
as advised by counsel to the Draper Board, the Draper Board will recommend that
Draper shareholders approve the merger and any other matters required to be
approved by the Draper shareholders for consummation of the merger.
Certain Filings, Consents and Arrangements
Pursuant to the merger agreement, Zions and Draper, on their own behalf or on
behalf of their subsidiaries, have made filings and applications for approval
or waiver with the OCC, the Federal Reserve Board and the Utah Commissioner in
order to obtain all approvals, consents and waivers necessary or appropriate
for the consummation of the transactions contemplated by the merger agreement.
Access to Information
Upon reasonable notice, each party has agreed to give the other party access
during normal business hours to the books, records, properties, personnel and
to such other information as the requesting party may reasonably request. Each
party has agreed that it will not use any information obtained pursuant to the
access described above for any purpose unrelated to the consummation of the
transactions contemplated by the merger agreement. In addition, subject to the
requirements of law, each party has agreed to keep confidential all information
obtained pursuant to the access described above, subject to customary
exceptions.
Further, Draper has agreed to provide Zions with all quarterly and annual
financial statements prepared in accordance with generally accepted accounting
principles for each period ending after June 30, 2000. Draper warrants that the
financial statements will fairly present the financial position, results of
operations, changes in shareholders' equity, changes in cash flow and results
of operation as of and for the periods in which they relate.
Cooperation
Zions and Draper have agreed that they will cooperate and use their
reasonable best efforts in good faith to effect all things necessary to
complete the merger and all related transactions contemplated by the merger
agreement.
Indemnification and Liability Insurance
Zions has agreed that it will indemnify and hold harmless each present and
former director and officer of Draper or Draper Bank for four years after the
effective date against any costs or expenses, including reasonable attorneys'
fees, judgments, fines, losses, claims, damages or liabilities, incurred in
connection with any claim, action, suit, proceeding or investigation arising
out of matters existing or occurring on or prior to the effective date
(including with respect to the merger agreement or any of the transactions
contemplated thereby), to the extent to which Draper and Draper Bank were
entitled under Utah law and the Draper articles of incorporation and by-laws in
effect on the date of the merger agreement.
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In addition, for a period of three years after the effective date, Zions has
agreed to use its reasonable best efforts to cause to be maintained in effect
the current (or comparable) policies of directors' and officers' liability
insurance maintained by Draper; provided that in no event will Zions be
obligated to expend in connection therewith any amount per year in excess of
125% of the amount of the annual premiums paid as of the date of the merger
agreement by Draper for such insurance. If the amount of the annual premiums
needed to keep such insurance coverage exceeds the 125% limit, Zions has agreed
to use all reasonable efforts to maintain the most advantageous policies of
directors' and officers' insurance obtainable for an annual premium equal to
such limit.
Acquisition Proposals
Draper has agreed that it will not solicit or encourage inquiries or
proposals with respect to, or engage in any negotiations concerning or provide
any confidential information to, or have any discussions with, any person
relating to, any tender or exchange offer, proposal for a merger, consolidation
or other business combination involving Draper or Draper Bank or any proposal
or offer to acquire in any manner a substantial equity interest in, or a
substantial position of the assets or deposits of, Draper or Draper Bank, other
than as contemplated by the merger agreement, except to the extent legally
required for the discharge by the Draper Board of its fiduciary duties.
Conditions
Mutual Conditions
The obligation of Zions and Draper to complete the merger is subject to the
fulfillment or written waiver prior to the effective time of various
conditions, including:
. obtaining the approval of Draper shareholders;
. obtaining all required regulatory approvals;
. no adverse act by a governmental authority prohibiting consummation of
the merger;
. the Registration Statement having become effective and no stop order
issued by the SEC; and
. obtaining all necessary permits and other authorizations under state
securities laws.
Zions Conditions
The obligation of Zions to consummate the merger is subject to the
fulfillment or written waiver prior to the effective time of additional
conditions, including:
. each of the representations and warranties of Draper contained in the
merger agreement being true and correct and Zions having received an
officers' certificate of Draper to such effect;
. Draper having performed in all material respects all obligations required
to be performed by it under the merger agreement and Zions having
received an officers' certificate of Draper to such effect;
. Zions having received a tax opinion from its counsel;
. Zions having received comfort letters from Deloitte & Touche LLP; and
. Zions having received from its independent auditor, letters to the effect
that the merger will qualify for pooling-of-interests accounting under
APB16 if closed and consummated in accordance with the merger agreement.
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Draper Conditions
The obligation of Draper to consummate the merger is also subject to the
fulfillment or written waiver prior to the effective time of additional
conditions, including:
. each of the representations and warranties of Zions contained in the
merger agreement being true and correct and Draper having received an
officers' certificate to such effect;
. Zions having performed in all material respects all obligations required
to be performed by it under the merger agreement and Draper's having
received an officers' certificate to such effect;
. Draper having received a tax opinion from its counsel;
. Draper having received comfort letters from KPMG LLP;
. no public announcement having been made from the date of the merger
agreement to the effective date that any entity has acquired beneficial
ownership of 10% or more of Zions common stock subject to exceptions set
forth in Zions shareholder rights plan;
. Draper having receiving the written opinion of Hovde that the
consideration to be received by Draper shareholders is fair from a
financial point of view; and
. Draper having received from its independent auditor, letters to the
effect that the merger will qualify for pooling-of-interests accounting,
if closed and consummated in accordance with the merger agreement.
Termination
Prior to the effective time, the merger agreement may be terminated, and the
merger abandoned:
. by our mutual consent;
. by either of us, in the event of a breach by the other party of any
representation, warranty, covenant or agreement contained in the merger
agreement, provided that the breach would be reasonably likely to result
in a material adverse effect;
. by either of us, in the event that the merger is not consummated by June
30, 2001;
. by either of us in the event the approval of the Draper shareholders is
not obtained or the approval by any governmental authority required for
consummation of the merger is denied and is nonappealable; or
. by Zions if the Draper Board fails to recommend approval of the merger
agreement and any other matters required to be approved by Draper
shareholders for consummation of the merger.
In the event of termination of the merger agreement by either of us as
provided above, neither Zions nor Draper will have any liability or further
obligation to the other party except to the extent the merger agreement
specifically provides that certain covenants survive such termination and
except that such termination will not relieve a breaching party from liability
for any willful breach of the merger agreement giving rise to such termination.
Waiver and Amendment
Prior to the effective time, any provision of the merger agreement may be
waived by the party benefitted by the provision, or amended or modified at any
time, by written agreement between the parties, except that after the special
meeting, the merger agreement may not be amended if it would violate Utah law
or reduce the consideration to be received by Draper shareholders in the
merger.
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THE COMPANIES
Zions Bancorporation
Zions Bancorporation, a Utah corporation, is a registered bank holding
company headquartered in Salt Lake City, Utah. Zions is the parent holding
company of Zions First National Bank, California Bank and Trust, National Bank
of Arizona, Vectra Bank Colorado, N.A., Nevada State Bank, and The Commerce
Bank of Washington, N.A. The principal asset of Zions is all of the outstanding
shares of common stock of its subsidiary banks, and its principal source of
revenue is dividends it receives from its subsidiary banks. Through its
subsidiaries, Zions operated 375 branches as of September 30, 2000 in the
states of Arizona, California, Colorado, Idaho, Nevada, New Mexico, Utah, and
Washington.
The banking business is extremely competitive, and Zions' banking
subsidiaries encounter intense competition from other financial institutions
located within their respective market area. In addition, Zions' banking
subsidiaries compete not only with other commercial banks but also with other
financial institutions such as thrifts, credit unions, money market and mutual
funds, insurance companies, brokerage firms, and a variety of other companies
offering financial services. Some of these financial services providers are
located outside their respective market areas.
Zions' principal executive offices are located at One South Main, Suite 1380,
Salt Lake City, Utah 84111, and its telephone number is (801) 524-4787.
Draper Bancorp
Business
Draper Bancorp is a registered bank holding company located in Draper, Utah.
Its wholly-owned subsidiary, Draper Bank, was formed July 8, 1964 under the
name Draper National Bank. In 1968, Draper converted its national charter to a
state charter and became Draper Bank & Trust. In 2000, Draper dropped the "&
Trust" from its name and became Draper Bank. As a state-chartered federally
insured bank, Draper Bank is subject to regulation, supervision, and regular
examination by the State of Utah Department of Financial Institutions and the
FDIC. Draper is subject to regulation, supervision and regular examination by
the Federal Reserve Board. As of September 30, 2000, Draper had approximately
324 shareholders holding 362,688 shares and total consolidated assets of
$260,674,000. Draper Bank has in excess of 50,000 customer accounts.
Primary Market Area
Draper Bank conducts its banking through six branches located in the southern
portion of Salt Lake County and one branch in Park City, Utah. The Salt Lake
City urban area branches are located in Draper, West Jordan, Sandy, South
Jordan, Riverton and Murray. The branch in Park City, Utah is officially
referred to as "Park City Bank -- A Division of Draper Bank".
Services Provided
Draper Bank provides a full range of commercial banking products and services
(excluding trust services) to the general public, with an emphasis on "free
checking" to retail customers, and business loans to small and medium-sized
businesses. Since the third quarter of 1999, Draper Bank has provided on-line
banking services through its informational web-site, DraperBank.com.
Personal Banking
Draper Bank has offered "free" no-minimum-balance checking to consumers since
1969. This very popular product (now numbering nearly 25,000 accounts) has
recently evolved to "Ultimate Free Checking" which utilizes imaging technology
to return imaged checks with bank statements.
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Commercial Loans
Draper Bank has expertise making commercial and real-estate loans to small
and medium-sized businesses and prefers to keep loan amounts in the under-$2
million range. Draper Bank has been awarded status as both a SBA Certified
Lender and SBA Preferred Lender.
Residential Mortgage Loans
Draper Bank has a residential construction loan department and mortgage loan
department. For many years, Draper Bank has been among the top providers of
construction financing in Salt Lake County. Draper Bank offers conventional,
FHA and VA mortgages with 15 to 30 year maturities on both fixed and adjustable
rates. Mortgages are sold on the secondary market shortly after closing.
Marketing
Draper Bank prides itself on "personalized, friendly service". Due to the
limited availability of advertising media in Draper Bank's primary market area
(other than Park City), advertising has been limited historically to one or two
strategically placed billboards and a time-and-temperature phone number.
Generally, new business resulted from word of mouth: satisfied customers
telling friends and neighbors. Draper Bank has been active in local chambers of
commerce.
Asset Management
Consistent with the requirements of prudent banking practices necessary to
maintain liquidity and minimize interest rate risk, Draper Bank has invested
the larger portion of its assets in loans. The remainder of Draper Banks' funds
are invested in sales of overnight Fed Funds to other financial institutions,
United States government treasuries and agencies, municipalities and similar
low-risk investments.
Competition
The financial services industry in Salt Lake County and Summit County is
considered to be extremely competitive. In Salt Lake County and Utah in
general, major banks and credit unions have many offices and operate over a
wide geographic area. Draper Bank competes with these institutions. By virtue
of their significantly greater capital, resources, recognition and experience,
these institutions have substantially greater lending limits and investment
flexibility than Draper Bank, and they also provide certain services for their
customers, such as trust, insurance and investment services, that Draper Bank
is not equipped to offer directly.
These larger banks and credit unions, along with smaller independent banks,
generally use many of the same competitive tools Draper Bank employs.
Currently, some of the major bank competitors in the market place are: Wells
Fargo, Zions, Bank One, Key Bank, US Bank, Bank of Utah, Community First Bank,
Washington Mutual, American Investment Bank, America First Credit Union and
Mountain America Credit Union.
Because of Utah's unique laws, many national and international firms come to
Utah seeking to establish financial institutions in the form of Industrial Loan
Corporations and mutual savings banks. These, along with credit unions,
insurance companies, consumer and commercial finance or loans companies, real
estate investment trusts, pension funds, mortgage companies, credit card
organizations, money market funds and mutual funds compete aggressively for
deposits. The national equity and debt securities markets also compete for
available funds.
Because of the limited availability of efficient advertising media in its
primary market area (other than Park City), Draper Bank has relied upon word of
mouth from satisfied customers, local advertising and promotional activity,
personal contact by its officers, directors, employees and shareholders and
specialized services. Draper Bank's promotional activities emphasize the
advantages of dealing with a locally owned and
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managed bank attuned to the particular needs and desires of the communities it
serves. For customers whose loan demands exceed Draper Bank's lending limit,
Draper Bank has generally arranged for such loans on a participation basis with
other banks. Draper Bank also assists customers requiring services not offered
by Draper Bank to obtain these services through other banks or financial
institutions.
Draper's principal executive office is located at 903 East 12300 South, P.O.
Box 1000, Draper, Utah 84020, telephone: (801) 571-3141.
REGULATION AND SUPERVISION
The following discussion sets forth a summary of the regulatory framework
applicable to bank holding companies, national banks, and state-chartered banks
which are not members of the Federal Reserve System, and provides certain
specific information relevant to Zions, Draper, Zions First National Bank and
Draper Bank. This regulatory framework is primarily intended for the protection
of depositors and the deposit insurance funds that insure bank deposits, and is
not intended for your protection. The following information summarizes various
statutory and regulatory provisions, and it is qualified in its entirety by
reference to those provisions. A change in the statutes, regulations, or
regulatory policies applicable to Zions, Zions First National Bank, Draper or
Draper Bank may have a material effect on the business of these entities.
Various governmental requirements, including Sections 23A and 23B of the
Federal Reserve Act, limit borrowing by Zions First National Bank from Zions
and by Draper Bank from Draper, and also limit various other transactions
between Zions First National Bank and Zions and between Draper Bank and Draper.
For example, Section 23A of the Federal Reserve Act limits the aggregate
outstanding amount of any insured bank's loans to and other "covered
transactions" with any particular non-bank affiliate to no more than 10% of its
total capital and limits the aggregate outstanding amount of any insured bank's
covered transactions with all of its non-bank affiliates to no more than 20% of
its total capital. Section 23A of the Federal Reserve Act also generally
requires that an insured bank's loans to its non-bank affiliates be secured,
and Section 23B of the Federal Reserve Act generally requires that an insured
bank's transactions with its non-bank affiliates be on arm's-length terms.
Also, Zions First National Bank is prohibited from engaging in certain "tie-in"
arrangements in connection with extensions of credit or provision of property
or services.
As a national bank, Zions First National Bank is subject to primary
supervision, regulation, and examination by the OCC and secondary regulation by
the FDIC and the Federal Reserve Board. As a commercial bank organized under
the laws of the State of Utah which is not a member of the Federal Reserve
System, Draper Bank is subject to supervision, regulation, and examination by
the Utah Department of Financial Institutions and the FDIC. Zions First
National Bank is subject to extensive federal statutes and regulations, and
Draper Bank to extensive state and federal statutes and regulations, that
significantly affect their respective business and activities. Zions First
National Bank and Draper Bank must file reports with their regulators
concerning their activities and financial condition and obtain regulatory
approval to enter into certain transactions. Zions First National Bank and
Draper Bank are both subject to periodic examinations by their respective
regulators to ascertain compliance with various regulatory requirements. Other
applicable statutes and regulations relate to insurance of deposits, allowable
investments, loans, acceptance of deposits, trust activities, mergers,
consolidations, payment of dividends, capital requirements, reserves against
deposits, establishment of branches and certain other facilities, limitations
on loans to one borrower and loans to affiliated persons, and other aspects of
the business of banks. Recent federal legislation has instructed federal
agencies to adopt standards or guidelines governing banks' internal controls,
information systems, loan documentation, credit underwriting, interest rate
exposure, asset growth, compensation and benefits, asset quality, earnings and
stock valuation, and other matters. Legislation adopted in 1994 gives the
federal banking agencies greater flexibility in implementing standards on asset
quality, earnings, and stock valuation. Regulatory authorities have broad
flexibility to initiate proceedings designed to prohibit banks from engaging in
unlawful activities and in unsafe and unsound banking practices.
37
<PAGE>
Zions First National Bank and Draper Bank are also affected by various other
governmental requirements and regulations, general economic conditions, and the
fiscal and monetary policies of the federal government and the Federal Reserve
Board. The monetary policies of the Federal Reserve Board influence to a
significant extent the overall growth of loans, investments, deposits, interest
rates charged on loans, and interest rates paid on deposits. The nature and
impact of future changes in monetary policies are often not predictable.
Support of Subsidiary Banks
Under current Federal Reserve Board policy, a bank holding company is
expected to act as a source of financial and managerial strength to each of its
subsidiary banks by standing ready to use available resources to provide
adequate capital funds to its subsidiary banks during periods of financial
adversity and by maintaining the financial flexibility and capital-raising
capacity to obtain additional resources for assisting its subsidiary banks. The
support expected by the Federal Reserve Board may be required at times when the
bank holding company may not have the resources or inclination to provide it.
Section 55 of the National Bank Act permits the OCC to order the pro-rata
assessment of shareholders of a national bank whose capital has become
impaired. Zions is the sole shareholder of Zions First National Bank. If a
shareholder fails to pay that assessment within three months, the OCC can order
the sale of the shareholder's stock to cover the deficiency. (The banking
statutes of Utah do not confer similar authority upon the Utah Department of
Financial Institutions to assess Draper for any capital deficiency experienced
by Draper Bank or to order the sale of its stock to cover the deficiency.) In
the event of a bank holding company's bankruptcy, any commitment by the bank
holding company to a federal bank regulatory agency to maintain the capital of
a subsidiary bank would be assumed by the bankruptcy trustee and entitled to
priority of payment.
If a default occurred with respect to a bank, any capital loans to the bank
from its parent holding company would be subordinate in right of payment to
payment of the bank's depositors and certain of its other obligations.
Liability of Commonly Controlled Banks
Any depository institution insured by the FDIC can be held liable for any
loss incurred, or reasonably expected to be incurred, by the FDIC in connection
with the default of a commonly controlled FDIC-insured depository institution,
or any assistance provided by the FDIC to a commonly controlled FDIC-insured
depository institution in danger of default. "Default" generally is defined as
the appointment of a conservator or receiver, and "in danger of default"
generally is defined as the existence of certain conditions indicating that a
default is likely to occur in the absence of regulatory assistance.
Capital Requirements
Zions and Draper are subject to risk-based capital requirements and
guidelines imposed by the Federal Reserve Board, which are substantially
similar to the capital requirements and guidelines imposed by the OCC on
national banks and by the FDIC on state-chartered banks which are not members
of the Federal Reserve System.
For this purpose, a bank's or bank holding company's assets and certain
specified off-balance sheet commitments are assigned to four risk categories,
each weighted differently based on the level of credit risk that is ascribed to
those assets or commitments. In addition, risk-weighted assets are adjusted for
low-level recourse and market-risk equivalent assets. A bank's or bank holding
company's capital, in turn, includes the following tiers:
. core ("Tier 1") capital, which includes common equity, non-cumulative
perpetual preferred stock, a limited amount of cumulative perpetual
preferred stock, and minority interests in equity accounts of
consolidated subsidiaries, less goodwill, certain identifiable intangible
assets, and certain other assets;
38
<PAGE>
. supplementary ("Tier 2") capital, which includes, among other items,
perpetual preferred stock not meeting the Tier 1 definition, mandatory
convertible securities, subordinated debt and allowances for loan and
lease losses, subject to certain limitations, less certain required
deductions; and
. market risk ("Tier 3") capital, which includes qualifying unsecured
subordinated debt.
Each of Zions and Draper, like other bank holding companies, is required to
maintain Tier 1 and "total capital" (the sum of Tier 1, Tier 2 and Tier 3
capital, less certain deductions) equal to at least 4% and 8% of their total
risk-weighted assets (including certain off-balance-sheet items, such as unused
lending commitments and standby letters of credit), respectively. At September
30, 2000, Zions met both requirements, with Tier 1 and total capital equal to
8.35% and 10.85%, respectively, of total risk-weighted assets, as did Draper,
with 13.51% and 14.76%, respectively, of total risk-weighted assets.
The Federal Reserve Board, the OCC and the FDIC have adopted rules to
incorporate market and interest rate risk components into their risk-based
capital standards. Under recent amendments to the market-risk requirements,
capital must be allocated to support the amount of market risk related to a
financial institution's ongoing trading activities.
The Federal Reserve Board also requires bank holding companies to maintain a
minimum "leverage ratio" (Tier 1 capital to adjusted total assets) of 3% if the
bank holding company has the highest regulatory rating and meets certain other
requirements, or of 3% plus an additional cushion of at least 1-2% if the bank
holding company does not meet these requirements. At September 30, 2000, Zions'
leverage ratio was 6.16% and Draper's was 9.92%.
The Federal Reserve Board may set capital requirements higher than the
minimums noted above for holding companies whose circumstances warrant it. For
example, bank holding companies experiencing or anticipating significant growth
may be expected to maintain strong capital positions substantially above the
minimum supervisory levels without significant reliance on intangible assets.
Furthermore, the Federal Reserve Board has indicated that it will consider a
"Tangible Tier 1 leverage ratio" (deducting all intangibles) and other indicia
of capital strength in evaluating proposals for expansion or new activities or
when a bank holding company faces unusual or abnormal risks.
Zions First National Bank and Draper Bank are subject to similar risk-based
capital and leverage requirements adopted respectively by the OCC and the FDIC.
Both Zions First National Bank and Draper Bank were in compliance with the
applicable minimum capital requirements as of September 30, 2000. Neither Zions
First National Bank nor Draper Bank has been advised by its respective primary
federal banking regulator of any specific minimum leverage ratio applicable to
it.
Failure to meet capital requirements could subject a bank to a variety of
enforcement remedies, including the termination of deposit insurance by the
FDIC, and to certain restrictions on its business. The Federal Deposit
Insurance Corporation Improvements Act of 1991, or the FDICIA, among other
things, identifies five capital categories for insured banks -- well
capitalized, adequately capitalized, undercapitalized, significantly
undercapitalized, and critically undercapitalized -- and requires federal bank
regulatory agencies to implement systems for "prompt corrective action" for
insured banks that do not meet minimum capital requirements based on these
categories. The FDICIA imposes progressively more restrictive constraints on
operations, management, and capital distributions, depending on the category in
which an institution is classified. Unless a bank is well capitalized, it is
subject to restrictions on its ability to offer brokered deposits, on "pass-
through" insurance coverage for certain of its accounts, and on certain other
aspects of its operations. The FDICIA generally prohibits a bank from paying
any dividend or making any capital distribution or paying any management fee to
its holding company if the bank would thereafter be undercapitalized. An
undercapitalized bank is subject to regulatory monitoring and may be required
to divest itself of or liquidate subsidiaries. Holding companies of such
institutions may be required to divest themselves of such institutions or
divest themselves of or liquidate other affiliates. An undercapitalized bank
must develop a capital restoration plan, and
39
<PAGE>
its parent bank holding company must guarantee the bank's compliance with the
plan up to the lesser of 5% of the bank's assets at the time it became
undercapitalized or the amount needed to comply with the plan. Critically
undercapitalized institutions are prohibited from making payments of principal
and interest on subordinated debt and are generally subject to the mandatory
appointment of a conservator or receiver.
Rules adopted by the OCC under the FDICIA provide that a national bank is
deemed to be well capitalized if the bank has a total risk-based capital ratio
of 10% or greater, a Tier 1 risk-based capital ratio of 6% or greater, and a
leverage ratio of 5% or greater and the institution is not subject to a written
agreement, order, capital directive, or prompt corrective action directive to
meet and maintain a specific level of any capital measure. The FDIC has adopted
comparable measures for state-chartered banks which are not members of the
Federal Reserve System. As of September 30, 2000, Zions First National Bank and
Draper Bank were both well-capitalized, based on the prompt corrective action
ratios and guidelines described above. It should be noted, however, that a
bank's capital category is determined solely for the purpose of applying prompt
corrective action regulations of its primary federal banking regulator, and
that the capital category may not constitute an accurate representation of the
bank's overall financial condition or prospects.
Dividend Restrictions
Zions is a legal entity separate and distinct from Zions First National Bank.
Similarly, Draper is a legal entity separate and distinct from Draper Bank. In
general, under Utah law, Zions and Draper cannot pay a cash dividend if such
payment would render either insolvent. The revenues of Zions consist primarily
of dividends paid by Zions First National Bank and by its other bank and
nonbank affiliates. The revenues of Draper consist solely of dividends paid by
Draper Bank. Various federal and state statutory provisions limit the amount of
dividends Zions First National Bank and its other bank affiliates can pay to
Zions and Draper Bank can pay to Draper without regulatory approval.
Dividend payments by national banks such as Zions First National Bank are
limited to the lesser of the level of undivided profits and an amount not in
excess of net income for the current year combined with retained net income for
the preceding two years. At September 30, 2000, approximately $65.1 million of
the total shareholders' equity of Zions subsidiaries was available for payment
of dividends to Zions without approval by government regulators.
Utah law establishes two limitations on the payment of dividends by banks
organized under it such as Draper Bank. First, a dividend may not be paid if it
would render a bank insolvent, and second, a dividend payable other than in a
bank's own stock may not be paid out of capital surplus without the approval of
the Utah Superintendent of Banks.
In addition, federal bank regulatory authorities have authority to prohibit
Zions First National Bank and Draper Bank from engaging in an unsafe or unsound
practice in conducting their business. Depending upon the financial condition
of the bank in question, the payment of dividends could be deemed to constitute
an unsafe or unsound practice. The ability of Zions First National Bank and its
other bank affiliates and Draper Bank to pay dividends in the future is
currently influenced, and could be further influenced, by bank regulatory
policies and capital guidelines.
Deposit Insurance Assessments
The deposits of Zions First National Bank and Draper Bank are insured up to
regulatory limits by the FDIC and, accordingly, are subject to deposit
insurance assessments to maintain the Bank Insurance Fund, administered by the
FDIC. The FDIC has adopted regulations establishing a permanent risk-related
deposit insurance assessment system. Under this system, the FDIC places each
insured bank in one of nine risk categories based on the bank's capitalization
and supervisory evaluations provided to the FDIC by the institution's primary
federal regulator. Each insured bank's insurance assessment rate is then
determined by the risk category in which it is classified by the FDIC.
40
<PAGE>
The annual insurance premiums on bank deposits insured by the Bank Insurance
Fund vary between $0.00 per $100 of deposits for banks classified in the
highest capital and supervisory evaluation categories to $0.27 per $100 of
deposits for banks classified in the lowest capital and supervisory evaluation
categories. Bank Insurance Fund assessment rates are subject to semi-annual
adjustment by the FDIC within a range of up to five basis points without public
comment. The FDIC also possesses authority to impose special assessments from
time to time.
The Deposit Insurance Funds Act provides for assessments to be imposed on
insured depository institutions with respect to deposits insured by the Bank
Insurance Fund (in addition to assessments currently imposed on depository
institutions with respect to Bank Insurance Fund-insured deposits) to pay for
the cost of Financing Corporation funding. The Financing Corporation
assessments are adjusted quarterly to reflect changes in the assessment bases
of the FDIC insurance funds and do not vary depending upon a depository
institution's capitalization or supervisory evaluations. In 1999, Zions First
National Bank and Draper Bank paid Financing Corporation assessments of
$142,123 and $24,097, respectively.
Control Acquisitions
The Change in Bank Control Act prohibits a person or group of persons from
acquiring "control" of a bank holding company, unless the Federal Reserve Board
has been notified and has not objected to the transaction. Under a rebuttable
presumption established by the Federal Reserve Board, the acquisition of 10% or
more of a class of voting stock of a bank holding company with a class of
securities registered under Section 12 of the Securities Exchange Act of 1934,
or the Exchange Act, such as Zions, would, under the circumstances set forth in
the presumption, constitute acquisition of control of the bank holding company.
In addition, a company is required to obtain the approval of the Federal
Reserve Board under the Bank Holding Company Act before acquiring 25% (5% in
the case of an acquiror that is a bank holding company) or more of any class of
outstanding common stock of a bank or bank holding company, such as Zions or
Draper, or otherwise obtaining control or a "controlling influence" over that
bank or bank holding company. However, regulations of the Federal Reserve Board
generally exempt from such approval requirement a merger, such as that proposed
here, of an operating bank that is a subsidiary of a bank holding company with
another bank if the transaction requires the prior approval of a federal bank
regulatory agency under the federal Bank Merger Act and does not involve the
acquisition of shares of a bank.
Financial Modernization
On November 12, 1999, the President signed into law the Gramm-Leach-Bliley
Act which permits qualifying bank holding companies to become financial holding
companies and thereby affiliate with securities firms and insurance companies
and engage in other activities that are financial in nature or complementary
thereto, as determined by the Federal Reserve Board. A bank holding company may
elect to become a financial holding company if each of its subsidiary banks (a)
is well capitalized under the prompt corrective action provisions of FDICIA,
(b) is well managed, and (c) has at least a satisfactory rating under the
Community Reinvestment Act, or the CRA. The Gramm-Leach-Bliley Act identifies
several activities as "financial in nature", including, among others, insurance
underwriting and agency, investment advisory services, and underwriting,
dealing in or making a market in securities. Under the Gramm-Leach-Bliley Act,
subject to limitations on investment, a national bank may, through a financial
subsidiary of the bank, engage in activities that are financial in nature, or
incidental thereto, excluding, among others, insurance underwriting, insurance
company portfolio investment, and if the bank is well capitalized, well managed
and has at least a satisfactory CRA rating, real estate development and real
estate investment. Subsidiary banks of a financial holding company or national
banks with financial subsidiaries must continue to be well capitalized and well
managed in order to continue to engage in activities that are financial in
nature without regulatory actions or restrictions, which could include
divestiture of a non-banking subsidiary or subsidiaries. A bank holding company
which does not elect to become a financial holding company may continue to
engage in activities approved for bank holding companies by the Federal Reserve
Board prior to enactment of the Gramm-Leach-Bliley Act.
41
<PAGE>
The Gramm-Leach-Bliley Act does not significantly alter the regulatory
regimes under which Zions, Zions First National Bank, Draper and Draper Bank
currently operate, as we describe above. Using the financial holding company
structure, insurance companies and securities firms may acquire bank holding
companies such as Zions and Draper and may compete more directly with banks or
bank holding companies. Zions has not, at this time, made any decisions with
respect to whether it will elect to become a financial holding company under
the Gramm-Leach-Bliley Act.
Future Legislation
Various legislation, including proposals to substantially change the
financial institution regulatory system and to expand or contract the powers of
banking institutions and bank holding companies, is from time to time
introduced in Congress. This legislation may change banking statutes and the
operating environment of the combined bank and its affiliates in substantial
and unpredictable ways. If enacted, such legislation could increase or decrease
the cost of doing business, limit or expand permissible activities or affect
the competitive balance among banks, savings associations, credit unions, and
other financial institutions. Neither Zions nor Draper can accurately predict
whether any of this potential legislation will ultimately be enacted, and, if
enacted, the ultimate effect that it, or implementing regulations, would have
upon the financial condition or results of operations of the combined bank
holding company or any of its affiliates.
42
<PAGE>
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
The following summary of the material federal income tax consequences of the
merger to Draper stockholders who hold shares of Draper common stock as capital
assets deals only with holders who are citizens or residents of the United
States, domestic corporations or otherwise subject to United States federal
income tax on a net income basis in respect of shares of Draper common stock.
This summary may not apply to certain classes of taxpayers, including, without
limitation, insurance companies, tax-exempt organizations, financial
institutions, dealers in stocks and securities, persons who acquired or acquire
shares of Draper common stock pursuant to the exercise of employee stock
options or otherwise as compensation, and persons who hold shares of Draper
common stock in a hedging transaction or as part of a straddle or conversion
transaction. In addition, the summary does not address state, local, or foreign
tax consequences of the merger. Consequently, each shareholder of Draper should
consult his or her own tax advisor as to the specific tax consequences of the
merger to him or her.
This summary is based on current law and represents the opinion of Lewis,
Rice & Fingersh, L.C., special counsel to Draper. Future legislative, judicial
or administrative changes or interpretations, which may be retroactive, could
alter or modify the statements set forth herein. This summary is based upon
assumptions and representations made by Zions and Draper, which representations
have been relied upon by counsel and assumed to be true, correct, and complete.
Zions does not intend to request any ruling from the Internal Revenue Service
as to the United States federal income tax consequences of the merger.
The obligation of Zions and Draper to consummate the merger is conditioned
upon, among other things, receipt by Zions of an opinion of Sullivan &
Cromwell, dated the effective date of the merger, to the effect that the merger
constitutes a reorganization under Section 368(a) of the Internal Revenue Code
of 1986, as amended, and receipt by Draper of an opinion of Lewis, Rice &
Fingersh, L.C., dated the effective date of the merger to the effect that the
merger constitutes a reorganization under Section 368(a) of the Code and that
no gain or loss will be recognized by shareholders of Draper who receive shares
of Zions common stock in exchange for shares of Draper common stock. Such
opinions will be based in part upon assumptions and representations contained
in letters received from Zions and Draper, which representations Sullivan &
Cromwell and Lewis, Rice & Fingersh, L.C. will assume to be true, correct, and
complete. The tax opinions will not be binding on the Internal Revenue Service
or the courts, either of which could take a contrary position, and there can be
no assurance that the Internal Revenue Service will not contest the conclusions
expressed in the opinions. Under the terms of the merger agreement, the
conditions to the merger, including receipt by each party of opinions of
counsel relating to tax matters, may generally be waived by Zions or Draper, as
applicable. As of the date of this proxy statement/prospectus, neither Zions
nor Draper intends to waive the conditions as to the receipt of opinions of
counsel on tax matters.
Assuming that the merger is consummated in accordance with the merger
agreement, the following federal income tax consequences will occur:
. The merger will constitute a reorganization within the meaning of
Section 368(a) of the Code;
. No gain or loss will be recognized by a Draper shareholder who receives
solely shares of Zions common stock in exchange for Draper common stock,
except as described below in the case of a Draper shareholder upon the
exercise of dissenters' rights;
. The aggregate tax basis of shares of Zions common stock received by a
Draper shareholder pursuant to the merger will be the same as the
aggregate tax basis of the shares of Draper common stock exchanged
therefor; and
. The holding period of shares of Zions common stock received by a Draper
shareholder pursuant to the merger will include the holding period of
the Draper common stock exchanged therefor.
43
<PAGE>
Draper shareholders who exercise their dissenters' rights and who receive
cash in exchange for their respective shares will be treated as having received
such payment in redemption of such shares. In general, if such shares are held
as a capital asset at the effective date of the merger and no other Draper
common stock is constructively owned, the Draper shareholder will recognize
capital gain or loss measured by the difference between the amount of cash
received and the Draper shareholder's tax basis for the shares. If, however,
the Draper shareholder owns, either actually or constructively, any Draper
common stock that is exchanged in the merger for Zions common stock, the
payment for dissenting shares to such shareholder might, in certain
circumstances, be treated as dividend income. In general, under the
constructive ownership rules of the Code, a holder may be considered to own
stock that is owned, and in come cases constructively owned, by other related
individuals or entities, as well as stock that the holder (or related
individuals or entities) has the right to acquire by exercising an option or
converting a convertible security. Each Draper stockholder who contemplates
exercising dissenters' rights should consult his or her own tax advisor as to
the possibility that any payment to such stockholder will be treated as
dividend income.
Because certain tax consequences of the merger may vary depending upon the
particular circumstances of each holder of Draper common stock and other
factors, each such holder is urged to consult his or her own tax advisor as to
the specific tax consequences of the merger to the holder (including the
application and effect of state and local income and other tax laws).
COMPARISON OF SHAREHOLDERS' RIGHTS
Comparison of Capital Stock
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------
Zions Combined Company Draper
------------------------------------------------------------------------------------------
<S> <C> <C>
Authorized Capital
------------------------------------------------------------------------------------------
200,000,000 shares of common stock, no par value, 500,000 shares of common
3,000,000 shares of preferred stock, no par value. stock, par value $10.00 per
share.
------------------------------------------------------------------------------------------
Issued Capital
------------------------------------------------------------------------------------------
As of September 30, 2000, Based on the number of As of September 30, 2000,
86,964,292 shares of Zions shares of Zions common stock 362,688 shares of Draper
common stock were issued and and Draper common stock common stock were issued and
outstanding and no shares of outstanding as of September outstanding.
Zions preferred stock were 30, 2000, and based on an
issued and outstanding. average closing price and
effective price of $55,
approximately 88.4 million
shares of common stock of
Zions will be issued and
outstanding after the
merger.
---------------------------------------------------------------------------------------------
</TABLE>
44
<PAGE>
Comparison of Other Shareholder Rights
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------
Zions Combined Company Draper
---------------------------------------------------------------------------------------------
<S> <C> <C>
Special Meetings
---------------------------------------------------------------------------------------------
The President and the Board can call special meetings of The President, the Board, and
shareholders. the holders of 10% or more of
all the votes entitled to be
cast who sign, date and
deliver to the corporation's
secretary a written demand
for a special meeting, which
demand states the purpose for
which the meeting will be
held, may all call a special
meeting of shareholders.
---------------------------------------------------------------------------------------------
Shareholder Action by Written
Consent
---------------------------------------------------------------------------------------------
Permitted if written consents to taking an action without a meeting are given by holders of
shares having not less than the minimum number of shares required to take such action at a
meeting.
---------------------------------------------------------------------------------------------
Shareholder Proposals
---------------------------------------------------------------------------------------------
Notice of any proposal to be presented by a shareholder or Utah law allows special
of any person to be nominated as a director must be given shareholder meetings to be
at least 120 days before the shareholder meeting. Notice called as described above.
must include the name of the shareholder, the number and Business within the purpose
class of stock owned by the shareholder, the information or purposes described in the
regarding the shareholder required by Regulation S-K of meeting notice may be
the Securities Act, a signed consent of the shareholder, conducted at such meeting.
the shareholder's name and address, and the number of
shares and class of stock owned by the shareholder.
---------------------------------------------------------------------------------------------
Restrictions on Shareholder
Action
---------------------------------------------------------------------------------------------
The vote of at least 80% of the voting power of all shares No restrictions on
outstanding and entitled to vote to approve certain shareholder transactions.
transactions with individuals holding over 10% of the
voting power of Zions, unless:
. approved by certain incumbent directors; or
. the transaction results in a price higher than the
highest price the related shareholder paid, the related
shareholder has not acquired additional shares, and
received certain non-pro rata benefits or caused
certain changes in Zions' business or capital
structure.
These transactions include:
. a merger, consolidation, sale of substantially all
assets of Zions or a subsidiary;
. the issuance of securities of Zions with a fair market
value of $5,000,000 or more;
. any reclassification or recapitalization resulting in
increased voting power for the 10% shareholder; or
. any liquidation, spinoff, split-off, split-up or
dissolution of Zions.
---------------------------------------------------------------------------------------------
</TABLE>
45
<PAGE>
Board of Directors
<TABLE>
<S> <C> <C>
-----------------------------------------------------------------------------------------
Classification
-----------------------------------------------------------------------------------------
Directors are divided into three classes, with each class All directors are elected
serving a three-year term. Each class is as nearly equal annually.
in size as possible.
-----------------------------------------------------------------------------------------
Number of Directors
-----------------------------------------------------------------------------------------
No fewer than three and no more than 15. Draper's by-laws provide
that its Board may consist
of no fewer than 1 and no
more than 3 directors. Utah
law, however, requires at
least three directors for
any corporation with more
than 3 shareholders.
-----------------------------------------------------------------------------------------
Special Meetings
-----------------------------------------------------------------------------------------
The President or a majority of the Board may call a The President, the Chairman
special meeting of the Board. of the Board, or any of the
other directors may call
special meetings of the
Board.
-----------------------------------------------------------------------------------------
Executive Committee of the
Board
-----------------------------------------------------------------------------------------
</TABLE>
The Board may designate three directors as an The Board may designate
executive committee. The committee may exercise an executive committee,
any power of the Board except that it may not: which must have at least
. amend the articles of incorporation or by-laws two directors or
of Zions, officers, at least one
. adopt a plan of merger or consolidation, or of whom must be a
. recommend to shareholders the disposition of director. Utah law
substantially all assets. allows committees
created by the Board to
exercise the authority
of the full Board.
--------------------------------------------------------------------------------
Removal of Directors
--------------------------------------------------------------------------------
A director may only be removed by the affirmative A director may be
vote of two-thirds of the issued and outstanding removed by the
shares. affirmative vote of a
majority of the shares
present at a shareholder
meeting held for that
purpose.
--------------------------------------------------------------------------------
Amendment of Articles and By-laws
--------------------------------------------------------------------------------
Articles of Incorporation
--------------------------------------------------------------------------------
In general, amendments to the articles of Amendments to the
incorporation require only a majority vote of the articles of
shareholders. incorporation require a
majority vote of the
shareholders entitled to
vote.
Amendments to the articles of incorporation
require approval of at least two-thirds of the
outstanding shares entitled to vote if the
amendment relates to:
. the number, classes, or removal of directors;
. the procedure for amendment of the articles of
incorporation;
. the duties and powers of the board, including
quorum requirements; and
. any other change that would restrict, limit or
alter the powers of the Board.
Amendments to the "Restrictions on Shareholder
Action" provisions, above, require the vote of at
least 80% of the outstanding shares entitled to
vote.
--------------------------------------------------------------------------------
By-laws
--------------------------------------------------------------------------------
The Board may amend the by-laws by a two-thirds The Board may amend or
vote of the entire Board. repeal by-laws except
any bylaw that fixes a
shareholder quorum or
voting requirement
greater than that
provided by Utah law.
The shareholders may amend the by-laws by
majority vote, except when such amendment would:
. restrict, limit or alter the powers of the
Board;
. vest powers in anyone other than the Board and The shareholders may
the officers to whom the Board has delegated amend or repeal Draper's
powers; by-laws in accordance
. require the approval of the shareholders if with the procedures for
taken by the Board; or shareholder approval.
. change the procedure for election or meetings
of directors.
--------------------------------------------------------------------------------
46
<PAGE>
Zions Shareholder Rights Plan
Zions entered into the Shareholder Protection Rights Agreement, dated
September 27, 1996, with Zions First National Bank, as rights agent, and the
Zions Board declared a dividend of one right on each outstanding share of Zions
common stock. The shareholder rights plan was not adopted in response to any
specific effort to acquire control of Zions. Rather, it was adopted to deter
abusive takeover tactics that can be used to deprive shareholders of the full
value of their investment.
Until it is announced that a person or group has acquired 10% or more of
Zions common stock or commences a tender offer that will result in such person
or group owning 10% or more of Zions common stock the rights will be evidenced
by the Zions common stock certificates, will automatically trade with the Zions
common stock and will not be exercisable. Thereafter, separate rights
certificates will be distributed and each right will entitle its holder to
purchase participating preferred stock of Zions having economic and voting
terms similar to those of one share of common stock.
Upon announcement that any person or group has become an acquiring person, 10
days thereafter (or such other date as the Zions Board may decide), each right
which is not beneficially owned by an acquiring person or transferee of an
acquiring person, will entitle its holder to purchase, for the exercise price,
a number of shares of Zions common stock or participating preferred stock
having a market value of twice the exercise price.
In addition, if, after an acquiring person controls the Zions Board, Zions is
involved in a merger or sells more than 50% of its assets or earning power or
enters into an agreement to do the same, and in the case of a merger, the
acquiring person will receive different treatment than all other shareholders
or the person with whom the merger occurs is the acquiring person or a person
affiliated or associated with the acquiring person, each right will entitle its
holder to purchase, for the exercise price, a number of share of common stock
of the acquiring person having a market value of twice the exercise price. If
any person or group acquires between 10% and 50% of the Zions common stock, the
Zions Board may, at its option, exchange one share of Zions common stock for
each right.
The existence of the shareholder rights plan may tend to deter the
acquisition of Zions by a third party without the consent of the Zions board.
As a result, the Plan may make less likely a takeover of Zions in which you
could receive a premium for your shares of Zions common stock. Zions believes,
however, that the existence of the Plan gives the Zions Board the leverage to
preserve continuity of management of Zions and to negotiate for the maximum
premium in the event of a takeover.
Discussion of Certain Provisions in Zions Articles of Incorporation
Certain provisions of Zions articles of incorporation and by-laws may have
anti-takeover effects, and may discourage or delay others' attempts to gain
control of Zions without the consent of the Zions Board. These provisions
include, among others:
. a classified board of directors;
. restrictions on who may call a special meeting of shareholders;
. a requirement of a two-thirds vote of the Board and the outstanding
shares to amend certain provisions of the articles of incorporation or
the by-laws; and
. the requirement of an 80% vote of the outstanding shares to amend
provisions of the articles of incorporation governing business
transactions with significant shareholders.
These anti-takeover measures could have the effect of discouraging potential
acquirors from purchasing shares of Zions and could decrease the likelihood of
receiving a premium bid on its shares. To the extent these
47
<PAGE>
provisions make Zions a less attractive takeover candidate, they may not always
be in the best interest of Zions or its shareholders. None of these provisions
is the result of any specific effort by a third party to accumulate securities
of Zions or to obtain control by means of merger, tender offer, solicitation in
opposition to management or otherwise.
Classified Board of Directors
Those sections of the articles of incorporation of Zions providing for a
classified board of directors will have the effect of making it more difficult
to change the overall composition of the Zions Board. At least two
shareholders' meetings will be required for shareholders to change a majority
of the Zions Board. However, Zions believes that the longer time required to
elect a majority of the Zions Board will help assure continuity and stability
in the management of the business and affairs of Zions after the merger.
RIGHTS OF DISSENTING SHAREHOLDERS
Under Part 13 of the Utah Revised Business Corporation Act, Draper
shareholders are entitled to dissent from the proposed merger and obtain
payment for the fair value of their shares in the event the merger is approved.
The fair value of the shares is defined as the value of the shares immediately
before the effective date of the merger, excluding any appreciation or
depreciation in anticipation of the merger.
Any Draper shareholder who contemplates exercising his or her right to
dissent is urged to read carefully the provisions of Part 13 of the URBCA
attached to this proxy statement/prospectus as Appendix D. The following is a
summary of the steps to be taken if the right to dissent is to be exercised,
and should be read in connection with the full text of the law found at
Appendix D. A dissenting shareholder must take each step in the indicated order
and in strict compliance with the provisions of the law in order to perfect
dissenters' rights. Failing to comply with these procedural steps will result
in the shareholder receiving shares of Zions common stock in exchange for
shares of Draper common stock based on the exchange ratio in the event that the
merger is completed. See "The Merger--Merger Consideration" on page 24.
The procedures discussed below apply only if the merger is approved by Draper
shareholders and applicable governmental agencies, and the merger is
consummated as provided in the merger agreement.
If a Draper shareholder wishes to assert dissenters' rights, he or she must:
. deliver to Draper, prior to the vote at the special meeting, written
notice of intent to demand payment for his or her shares if the proposed
merger is effected,
. not vote for the merger, and
. hold the shares until the vote at the special meeting.
No later than 10 days after the effective date of approval of the merger by
shareholders, notice will be sent to dissenting shareholders stating where
written demand for payment must be sent and the dates by which the written
demand must be received and certificates for shares must be deposited for
payment. The dissenting shareholder must then deliver a written payment demand,
which may be on the form provided by Draper, and deposit their certificates
according to the instructions in the notice.
A dissenting shareholder who has submitted a payment demand will retain all
of his or her rights as a shareholder of Draper except the right to transfer
the dissenting shares until the vote at the special meeting. After the special
meeting, dissenting shareholders will have no rights as a shareholder except to
receive payment for their shares.
48
<PAGE>
Once a dissenting shareholder submits a payment demand, Draper will estimate
the fair value of the dissenter's shares and pay that amount, plus interest. If
the dissenting shareholder does not agree with Draper's estimate, he or she
must notify Draper in writing within 30 days after Draper's payment or offer of
his or her own estimate of the fair value of the shares and demand payment for
that amount. If the dissenting shareholder cannot agree with Draper about the
value of the shares, Draper must petition a court to determine the fair value
of the shares. If Draper fails to petition the court within 60 days from the
date the dissenting shareholder submitted an estimate and payment demand,
Draper must pay the dissenting shareholder the estimate amount. Otherwise, a
court will determine the value of the shares, and if the court determines the
fair value of the shares exceeds the amount paid to the dissenting shareholder
by Draper, Draper must pay the excess value, plus interest.
Only a holder of record of dissenting shares is entitled to assert
dissenters' rights for shares registered in that holder's name. A demand for
payment should be executed by or on behalf of the holder of record, fully and
correctly, as such holder's name appears on the holder's stock certificates. If
the dissenting shares are owned in a fiduciary capacity, such as by a trustee,
guardian or custodian, execution of the demand should be made in that capacity.
If the dissenting shares are owned of record by more than one person, such as
in joint tenancy or tenancy in common, the demand should be executed by or on
behalf of all joint owners. If a shareholder owns his or her shares through a
broker, the shareholder is urged to consult with his or her broker to determine
the appropriate procedures for the making of a demand. All written demands for
payment should be sent or delivered to Draper Bancorp, 903 East 12300 South,
P.O. Box 1000, Draper, Utah 84020.
The foregoing discussion is not a complete statement of the procedures to be
followed by Draper shareholders desiring to exercise dissenters' rights and,
because exercise of such rights requires strict adherence to the relevant
provisions of the URBCA, each shareholder desiring to exercise dissenters'
rights is advised individually to consult the law (as provided in Appendix D to
this proxy statement/prospectus) and comply with the relevant provisions of the
law. For example, dissenting shareholders will lose their right to demand
payment if they fail to give timely written notice of intent to demand payment,
or fail to timely make written demand for payment after receiving Draper's
notice. Draper shareholders wishing to exercise their dissenters' rights should
consult their own counsel to ensure that they fully and properly comply with
the requirements of Utah law. Unless the above procedures are followed, Draper
shareholders will be presumed to have acquiesced in the approval of the merger
and waived their dissenters' rights.
49
<PAGE>
BENEFICIAL OWNERSHIP OF DRAPER'S PRINCIPAL SHAREHOLDERS, EXECUTIVE OFFICERS,
AND DIRECTORS
The following table shows the common stock owned by directors and executive
officers of Draper and persons known by Draper to beneficially own more than 5%
of Draper common stock issued and outstanding as of September 30, 2000. The
address of each person listed below is 903 East 12300 South, P.O. Box 1000,
Draper, Utah 84020. This information has been prepared based upon the SEC's
"beneficial ownership" rules. Under these rules, a person is deemed to be a
beneficial owner of a security if that person has or shares voting power, which
includes the power to vote or to direct the voting of a security, or investment
power, which includes the power to dispose or to direct the disposition of a
security. Unless otherwise indicated, each of the following persons has sole
voting and investment power with respect to the shares beneficially owned.
<TABLE>
<CAPTION>
Number of
Shares Percent of
Beneficially Outstanding
Name and Address of Beneficial Owner Owned Shares
------------------------------------ ------------ -----------
<S> <C> <C>
Principal Shareholders
Robert H. Ballard Family Trust....................... 20,800 5.53%
Executive Officers and Directors
Robert M. Daugherty (1).............................. 249,736 66.43%
Stewart M. Hanson, Jr. (2)........................... 2,500 0.66%
John M. Robertson (3)................................ 500 0.13%
G. Blake Robinson (4)................................ 500 0.13%
W. James Tozer, Jr. (5).............................. 247,776 65.91%
Richard P. Coleman (6)............................... 2,310 0.61%
Holly J. Cordner (7)................................. 570 0.15%
Dennis L. Higbee (8)................................. 4,072 1.08%
Douglas A. Stewart (9)............................... 2,280 0.61%
All directors and executive officers as a group (nine
persons)............................................ 262,968 69.95%
</TABLE>
----------------
(1) Includes 247,276 shares held by Messrs. Daugherty and Tozer as nominees
under a nominee arrangement which by its own terms, expires upon the
closing of the merger. Also includes 2,460 options to purchase an identical
number of shares of common stock of which 1,200 are currently exercisable
and vested. Of the remaining 1,260 options, 92 become exercisable and
vested on December 31, 2000 with the balance to become exercisable and
vested at the time of closing.
(2) Includes 500 options to purchase an identical number of shares of common
stock of which 300 are currently exercisable and vested with the balance to
become exercisable and vested at the time of closing.
(3) Includes 500 options to purchase an identical number of shares of common
stock of which 300 are currently exercisable and vested with the balance to
become exercisable and vested at the time of closing.
(4) Includes 500 options to purchase an identical number of shares of common
stock of which 300 are currently exercisable and vested with the balance to
become exercisable and vested at the time of closing.
(5) Includes 247,276 shares held by Messrs. Daugherty and Tozer as nominees
under a nominee arrangement which by its own terms, expires upon the
closing of the merger. Also includes 500 options to purchase an identical
number of shares of common stock of which 300 are currently exercisable and
vested with the balance to become exercisable and vested at the time of
closing.
(6) Includes 2,310 options to purchase an identical number of shares of common
stock of which 1,200 are currently exercisable and vested. Of the remaining
1,110 options, 62 become exercisable and vested on December 31, 2000, with
the balance to become exercisable and vested at the time of closing.
(7) Includes 570 options to purchase an identical number of shares of common
stock of which 80 are currently exercisable and vested. Of the remaining
490 options, 34 become exercisable and vested on December 31, 2000, with
the balance to become exercisable and vested at the time of closing.
(8) Includes 2,360 options to purchase an identical number of shares of common
stock of which 1,200 are currently exercisable and vested. Of the remaining
1,160 options, 72 become exercisable and vested on December 31, 2000, with
the balance to become exercisable and vested at the time of closing.
(9) Includes 2,280 options to purchase an identical number of shares of common
stock of which 1,200 are currently exercisable and vested. Of the remaining
1,080 options, 56 become exercisable and vested on December 31, 2000, with
the balance to become exercisable and vested at the time of closing.
50
<PAGE>
OTHER MATTERS
As of the date of this proxy statement/prospectus, the Draper Board knows of
no matters that will be presented for consideration at the Draper meeting other
than as described in this proxy statement/prospectus. If any other matters
shall properly come before the Draper meeting and be voted upon, the enclosed
proxies will be deemed to confer discretionary authority on the individuals
named as proxies therein to vote the shares represented by such proxies as to
any such matters. The persons named as proxies intend to vote or not to vote in
accordance with the recommendation of the management of Draper.
LEGAL MATTERS
The validity of the common stock to be issued in connection with the merger
will be passed upon by Sullivan & Cromwell, Los Angeles, California, counsel
for Zions. Lewis, Rice & Fingersh, L.C., St. Louis, Missouri, counsel for
Draper, will pass on certain federal income tax consequences of the merger.
EXPERTS
The consolidated financial statements of Zions as of December 31, 1999 and
1998 and for each of the years in the three-year period ended December 31,
1999, have been incorporated by reference in this proxy statement/prospectus in
reliance upon the report of KPMG LLP, independent certified public accountants,
incorporated herein by reference and upon the authority of said firm as experts
in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
Zions files annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any reports, statements or
other information we file at the SEC's public reference room at 450 Fifth
Street, N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for
further information on the public reference rooms. Our SEC filings are also
available to the public from commercial document retrieval services and at the
web site maintained by the SEC at http://www.sec.gov. In addition, you may read
and copy Zions' SEC filings at the Nasdaq National Market, 1735 K Street, N.W.,
Washington, D.C. 20006-1500. Zions' Internet address is www.zionsbank.com.
Zions has filed a registration statement on Form S-4 to register with the SEC
the Zions common stock to be issued to the holders of Draper common stock in
the merger. This proxy statement/prospectus is a part of that registration
statement and constitutes a prospectus of Zions in addition to being a proxy
statement of Draper for the Draper special meeting. As allowed by SEC rules,
this proxy statement/prospectus does not contain all the information you can
find in the registration statement or the exhibits to the registration
statement.
The SEC allows us to "incorporate by reference" information into this proxy
statement/prospectus, which means that we can disclose important information to
you by referring you to another document filed separately with the SEC. The
information incorporated by reference is deemed to be part of this proxy
statement/prospectus, except for any information superseded by information in
this proxy statement/prospectus. This proxy statement/prospectus incorporates
by reference the documents set forth below that we have previously filed with
the SEC. These documents contain important information about Zions, Zions'
finances and Zions' common stock.
Zions' SEC Filings Incorporated by Reference
. Annual Report on Form 10-K for the year ended December 31, 1999.
. Quarterly Reports on Form 10-Q for the quarters ended March 31, 2000,
June 30, 2000 and September 30, 2000.
51
<PAGE>
. Definitive Proxy Statement on Form 14A, filed on April 26, 2000.
. The description of Zions common stock and rights set forth in Zions'
registration statements on Form 10 and Form 8-A filed pursuant to Section
12 of the Exchange Act, including any amendment or report filed with the
SEC for the purpose of updating such descriptions.
We incorporate by reference additional documents that we file with the SEC
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act between the
date of this proxy statement/prospectus and the effective time of the merger.
Zions has supplied all information contained or incorporated by reference in
this proxy statement/prospectus relating to Zions, and Draper has supplied all
such information relating to Draper.
If you are a shareholder, we may have sent you some of the documents
incorporated by reference, but you can obtain any of them through us or the
SEC. You can obtain documents incorporated by reference from us without charge,
excluding all exhibits unless we have specifically incorporated by reference an
exhibit in this proxy statement/prospectus. Shareholders may obtain documents
incorporated by reference in this proxy statement/prospectus by requesting them
in writing or by telephone from the appropriate party at the following address:
Zions Bancorporation,
One South Main, Suite 1380
Salt Lake City, Utah 84111
Attention: Mr. Dale M. Gibbons, Secretary
Tel: (801) 524-4787.
If you would like to request documents from us, please do so by , 2000,
in order to receive them prior to the Draper special meeting.
You should rely only on the information contained or incorporated by
reference in this proxy statement/prospectus to vote on the Draper proposal. We
have not authorized anyone to provide you with information that is different
from what is contained in this proxy statement/prospectus. This proxy
statement/prospectus is dated , 2000. You should not assume that the
information contained in this proxy statement/prospectus is accurate as of any
date other than such date unless the information specifically indicates that
another date applies. Neither the mailing of this proxy statement/prospectus to
shareholders nor the issuance of shares of Zions common stock in the merger
shall create any implication to the contrary.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Zions has used and incorporated by reference "forward-looking statements" in
this proxy statement/prospectus, including one or more of the following:
. projections of revenues, income, earnings per share, capital
expenditures, dividends, capital structure or other financial items;
. descriptions of plans or objectives of management for future operations,
products or services;
. forecasts of future economic performance; and
. descriptions of assumptions underlying or relating to any of the
foregoing.
Forward-looking statements can be identified by the fact that they do not
relate strictly to historical or current facts. They often include words such
as "will permit", "will afford", "believes", "expects", "may", "should",
"projected", "contemplates", or "anticipates". These statements are within the
meaning of
52
<PAGE>
Section 27A of the Securities Act and Section 21E of the Exchange Act and are
subject to risks and uncertainties that could cause our actual results to
differ materially. Zions has used these statements to describe our expectations
and estimates in various sections of this proxy statement/prospectus.
Factors that might cause such differences include, but are not limited to:
the timing of closing the proposed merger being delayed; competitive pressures
among financial institutions increasing significantly; economic conditions,
either nationally or locally in areas in which Zions conducts its operations,
being less favorable than expected; the cost and effort required to integrate
aspects of the operations of the companies being more difficult than expected;
expected cost savings from the proposed merger not being fully realized or
realized within the expected time frame; and legislation or regulatory changes
which adversely affect the ability of Zions to conduct its current and future
operations. Zions disclaims any obligation to update any such factors or to
publicly announce the result of any revisions to any of the forward-looking
statements included in this proxy statement/prospectus to reflect future events
or developments. Zions' actual results could differ materially from those set
forth in the forward-looking statements because of many reasons, including the
risk factors listed above. This list may not be exhaustive.
53
<PAGE>
APPENDIX A
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
dated as of October 10, 2000
by and between
Zions Bancorporation
and
Draper Bancorp
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
A-1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
RECITALS................................................................... A-4
</TABLE>
ARTICLE I
Certain Definitions
<TABLE>
<S> <C>
1.01 Certain Definitions.................................................... A-4
</TABLE>
ARTICLE II
The Merger
<TABLE>
<S> <C>
2.01 The Merger............................................................. A-8
2.02 Effective Date and Effective Time...................................... A-8
2.03 Plan of Merger......................................................... A-8
</TABLE>
ARTICLE III
Consideration; Exchange Procedures
<TABLE>
<S> <C>
3.01 Merger Consideration.................................................. A-9
3.02 Rights as Stockholders; Stock Transfers............................... A-9
3.03 Fractional Shares..................................................... A-9
3.04 Exchange Procedures................................................... A-9
3.05 Anti-Dilution Provisions.............................................. A-10
3.06 Options............................................................... A-11
3.07 Dissenters' Rights.................................................... A-11
</TABLE>
ARTICLE IV
Actions Pending Acquisition
<TABLE>
<S> <C>
4.01 Forebearances of Company.............................................. A-11
4.02 Forebearances of Zions................................................ A-13
</TABLE>
ARTICLE V
Representations and Warranties
<TABLE>
<S> <C>
5.01 Disclosure Schedules.................................................. A-13
5.02 Standard.............................................................. A-14
5.03 Representations and Warranties of Company............................. A-14
5.04 Representations and Warranties of Zions............................... A-20
</TABLE>
A-2
<PAGE>
ARTICLE VI
Covenants
<TABLE>
<S> <C>
6.01 Reasonable Best Efforts............................................... A-21
6.02 Stockholder Approval.................................................. A-21
6.03 Registration Statement................................................ A-22
6.04 Press Releases........................................................ A-22
6.05 Access; Information................................................... A-22
6.06 Acquisition Proposals................................................. A-23
6.07 Affiliate Agreements.................................................. A-23
6.08 Takeover Laws......................................................... A-24
6.09 Certain Policies...................................................... A-24
6.10 Nasdaq Listing........................................................ A-24
6.11 Regulatory Applications............................................... A-24
6.12 Indemnification; Director and Officers' Insurance..................... A-24
6.13 Benefit Plans......................................................... A-25
6.14 Accountants' Letters.................................................. A-25
6.15 Notification of Certain Matters....................................... A-26
6.16 Other Agreements...................................................... A-26
</TABLE>
ARTICLE VII
Conditions to Consummation of the Merger
<TABLE>
<S> <C>
7.01 Conditions to Each Party's Obligation to Effect the Merger............ A-26
7.02 Conditions to Obligation of Company................................... A-27
7.03 Conditions to Obligation of Zions..................................... A-27
</TABLE>
ARTICLE VIII
Termination
<TABLE>
<S> <C>
8.01 Termination........................................................... A-28
8.02 Effect of Termination and Abandonment................................. A-29
</TABLE>
ARTICLE IX
Miscellaneous
<TABLE>
<S> <C>
9.01 Survival.............................................................. A-29
9.02 Waiver; Amendment..................................................... A-29
9.03 Counterparts.......................................................... A-29
9.04 Governing Law; Waiver of Jury Trial................................... A-29
9.05 Expenses.............................................................. A-29
9.06 Notices............................................................... A-29
9.07 Entire Understanding; No Third Party Beneficiaries.................... A-30
9.08 Interpretation; Effect................................................ A-30
</TABLE>
EXHIBIT A Form of Affiliate Agreement
EXHIBIT B Form of Voting Agreement
EXHIBIT C Employment Agreement
EXHIBIT D Voting and Non-Competition Agreement
A-3
<PAGE>
AGREEMENT AND PLAN OF MERGER, dated as of October 10, 2000 (this
"Agreement"), by and between Draper Bancorp ("Company") and Zions
Bancorporation ("Zions").
RECITALS
A. Draper Bancorp. Draper Bancorp is a Utah corporation, having its principal
place of business in Draper, Utah.
B. Zions Bancorporation. Zions Bancorporation is a Utah corporation, having
its principal place of business in Salt Lake City, Utah.
C. Intentions of the Parties. It is the intention of the parties to this
Agreement that the business combination contemplated hereby be accounted for
under the "pooling-of-interests" accounting method and be treated as a
"reorganization" under Section 368 of the Internal Revenue Code of 1986 as
amended (the "Code").
D. Board Action. The respective Boards of Directors of each of Zions and
Company have determined that it is in the best interests of their respective
companies and their stockholders to consummate the strategic business
combination transaction provided for herein.
NOW, THEREFORE, in consideration of the premises and of the mutual covenants,
representations, warranties and agreements contained herein, the parties agree
as follows:
ARTICLE I
Certain Definitions
1.01 Certain Definitions. The following terms are used in this Agreement with
the meanings set forth below:
"Acquisition Proposal" means any tender or exchange offer, proposal for a
merger, consolidation or other business combination involving Company or
any of its Subsidiaries or any proposal or offer to acquire in any manner a
substantial equity interest in, or a substantial portion of the assets or
deposits of, Company or any of its Subsidiaries, other than the
transactions contemplated by this Agreement.
"Agreement" means this Agreement, as amended or modified from time to
time in accordance with Section 9.02.
"Average Closing Price" means the average of the daily closing (4:00 p.m.
New York time) prices of Zions Common Stock on Nasdaq (as reported in The
Wall Street Journal or, if not reported therein, in another mutually agreed
upon authoritative source) for the fifteen consecutive full Nasdaq Trading
Days in which such shares are traded on Nasdaq ending at the close of
trading on the Determination Date.
"Benefit Plans" has the meaning set forth in Section 5.03(m).
"Business Combination" has the meaning set forth in Section 3.05.
"Code" has the meaning set forth in the recitals.
"Company" has the meaning set forth in the preamble to this Agreement.
"Company Affiliate" has the meaning set forth in Section 6.07(a).
"Company Board" means the Board of Directors of Company.
A-4
<PAGE>
"Company Bank" means Draper Bank, a Utah banking corporation and a wholly
owned subsidiary of Company.
"Company By-Laws" means the By-laws of Company.
"Company Certificate" means the Articles of Incorporation of Company.
"Company Meeting" has the meaning set forth in Section 6.02.
"Company Stock" means the common stock, par value $10.00 per share, of
Company.
"Company Stock Option"has the meaning set forth in Section 3.06.
"Company Stock Plans" means the Company's 1998 Incentive Stock Option
Plan and the 1999 Nonqualified Stock Option Plan.
"Corporations Division" has the meaning set forth in Section 2.01(b).
"Costs" has the meaning set forth in Section 6.12(a).
"Covered Transactions" has the meaning set forth in Section 5.03(o).
"Determination Date" means the date that is five Nasdaq Trading Days
prior to the Effective Date.
"Disclosure Schedule" has the meaning set forth in Section 5.01.
"Dissenters' Shares" means shares as to which holders have perfected
their rights to dissent under the URBCA.
"DOL" has the meaning set forth in Section 5.03(m).
"Effective Date" means the date on which the Effective Time occurs.
"Effective Price" means the weighted average trading price of Zions
Common Stock on Nasdaq (as reported on Bloomberg or, if not reported
therein, in another mutually agreed upon authoritative source) for the
Nasdaq Trading Day immediately preceding the Effective Date.
"Effective Time" means the effective time of the Merger, as provided for
in Section 2.02
"Employment Agreement" has the meaning set forth in Section 6.16.
"Employees" has the meaning set forth in Section 5.03(m).
"Environmental Law" has the meaning set forth in Section 5.03(p).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" has the meaning set forth in Section 5.03(m).
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations thereunder.
"Exchange Agent" has the meaning set forth in Section 3.04.
"Exchange Fund" has the meaning set forth in Section 3.04.
A-5
<PAGE>
"Exchange Ratio" has the meaning set forth in Section 3.01.
"Execution Price" means the closing price of Zions Common Stock on Nasdaq
(as reported in The Wall Street Journal or, if not reported therein, in
another mutually agreed upon authoritative source) on the date hereof.
"FDIC" means the Federal Deposit Insurance Corporation.
"Federal Reserve" means the Board of Governors of the Federal Reserve
System.
"Governmental Authority" means any court, administrative agency or
commission or other federal, state or local governmental authority or
instrumentality.
"Hazardous Substance" has the meaning set forth in Section 5.03(p).
"Indemnified Party" has the meaning set forth in Section 6.12(a).
"Insurance Policy" has the meaning set forth in Section 5.03(t).
"Liens" means any charge, mortgage, pledge, security interest,
restriction, claim, lien or encumbrance.
"Material Adverse Effect" means, with respect to Zions or Company, any
effect that (i) is material and adverse to the financial position, results
of operations or business of Zions and its Subsidiaries taken as a whole or
Company and its Subsidiaries taken as a whole, respectively, or (ii) would
materially impair the ability of either Zions or Company to perform its
obligations under this Agreement or otherwise materially threaten or
materially impede the consummation of the Merger and the other transactions
contemplated by this Agreement; provided, however, that Material Adverse
Effect shall not be deemed to include the impact of (a) changes in banking
and similar laws of general applicability or interpretations thereof by
courts or governmental authorities, (b) changes in generally accepted
accounting principles or regulatory accounting requirements applicable to
banks and their holding companies generally and (c) any modifications or
changes to valuation policies and practices in connection with the Merger
or restructuring charges taken in connection with the Merger, in each case
in accordance with generally accepted accounting principles.
"Maximum Amount" has the meaning set forth in Section 6.12(c).
"Merger" has the meaning set forth in Section 2.01.
"Merger Consideration" has the meaning set forth in Section 2.01.
"Multiemployer Plans" has the meaning set forth in Section 5.03(m).
"Nasdaq" means The Nasdaq Stock Market, Inc.'s National Market.
"Nasdaq Trading Day" means each weekday other than any day on which Zions
Common Stock is not available for trading on Nasdaq.
"New Certificate" has the meaning set forth in Section 3.04.
"Old Certificate" has the meaning set forth in Section 3.04.
"Person" means any individual, bank, corporation, partnership,
association, joint-stock company, business trust or unincorporated
organization.
"Pension Plan" has the meaning set forth in Section 5.03(m).
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"Plans" has the meaning set forth in Section 5.03(m).
"Previously Disclosed" by a party shall mean information set forth in its
Disclosure Schedule.
"Proxy Statement" has the meaning set forth in Section 6.03.
"Registration Statement" has the meaning set forth in Section 6.03.
"Regulatory Authority" has the meaning set forth in Section 5.03(i).
"Replacement Option" has the meaning set forth in Section 3.06.
"Representatives" means, with respect to any Person, such Person's
directors, officers, employees, legal or financial advisors or any
representatives of such legal or financial advisors.
"Rights" means, with respect to any Person, securities or obligations
convertible into or exercisable or exchangeable for, or giving any person
any right to subscribe for or acquire, or any options, calls or commitments
relating to, or any stock appreciation right or other instrument the value
of which is determined in whole or in part by reference to the market price
or value of, shares of capital stock of such Person.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations thereunder.
"Subsidiary" and "Significant Subsidiary" have the meanings ascribed to
them in Rule1-02 of Regulation S-X of the SEC.
"Surviving Corporation" has the meaning set forth in Section 2.01.
"Takeover Laws" has the meaning set forth in Section 5.03(o).
"Tax" and "Taxes" means all federal, state, local or foreign taxes,
charges, fees, levies or other assessments, however denominated, including,
without limitation, all net income, gross income, gains, gross receipts,
sales, use, ad valorem, goods and services, capital, production, transfer,
franchise, windfall profits, license, withholding, payroll, employment,
disability, employer health, excise, estimated, severance, stamp,
occupation, property, environmental, unemployment or other taxes, custom
duties, fees, assessments or charges of any kind whatsoever, together with
any interest and any penalties, additions to tax or additional amounts
imposed by any taxing authority whether arising before, on or after the
Effective Date.
"Tax Returns" means any return, amended return or other report (including
elections, declarations, disclosures, schedules, estimates and information
returns) required to be filed with respect to any Tax.
"Treasury Stock" shall mean shares of Company Stock held by Company or
any of its Subsidiaries or by Zions or any of its Subsidiaries, in each
case other than in a fiduciary (including custodial or agency) capacity or
as a result of debts previously contracted in good faith.
"URBCA" means the Utah Revised Business Corporation Act.
"Voting Agreements" has the meaning set forth in Section 6.16.
"Voting and Non-Competition Agreement" has the meaning set forth in
Section 6.16.
"Zions" has the meaning set forth in the preamble to this Agreement.
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"Zions Board" means the Board of Directors of Zions.
"Zions Common Stock" means the common stock, no par value per share, of
Zions together with any rights attached thereto under or by virtue of the
Shareholder Protection Rights Agreement, dated September 27, 1996, between
Zions and Zions First National Bank, as rights agent.
"Zions Preferred Stock" means the preferred stock, no par value per
share, of Zions.
"Zions SEC Documents" means its annual reports on Form 10-K, as amended,
for the fiscal years ended December 31, 1997, 1998 and 1999 and all other
reports, registration statements, definitive proxy statements or
information statements filed by Zions subsequent to December 31, 1999 under
the Securities Act or under Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act.
ARTICLE II
The Merger
2.01 The Merger. (a) At the Effective Time, Company shall merge with and into
Zions (the "Merger"), the separate corporate existence of Company shall cease
and Zions shall survive and continue to exist as a Utah corporation (Zions, as
the surviving corporation in the Merger, sometimes being referred to herein as
the "Surviving Corporation"). Zions may at any time prior to the Effective Time
change the method of effecting the combination with Company (including, without
limitation, the provisions of this Article II) if and to the extent it deems
such change to be necessary, appropriate or desirable; provided, however, that
no such change shall (i) alter or change the amount or kind of consideration to
be issued to holders of Company Stock as provided for in this Agreement (the
"Merger Consideration"), (ii) adversely affect the tax treatment of Company's
stockholders as a result of receiving the Merger Consideration or (iii)
materially impede or delay consummation of the transactions contemplated by
this Agreement.
(b) Subject to the satisfaction or waiver of the conditions set forth in
Article VII, the Merger shall become effective upon the occurrence of the
filing in the office of the Utah Division of Corporations and Commercial Code
(the "Corporations Division") of articles of merger in accordance with Section
16-10a-1105 of the URBCA or such later date and time as may be set forth in
such articles. The Merger shall have the effects prescribed in the URBCA.
(c) Articles of Incorporation and By-Laws. The articles of incorporation and
by-laws of Zions immediately after the Merger shall be those of Zions as in
effect immediately prior to the Effective Time.
(d) Directors and Officers of the Surviving Corporation. The directors and
officers of Zions immediately after the Merger shall be the directors and
officers of Zions immediately prior to the Effective Time, until such time as
their successors shall be duly elected and qualified.
2.02 Effective Date and Effective Time. On such date as Zions selects (and
promptly provides notice thereof to the Company), which shall be within ten
days after the last to occur of the expiration of all applicable waiting
periods in connection with approvals of governmental authorities and the
receipt of all approvals of governmental authorities and all conditions to the
consummation of the Merger are satisfied or waived, or on such earlier or later
date as may be agreed in writing by the parties, articles of merger shall be
executed in accordance with all appropriate legal requirements and shall be
filed as required by law, and the Merger provided for herein shall become
effective upon such filing or on such date as may be specified in such articles
of merger. The date of such filing or such later effective date is herein
called the "Effective Date". The "Effective Time" of the Merger shall be the
time of such filing or as set forth in such articles of merger.
2.03 Plan of Merger. At the request of Zions, Zions and Company shall enter
into a separate plan of merger or articles of merger reflecting the terms
hereof for purposes of any filing requirement of the URBCA.
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ARTICLE III
Consideration; Exchange Procedures
3.01 Merger Consideration. Subject to the provisions of this Agreement, at
the Effective Time, automatically by virtue of the Merger and without any
action on the part of any Person:
(a) Outstanding Company Stock. Each share, excluding Treasury Stock and
Dissenters' Shares, of Company Stock issued and outstanding immediately
prior to the Effective Time shall become and be converted into that number
of shares of Zions Common Stock (the "Exchange Ratio") determined by
dividing the Consideration Number by the sum of (x) the number of shares of
Company Stock that shall be issued and outstanding at the Effective Time
and (y) the number of shares of Company Stock issuable upon the exercise of
Company Stock Options immediately prior to the Effective Time.
As used in this section:
(i) If the Average Closing Price is greater than or equal to the
Execution Price, the term "Consideration Number" will mean the number
obtained by dividing $81,500,000 by the lesser of the Average Closing
Price and the Effective Price,
or
(ii) If the Average Closing Price is less than the Execution Price,
the term "Consideration Number" will mean the number obtained by
dividing $81,500,000 by the greater of the Average Closing Price and
the Effective Price.
The Exchange Ratio shall be subject to adjustment as set forth in
Sections 3.05.
(b) Outstanding Zions Stock. Each share of Zions Common Stock issued and
outstanding immediately prior to the Effective Time shall remain issued and
outstanding and unaffected by the Merger.
(c) Treasury Shares. Each share of Company Stock held as Treasury Stock
immediately prior to the Effective Time shall be canceled and retired at
the Effective Time and no consideration shall be issued in exchange
therefor.
3.02 Rights as Stockholders; Stock Transfers. At the Effective Time, holders
of Company Stock shall cease to be, and shall have no rights as, stockholders
of Company, other than to receive any dividend or other distribution with
respect to such Company Stock with a record date occurring prior to the
Effective Time and the consideration provided under this Article III. After the
Effective Time, there shall be no transfers on the stock transfer books of
Company or the Surviving Corporation of shares of Company Stock.
3.03 Fractional Shares. Notwithstanding any other provision hereof, no
fractional shares of Zions Common Stock and no certificates or scrip therefor,
or other evidence of ownership thereof, will be issued in the Merger; instead,
each holder of Company Stock who would otherwise be entitled to a fractional
share of Zions Common Stock (after taking into account all Old Certificates
delivered by such holder) will receive, instead of the fractional amount, one
additional share of Zions Common Stock.
3.04 Exchange Procedures. (a) At or prior to the Effective Time, Zions shall
deposit, or shall cause to be deposited, with such bank or trust company as
Zions shall elect (in such capacity, the "Exchange Agent"), for the benefit of
the holders of certificates formerly representing shares of Company Stock ("Old
Certificates"), for exchange in accordance with this Article III, certificates
representing the shares of Zions Common Stock ("New Certificates") (such New
Certificates, together with any dividends or distributions with a record date
occurring after the Effective Date with respect thereto (without any interest
on any such cash, dividends or distributions), being hereinafter referred to as
the "Exchange Fund") to be paid pursuant to this Article III in exchange for
outstanding shares of Company Stock.
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(b) As soon as practicable after the Effective Date but not more than five
business days thereafter, Zions shall send or cause to be sent to each former
holder of record of shares of Company Stock immediately prior to the Effective
Time transmittal materials for use in exchanging such stockholder's Old
Certificates for the consideration set forth in this Article III. Zions shall
cause the New Certificates into which shares of a stockholder's Company Stock
are converted on the Effective Date or dividends or distributions which such
person shall be entitled to receive to be delivered to such stockholder upon
delivery to the Exchange Agent of Old Certificates representing such shares of
Company Stock (or an affidavit of lost certificate and, if required by the
Exchange Agent, indemnity reasonably satisfactory to Zions and the Exchange
Agent, if any of such certificates are lost, stolen or destroyed) owned by such
stockholder. No interest will be paid in respect of dividends or distributions
which any such person shall be entitled to receive pursuant to this Article III
upon such delivery. In the event of a transfer of ownership of any shares of
Company Stock not registered in the transfer records of Company, the exchange
described in this Section 3.04(b) may nonetheless be effected if the Old
Certificate representing such Company Stock is presented to the Exchange Agent,
accompanied by documents sufficient, in the discretion of Zions and the
Exchange Agent, (i) to evidence and effect such transfer but for the provisions
of Section 3.02 hereof and (ii) to evidence that all applicable stock transfer
taxes have been paid.
(c) If Old Certificates are not surrendered or the consideration therefor is
not claimed prior to the date on which such consideration would otherwise
escheat to or become the property of any governmental unit or agency, the
unclaimed consideration shall, to the extent permitted by abandoned property
and any other applicable law, become the property of the Surviving Corporation
(and to the extent not in its possession shall be paid over to the Surviving
Corporation), free and clear of all claims or interest of any person previously
entitled to such claims. Notwithstanding the foregoing, neither the Exchange
Agent nor any party hereto shall be liable to any former holder of Company
Stock for any amount properly delivered to a public official pursuant to
applicable abandoned property, escheat or similar laws.
(d) At the election of Zions, no dividends or other distributions with
respect to Zions Common Stock with a record date occurring after the Effective
Time shall be paid to the holder of any unsurrendered Old Certificate
representing shares of Company Stock converted in the Merger into the right to
receive shares of such Zions Stock until the holder thereof shall be entitled
to receive New Certificates in exchange therefor in accordance with the
procedures set forth in this Section 3.04, and no such shares of Company Stock
shall be eligible to vote until the holder of Old Certificates is entitled to
receive New Certificates in accordance with the procedures set forth in this
Section 3.04. After becoming so entitled in accordance with this Section 3.04,
the record holder thereof also shall be entitled to receive any such dividends
or other distributions, without any interest thereon, which theretofore had
become payable with respect to shares of Zions Common Stock such holder had the
right to receive upon surrender of the Old Certificate.
(e) Any portion of the Exchange Fund that remains unclaimed by the
stockholders of Company for six months after the Effective Time shall be
returned by the Exchange Agent to Zions. Any stockholders of Company who have
not theretofore complied with this Article III shall thereafter look only to
Zions for payment of the shares of Zions Common Stock, unpaid dividends and
distributions on Zions Common Stock deliverable in respect of each share of
Company Stock such stockholder holds as determined pursuant to this Agreement,
in each case, without any interest thereon.
3.05 Anti-Dilution Provisions. In the event Zions changes (or establishes a
record date for changing) the number of shares of Zions Common Stock issued and
outstanding prior to the Effective Date as a result of a stock split, stock
dividend, recapitalization or similar transaction with respect to the
outstanding Zions Common Stock and the record date therefor shall be after the
date hereof but prior to the Nasdaq Trading Day immediately preceding the
Effective Date, the applicable prices used in calculating the Average Closing
Price, the Effective Price and the Execution Price shall be appropriately or
proportionately adjusted. If, between the date hereof and the Effective Time,
Zions shall consolidate with or into any other corporation (a "Business
Combination") and the terms thereof shall provide that Zions Common Stock shall
be converted into or exchanged for the shares of any other corporation or
entity, then provision shall be made as part of the terms of such Business
Combination
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so that shareholders of Company who would be entitled to receive shares of
Zions Common Stock pursuant to this Agreement shall be entitled to receive, in
lieu of each share of Zions Common Stock issuable to such shareholders as
provided herein, the same kind and amount of securities or assets as shall be
distributable upon such Business Combination with respect to one share of Zions
Common Stock.
3.06 Options. At the Effective Time, each outstanding option to purchase
shares of Company Stock under the Company Stock Plans (each, a "Company Stock
Option"), whether vested or unvested, shall be converted into an option to
acquire, on the same terms and conditions as were applicable under such Company
Stock Option, the number of shares of Zions Common Stock equal to (a) the
number of shares of Company Stock subject to the Company Stock Option,
multiplied by (b) the Exchange Ratio (such product rounded to the nearest whole
number) (a "Replacement Option"), at an exercise price per share (rounded to
the nearest whole cent) equal to (y) the aggregate exercise price for the
shares of Company Stock which were purchasable pursuant to such Company Stock
Option divided by (z) the number of full shares of Zions Common Stock subject
to such Replacement Option in accordance with the foregoing. Notwithstanding
the foregoing, each Company Stock Option which is intended to be an "incentive
stock option" (as defined in Section 422 of the Code) shall be adjusted in
accordance with the requirements of Section 424 of the Code. At or prior to the
Effective Time, Company shall take all action, if any, necessary with respect
to the Company Stock Plans to permit the replacement of the outstanding Company
Stock Options by Zions pursuant to this Section. At the Effective Time, Zions
shall assume the Company Stock Plans; provided, that such assumption shall be
only in respect of the Replacement Options and that Zions shall have no
obligation with respect to any awards under the Company Stock Plans other than
the Replacement Options and shall have no obligation to make any additional
grants or awards under such assumed Company Stock Plans.
3.07 Dissenters' Rights. Any dissenting shareholder who shall be entitled to
be paid the "fair value" of his or her Dissenters' Shares, as provided in
Section 16-10a-1301 et seq. of the URBCA, shall not be entitled to the merger
consideration in respect thereof provided for under Section 3.01(a) unless and
until such dissenting shareholder shall have failed to perfect or shall have
effectively withdrawn or lost such dissenting shareholder's right to dissent
from the Merger under the URBCA, and shall be entitled to receive only the
payment provided for by Section 16-10a-1302 of the URBCA with respect to such
Dissenters' Shares. If any dissenting shareholder shall fail to perfect or
shall have effectively withdrawn or lost such right to dissent, the Dissenters'
Shares held by such dissenting shareholder shall thereupon be treated as though
such Dissenters' Shares had been converted into the right to receive the merger
consideration pursuant to Section 3.01(a) hereof.
ARTICLE IV
Actions Pending Acquisition
4.01 Forebearances of Company. From the date hereof until the Effective Time,
except as expressly contemplated by this Agreement, without the prior written
consent of Zions, Company will not, and will cause each of its Subsidiaries not
to:
(a) Ordinary Course. Conduct the business of Company and its Subsidiaries
other than in the ordinary and usual course or fail to use reasonable best
efforts to preserve intact their business organizations and assets and
maintain their rights, franchises and existing relations with customers,
suppliers, employees and business associates, take any action that would
adversely affect or delay the ability of Company, Zions or any of their
Subsidiaries to perform any of their obligations on a timely basis under
this Agreement, or take any action that is reasonably likely to have a
Material Adverse Effect on the Company or its Subsidiaries, taken as a
whole.
(b) Capital Stock. Other than pursuant to Rights Previously Disclosed,
(i) issue, sell or otherwise permit to become outstanding, or authorize the
creation of, any additional shares of Company Stock or any Rights, (ii)
enter into any agreement with respect to the foregoing or (iii) permit any
additional shares of Company Stock to become subject to new grants of
employee or director stock options, other Rights or similar stock-based
employee rights.
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(c) Dividends, Etc. (i) Make, declare, pay or set aside for payment any
dividend (other than (A) quarterly cash dividends in an amount not to
exceed $4.00 per share with record and payment dates consistent with past
practice and (B) dividends from wholly owned Subsidiaries to Company or
another wholly owned Subsidiary of Company) on or in respect of, or declare
or make any distribution on any shares of Company Stock or (ii) directly or
indirectly adjust, split, combine, redeem, reclassify, purchase or
otherwise acquire, any shares of its capital stock.
(d) Compensation; Employment Agreements; Etc. Enter into or amend or
renew any employment, consulting, severance or similar agreements or
arrangements with any director, officer or employee of Company or its
Subsidiaries, or grant any salary or wage increase or increase any employee
benefit (including incentive or bonus payments), except (i) for normal
individual increases in compensation to employees in the ordinary course of
business consistent with past practice, (ii) for other changes that are
required by applicable law, (iii) to satisfy Previously Disclosed
contractual obligations existing as of the date hereof or (iv) for grants
of awards to newly hired employees consistent with past practice.
(e) Benefit Plans. Enter into, establish, adopt or amend (except (i) as
may be required by applicable law or (ii) to satisfy Previously Disclosed
contractual obligations existing as of the date hereof) any pension,
retirement, stock option, stock purchase, savings, profit sharing, deferred
compensation, consulting, bonus, group insurance or other employee benefit,
incentive or welfare contract, plan or arrangement, or any trust agreement
(or similar arrangement) related thereto, in respect of any director,
officer or employee of Company or its Subsidiaries, or take any action to
accelerate the vesting or exercisability of stock options, restricted stock
or other compensation or benefits payable thereunder.
(f) Dispositions. Except as Previously Disclosed, sell, transfer,
mortgage, encumber or otherwise dispose of or discontinue any of its
assets, deposits, business or properties except in the ordinary course of
business and in a transaction that is not material to it and its
Subsidiaries taken as a whole.
(g) Acquisitions. Except as Previously Disclosed, acquire (other than by
way of foreclosures or acquisitions of control in a bona fide fiduciary
capacity or in satisfaction of debts previously contracted in good faith,
in each case in the ordinary and usual course of business consistent with
past practice) all or any portion of, the assets, business, deposits or
properties of any other entity except in the ordinary course of business
consistent with past practice and in a transaction that is not material to
the Company and its Subsidiaries, taken as a whole.
(h) Capital Expenditures. Except as Previously Disclosed, make any
capital expenditures other than capital expenditures in the ordinary course
of business consistent with past practice in amounts not exceeding $50,000
individually or $250,000 in the aggregate.
(i) Governing Documents. Amend the Company Certificate, Company By-Laws
or the certificate of incorporation or by-laws (or similar governing
documents) of any of Company's Subsidiaries.
(j) Accounting Methods. Implement or adopt any change in its accounting
principles, practices or methods, other than as may be required by
generally accepted accounting principles.
(k) Contracts. Except in the ordinary course of business consistent with
past practice, enter into or terminate any material contract (as defined in
Section 5.03(k)) or amend or modify in any material respect any of its
existing material contracts.
(l) Claims. Except in the ordinary course of business consistent with
past practice, settle any claim, action or proceeding, except for any
claim, action or proceeding involving solely money damages in an amount,
individually or in the aggregate for all such settlements, that is not
material to Company and its Subsidiaries, taken as a whole.
(m) Adverse Actions. (a) Take any action while knowing that such action
would, or is reasonably likely to, prevent or impede the Merger from
qualifying (i) for "pooling-of-interests" accounting treatment
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or (ii) as a reorganization within the meaning of Section 368 of the Code;
or (b) knowingly take any action that is intended or is reasonably likely
to result in (i) any of its representations and warranties set forth in
this Agreement being or becoming untrue in any material respect at any time
at or prior to the Effective Time, (ii) any of the conditions to the Merger
set forth in Article VII not being satisfied or (iii) a material violation
of any provision of this Agreement except, in each case, as may be required
by applicable law or regulation.
(n) Risk Management. Except as required by applicable law or regulation,
(i) implement or adopt any material change in its interest rate and other
risk management policies, procedures or practices; (ii) fail to follow its
existing policies or practices with respect to managing its exposure to
interest rate and other risk; or (iii) fail to use commercially reasonable
means recommended by Zions, to avoid any material increase in its aggregate
exposure to interest rate risk.
(o) Indebtedness. Incur any indebtedness for borrowed money other than in
the ordinary course of business consistent with past practice.
(p) Commitments. Agree or commit to do any of the foregoing.
4.02 Forebearances of Zions. From the date hereof until the Effective Time,
except as expressly contemplated by this Agreement, without the prior written
consent of the Company, Zions will not, and will cause each of its Subsidiaries
not to:
(a) Ordinary Course. Take any action that would adversely affect or delay
the ability of Company or Zions to perform any of their obligations on a
timely basis under this Agreement, or take any action that is reasonably
likely to have a Material Adverse Effect on Zions or its Subsidiaries,
taken as a whole.
(b) Adverse Actions. (a) Take any action while knowing that such action
would, or is reasonably likely to, prevent or impede the Merger from
qualifying (i)for "pooling-of-interests" accounting treatment or (ii) as a
reorganization within the meaning of Section 368 of the Code; or (b)
knowingly take any action that is intended or is reasonably likely to
result in (i) any of its representations and warranties set forth in this
Agreement being or becoming untrue in any material respect at any time at
or prior to the Effective Time, (ii) any of the conditions to the Merger
set forth in Article VII not being satisfied or (iii) a material violation
of any provision of this Agreement except, in each case, as may be required
by applicable law or regulation.
ARTICLE V
Representations and Warranties
5.01 Disclosure Schedules. On or prior to the date hereof, Zions has
delivered to Company a schedule and Company has delivered to Zions a schedule
(respectively, its "Disclosure Schedule") setting forth, among other things,
items the disclosure of which is necessary or appropriate either in response to
an express disclosure requirement contained in a provision hereof or as an
exception to one or more representations or warranties contained in Section
5.03 or 5.04; provided, that (a) no such item is required to be set forth in a
Disclosure Schedule as an exception to a representation or warranty if its
absence would not be reasonably likely to result in the related representation
or warranty being deemed untrue or incorrect under the standard established by
Section 5.02, and (b) the mere inclusion of an item in a Disclosure Schedule as
an exception to a representation or warranty shall not be deemed an admission
by a party that such item represents a material exception or fact, event or
circumstance or that such item is reasonably likely to result in a Material
Adverse Effect.
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5.02 Standard. No representation or warranty of Company or Zions contained in
Section 5.03 or 5.04 shall be deemed untrue or incorrect, and no party hereto
shall be deemed to have breached a representation or warranty, as a consequence
of the existence of any fact, event or circumstance unless such fact,
circumstance or event, individually or taken together with all other facts,
events or circumstances inconsistent with any representation or warranty
contained in Section 5.03 or 5.04 has had or is reasonably likely to have a
Material Adverse Effect on the party making such representation or warranty.
5.03 Representations and Warranties of Company. Subject to Sections 5.01 and
5.02 and except as Previously Disclosed in a paragraph of its Disclosure
Schedule corresponding to the relevant paragraph below, Company hereby
represents and warrants to Zions:
(a) Organization, Standing and Authority. Company is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Utah. Company is duly qualified to do business and is in good
standing in the states of the United States and any foreign jurisdictions
where its ownership or leasing of property or assets or the conduct of its
business requires it to be so qualified.
(b) Company Stock. As of the date hereof, the authorized capital stock of
Company consists solely of 500,000 shares of Company Stock, of which no
more than 362,688 shares were outstanding as of the date hereof. As of the
date hereof, no shares of Company Stock were held in treasury by Company or
otherwise owned by Company or its Subsidiaries. The outstanding shares of
Company Stock have been duly authorized and are validly issued and
outstanding, fully paid and nonassessable, and subject to no preemptive
rights (and were not issued in violation of any preemptive rights). As of
the date hereof, there are no shares of Company Stock authorized and
reserved for issuance, Company does not have any Rights issued or
outstanding with respect to Company Stock, and Company does not have any
commitment to authorize, issue or sell any Company Stock or Rights, except
pursuant to this Agreement and the Company Stock Plans. The number of
shares of Company Stock which are issuable and reserved for issuance upon
exercise of Company Stock Options as of the date hereof are Previously
Disclosed in Company's Disclosure Schedule.
(c) Subsidiaries. (i)(A) Company has Previously Disclosed a list of all
of its Subsidiaries together with the jurisdiction of organization of each
such Subsidiary, (B) Company owns, directly or indirectly, all the issued
and outstanding equity securities of each of its Subsidiaries, (C) no
equity securities of any of its Subsidiaries are or may become required to
be issued (other than to it or its wholly owned Subsidiaries) by reason of
any Right or otherwise, (D) there are no contracts, commitments,
understandings or arrangements by which any of such Subsidiaries is or may
be bound to sell or otherwise transfer any equity securities of any such
Subsidiaries (other than to it or its wholly-owned Subsidiaries), (E) there
are no contracts, commitments, understandings, or arrangements relating to
its rights to vote or to dispose of such securities and (F) all the equity
securities of each Subsidiary held by Company or its Subsidiaries are fully
paid and nonassessable (except pursuant to applicable Utah law) and are
owned by Company or its Subsidiaries free and clear of any Liens.
(ii) Company does not own beneficially, directly or indirectly, any
equity securities or similar interests of any Person, or any interest in a
partnership or joint venture of any kind, other than its Subsidiaries.
(iii) Each of Company's Subsidiaries has been duly organized and is
validly existing in good standing under the laws of the jurisdiction of its
organization, and is duly qualified to do business and in good standing in
the jurisdictions where its ownership or leasing of property or the conduct
of its business requires it to be so qualified.
(d) Corporate Power. Company and each of its Subsidiaries has the
corporate power and authority to carry on its business as it is now being
conducted and to own all its properties and assets; and Company has the
corporate power and authority to execute, deliver and perform its
obligations under this Agreement and to consummate the transactions
contemplated hereby.
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(e) Corporate Authority. Subject in the case of this Agreement to receipt
of the requisite approval of the agreement of merger set forth in this
Agreement by the holders of a majority of the outstanding shares of Company
Stock entitled to vote thereon, this Agreement and the transactions
contemplated hereby have been authorized by all necessary corporate action
of Company and the Company Board on or prior to the date hereof. This
Agreement is a valid and legally binding obligation of Company, enforceable
in accordance with its terms (except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer and similar laws of general applicability relating to or affecting
creditors' rights or by general equity principles). The Company Board of
Directors has received the written opinion of Hovde Financial LLC to the
effect that as of the date hereof the consideration to be received by the
holders of Company Stock in the Merger is fair to the holders of Company
Stock from a financial point of view.
(f) Regulatory Approvals; No Defaults. (i) No consents or approvals of,
or filings or registrations with, any Governmental Authority or with any
third party are required to be made or obtained by Company or any of its
Subsidiaries in connection with the execution, delivery or performance by
Company of this Agreement or to consummate the Merger except for (A)
filings of applications or notices with federal and Utah banking
authorities, (B) filings with the SEC and state securities authorities and
the approval of this Agreement by the stockholders of Company, and (C) the
filing of articles of merger with the Corporations Division pursuant to the
URBCA and the issuance of a related certificate of merger. As of the date
hereof, Company is not aware of any reason why the approvals set forth in
Section 7.01(b) will not be received without the imposition of a condition,
restriction or requirement of the type described in Section 7.01(b).
(ii) Subject to receipt of the regulatory approvals referred to in the
preceding paragraph, and the expiration of related waiting periods, and
required filings under federal and state securities laws, the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby do not and will not (A) constitute a
breach or violation of, or a default under, or give rise to any Lien, any
acceleration of remedies or any right of termination under, any law, rule
or regulation or any judgment, decree, order, governmental permit or
license, or agreement, indenture or instrument of Company or of any of its
Subsidiaries or to which Company or any of its Subsidiaries or properties
is subject or bound, (B) constitute a breach or violation of, or a default
under, the Company Certificate or the Company By-Laws, or (C) require any
consent or approval under any such law, rule, regulation, judgment, decree,
order, governmental permit or license, agreement, indenture or instrument.
(g) Financial Reports. (i) Each of the balance sheets contained in the
Company's audited financial statements as of December 31, 1997, 1998 and
1999 and in Company's unaudited financial statements as of June 30, 2000
(including, in the case of the audited financial statements, the related
notes and schedules thereto) fairly presents the financial position of
Company and its Subsidiaries as of its date, and each of the statements of
income and changes in stockholders' equity and cash flows or equivalent
statements in such audited and June 30, 2000 financial statements
(including, in the case of the audited financial statements, any related
notes and schedules thereto) fairly presents the results of operations,
changes in stockholders' equity and changes in cash flows, as the case may
be, of Company and its Subsidiaries for the periods to which they relate,
in each case in accordance with generally accepted accounting principles
consistently applied during the periods involved, except in each case as
may be noted therein, subject to normal year-end audit adjustments in the
case of unaudited statements.
(ii) Since December 31, 1999, Company and its Subsidiaries have not
incurred any liability other than in the ordinary course of business
consistent with past practice.
(iii) Since December 31, 1999, (A) Company and its Subsidiaries have
conducted their respective businesses in the ordinary and usual course
consistent with past practice (excluding the incurrence of expenses related
to this Agreement and the transactions contemplated hereby) and (B) no
event has
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occurred or circumstance arisen that, individually or taken together with
all other facts, circumstances and events (described in any paragraph of
Section 5.03 or otherwise), is reasonably likely to have a Material Adverse
Effect with respect to Company.
(h) Litigation. No litigation, claim or other proceeding before any court
or governmental agency is pending against Company or any of its
Subsidiaries and, to Company's knowledge, no such litigation, claim or
other proceeding has been threatened.
(i) Regulatory Matters. (i) Neither Company nor any of its Subsidiaries
or any of their properties is a party to or is subject to any order,
decree, agreement, memorandum of understanding or similar arrangement with,
or a commitment letter or similar submission to, or extraordinary
supervisory letter from, any federal or state governmental agency or
authority charged with the supervision or regulation of financial
institutions or issuers of securities or engaged in the insurance of
deposits (including, without limitation, the Utah Commissioner of Financial
Institutions, the Federal Reserve and the FDIC) or the supervision or
regulation of it or any of its Subsidiaries (collectively, the "Regulatory
Authorities").
(ii) Neither it nor any of its Subsidiaries has been advised by any
Regulatory Authority that such Regulatory Authority is contemplating
issuing or requesting (or is considering the appropriateness of issuing or
requesting) any such order, decree, agreement, memorandum of understanding,
commitment letter, supervisory letter or similar submission.
(j) Compliance with Laws. Company and each of its Subsidiaries:
(i) is in compliance with all applicable federal, state, local and
foreign statutes, laws, regulations, ordinances, rules, judgments,
orders or decrees applicable thereto or to the employees conducting
such businesses, including, without limitation, the Equal Credit
Opportunity Act, the Fair Housing Act, the Community Reinvestment Act,
the Home Mortgage Disclosure Act and all other applicable fair lending
laws and other laws relating to discriminatory business practices;
(ii) has all permits, licenses, authorizations, orders and approvals
of, and has made all filings, applications and registrations with, all
Governmental Authorities that are required in order to permit them to
own or lease their properties and to conduct their businesses as
presently conducted; all such permits, licenses, certificates of
authority, orders and approvals are in full force and effect and, to
Company's knowledge, no suspension or cancellation of any of them is
threatened; and
(iii) has received, since December 31, 1998, no notification or
communication from any Governmental Authority (A) asserting that
Company or any of its Subsidiaries is not in compliance with any of the
statutes, regulations or ordinances which such Governmental Authority
enforces or (B) threatening to revoke any license, franchise, permit or
governmental authorization (nor, to Company's knowledge, do any grounds
for any of the foregoing exist).
(k) Material Contracts; Defaults. Except as Previously Disclosed in its
Disclosure Schedule, neither it nor any of its Subsidiaries is a party to,
bound by or subject to any agreement, contract, arrangement, commitment or
understanding (whether written or oral) (i) that is a "material contract"
within the meaning of Item 601(b)(10) of the SEC's Regulation S-K or (ii)
that materially restricts the conduct of business by it or any of its
Subsidiaries. Neither it nor any of its Subsidiaries is in default under
any contract, agreement, commitment, arrangement, lease, insurance policy
or other instrument to which it is a party, by which its respective assets,
business, or operations may be bound or affected, or under which it or its
respective assets, business, or operations receives benefits, and there has
not occurred any event that, with the lapse of time or the giving of notice
or both, would constitute such a default.
(l) No Brokers. No action has been taken by Company that would give rise
to any valid claim against any party hereto for a brokerage commission,
finder's fee or other like payment with respect to the transactions
contemplated by this Agreement, excluding a Previously Disclosed fee to be
paid to Hovde Financial LLC.
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(m) Employee Benefit Plans. (i) All benefit and compensation plans,
contracts, policies or arrangements covering current employees or former
employees of Company and its subsidiaries (the "Employees") and current or
former directors of Company, including, but not limited to, "employee
benefit plans" within the meaning of Section 3(3) of ERISA, and deferred
compensation, stock option, stock purchase, stock appreciation rights,
stock based, incentive and bonus plans (the "Benefit Plans"), are
Previously Disclosed in the Disclosure Schedule. True and complete copies
of all Benefit Plans, including, but not limited to, any trust instruments
and insurance contracts forming a part of any Benefit Plans, and all
amendments thereto have been provided or made available to Zions.
(ii) All employee benefit plans, other than "multiemployer plans" within
the meaning of Section 3(37) of ERISA, covering Employees (the "Plans"), to
the extent subject to ERISA, are in substantial compliance with ERISA. The
Company is not a party to any "employee pension benefit plan" within the
meaning of Section 3(2) of ERISA ("Pension Plan") and which is intended to
be qualified under Section 401(a) of the Code. There is no material pending
or threatened litigation relating to the Plans. Neither Company nor any of
its Subsidiaries has engaged in a transaction with respect to any Plan
that, assuming the taxable period of such transaction expired as of the
date hereof, could subject Company or any Subsidiary to a tax or penalty
imposed by either Section 4975 of the Code or Section 502(i) of ERISA in an
amount which would be material.
(iii) No liability under Subtitle C or D of Title IV of ERISA has been or
is expected to be incurred by Company or any of its Subsidiaries with
respect to any ongoing, frozen or terminated "single-employer plan", within
the meaning of Section 4001(a)(15) of ERISA, currently or formerly
maintained by any of them, or the single-employer plan of any entity which
is considered one employer with Company under Section 4001 of ERISA or
Section 414 of the Code (an "ERISA Affiliate"). Neither Company, any of its
Subsidiaries nor an ERISA Affiliate has contributed to a "multiemployer
plan", within the meaning of Section 3(37) of ERISA, at any time on or
after September 26, 1980. No notice of a "reportable event", within the
meaning of Section 4043 of ERISA for which the 30-day reporting requirement
has not been waived, has been required to be filed for any Pension Plan or
by any ERISA Affiliate within the 12-month period ending on the date hereof
or will be required to be filed in connection with the transactions
contemplated by this Plan.
(iv) All contributions required to be made under the terms of any Plan
have been timely made or have been reflected on the consolidated financial
statements of Company. Neither any Pension Plan nor any single-employer
plan of an ERISA Affiliate has an "accumulated funding deficiency" (whether
or not waived) within the meaning of Section 412 of the Code or Section 302
of ERISA and no ERISA Affiliate has an outstanding funding waiver. Neither
Company nor any of its Subsidiaries has provided, or is required to
provide, security to any Pension Plan or to any single-employer plan of an
ERISA Affiliate pursuant to Section 401(a)(29) of the Code.
(v) Under each Pension Plan which is a single-employer plan, as of the
last day of the most recent plan year ended prior to the date hereof, the
actuarially determined present value of all "benefit liabilities", within
the meaning of Section 4001(a)(16) of ERISA (as determined on the basis of
the actuarial assumptions contained in the Plan's most recent actuarial
valuation), did not exceed the then current value of the assets of such
Plan, and there has been no material change in the financial condition of
such Plan since the last day of the most recent plan year.
(vi) Neither Company nor any of its Subsidiaries has any obligations for
retiree health and life benefits under any Benefit Plan. Company or its
Subsidiaries may amend or terminate any such Benefit Plan at any time
without incurring any liability thereunder.
(vii) The consummation of the transactions contemplated by this Agreement
will not (x) entitle any employees of Company or any of its Subsidiaries to
severance pay, (y) accelerate the time of payment or vesting or trigger any
payment of compensation or benefits under, increase the amount payable or
trigger
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<PAGE>
any other material obligation pursuant to, any of the Benefit Plans or (z)
result in any breach or violation of, or a default under, any of the
Benefit Plans. Without limiting the foregoing, as a result of the
consummation of the transactions contemplated by this Agreement, none of
Zions, Company, or any of its Subsidiaries will be obligated to make a
payment to an individual that would be a "parachute payment" to a
disqualified individual" as those terms are defined in Section 280G of the
Code, without regard to whether such payment is reasonable compensation for
personal services performed or to be performed in the future.
(n) Labor Matters. Neither Company nor any of its Subsidiaries is a party
to or is bound by any collective bargaining agreement, contract or other
agreement or understanding with a labor union or labor organization, nor is
Company or any of its Subsidiaries the subject of a proceeding asserting
that it or any such Subsidiary has committed an unfair labor practice
(within the meaning of the National Labor Relations Act) or seeking to
compel Company or any such Subsidiary to bargain with any labor
organization as to wages or conditions of employment, nor is there any
strike or other labor dispute involving it or any of its Subsidiaries
pending or, to Company's knowledge, threatened, nor is Company aware of any
activity involving its or any of its Subsidiaries' employees seeking to
certify a collective bargaining unit or engaging in other organizational
activity.
(o) Takeover Laws. Company has taken all action required to be taken by
it in order to exempt this Agreement and the transactions contemplated
hereby from, and this Agreement and the transactions contemplated hereby
(the "Covered Transactions") are exempt from, the requirements of any
"moratorium", "control share", "fair price", "affiliate transaction",
"business combination" or other antitakeover laws and regulations of the
State of Utah (collectively, "Takeover Laws").
(p) Environmental Matters. (i) Company and each of its Subsidiaries has
complied at all times with applicable Environmental Laws; (ii) no real
property (including buildings or other structures) currently or formerly
owned or operated by Company or any of its Subsidiaries, or any property in
which Company or any of its Subsidiaries has held a security interest, lien
or a fiduciary or management role ("Loan Property"), has been contaminated
with, or has had any release of, any Hazardous Substance; (iii) neither
Company nor any of its Subsidiaries could be deemed the owner or operator
of any Loan Property under any Environmental Law which such Loan Property
has been contaminated with, or has had any release of, any Hazardous
Substance; (iv) neither Company nor any of its Subsidiaries is subject to
liability for any Hazardous Substance disposal or contamination on any
third party property; (v) neither Company nor any of its Subsidiaries has
received any notice, demand letter, claim or request for information
alleging any violation of, or liability under, any Environmental Law; (vi)
neither Company nor any of its Subsidiaries is subject to any order,
decree, injunction or other agreement with any Governmental Authority or
any third party relating to any Environmental Law; (vii) to the best of
Company's knowledge, there are no circumstances or conditions (including
the presence of asbestos, underground storage tanks, lead products,
polychlorinated biphenyls, prior manufacturing operations, dry-cleaning, or
automotive services) involving Company or any of its Subsidiaries, any
currently or formerly owned or operated property, or any Loan Property,
that could reasonably be expected to result in any claims, liability or
investigations against Company or any of its Subsidiaries or result in any
restrictions on the ownership, use, or transfer of any property pursuant to
any Environmental Law; and (viii) Company has delivered to Zions copies of
all environmental reports, studies, sampling data, correspondence, filings
and other environmental information in its possession or reasonably
available to it relating to Company, any Subsidiary of Company, any
currently or formerly owned or operated property or any Loan Property.
As used herein, the term "Environmental Law" means any federal, state
or local law, regulation, order, decree, permit, authorization,
opinion, common law or agency requirement relating to: (A) the
protection or restoration of the environment, health, safety, or
natural resources, (B) the handling, use, presence, disposal, release
or threatened release of any Hazardous Substance or (C) noise, odor,
wetlands, indoor air, pollution, contamination or any injury or threat
of injury to persons or property in connection with any Hazardous
Substance and the term "Hazardous Substance" means any
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<PAGE>
substance in any concentration that is: (A) listed, classified or
regulated pursuant to any Environmental Law; (B) any petroleum product
or by-product, asbestos-containing material, lead-containing paint or
plumbing, polychlorinated biphenyls, radioactive materials or radon; or
(C) any other substance which is or may be the subject of regulatory
action by any Governmental Authority in connection with any
Environmental Law.
(q) Tax Matters. (i) (A) All Tax Returns that are required to be filed
(taking into account any extensions of time within which to file) by or
with respect to Company and its Subsidiaries have been duly filed, (B) all
Taxes shown to be due on the Tax Returns referred to in clause (A) have
been paid in full, (C) the Tax Returns referred to in clause (A) have been
examined by the Internal Revenue Service or the appropriate Tax authority
or the period for assessment of the Taxes in respect of which such Tax
Returns were required to be filed has expired, (D) all deficiencies
asserted or assessments made as a result of such examinations have been
paid in full, (E) no issues that have been raised by the relevant taxing
authority in connection with the examination of any of the Tax Returns
referred to in clause (A) are currently pending, and (F) no waivers of
statutes of limitation have been given by or requested with respect to any
Taxes of Company or its Subsidiaries. Company has made available to Zions
true and correct copies of the United States federal income Tax Returns
filed by Company and its Subsidiaries for each of the three most recent
fiscal years ended on or before December 31, 1999. Neither Company nor any
of its Subsidiaries has any liability with respect to income, franchise or
similar Taxes that accrued on or before the end of the most recent period
covered by Company's financial statements referred to in Section 5.03(g) in
excess of the amounts accrued with respect thereto that are reflected in
Company's financial statements referred to in Section 5.03(g). Neither
Company nor any of its Subsidiaries is a party to any Tax allocation or
sharing agreement, is or has been a member of an affiliated group filing
consolidated or combined Tax returns (other than a group the common parent
of which is or was Company) or otherwise has any liability for the Taxes of
any person (other than Company and its Subsidiaries). As of the date
hereof, neither Company nor any of its Subsidiaries has any reason to
believe that any conditions exist that might prevent or impede the Merger
from qualifying as a reorganization within the meaning of Section 368 of
the Code.
(ii) No Tax is required to be withheld pursuant to Section 1445 of the
Code as a result of the transfer contemplated by this Agreement.
(r) Risk Management Instruments. All interest rate swaps, caps, floors,
option agreements, futures and forward contracts and other similar risk
management arrangements, whether entered into for Company's own account, or
for the account of one or more of Company's Subsidiaries or their customers
(all of which are listed on Company's Disclosure Schedule), if any, were
entered into (i) in accordance with prudent business practices and all
applicable laws, rules, regulations and regulatory policies and (ii) with
counterparties believed to be financially responsible at the time; and each
of them constitutes the valid and legally binding obligation of Company or
one of its Subsidiaries, enforceable in accordance with its terms (except
as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and similar laws of general
applicability relating to or affecting creditors' rights or by general
equity principles), and are in full force and effect. Neither Company nor
its Subsidiaries, nor to Company's knowledge, any other party thereto, is
in breach of any of its obligations under any such agreement or
arrangement.
(s) Books and Records. The books and records of Company and its
Subsidiaries have been fully, properly and accurately maintained in all
material respects, and there are no material inaccuracies or discrepancies
of any kind contained or reflected therein, and they fairly present the
financial position of Company and its Subsidiaries.
(t) Insurance. Company has Previously Disclosed all of the insurance
policies, binders, or bonds maintained by Company or its Subsidiaries
("Insurance Policies"). Company and its Subsidiaries are insured with
reputable insurers against such risks and in such amounts as the management
of Company
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reasonably has determined to be prudent in accordance with industry
practices. All the Insurance Policies are in full force and effect; Company
and its Subsidiaries are not in material default thereunder; and all claims
thereunder have been filed in due and timely fashion.
(u) Accounting Treatment. As of the date hereof, Company is not aware of
any reason why the Merger will fail to qualify for "pooling-of-interests"
accounting treatment.
5.04 Representations and Warranties of Zions. Subject to Sections 5.01 and
5.02 and except as Previously Disclosed in a paragraph of its Disclosure
Schedule corresponding to the relevant paragraph below, Zions hereby represents
and warrants to Company as follows:
(a) Organization, Standing and Authority. Zions is duly organized,
validly existing and in good standing under the laws of the State of Utah.
Zions is duly qualified to do business and is in good standing in the
states of the United States and foreign jurisdictions where its ownership
or leasing of property or assets or the conduct of its business requires it
to be so qualified. Zions has in effect all federal, state, local, and
foreign governmental authorizations necessary for it to own or lease its
properties and assets and to carry on its business as it is now conducted.
(b) Zions Stock. As of the date hereof, the authorized capital stock of
Zions consists solely of 200,000,000 shares of Zions Common Stock, of which
no more than 88,000,000 shares were outstanding as of the date hereof and
3,000,000 shares of Zions Preferred Stock, of which no shares were
outstanding as of the date hereof.
(c) Corporate Power. Zions and each of its Significant Subsidiaries has
the corporate power and authority to carry on its business as it is now
being conducted and to own all its properties and assets; and Zions has the
corporate power and authority to execute, deliver and perform its
obligations under this Agreement and to consummate the transactions
contemplated hereby.
(d) Corporate Authority. This Agreement and the transactions contemplated
hereby have been authorized by all necessary corporate action of Zions and
its Board of Directors. This Agreement is a valid and legally binding
agreement of Zions enforceable in accordance with its terms (except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and similar laws of general
applicability relating to or affecting creditors' rights or by general
equity principles).
(e) Regulatory Approvals; No Defaults. (i) No consents or approvals of,
or filings or registrations with, any court, administrative agency or
commission or other governmental authority or instrumentality or with any
third party are required to be made or obtained by Zions or any of its
Subsidiaries in connection with the execution, delivery or performance by
Zions of this Agreement or to consummate the Merger except for (A) the
filing of applications and notices, as applicable, with the federal and
state banking authorities; (B) approval of the listing on the Nasdaq of
Zions Common Stock to be issued in the Merger; (C) the filing and
declaration of effectiveness of the Registration Statement; (D) the filing
of articles of merger with the Corporations Division pursuant to the URBCA
and the issuance of a related certificate of merger; (E) such filings as
are required to be made or approvals as are required to be obtained under
the securities or "Blue Sky" laws of various states in connection with the
issuance of Zions Stock in the Merger; and (F) receipt of the approvals set
forth in Section 7.01(b). As of the date hereof, Zions is not aware of any
reason why the approvals set forth in Section 7.01(b) will not be received
without the imposition of a condition, restriction or requirement of the
type described in Section 7.01(b).
(ii) Subject to receipt of the regulatory approvals referred to in the
preceding paragraph and expiration of the related waiting periods, and
required filings under federal and state securities laws, the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby do not and will not (A) constitute a
breach or violation of, or a default under, or give
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<PAGE>
rise to any Lien, any acceleration of remedies or any right of termination
under, any law, rule or regulation or any judgment, decree, order,
governmental permit or license, or agreement, indenture or instrument of
Zions or of any of its Subsidiaries or to which Zions or any of its
Subsidiaries or properties is subject or bound, (B) constitute a breach or
violation of, or a default under, the certificate of incorporation or by-
laws (or similar governing documents) of Zions or any of its Subsidiaries,
or (C) require any consent or approval under any such law, rule,
regulation, judgment, decree, order, governmental permit or license,
agreement, indenture or instrument.
(f) Financial Reports and SEC Documents; Material Adverse Effect. (i)
Zions' SEC Documents, as of the date filed, (A) complied or will comply in
all material respects as to form with the applicable requirements under the
Securities Act or the Exchange Act, as the case may be, and (B) did not and
will not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; and each of the balance sheets contained in or
incorporated by reference into any such SEC Document (including the related
notes and schedules thereto) fairly presents, or will fairly present, the
financial position of Zions and its Subsidiaries as of its date, and each
of the statements of income and changes in stockholders' equity and cash
flows or equivalent statements in such SEC Documents (including any related
notes and schedules thereto) fairly presents, or will fairly present, the
results of operations, changes in stockholders' equity and changes in cash
flows, as the case may be, of Zions and its Subsidiaries for the periods to
which they relate, in each case in accordance with generally accepted
accounting principles consistently applied during the periods involved,
except in each case as may be noted therein, subject to normal year-end
audit adjustments in the case of unaudited statements.
(ii) Since December 31, 1999, no event has occurred or circumstance
arisen that, individually or taken together with all other facts,
circumstances and events (described in any paragraph of Section 5.04 or
otherwise), is reasonably likely to have a Material Adverse Effect with
respect to it.
(g) No Brokers. No action has been taken by Zions that would give rise to
any valid claim against any party hereto for a brokerage commission,
finder's fee or other like payment with respect to the transactions
contemplated by this Agreement.
(h) Accounting Treatment; Tax Matters. As of the date hereof, it is aware
of no reason why the Merger will fail to qualify for "pooling-of-interests"
accounting treatment. As of the date hereof, neither Zions nor any of its
Subsidiaries has any reason to believe that any conditions exist that might
prevent or impede the Merger from qualifying as a reorganization within the
meaning of Section 368 of the Code.
ARTICLE VI
Covenants
6.01 Reasonable Best Efforts. Subject to the terms and conditions of this
Agreement, each of Company and Zions agrees to use its reasonable best efforts
in good faith to take, or cause to be taken, all actions, and to do, or cause
to be done, all things necessary, proper or desirable, or advisable under
applicable laws, so as to permit consummation of the Merger as promptly as
practicable and otherwise to enable consummation of the transactions
contemplated hereby and shall cooperate fully with the other party hereto to
that end.
6.02 Stockholder Approval. Company agrees to take, in accordance with
applicable law and the Company Certificate and the Company By-Laws, all action
necessary to convene an appropriate meeting of its stockholders to consider and
vote upon the approval and adoption of this Agreement and any other matters
required to be approved by Company's stockholders for consummation of the
Merger (including any adjournment or postponement, the "Company Meeting"), in
each case as promptly as practicable after the Registration Statement is
declared effective. Except to the extent legally required for the discharge by
the Company Board of its fiduciary duties as advised by counsel to the Company
Board, the Company Board shall recommend such approval, and Company shall take
all reasonable, lawful action to solicit such approval by its stockholders.
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6.03 Registration Statement. (a) Zions agrees to prepare a registration
statement on Form S-4 or other applicable form (the "Registration Statement")
to be filed by Zions with the SEC in connection with the issuance of Zions
Common Stock in the Merger (including the proxy statement and prospectus and
other proxy solicitation materials of Company constituting a part thereof (the
"Proxy Statement") and all related documents). Company agrees to cooperate, and
to cause its Subsidiaries to cooperate, with Zions, its counsel and its
accountants, in preparation of the Registration Statement and the Proxy
Statement; and provided that Company and its Subsidiaries have cooperated as
required above, Zions agrees to file the Registration Statement in preliminary
form with the SEC as soon as reasonably practicable but not later than 45 days
after the date hereof. Each of Company and Zions agrees to use all reasonable
efforts to cause the Registration Statement to be declared effective under the
Securities Act as promptly as reasonably practicable after filing thereof.
Zions also agrees to use all reasonable efforts to obtain all necessary state
securities law or "Blue Sky" permits and approvals required to carry out the
transactions contemplated by this Agreement. Company agrees to furnish to Zions
all information concerning Company, its Subsidiaries, officers, directors and
stockholders as may be reasonably requested in connection with the foregoing.
(b) Each of Company and Zions agrees, as to itself and its Subsidiaries, that
none of the information supplied or to be supplied by it for inclusion or
incorporation by reference in (i) the Registration Statement will, at the time
the Registration Statement and each amendment or supplement thereto, if any,
becomes effective under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading, and (ii) the Proxy
Statement and any amendment or supplement thereto will, at the date of mailing
to stockholders and at the time of the Company Meeting, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading or
any statement which, in the light of the circumstances under which such
statement is made, will be false or misleading with respect to any material
fact, or which will omit to state any material fact necessary in order to make
the statements therein not false or misleading or necessary to correct any
statement in any earlier statement in the Proxy Statement or any amendment or
supplement thereto. Each of Company and Zions further agrees that if it shall
become aware prior to the Effective Date of any information furnished by it
that would cause any of the statements in the Proxy Statement to be false or
misleading with respect to any material fact, or to omit to state any material
fact necessary to make the statements therein not false or misleading, promptly
to inform the other party thereof and to take the necessary steps to correct
the Proxy Statement.
(c) Zions agrees to advise Company, promptly after Zions receives notice
thereof, of the time when the Registration Statement has become effective or
any supplement or amendment has been filed, of the issuance of any stop order
or the suspension of the qualification of Zions Common Stock for offering or
sale in any jurisdiction, of the initiation or threat of any proceeding for any
such purpose, or of any request by the SEC for the amendment or supplement of
the Registration Statement or for additional information.
6.04 Press Releases. Each of Company and Zions agrees that it will not,
without the prior approval of the other party, issue any press release or
written statement for general circulation relating to the transactions
contemplated hereby, except as otherwise required by applicable law or
regulation or Nasdaq rules (provided that the issuing party shall nevertheless
provide the other party with notice of, and the opportunity to review, any such
press release or written statement).
6.05 Access; Information. (a) Company and Zions agrees that upon reasonable
notice and subject to applicable laws relating to the exchange of information,
each party shall afford the other party and the other party's officers,
employees, counsel, accountants and other authorized representatives, such
access during normal business hours throughout the period prior to the
Effective Time to the books, records (including, without limitation, tax
returns and work papers of independent auditors), properties, personnel and to
such other information as the requesting party may reasonably request and,
during such period, the providing party shall furnish promptly to the
requesting party (i) a copy of each material report, schedule and other
document filed by it pursuant to the requirements of federal or state
securities or banking laws, and (ii) all other information concerning the
business, properties and personnel of it as the requesting party may reasonably
request.
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(b) Each party agrees that it will not, and will cause its representatives
not to, use any information obtained pursuant to this Section 6.05 (as well as
any other information obtained prior to the date hereof in connection with the
entering into of this Agreement) for any purpose unrelated to the consummation
of the transactions contemplated by this Agreement. Subject to the requirements
of law, each party will keep confidential, and will cause its representatives
to keep confidential, all information and documents obtained pursuant to this
Section 6.05 (as well as any other information obtained prior to the date
hereof in connection with the entering into of this Agreement) unless such
information (i) was already known to such party, (ii) becomes available to such
party from other sources not known by such party to be bound by a
confidentiality obligation, (iii) is disclosed with the prior written approval
of the providing party or (iv) is or becomes readily ascertainable from
published information or trade sources. In the event that this Agreement is
terminated or the transactions contemplated by this Agreement shall otherwise
fail to be consummated, each party shall promptly cause all copies of documents
or extracts thereof containing information and data as to the other party to be
returned to the other party. No investigation by either party of the business
and affairs of the other party shall affect or be deemed to modify or waive any
representation, warranty, covenant or agreement in this Agreement, or the
conditions to either party's obligation to consummate the transactions
contemplated by this Agreement.
(c) Company agrees to provide Zions with all annual and quarterly financial
statements of the Company and its Subsidiaries prepared in accordance with
generally accepted accounting principles consistently applied during the
period(s) involved for each quarterly or annual period ending after June 30,
2000 but prior to the Effective Time, except in each case as may be noted
therein, subject to normal year-end audit adjustments in the case of unaudited
statements. Such financial statements shall include statements of income,
changes in stockholders' equity and cash flows and results of operations (and,
in the case of audited financial statements, the related notes and schedules
thereto) and shall be provided by the Company promptly after they become
available. Company further warrants that each of such financial statements will
fairly present the financial position, results of operations, changes in
stockholders' equity, changes in cash flow, and results of operations as of and
for the periods to which they relate, except in each case as may be noted
therein, subject to normal year-end audit adjustments in the case of unaudited
statements.
6.06 Acquisition Proposals. Company agrees that it shall not, and shall cause
its Subsidiaries and its and its Subsidiaries' officers, directors, agents,
advisors and affiliates not to, solicit or encourage inquiries or proposals
with respect to, or engage in any negotiations concerning, or provide any
confidential information to, or have any discussions with, any person relating
to, any Acquisition Proposal, except to the extent legally required for the
discharge by the Company Board of its fiduciary duties as advised by counsel to
the Company Board. Company shall immediately cease and cause to be terminated
any activities, discussions or negotiations conducted prior to the date of this
Agreement with any parties other than Zions with respect to any of the
foregoing and shall use its reasonable best efforts to enforce any
confidentiality or similar agreement relating to an Acquisition Proposal.
Company shall promptly (within 24 hours) advise Zions following the receipt by
Company of any Acquisition Proposal and the substance thereof (including the
identity of the person making such Acquisition Proposal), and advise Zions of
any developments with respect to such Acquisition Proposal immediately upon the
occurrence thereof.
6.07 Affiliate Agreements. (a) Not later than the 15th day prior to the
mailing of the Proxy Statement, Company shall deliver to Zions a schedule of
each person that, to the best of its knowledge, is or is reasonably likely to
be, as of the date of the Company Meeting, deemed to be an "affiliate" of
Company (each, a "Company Affiliate") as that term is used in Rule 145 under
the Securities Act or SEC Accounting Series Releases 130 and 135.
(b) Company shall use its reasonable best efforts to cause each person who
may be deemed to be a Company Affiliate to execute and deliver to Zions on or
before the date of mailing of the Proxy Statement an agreement in the form
attached hereto as Exhibit A.
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6.08 Takeover Laws. No party hereto shall take any action that would cause
the transactions contemplated by this Agreement to be subject to requirements
imposed by any Takeover Law and each of them shall take all necessary steps
within its control to exempt (or ensure the continued exemption of) the
transactions contemplated by this Agreement from, or if necessary challenge the
validity or applicability of, any applicable Takeover Law, as now or hereafter
in effect.
6.09 Certain Policies. Prior to the Effective Date, Company shall, consistent
with generally accepted accounting principles and on a basis mutually
satisfactory to it and Zions, modify and change its loan, litigation and real
estate valuation policies and practices (including loan classifications and
levels of reserves) so as to be applied on a basis that is consistent with that
of Zions.
6.10 Nasdaq Listing. Zions agrees to use its reasonable best efforts to list,
prior to the Effective Date, on the Nasdaq, subject to official notice of
issuance, the shares of Zions Common Stock to be issued to the holders of
Company Stock in the Merger.
6.11 Regulatory Applications. (a) Zions and Company and their respective
Subsidiaries shall cooperate and use their respective reasonable best efforts
to prepare all documentation, to effect all filings and to obtain all permits,
consents, approvals and authorizations of all third parties and Governmental
Authorities necessary to consummate the transactions contemplated by this
Agreement. Zions and Company shall make all required bank regulatory filings,
including the appropriate filing with the Federal Reserve, within 30 days after
the date hereof. Each of Zions and Company shall have the right to review in
advance, and to the extent practicable each will consult with the other, in
each case subject to applicable laws relating to the exchange of information,
with respect to all material written information submitted to any third party
or any Governmental Authority in connection with the transactions contemplated
by this Agreement. In exercising the foregoing right, each of the parties
hereto agrees to act reasonably and as promptly as practicable. Each party
hereto agrees that it will consult with the other party hereto with respect to
the obtaining of all material permits, consents, approvals and authorizations
of all third parties and Governmental Authorities necessary or advisable to
consummate the transactions contemplated by this Agreement and each party will
keep the other party appraised of the status of material matters relating to
completion of the transactions contemplated hereby.
(b) Each party agrees, upon request, to furnish the other party with all
information concerning itself, its Subsidiaries, directors, officers and
stockholders and such other matters as may be reasonably necessary or advisable
in connection with any filing, notice or application made by or on behalf of
such other party or any of its Subsidiaries to any third party or Governmental
Authority.
6.12 Indemnification; Director and Officers' Insurance. (a) From and after
the Effective Time through the fourth anniversary of the Effective Date, Zions
agrees to indemnify and hold harmless each present and former director and
officer of Company or any Subsidiary of Company determined as of the Effective
Time (the "Indemnified Parties"), against any costs or expenses (including
reasonable attorneys' fees), judgments, fines, losses, claims, damages or
liabilities (collectively, "Costs") incurred in connection with any claim,
action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, arising out of matters existing or occurring
at or prior to the Effective Time (including with respect to this Agreement or
any of the transactions contemplated hereby), whether asserted, claimed or
arising prior to, at or after the Effective Time, to the extent to which such
Indemnified Parties were entitled under Utah law and the Company Certificate or
the Company By-Laws in effect on the date hereof, and Zions shall also advance
expenses as incurred to the extent permitted under Utah law and the Company
Certificate and the Company By-Laws.
(b) Any Indemnified Party wishing to claim indemnification under Section
6.12(a), upon learning of any such claim, action, suit, proceeding or
investigation, shall as promptly as possible notify Zions thereof, but the
failure to so notify shall not relieve Zions of any liability it may have to
such Indemnified Party if such failure does not materially prejudice Zions. In
the event of any such claim, action, suit, proceeding or investigation (whether
arising before or after the Effective Time), (i) Zions shall have the right to
assume the defense thereof and Zions shall not be liable to such Indemnified
Parties for any legal expenses of other counsel or any other
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expenses subsequently incurred by such Indemnified Parties in connection with
the defense thereof, except that if Zions elects not to assume such defense or
counsel for the Indemnified Parties advises in writing that there are issues
which raise conflicts of interest between Zions and the Indemnified Parties,
the Indemnified Parties may retain counsel satisfactory to them, and Zions
shall pay the reasonable fees and expenses of one such counsel for the
Indemnified Parties in any jurisdiction promptly as statements thereof are
received, (ii) the Indemnified Parties will cooperate in the defense of any
such matter and (iii) Zions shall not be liable for any settlement effected
without its prior written consent (which consent shall not be unreasonably
withheld); and provided, further, that Zions shall not have any obligation
hereunder to any Indemnified Party when and if a court of competent
jurisdiction shall ultimately determine, and such determination shall have
become final and nonappealable, that the indemnification of such Indemnified
Party in the manner contemplated hereby is not permitted or is prohibited by
applicable law.
(c) For a period of three years after the Effective Time, Zions shall use its
reasonable best efforts to cause to be maintained in effect the current
policies of directors' and officers' liability insurance maintained by Company
(provided that Zions may substitute therefor policies of comparable coverage
with respect to claims arising from facts or events which occurred before the
Effective Time); provided, however, that in no event shall Zions be obligated
to expend, in order to maintain or provide insurance coverage pursuant to this
Section 6.12(c), any amount per annum in excess of 125% of the amount of the
annual premiums paid as of the date hereof by Company for such insurance (the
"Maximum Amount"). If the amount of the annual premiums necessary to maintain
or procure such insurance coverage exceeds the Maximum Amount, Zions shall use
all reasonable efforts to maintain the most advantageous policies of directors'
and officers' insurance obtainable for an annual premium equal to the Maximum
Amount. Notwithstanding the foregoing, prior to the Effective Time, Zions may
request Company to, and Company shall, purchase insurance coverage, on such
terms and conditions as shall be acceptable to Zions, extending for a period of
three years Company's directors' and officers' liability insurance coverage in
effect as of the date hereof (covering past or future claims with respect to
periods before the Effective Time) and such coverage shall satisfy Zions'
obligations under this Subsection (c).
(d) If Zions or any of its successors or assigns (i) shall consolidate with
or merge into any other corporation or entity and shall not be the continuing
or surviving corporation or entity of such consolidation or merger or (ii)
shall transfer all or substantially all of its properties and assets to any
individual, corporation or other entity, then and in each such case, proper
provision shall be made so that the successors and assigns of Zions shall
assume the obligations set forth in this Section 6.12.
6.13 Benefit Plans. Zions shall, from and after the Effective Time, provide
former employees of Company who remain as employees of Zions, with employee
benefit plans no less favorable in the aggregate than those provided to
similarly situated employees of Zions. If any employee of Company or any
subsidiary of Company becomes a participant in any employment benefit plan,
practice or policy of the Surviving Corporation, such employee shall be given
credit under such plan, practice or policy for all service prior to the
Effective Date with Company or such subsidiary of Company for purposes of
eligibility and vesting, but not for benefit accrual purposes, for which such
service is taken into account or recognized, provided that there be no
duplication of such benefits as are provided under any employee benefit plans,
practices, or policies of Company or any subsidiary of Company that continue in
effect following the Effective Time. In addition, Zions shall roll Company's
existing 401(k) plan into Zion's 401(k) plan, and shall honor the employee
severance plans listed in Section 5.03(m) of the Disclosure Schedule.
6.14 Accountants' Letters. Each of Company and Zions shall use its reasonable
best efforts to cause to be delivered to the other party, and to Zions'
directors and officers who sign the Registration Statement, a letter of its
respective independent auditors, dated (i) the date on which the Registration
Statement shall become effective and (ii) a date shortly prior to the Effective
Date, and addressed to such other party, and such directors and officers, in
form and substance customary for "comfort" letters delivered by independent
accountants in accordance with Statement of Accounting Standards No. 72.
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6.15 Notification of Certain Matters. Each of Company and Zions shall give
prompt notice to the other of any fact, event or circumstance known to it that
(i) is reasonably likely, individually or taken together with all other facts,
events and circumstances known to it, to result in any Material Adverse Effect
with respect to it or (ii) would cause or constitute a material breach of any
of its representations, warranties, covenants or agreements contained herein.
6.16 Other Agreements. The directors and certain officers of Company, in
their capacities as shareholders, in exchange for good and valuable
consideration, have executed and delivered to Zions voting agreements
substantially in the form of Exhibit B hereto (the "Voting Agreements"),
committing such persons, among other things, (i) to vote their shares of
Company Stock in favor of the Agreement at the Company Meeting and (ii) to
certain representations concerning the ownership of Company Stock and Zions
Common Stock to be received in the Merger. In addition, Robert M. Daugherty has
executed and delivered to Zions an employment agreement substantially in the
form of Exhibit C hereto (the "Employment Agreement"), and W. James Tozer, Jr.
has executed and delivered to Zions a voting and non-competition agreement W.
substantially in the form of Exhibit D hereto (the "Voting and Non-Competition
Agreement").
ARTICLE VII
Conditions to Consummation of the Merger
7.01 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each of Zions and Company to consummate the Merger is
subject to the fulfillment or written waiver by Zions and Company prior to the
Effective Time of each of the following conditions:
(a) Stockholder Approvals. This Agreement and the Merger shall have been
duly adopted by the requisite vote of the stockholders of Company.
(b) Regulatory Approvals. All regulatory approvals required to consummate
the transactions contemplated hereby shall have been obtained and shall
remain in full force and effect and all statutory waiting periods in
respect thereof shall have expired and no such approvals shall contain any
conditions, restrictions or requirements which the Zions Board reasonably
determines would (i) following the Effective Time, have a Material Adverse
Effect on the Surviving Corporation and its Subsidiaries taken as a whole
or (ii) reduce the benefits of the transactions contemplated hereby to such
a degree that Zions would not have entered into this Agreement had such
conditions, restrictions or requirements been known at the date hereof.
(c) No Injunction. No Governmental Authority of competent jurisdiction
shall have enacted, issued, promulgated, enforced or entered any statute,
rule, regulation, judgment, decree, injunction or other order (whether
temporary, preliminary or permanent) which is in effect and prohibits
consummation of the transactions contemplated by this Agreement.
(d) Registration Statement. The Registration Statement shall have become
effective under the Securities Act and no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been initiated or threatened by the
SEC.
(e) Blue Sky Approvals. All permits and other authorizations under state
securities laws necessary to consummate the transactions contemplated
hereby and to issue the shares of Zions Common Stock to be issued in the
Merger shall have been received and be in full force and effect.
(f) Listing. The shares of Zions Common Stock to be issued in the Merger
shall have been approved for listing on the Nasdaq, subject to official
notice of issuance.
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7.02 Conditions to Obligation of Company. The obligation of Company to
consummate the Merger is also subject to the fulfillment or written waiver by
Company prior to the Effective Time of each of the following conditions:
(a) Representations and Warranties. The representations and warranties of
Zions set forth in this Agreement (subject to the standard set forth in
Section 5.02) shall be true and correct as of the date of this Agreement
and as of the Effective Date as though made on and as of the Effective Date
(except that representations and warranties that by their terms speak only
as of the date of this Agreement or some other date shall be true and
correct as of such date), and Company shall have received a certificate,
dated the Effective Date, signed on behalf of Zions by the Chief Executive
Officer and the Chief Financial Officer of Zions to such effect.
(b) Performance of Obligations of Zions. Zions shall have performed in
all material respects all obligations required to be performed by it under
this Agreement at or prior to the Effective Time, and Company shall have
received a certificate, dated the Effective Date, signed on behalf of Zions
by the Chief Executive Officer and the Chief Financial Officer of Zions to
such effect.
(c) Opinion of Company's Counsel. Company shall have received an opinion
of Lewis, Rice & Fingersh, special counsel to Company, dated the Effective
Date, to the effect that, on the basis of facts, representations and
assumptions set forth in such opinion, (i) the Merger constitutes a
"reorganization" within the meaning of Section 368 of the Code and (ii) no
gain or loss will be recognized by stockholders of Company who receive
shares of Zions Common Stock in exchange for shares of Company Stock,
except with respect to cash received in lieu of fractional share interests.
In rendering its opinion, Lewis, Rice & Fingersh may require and rely upon
representations contained in letters from Company, Zions and stockholders
of Company.
(d) Accountants' Letters. Company shall have received the letters
referred to in Section 6.14 from Zions' independent auditors.
(e) Rights Plan. No Stock Acquisition Date (as such term is defined in
the Shareholder Protection Rights Plan) shall have occurred under the
Shareholder Protection Rights Plan prior to the Effective Time.
(f) Fairness Opinion. Company shall have received the written opinion of
Hovde Financial LLC to the effect that, as of the date of the mailing of
the Proxy Statement to the shareholders of Company in connection with the
Company Meeting, the consideration to be received by the holders of the
Company Stock in the Merger is fair to the holders of the Company Stock
from a financial point of view.
(g) Accounting Treatment. Company shall have received from Company's
independent auditors, letters, dated the date of or shortly prior to each
of the mailing date of the Proxy Statement and the Effective Date, stating
its opinion that the Merger shall qualify for pooling-of-interests
accounting treatment.
7.03 Conditions to Obligation of Zions. The obligation of Zions to consummate
the Merger is also subject to the fulfillment or written waiver by Zions prior
to the Effective Time of each of the following conditions:
(a) Representations and Warranties. The representations and warranties of
Company set forth in this Agreement (subject to the standard set forth in
Section 5.02) shall be true and correct as of the date of this Agreement
and as of the Effective Date as though made on and as of the Effective Date
(except that representations and warranties that by their terms speak only
as of the date of this Agreement or some other date shall be true and
correct as of such date) and Zions shall have received a certificate, dated
the Effective Date, signed on behalf of Company by the Chief Executive
Officer and the Chief Financial Officer of Company to such effect.
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(b) Performance of Obligations of Company. Company shall have performed
in all material respects all obligations required to be performed by it
under this Agreement at or prior to the Effective Time, and Zions shall
have received a certificate, dated the Effective Date, signed on behalf of
Company by the Chief Executive Officer and the Chief Financial Officer of
Company to such effect.
(c) Opinion of Zions' Counsel. Zions shall have received an opinion of
Sullivan & Cromwell, special counsel to Zions, dated the Effective Date, to
the effect that, on the basis of facts, representations and assumptions set
forth in such opinion, the Merger constitutes a reorganization under
Section 368 of the Code. In rendering its opinion, Sullivan & Cromwell may
require and rely upon representations contained in letters from Company,
Zions and stockholders of Company.
(d) Accountants' Letters. Zions shall have received the letters referred
to in Section 6.14 from Company's independent auditors.
(e) Accounting Treatment. Zions shall have received from Zions'
independent auditors, letters, dated the date of or shortly prior to each
of the mailing date of the Proxy Statement and the Effective Date, stating
its opinion that the Merger shall qualify for pooling-of-interests
accounting treatment.
ARTICLE VIII
Termination
8.01 Termination. This Agreement may be terminated, and the Acquisition may
be abandoned:
(a) Mutual Consent. At any time prior to the Effective Time, by the
mutual consent of Zions and Company, if the Board of Directors of each so
determines by vote of a majority of the members of its entire Board.
(b) Breach. At any time prior to the Effective Time, by Zions or Company,
if its Board of Directors so determines by vote of a majority of the
members of its entire Board, in the event of either: (i) a breach by the
other party of any representation or warranty contained herein (subject to
the standard set forth in Section 5.02), which breach cannot be or has not
been cured within 30 days after the giving of written notice to the
breaching party of such breach; or (ii) a breach by the other party of any
of the covenants or agreements contained herein, which breach cannot be or
has not been cured within 30 days after the giving of written notice to the
breaching party of such breach, provided that such breach (whether under
(i) or (ii)) would be reasonably likely, individually or in the aggregate
with other breaches, to result in a Material Adverse Effect.
(c) Delay. At any time prior to the Effective Time, by Zions or Company,
if its Board of Directors so determines by vote of a majority of the
members of its entire Board, in the event that the Merger is not
consummated by June 30, 2001, except to the extent that the failure of the
Merger then to be consummated arises out of or results from the knowing
action or inaction of the party seeking to terminate pursuant to this
Section 8.01(c).
(d) No Approval. By Company or Zions, if its Board of Directors so
determines by a vote of a majority of the members of its entire Board, in
the event (i) the approval of any Governmental Authority required for
consummation of the Merger and the other transactions contemplated by this
Agreement shall have been denied by final nonappealable action of such
Governmental Authority or (ii) the stockholder approval required by Section
7.01(a) herein is not obtained at the Company Meeting.
(e) Failure to Recommend, Etc. At any time prior to the Company Meeting,
by Zions if the Company Board shall have failed to make its recommendation
referred to in Section 6.02, withdrawn such recommendation or modified or
changed such recommendation in a manner adverse in any respect to the
interests of Zions.
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8.02 Effect of Termination and Abandonment. In the event of termination of
this Agreement and the abandonment of the Merger pursuant to this Article VIII,
no party to this Agreement shall have any liability or further obligation to
any other party hereunder except (i) as set forth in Section 9.01 and (ii) that
termination will not relieve a breaching party from liability for any willful
breach of this Agreement giving rise to such termination.
ARTICLE IX
Miscellaneous
9.01 Survival. No representations, warranties, agreements and covenants
contained in this Agreement shall survive the Effective Time (other than
Sections 6.12 and 6.13 and this Article IX which shall survive the Effective
Time) or the termination of this Agreement if this Agreement is terminated
prior to the Effective Time (other than Sections 6.03(b), 6.05(b), 8.02, and
this Article IX which shall survive such termination).
9.02 Waiver; Amendment. Prior to the Effective Time, any provision of this
Agreement may be (i) waived by the party benefitted by the provision, or (ii)
amended or modified at any time, by an agreement in writing between the parties
hereto executed in the same manner as this Agreement, except that after the
Company Meeting, this Agreement may not be amended if it would violate the
URBCA or reduce the consideration to be received by Company stockholders in the
Merger.
9.03 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to constitute an original.
9.04 Governing Law; Waiver of Jury Trial. This Agreement shall be governed
by, and interpreted in accordance with, the laws of the State of Utah
applicable to contracts made and to be performed entirely within such State
(except to the extent that mandatory provisions of Federal law are applicable).
Each of the parties hereto hereby irrevocably waives any and all right to trial
by jury in any legal proceeding arising out of or related to this Agreement or
the transactions contemplated hereby.
9.05 Expenses. Each party hereto will bear all expenses incurred by it in
connection with this Agreement and the transactions contemplated hereby.
9.06 Notices. All notices, requests and other communications hereunder to a
party shall be in writing and shall be deemed given if personally delivered,
telecopied (with confirmation) or mailed by registered or certified mail
(return receipt requested) to such party at its address set forth below or such
other address as such party may specify by notice to the parties hereto.
If to Company, to:
Draper Bancorp
903 East 12300 South
P.O. Box 1000
Draper, Utah 84020
Attention: Robert M. Daugherty
Facsimile: (801) 576-5266
With a copy to:
Lewis, Rice & Fingersh, L.C.
500 N. Broadway
St. Louis, Missouri 63102-2147
Attention: Thomas C. Erb
Facsimile: (314) 241-6056
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If to Zions, to:
Zions Bancorporation
One South Main, Suite 1380
Salt Lake City, Utah 84111
Attention: Dale M. Gibbons
Facsimile: (801) 524-2129
With a copy to:
Sullivan & Cromwell
1888 Century Park East
Los Angeles, California 90067
Attention: Stanley F. Farrar
Facsimile: (310) 712-8800
9.07 Entire Understanding; No Third Party Beneficiaries. This Agreement, the
Voting Agreements, the Voting and Non-Competition Agreement, the Employment
Agreement and the Confidentiality Agreement dated August 24, 2000 represent the
entire understanding of the parties hereto with reference to the transactions
contemplated hereby and thereby and this Agreement supersedes any and all other
oral or written agreements heretofore made. Except for Sections 6.12 and 6.13
and as set forth in Company's Disclosure Schedule, nothing in this Agreement
expressed or implied, is intended to confer upon any person, other than the
parties hereto or their respective successors, any rights, remedies,
obligations or liabilities under or by reason of this Agreement.
9.08 Interpretation; Effect. When a reference is made in this Agreement to
Sections, Exhibits or Schedules, such reference shall be to a Section of, or
Exhibit or Schedule to, this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and are not part of this Agreement. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall be deemed to
be followed by the words "without limitation." No provision of this Agreement
shall be construed to require Company, Zions or any of their respective
Subsidiaries, affiliates or directors to take any action which would violate
applicable law (whether statutory or common law), rule or regulation.
* * *
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in counterparts by their duly authorized officers, all as of the day
and year first above written.
Draper Bancorp
/s/ Robert M. Daugherty
By: _________________________________
Name: Robert M. Daugherty
Title: President and
Chief Executive Officer
Zions Bancorporation
/s/ Dale M. Gibbons
By: _________________________________
Name: Dale M. Gibbons
Title: Chief Financial Officer
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APPENDIX B
AGREEMENT OF BANK MERGER
This AGREEMENT OF BANK MERGER (this "Agreement") is made by and between
Zions First National Bank, a national banking association headquartered at One
South Main Street, Salt Lake City, Utah 84111, county of Salt Lake, in the
state of Utah ("ZFNB"), and Draper Bank, a state-chartered bank headquartered
at 903 East 12300 South, P.O. Box 1000, Draper, Utah 84020, county of Salt
Lake, in the state of Utah ("Draper Bank"), in connection with the Merger (the
"Parent Company Merger") described in that Agreement and Plan of Merger, dated
as of October 10, 2000 (the "Merger Agreement"), by and between Zions
Bancorporation, a Utah corporation ("Zions"), and Draper Bancorp, a Utah
corporation ("Draper Bancorp").
As of the date hereof, ZFNB has authorized capital stock of three million
shares of common stock, par value $5.00 per share (the "ZFNB Stock"), three
million shares of which are issued and outstanding, with common stock of $15
million, paid in surplus of approximately $64.9 million, and undivided profits
and accumulated other comprehensive loss as of September 30, 2000 of
approximately $375.6 million. As of the date hereof, Draper Bank had
authorized capital stock of 20,000 shares of common stock, par value $10.00
per share ("Draper Bank Stock"), of which 20,000 shares are issued and
outstanding, with common stock of $0.2 million, paid in surplus of $0.5
million, and undivided profits as of September 30, 2000 of approximately $24.1
million.
As of the date hereof, Zions owns directly all of the issued and outstanding
ZFNB Stock, and Draper Bancorp owns directly all of the issued and outstanding
Draper Bank Stock. Immediately prior to the Effective Time of the Bank Merger
(as defined below), Draper Bancorp shall be merged with and into Zions with
Zions surviving as the resulting corporation, so that as of the Effective Time
of the Bank Merger, Zions shall own directly or indirectly all of the Draper
Bank Stock.
Each of ZFNB and Draper Bank, acting pursuant to a resolution of its board
of directors, adopted by vote of a majority of its directors, pursuant to the
authority given by and in accordance with the provisions of the National Bank
Act (the "National Bank Act") of November 7, 1918, as amended (12 U.S.C.
(S)215(a)), witness as follows:
I. Merger. At and on the Effective Time of the Bank Merger (as defined
below), Draper Bank shall be merged with and into ZFNB in accordance with the
terms hereof and pursuant to the provisions of, and with the effect provided
in, the National Bank Act (the "Bank Merger"). ZFNB, as the institution
surviving the Bank Merger, shall be the "Surviving Bank".
II. Effective Time. The effective time of the Bank Merger ("Effective Time
of the Bank Merger") shall be immediately following the closing of the Parent
Company Merger which shall be after this Agreement has been approved by the
Office of the Comptroller of the Currency and all other required governmental
authorities.
III. Name. The name of the Surviving Bank shall continue to be "Zions First
National Bank".
IV. Business. The business of the Surviving Bank shall be that of a national
banking association. This business shall be conducted by the Surviving Bank at
its main office in Salt Lake City, Utah, and at its legally established
branches.
V. Assumption of Assets and Liabilities. All assets of Draper Bank as they
exist at the effective time of the Bank Merger shall pass to and vest in the
Surviving Bank without any conveyance or other transfer. The Surviving Bank
shall also be responsible for all of the liabilities of every kind and
description, including liabilities arising from the operation of a trust
department, of Draper Bank existing as of the effective time of the Bank
Merger.
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VI. Directors and Principal Officers. The directors and principal officers of
the Surviving Bank, effective as of the Effective Time of the Bank Merger,
shall be those persons who are identified on Exhibit A attached hereto and
incorporated herein, and such persons shall continue to hold office until their
successors are elected and duly qualified.
VII. Treatment of Outstanding Stock.
At the Effective Time of the Bank Merger:
(a) Each share of Draper Bank Stock issued and outstanding immediately
prior to the Effective Time of the Bank Merger shall at the Effective Time
of the Bank Merger be canceled, with no consideration to be received
therefor.
(b) Each share of ZFNB Stock issued and outstanding immediately prior to
the Effective Time of the Bank Merger shall remain outstanding and
unchanged.
VIII. Conditions to Closing.
(a) All regulatory approvals shall have been received and all waiting
periods shall have expired.
(b) The Parent Company Merger shall have been consummated.
IX. Articles of Association and Bylaws. At and after the Effective Time of
the Bank Merger, the Articles of Association and Bylaws of ZFNB as in effect
immediately prior to the Effective Time of the Bank Merger shall continue to be
the Articles of Association and Bylaws of the Surviving Bank until amended in
accordance with law.
X. Termination. In the event that the Merger Agreement is terminated prior to
consummation of the Parent Company Merger, this Agreement shall automatically
terminate and be of no further force or effect.
XI. Execution. This Agreement may be executed in any number of counterparts
each of which shall be deemed an original and all of such counterparts shall
constitute one and the same instrument.
XII. Applicable Law. This Agreement shall be governed by, and interpreted in
accordance with, the federal laws of the United States.
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Dated as of November 21, 2000
ZIONS FIRST NATIONAL BANK
By: /s/ A. Scott Anderson
___________________________________
Name: A. Scott Anderson
Title: President and CEO
By: /s/ Dale M. Gibbons
___________________________________
Name: Dale M. Gibbons
Title: Secretary
STATE OF UTAH )
)ss
COUNTY OF SALT LAKE)
On this 21st day of November, 2000, before me, a notary public for this state
and count, personally came A Scott Anderson, as president, and Dale M. Gibbons,
as secretary, of Zions First National Bank, and each in his capacity
acknowledged this instrument to be the act and deed of Zions First National
Bank.
WITNESS my official seal and signature this day and year.
(Seal of Notary)
Jennifer R. Jolley
_____________________________________
Notary Public, Salt Lake County.
My commission expires on 6/15/2001.
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Dated as of November 21, 2000
DRAPER BANK
By: /s/ Robert M. Daugherty
___________________________________
Name: Robert M. Daugherty
Title: President and CEO
By: /s/ Dennis L. Higbee
___________________________________
Name: Dennis L. Higbee
Title: Secretary
STATE OF UTAH )
)ss
COUNTY OF SALT LAKE)
On this 21st day of November, 2000, before me, a notary public for this state
and count, personally came Robert M. Daugherty, as president, and Dennis L.
Higbee, as secretary, of Draper Bank, and each in his capacity acknowledged
this instrument to be the act and deed of Draper Bank.
WITNESS my official seal and signature this day and year.
(Seal of Notary)
Linda Coy
_____________________________________
Notary Public, Salt Lake County.
My commission expires on April 6,
2003.
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<PAGE>
APPENDIX C
FAIRNESS OPINION OF HOVDE FINANCIAL LLC
October 10, 2000
Board of Directors
Draper Bancorp
903 East 12300 South
P.O. Box 1000
Draper, Utah 84020-9754
Members of the Board:
Draper Bancorp ("Draper"), a Utah corporation, and Zions Bancorporation
("Zions"), a Utah corporation, have entered into an Agreement and Plan of
Merger (the "Plan") dated October 10, 2000, pursuant to which Draper will be
merged with and into Zions (the "Merger"). As more fully discussed in Section
3.01(a) of the Plan, at the effective time of the Merger, each of the
outstanding shares of Draper common stock ("Draper Common Stock") will be
converted into and have the right to receive shares of Zions common stock
("Zions Common Stock"). The estimated value per fully diluted share of Draper
Common Stock is $216.79 per share and an estimated value for all shares of
Draper Common Stock and stock options totals eighty million one hundred
thirty-eight thousand dollars ($80,174,000). The Agreement contains certain
mechanisms which ensure that shareholders of Draper will receive a number of
shares of Zions Common Stock which, on the Closing Date, have an effective
value of $216.79 per share of Draper Common Stock. These mechanisms and
protections are more fully discussed in Section 3.01(a)(i) and 3.01(a)(ii) of
the Plan. In connection therewith, you have requested our opinion as to the
fairness, from a financial point of view, of the purchase consideration to the
shareholders of Draper.
Hovde Financial, Inc. ("Hovde") specializes in providing investment banking
and financial advisory services to commercial bank and thrift institutions.
Our principals are experienced in the independent valuation of securities in
connection with negotiated underwritings, subscription and community
offerings, private placements, merger and acquisition transactions and
recapitalizations. We are familiar with Draper, having acted as its financial
advisor in connection with the Plan.
We were retained by Draper to act as its exclusive financial advisor with
respect to a review of Draper's strategic alternatives and the possible sale,
merger, consolidation, or other business combination, in one or a series of
transactions, involving all or a substantial amount of the business,
securities or assets of Draper. We will receive compensation from Draper in
connection with our services, a significant portion of which is contingent
upon the consummation of the Merger. In the ordinary course of their
businesses, affiliates of Hovde may actively trade the debt and equity
securities of Zions for their own accounts and, accordingly, they may at any
time hold long or short positions in such securities.
During the course of our engagement, we reviewed and analyzed material
bearing upon the financial and operating conditions of Draper and Zions and
material prepared in connection with the proposed transaction, including the
following: the Plan; certain publicly available historical information
concerning Draper and Zions; consolidated financial statements of Draper and
Zions for each of the three-years ended December 31, 1999, respectively, as
well as subsequent quarterly statements for the periods ended March 31, 2000
and June 30, 2000; the terms of recent merger and acquisition transactions
involving banks and bank holding companies that we considered relevant;
historical market prices and trading volumes for Zions Common Stock; and
financial and other information provided to us by the managements of Draper
and Zions.
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Board of Directors
Draper Bancorp
October 10, 2000
Page Two
In addition, we have conducted meetings with members of the senior management
of Draper for the purpose of reviewing the future prospects of Draper. We also
evaluated the pro forma ownership of Zions Common Stock by Draper's
shareholders relative to the pro forma contribution of Draper's assets,
liabilities, equity and earnings to the pro forma company, and conducted such
other studies, analyses and examinations as we deemed appropriate. We also took
into account our assessment of general economic, market and financial
conditions and our experience in other transactions, as well as our knowledge
of the banking industry and our general experience in securities valuations.
In rendering this opinion, we have assumed, without independent verification,
the accuracy and completeness of the financial and other information and
representations contained in the materials provided to us by Draper and Zions
and in the discussions with Draper and Zions management. We did not
independently verify and have relied on and assumed that the aggregate
allowances for loan losses set forth in the balance sheets of each of Draper
and Zions at June 30, 2000, were adequate to cover such losses and complied
fully with applicable law, regulatory policy and sound banking practices as of
the date of such financial statements. We were not retained to and did not
conduct a physical inspection of any of the properties or facilities of Draper
or Zions, nor did we make any independent evaluation or appraisal of the
assets, liabilities or prospects of Draper or Zions, nor were we furnished with
any such evaluation or appraisal, and we were not retained to and did not
review any individual credit files.
We have assumed that the Merger is, and will be, in compliance with all laws
and regulations that are applicable to Draper and Zions. In rendering this
opinion, we have been advised by Draper and Zions and we have assumed that
there are no factors that would impede any necessary regulatory or governmental
approval for the Merger and we have further assumed that in the course of
obtaining the necessary regulatory and governmental approvals, no restriction
will be imposed on Zions or the surviving corporation that would have a
material adverse effect on Zions or the contemplated benefits of the Merger. We
have also assumed that there would not occur any change in the applicable law
or regulation that would cause a material adverse change in the prospects or
operations of Zions or the surviving corporation after the Merger.
Our opinion is based solely upon the information available to us and the
economic, market and other circumstances as they exist as of the date hereof.
Events occurring and information that becomes available after the date hereof
could materially affect the assumptions and analyses used in preparing this
opinion. We have not undertaken to reaffirm or revise this opinion or otherwise
comment upon any events occurring or information that becomes available after
the date hereof.
We are not expressing any opinion herein as to the prices at which shares of
Zions Common Stock issued in the Merger may trade if and when they are issued
or at any future time, nor does our opinion constitute a recommendation to any
holder of Draper Common Stock as to how such holder should vote with respect to
the Plan at any meeting of holders of Draper Common Stock.
This letter is solely for the information of the Board of Directors of Draper
and is not to be used, circulated, quoted or otherwise referred to for any
other purpose, nor is it to be filed with, included in or referred to in whole
or in part in any registration statement, proxy statement or any other
document, except in each case in accordance with our prior written consent
which shall not be unreasonably withheld; provided, however, that we hereby
consent to the inclusion and reference to this letter in any registration
statement, proxy statement, information statement or tender offer document to
be delivered to the holders of Draper Common Stock in connection with the
Merger if and only if this letter is quoted in full or attached as an exhibit
to such document and this letter has not been withdrawn prior to the date of
such document.
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<PAGE>
Board of Directors
Draper Bancorp
October 10, 2000
Page Three
Subject to the foregoing and based on our experience as investment bankers,
our activities and assumptions as described above, and other factors we have
deemed relevant, we are of the opinion as of the date hereof that the purchase
consideration is fair, from a financial point of view, to the shareholders of
Draper.
Sincerely,
/s/ Hovde Financial LLC
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APPENDIX D
TITLE 16. CORPORATIONS
CHAPTER 10a. UTAH REVISED BUSINESS CORPORATION ACT
PART 10. AMENDMENT OF ARTICLES OF INCORPORATION AND BYLAWS
PART 13. DISSENTERS' RIGHTS
(S) 16-10a-1301. Definitions
For purposes of Part 13:
(1) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
(2) "Corporation" means the issuer of the shares held by a dissenter before
the corporate action, or the surviving or acquiring corporation by merger or
share exchange of that issuer.
(3) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under Section 16-10a-1302 and who exercises that right when
and in the manner required by Sections 16-10a-1320 through 16-10a-1328.
(4) "Fair value" with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to
which the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action.
(5) "Interest" means interest from the effective date of the corporate
action until the date of payment, at the statutory rate set forth in Section
15-1-1, compounded annually.
(6) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares
that are registered in the name of a nominee to the extent the beneficial
owner is recognized by the corporation as the shareholder as provided in
Section 16-10a-723.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
(S) 16-10a-1302. Right to dissent
(1) A shareholder, whether or not entitled to vote, is entitled to dissent
from, and obtain payment of the fair value of shares held by him in the event
of, any of the following corporate actions:
(a) consummation of a plan of merger to which the corporation is a party
if:
(i) shareholder approval is required for the merger by Section 16-
10a-1103 or the articles of incorporation; or
(ii) the corporation is a subsidiary that is merged with its parent
under Section 16-10a-1104;
(b) consummation of a plan of share exchange to which the corporation is
a party as the corporation whose shares will be acquired;
(c) consummation of a sale, lease, exchange, or other disposition of all,
or substantially all, of the property of the corporation for which a
shareholder vote is required under Subsection 16-10a-1202(1), but not
including a sale for cash pursuant to a plan by which all or substantially
all of the net proceeds of the sale will be distributed to the shareholders
within one year after the date of sale; and
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(d) consummation of a sale, lease, exchange, or other disposition of all,
or substantially all, of the property of an entity controlled by the
corporation if the shareholders of the corporation were entitled to vote
upon the consent of the corporation to the disposition pursuant to
Subsection 16-10a-1202(2).
(2) A shareholder is entitled to dissent and obtain payment of the fair value
of his shares in the event of any other corporate action to the extent the
articles of incorporation, bylaws, or a resolution of the board of directors so
provides.
(3) Notwithstanding the other provisions of this part, except to the extent
otherwise provided in the articles of incorporation, bylaws, or a resolution of
the board of directors, and subject to the limitations set forth in Subsection
(4), a shareholder is not entitled to dissent and obtain payment under
Subsection (1) of the fair value of the shares of any class or series of shares
which either were listed on a national securities exchange registered under the
federal Securities Exchange Act of 1934, as amended, or on the National Market
System of the National Association of Securities Dealers Automated Quotation
System, or were held of record by more than 2,000 shareholders, at the time of:
(a) the record date fixed under Section 16-10a-707 to determine the
shareholders entitled to receive notice of the shareholders' meeting at
which the corporate action is submitted to a vote;
(b) the record date fixed under Section 16-10a-704 to determine
shareholders entitled to sign writings consenting to the proposed corporate
action; or
(c) the effective date of the corporate action if the corporate action is
authorized other than by a vote of shareholders.
(4) The limitation set forth in Subsection (3) does not apply if the
shareholder will receive for his shares, pursuant to the corporate action,
anything except:
(a) shares of the corporation surviving the consummation of the plan of
merger or share exchange;
(b) shares of a corporation which at the effective date of the plan of
merger or share exchange either will be listed on a national securities
exchange registered under the federal Securities Exchange Act of 1934, as
amended, or on the National Market System of the National Association of
Securities Dealers Automated Quotation System, or will be held of record by
more than 2,000 shareholders;
(c) cash in lieu of fractional shares; or
(d) any combination of the shares described in Subsection (4), or cash in
lieu of fractional shares.
(5) A shareholder entitled to dissent and obtain payment for his shares under
this part may not challenge the corporate action creating the entitlement
unless the action is unlawful or fraudulent with respect to him or to the
corporation.
(S) 16-10a-1320. Notice of dissenters' rights
(1) If a proposed corporate action creating dissenters' rights under Section
16-10a-1302 is submitted to a vote at a shareholders' meeting, the meeting
notice must be sent to all shareholders of the corporation as of the applicable
record date, whether or not they are entitled to vote at the meeting. The
notice shall state that shareholders are or may be entitled to assert
dissenters' rights under this part. The notice must be accompanied by a copy of
this part and the materials, if any, that under this chapter are required to be
given the shareholders entitled to vote on the proposed action at the meeting.
Failure to give notice as required by this subsection does not affect any
action taken at the shareholders' meeting for which the notice was to have been
given.
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(2) If a proposed corporate action creating dissenters' rights under Section
16-10a-1302 is authorized without a meeting of shareholders pursuant to Section
16-10a-704, any written or oral solicitation of a shareholder to execute a
written consent to the action contemplated by Section 16-10a-704 must be
accompanied or preceded by a written notice stating that shareholders are or
may be entitled to assert dissenters' rights under this part, by a copy of this
part, and by the materials, if any, that under this chapter would have been
required to be given to shareholders entitled to vote on the proposed action if
the proposed action were submitted to a vote at a shareholders' meeting.
Failure to give written notice as provided by this subsection does not affect
any action taken pursuant to Section 16-10a-704 for which the notice was to
have been given.
(S) 16-10a-1321. Demand for payment--Eligibility and notice of intent
(1) If a proposed corporate action creating dissenters' rights under Section
16-10a-1302 is submitted to a vote at a shareholders' meeting, a shareholder
who wishes to assert dissenters' rights:
(a) must cause the corporation to receive, before the vote is taken,
written notice of his intent to demand payment for shares if the proposed
action is effectuated; and
(b) may not vote any of his shares in favor of the proposed action.
(2) If a proposed corporate action creating dissenters' rights under Section
16-10a-1302 is authorized without a meeting of shareholders pursuant to Section
16-10a-704, a shareholder who wishes to assert dissenters' rights may not
execute a writing consenting to the proposed corporate action.
(3) In order to be entitled to payment for shares under this part, unless
otherwise provided in the articles of incorporation, bylaws, or a resolution
adopted by the board of directors, a shareholder must have been a shareholder
with respect to the shares for which payment is demanded as of the date the
proposed corporate action creating dissenters' rights under Section 16-10a-1302
is approved by the shareholders, if shareholder approval is required, or as of
the effective date of the corporate action if the corporate action is
authorized other than by a vote of shareholders.
(4) A shareholder who does not satisfy the requirements of Subsections (1)
through (3) is not entitled to payment for shares under this part.
(S) 16-10a-1322. Dissenters' notice
(1) If proposed corporate action creating dissenters' rights under Section
16-10a-1302 is authorized, the corporation shall give a written dissenters'
notice to all shareholders who are entitled to demand payment for their shares
under this part.
(2) The dissenters' notice required by Subsection (1) must be sent no later
than ten days after the effective date of the corporate action creating
dissenters' rights under Section 16-10a-1302, and shall:
(a) state that the corporate action was authorized and the effective date
or proposed effective date of the corporate action;
(b) state an address at which the corporation will receive payment
demands and an address at which certificates for certificated shares must
be deposited;
(c) inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(d) supply a form for demanding payment, which form requests a dissenter
to state an address to which payment is to be made;
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(e) set a date by which the corporation must receive the payment demand
and by which certificates for certificated shares must be deposited at the
address indicated in the dissenters' notice, which dates may not be fewer
than 30 nor more than 70 days after the date the dissenters' notice
required by Subsection (1) is given;
(f) state the requirement contemplated by Subsection 16-10a-1303(3), if
the requirement is imposed; and
(g) be accompanied by a copy of this part.
(S) 16-10a-1323. Procedure to demand payment
(1) A shareholder who is given a dissenters' notice described in Section 16-
10a-1322, who meets the requirements of Section 16-10a-1321, and wishes to
assert dissenters' rights must, in accordance with the terms of the dissenters'
notice:
(a) cause the corporation to receive a payment demand, which may be the
payment demand form contemplated in Subsection 16-10a-1322(2)(d), duly
completed, or may be stated in another writing;
(b) deposit certificates for his certificated shares in accordance with
the terms of the dissenters' notice; and
(c) if required by the corporation in the dissenters' notice described in
Section 16-10a-1322, as contemplated by Section 16-10a-1327, certify in
writing, in or with the payment demand, whether or not he or the person on
whose behalf he asserts dissenters' rights acquired beneficial ownership of
the shares before the date of the first announcement to news media or to
shareholders of the terms of the proposed corporate action creating
dissenters' rights under Section 16-10a-1302.
(2) A shareholder who demands payment in accordance with Subsection (1)
retains all rights of a shareholder except the right to transfer the shares
until the effective date of the proposed corporate action giving rise to the
exercise of dissenters' rights and has only the right to receive payment for
the shares after the effective date of the corporate action.
(3) A shareholder who does not demand payment and deposit share certificates
as required, by the date or dates set in the dissenters' notice, is not
entitled to payment for shares under this part.
(S) 16-10a-1324. Uncertificated shares
(1) Upon receipt of a demand for payment under Section 16-10a-1323 from a
shareholder holding uncertificated shares, and in lieu of the deposit of
certificates representing the shares, the corporation may restrict the transfer
of the shares until the proposed corporate action is taken or the restrictions
are released under Section 16-10a-1326.
(2) In all other respects, the provisions of Section 16-10a-1323 apply to
shareholders who own uncertificated shares.
(S) 16-10a-1325. Payment
(1) Except as provided in Section 16-10a-1327, upon the later of the
effective date of the corporate action creating dissenters' rights under
Section 16-10a-1302, and receipt by the corporation of each payment demand
pursuant to Section 16-10a-1323, the corporation shall pay the amount the
corporation estimates to be the fair value of the dissenter's shares, plus
interest to each dissenter who has complied with Section 16-10a-1323, and who
meets the requirements of Section 16-10a-1321, and who has not yet received
payment.
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(2) Each payment made pursuant to Subsection (1) must be accompanied by:
(a)(i)(A) the corporation's balance sheet as of the end of its most
recent fiscal year, or if not available, a fiscal year ending not more than
16 months before the date of payment;
(B) an income statement for that year;
(C) a statement of changes in shareholders' equity for that year and a
statement of cash flow for that year, if the corporation customarily
provides such statements to shareholders; and
(D) the latest available interim financial statements, if any;
(ii) the balance sheet and statements referred to in Subsection (i)
must be audited if the corporation customarily provides audited
financial statements to shareholders;
(b) a statement of the corporation's estimate of the fair value of the
shares and the amount of interest payable with respect to the shares;
(c) a statement of the dissenter's right to demand payment under Section
16-10a-1328; and
(d) a copy of this part.
(S) 16-10a-1327. Special provisions relating to shares acquired after
announcement of proposed corporate action
(1) A corporation may, with the dissenters' notice given pursuant to Section
16-10a-1322, state the date of the first announcement to news media or to
shareholders of the terms of the proposed corporate action creating dissenters'
rights under Section 16-10a-1302 and state that a shareholder who asserts
dissenters' rights must certify in writing, in or with the payment demand,
whether or not he or the person on whose behalf he asserts dissenters' rights
acquired beneficial ownership of the shares before that date. With respect to
any dissenter who does not certify in writing, in or with the payment demand
that he or the person on whose behalf the dissenters' rights are being
asserted, acquired beneficial ownership of the shares before that date, the
corporation may, in lieu of making the payment provided in Section 16-10a-1325,
offer to make payment if the dissenter agrees to accept it in full satisfaction
of his demand.
(2) An offer to make payment under Subsection (1) shall include or be
accompanied by the information required by Subsection 16-10a-1325(2).
(S) 16-10a-1328. Procedure for shareholder dissatisfied with payment or offer
(1) A dissenter who has not accepted an offer made by a corporation under
Section 16-10a-1327 may notify the corporation in writing of his own estimate
of the fair value of his shares and demand payment of the estimated amount,
plus interest, less any payment made under Section 16-10a-1325, if:
(a) the dissenter believes that the amount paid under Section 16-10a-1325
or offered under Section 16-10a-1327 is less than the fair value of the
shares;
(b) the corporation fails to make payment under Section 16-10a-1325
within 60 days after the date set by the corporation as the date by which
it must receive the payment demand; or
(c) the corporation, having failed to take the proposed corporate action
creating dissenters' rights, does not return the deposited certificates or
release the transfer restrictions imposed on uncertificated shares as
required by Section 16-10a-1326.
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(2) A dissenter waives the right to demand payment under this section unless
he causes the corporation to receive the notice required by Subsection (1)
within 30 days after the corporation made or offered payment for his shares.
(S) 16-10a-1330. Judicial appraisal of shares--Court action
(1) If a demand for payment under Section 16-10a-1328 remains unresolved, the
corporation shall commence a proceeding within 60 days after receiving the
payment demand contemplated by Section 16-10a-1328, and petition the court to
determine the fair value of the shares and the amount of interest. If the
corporation does not commence the proceeding within the 60-day period, it shall
pay each dissenter whose demand remains unresolved the amount demanded.
(2) The corporation shall commence the proceeding described in Subsection (1)
in the district court of the county in this state where the corporation's
principal office, or if it has no principal office in this state, the county
where its registered office is located. If the corporation is a foreign
corporation without a registered office in this state, it shall commence the
proceeding in the county in this state where the registered office of the
domestic corporation merged with, or whose shares were acquired by, the foreign
corporation was located.
(3) The corporation shall make all dissenters who have satisfied the
requirements of Sections 16-10a-1321, 16-10a-1323, and 16-10a-1328, whether or
not they are residents of this state whose demands remain unresolved, parties
to the proceeding commenced under Subsection (2) as an action against their
shares. All such dissenters who are named as parties must be served with a copy
of the petition. Service on each dissenter may be by registered or certified
mail to the address stated in his payment demand made pursuant to Section 16-
10a-1328. If no address is stated in the payment demand, service may be made at
the address stated in the payment demand given pursuant to Section 16-10a-1323.
If no address is stated in the payment demand, service may be made at the
address shown on the corporation's current record of shareholders for the
record shareholder holding the dissenter's shares. Service may also be made
otherwise as provided by law.
(4) The jurisdiction of the court in which the proceeding is commenced under
Subsection (2) is plenary and exclusive. The court may appoint one or more
persons as appraisers to receive evidence and recommend decision on the
question of fair value. The appraisers have the powers described in the order
appointing them, or in any amendment to it. The dissenters are entitled to the
same discovery rights as parties in other civil proceedings.
(5) Each dissenter made a party to the proceeding commenced under Subsection
(2) is entitled to judgment:
(a) for the amount, if any, by which the court finds that the fair value
of his shares, plus interest, exceeds the amount paid by the corporation
pursuant to Section 16-10a-1325; or
(b) for the fair value, plus interest, of the dissenter's after-acquired
shares for which the corporation elected to withhold payment under Section
16-10a-1327.
(S) 16-10a-1331. Court costs and counsel fees
(1) The court in an appraisal proceeding commenced under Section 16-10a-1330
shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court. The court shall
assess the costs against the corporation, except that the court may assess
costs against all or some of the dissenters, in amounts the court finds
equitable, to the extent the court finds that the dissenters acted arbitrarily,
vexatiously, or not in good faith in demanding payment under Section 16-10a-
1328.
D-6
<PAGE>
(2) The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable:
(a) against the corporation and in favor of any or all dissenters if the
court finds the corporation did not substantially comply with the
requirements of Sections 16-10a-1320 through 16-10a-1328; or
(b) against either the corporation or one or more dissenters, in favor of
any other party, if the court finds that the party against whom the fees
and expenses are assessed acted arbitrarily, vexatiously, or not in good
faith with respect to the rights provided by this part.
(3) If the court finds that the services of counsel for any dissenter were of
substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court
may award to those counsel reasonable fees to be paid out of the amounts
awarded the dissenters who were benefitted.
D-7
<PAGE>
PART II: INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
Section 16-10a-901 et seq. of the Utah Revised Business Corporation Act
authorizes indemnification of directors and officers of a Utah corporation
under certain circumstances against expenses, judgments, and the like in
connection with an action, suit or proceeding.
Article XVIII of Zions Bancorporation's Articles of Incorporation provides as
follows:
No director of the corporation shall be personally liable to the corporation
or its shareholders for monetary damages for any breach of fiduciary duty by
such director as a director, except for liability (1) for any breach of the
director's duty of loyalty to the corporation or its shareholders; (2) for acts
or omissions not in good faith or which involve intentional misconduct or
knowing violation of law; or (3) for any transaction from which the director
derived an improper personal benefit. Any repeal or modification of this
paragraph by the shareholders of the corporation shall be prospective only, and
shall not adversely affect any limitation on the personal liability of a
director of the corporation for acts or omissions occurring prior to the
effective date of such repeal or modification.
Item 21. Exhibits and Financial Statement Schedules.
(a) Exhibits. An Exhibit Index, containing a list of all exhibits filed
with this Registration Statement, is included beginning on page II-5.
(b) Financial Statement Schedules. Not applicable.
(c) Report, Opinion or Appraisal. The fairness opinion of Hovde Financial
LLC is attached as Appendix C to the proxy statement/prospectus included in
this Registration Statement.
Item 22. Undertakings.
(a) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of
the registrant's annual report pursuant to Section 13(a) or Section 15(d)
of the Securities Exchange Act of 1934 (and, where applicable, each filing
of an employee benefit plan's annual report pursuant to Section 15(d) of
the Securities Exchange Act of 1934) that is incorporated by reference in
the registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona fide
offering thereof.
(b) (1) The undersigned registrant hereby undertakes as follows: that
prior to any public reoffering of the securities registered hereunder
through the use of a prospectus which is a part of this registration
statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), the issuer undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items
of the applicable form.
(2) The registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (1) immediately preceding, or (ii) that purports to
meet the requirements of Section 10(a)(3) of the Act and is used in
connection with an offering of securities subject to Rule 415, will be
filed as a part of an amendment to the registration statement and will not
be used until such amendment is effective, and that, for purposes of
determining any liability under the Securities Act of 1933, each such post-
effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
II-1
<PAGE>
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions,
or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or paid by a
director, officer or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
(d) The undersigned registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the prospectus
pursuant to Items 4, 10(b), 11 or 13 of this form, within one business day
of receipt of such request, and to send the incorporated documents by first
class mail or other equally prompt means. This includes information
contained in documents filed subsequent to the effective date of the
registration statement through the date of responding to the request.
(e) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Salt Lake, State of
Utah, on November 21, 2000.
ZIONS BANCORPORATION
By: /s/ Harris H. Simmons
___________________________________
Harris H. Simmons, President and
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Harris H. Simmons, Roy W. Simmons, and Dale M.
Gibbons, and each of them, his true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this registration statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents or either
of them, or their or his substitutes, may lawfully do or cause to be done by
virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
Signature Capacity Date
--------- -------- ----
<S> <C> <C>
/s/ Harris H. Simmons President, Chief Executive November 21, 2000
______________________________________ Officer and Director
Name
/s/ Dale M. Gibbons Executive Vice President November 21, 2000
______________________________________ Chief Financial Officer
Name
/s/ Nolan X. Bellon Chief Accounting Officer November 21, 2000
______________________________________
Name
/s/ Roy W. Simmons Chairman and Director November 21, 2000
______________________________________
Name
/s/ Jerry C. Atkin Director November 21, 2000
______________________________________
Name
Director
______________________________________
Name
/s/ Grant R. Caldwell Director November 21, 2000
______________________________________
Name
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
Signature Capacity Date
--------- -------- ----
<S> <C> <C>
Director
______________________________________
Name
Director
______________________________________
Name
Director
______________________________________
Name
/s/ Richard H. Madsen Director November 21, 2000
______________________________________
Name
/s/ I. J. Wagner Director November 21, 2000
______________________________________
Name
/s/ Roger B. Porter Director November 21, 2000
______________________________________
Name
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Description and Method of Filing
------- --------------------------------
<C> <S>
2.1 Agreement and Plan of Merger dated as of October 10, 2000, between
Zions Bancorporation and Draper Bancorp (included in the proxy
statement/prospectus as Appendix A and incorporated by reference
herein).
3.1 Restated Articles of Incorporation of Zions Bancorporation dated
November 8, 1993, incorporated by reference to Exhibit 3.1 of Form S-4
filed on November 22, 1993, SEC File No. 0-2610.
3.2 Articles of Amendment to the Restated Articles of Incorporation of
Zions Bancorporation dated April 30, 1997, incorporated by reference
to Exhibit 3.1 of Form 10-Q for the quarter ended June 30, 1997, SEC
File No. 0-2610.
3.3 Articles of Amendment to the Restated Articles of Incorporation of
Zions Bancorporation dated April 24, 1998, incorporated by reference
to Exhibit 3 of Form 10-Q for the quarter ended June 30, 1998, SEC
File No. 0-2610.
3.4 Restated By-laws of Zions Bancorporation, dated September 18, 1998,
incorporated by reference to Exhibit 3 of Form 10-Q for the quarter
ended September 30, 1998, SEC File No. 0-2610.
3.5 Amendment to the Restated By-laws dated November 18, 1998,
incorporated by reference to Exhibit 3 of Form 10-Q for the quarter
ended September 30, 1998, SEC File No. 0-2610.
4.1 Shareholder Protection Rights Agreement, dated September 27, 1996,
incorporated by reference to Exhibit 1 of Form 8-K filed October 11,
1996, SEC File No. 0-2610.
5.1 Opinion of Sullivan & Cromwell regarding legality (filed herewith).
5.2 Opinion of Callister, Nebeker & McCullough, a Professional Corporation
regarding legality (filed herewith).
8.1 Opinion of Lewis, Rice & Fingersh, L.C. regarding tax matters (filed
herewith).
23.1 Consent of KPMG LLP, former independent auditor for Zions
Bancorporation (filed herewith).
23.2 Consent of Lewis, Rice & Fingersh, L.C. (contained in their opinion
filed as Exhibit 8.1).
23.3 Consent of Sullivan & Cromwell (contained in their opinion, filed as
Exhibit 5.1).
23.4 Consent of Callister, Nebeker & McCullough, a Professional Corporation
(contained in their opinion filed as Exhibit 5.2).
24.1 Power of Attorney (set forth on Page II-3 of the Registration
Statement).
99.1 Form of Proxy of Draper Bancorp (filed herewith).
99.2 Consent of Hovde Financial LLC (contained in their fairness opinion
included in the proxy statement/prospectus as Appendix C and
incorporated by reference herein).
</TABLE>
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