<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 22, 1999
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
FIRST SECURITY CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 6712 87-6118148
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
<TABLE>
<S> <C>
79 SOUTH MAIN BRAD D. HARDY
SALT LAKE CITY, UTAH 84130 EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL
(801) 246-5976 OFFICER
(ADDRESS, INCLUDING ZIP CODE, AND FIRST SECURITY CORPORATION
TELEPHONE NUMBER, INCLUDING AREA CODE, 79 SOUTH MAIN
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) SALT LAKE CITY, UTAH 84111
(801) 246-5976
(NAME, ADDRESS, INCLUDING ZIP CODE, AND
TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
</TABLE>
WITH COPIES TO:
<TABLE>
<S> <C>
STANLEY F. FARRAR CRAIG M. WASSERMAN
SULLIVAN & CROMWELL WACHTELL, LIPTON, ROSEN & KATZ
1888 CENTURY PARK EAST, 21ST FLOOR 51 WEST 52ND STREET
LOS ANGELES, CALIFORNIA 90067 NEW YORK, NEW YORK 10019
(310) 712-6600 (212) 403-1000
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
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. [ ]
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. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
OF SECURITIES TO BE REGISTERED REGISTERED(2) PER SHARE(3) PRICE(3) REGISTRATION FEE(4)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $1.25 per
share(1)............................. 88,490,503 shares $62.63 $5,542,160,203 $1,540,721
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes associated preferred share purchase rights.
(2) Represents the estimated maximum number of shares of Common Stock, par value
$1.25 ("First Security Common Stock"), of First Security Corporation ("First
Security") that are issuable in exchange for shares of Common Stock, no par
value ("Zions Common Stock"), of Zions Bancorporation ("Zions") upon
consummation of the merger (the "Merger") of Zions with and into First
Security.
(3) Pursuant to Rule 457(f)(1) and 457(c), the registration fee is based on the
average of the high and low sales prices of the Zions Common Stock as
reported on the Nasdaq National Market System on November 15, 1999 and
computed based on the estimated maximum number of shares of Zions Common
Stock (88,490,503) that may be converted into the shares of First Security
Common Stock to be registered.
(4) Pursuant to Rule 457(b), the amount of the registration fee has been reduced
by $924,482.71, the amount paid to the Securities and Exchange Commission on
July 23, 1999 with respect to this transaction. The difference of
$616,238.29 is paid herewith.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT BECOMES EFFECTIVE
ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY
DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
ZIONS BANCORPORATION FIRST SECURITY CORPORATION
MERGER PROPOSED -- YOUR VOTE IS VERY IMPORTANT
Dear Fellow Shareholders:
The boards of Zions Bancorporation and First Security Corporation have each
called shareholder meetings for December 28, 1999, at which you will be asked to
consider and vote upon a proposal to adopt a merger agreement providing for a
merger of our companies. The combined company, which will operate under the
First Security name, will be the second largest bank holding company
headquartered in the western United States.
IN THE MERGER AND RELATED TRANSACTIONS, EACH OF YOUR SHARES OF ZIONS COMMON
STOCK WILL BE CONVERTED INTO ONE SHARE OF COMMON STOCK OF THE COMBINED COMPANY
AND EACH OF YOUR SHARES OF FIRST SECURITY COMMON STOCK WILL BE CONVERTED INTO
0.442 OF A SHARE OF COMMON STOCK OF THE COMBINED COMPANY. FOR FIRST SECURITY
STOCKHOLDERS, THIS REPRESENTS A VALUE OF APPROXIMATELY $5,572,704,375 BASED ON
THE NOVEMBER 18, 1999 LAST SALES PRICE OF ZIONS COMMON STOCK. IN ADDITION, THE
CONVERSION OF YOUR SHARES OF ZIONS COMMON STOCK OR FIRST SECURITY COMMON STOCK
FOR COMMON STOCK OF THE COMBINED COMPANY GENERALLY WILL NOT BE TAXABLE.
We cannot complete the merger unless the shareholders of both our companies
adopt the merger agreement at the shareholders meetings.
Whether or not you plan to attend your shareholders meeting, please take
the time to complete and mail the enclosed proxy card. If you sign, date and
mail your proxy card without indicating how you want to vote, your proxy will be
voted in favor of the merger agreement. If you fail to return your proxy card,
the effect will be the same as a vote against the merger agreement.
This proxy statement/prospectus describes the shareholders meetings, the
merger and other related matters. Please read this entire document carefully.
<TABLE>
<S> <C>
/s/ HARRIS H. SIMMONS /s/ SPENCER F. ECCLES
- ----------------------------------------------------- -----------------------------------------------------
Harris H. Simmons Spencer F. Eccles
President and Chief Executive Officer Chairman and Chief Executive Officer
Zions Bancorporation First Security Corporation
</TABLE>
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THE FIRST SECURITY COMMON STOCK TO BE
ISSUED UNDER THIS PROXY STATEMENT/PROSPECTUS OR DETERMINED IF THIS PROXY
STATEMENT/PROSPECTUS IS ACCURATE OR ADEQUATE. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
-------------------------
The date of this proxy statement/prospectus is November 23, 1999, and it is
being mailed or otherwise delivered to Zions shareholders and First Security
stockholders on or about such date.
<PAGE> 3
ZIONS BANCORPORATION
ONE SOUTH MAIN, SUITE 1380
SALT LAKE CITY, UTAH 84111
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD DECEMBER 28, 1999
To the Shareholders of Zions Bancorporation:
NOTICE IS HEREBY GIVEN that a special meeting of shareholders of Zions
Bancorporation, a Utah corporation, will be held at the Salt Lake City Marriott
Hotel, 75 South West Temple, Salt Lake City, Utah 84101 at 9:00 a.m. on December
28, 1999. The purpose of the meeting is to consider and vote upon the following
matters:
1. A proposal to adopt an Agreement and Plan of Merger, dated as of June 6,
1999, between Zions and First Security Corporation, pursuant to which
Zions and First Security will merge, with the combined company retaining
the First Security name. In connection with the completion of the merger
and related transactions, each outstanding share of Zions common stock
will be converted into one share of common stock of the combined company
and each outstanding share of First Security common stock will be
reclassified and converted into 0.442 of a share of common stock of the
combined company.
2. Such other business as may properly come before the Zions special
meeting.
The board of directors has fixed the close of business on November 18, 1999
as the record date for the Zions special meeting, and only Zions shareholders of
record at such time are entitled to receive notice of and to vote at the special
meeting or any adjournments or postponements thereof. Approval of the merger
requires that a majority of the outstanding shares of Zions common stock be
voted at the special meeting in favor of the merger agreement.
A form of proxy and a proxy statement/prospectus containing more detailed
information with respect to the matters to be considered at the Zions special
meeting, including a copy of the merger agreement attached as Appendix A
thereto, accompany and form a part of this notice.
To ensure that your vote will be counted, please complete, date and sign
the enclosed proxy card and return it promptly in the enclosed postage-paid
envelope, whether or not you currently plan to attend the Zions special meeting.
You may revoke your proxy in the manner described in the accompanying proxy
statement/prospectus at any time before it is voted at the Zions special
meeting.
ZIONS' BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR"
APPROVAL OF THE MERGER PROPOSAL.
By Order of the Board of Directors,
/s/ DALE M. GIBBONS
--------------------------------------
Secretary
Salt Lake City, Utah
November 23, 1999
<PAGE> 4
FIRST SECURITY CORPORATION
79 SOUTH MAIN, 2ND FLOOR
SALT LAKE CITY, UTAH 84130
------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD DECEMBER 28, 1999
To the Stockholders of First Security Corporation:
NOTICE IS HEREBY GIVEN that a special meeting of stockholders of First
Security Corporation, a Delaware corporation, will be held at the Salt Lake City
Marriott Hotel, 75 South West Temple, Salt Lake City, Utah 84101 at 1:00 p.m. on
December 28, 1999. The purpose of the meeting is to consider and vote upon the
following matters:
1. A proposal to adopt an Agreement and Plan of Merger, dated as of June 6,
1999, between First Security and Zions Bancorporation, pursuant to which
Zions and First Security will merge, with the combined company retaining
the First Security name. As a result of the reclassification discussed
in proposal number 2 below and the merger, each outstanding share of
Zions common stock will be converted into one share of common stock of
the combined company and each outstanding share of First Security common
stock will be reclassified and converted into 0.442 of a share of common
stock of the combined company.
2. A proposal to amend and restate the certificate of incorporation of
First Security to provide, among other things, that each share of First
Security common stock outstanding immediately prior to the effective
time of the amendment and restatement will be automatically reclassified
and converted into 0.442 of a share of common stock of the combined
company. First Security stockholders will not receive fractional shares
in the reclassification. Instead, they will be entitled to receive an
amount in cash based on the market value of Zions common stock on the
last trading day prior to the date on which the amendment and
restatement of the First Security certificate of incorporation becomes
effective. The amendment and restatement will also effect other changes
to the First Security certificate of incorporation.
3. Such other business as may properly come before the First Security
special meeting.
The amendment and restatement of the First Security certificate of
incorporation is a condition to the merger and must be approved in order for the
merger to be completed. The other conditions to the merger are also conditions
to First Security's obligations to complete the amendment and restatement of the
certificate of incorporation.
The board of directors has fixed the close of business on November 18, 1999
as the record date for the First Security special meeting, and only First
Security stockholders of record at such time are entitled to receive notice of
and to vote at the First Security special meeting or any adjournments or
postponements thereof. Approval of the merger requires that a majority of the
outstanding shares of First Security common stock and First Security preferred
stock, voting as one class, be voted at the special meeting in favor of the
merger agreement.
A form of proxy and a proxy statement/prospectus containing more detailed
information with respect to the matters to be considered at the First Security
special meeting, including a copy of the merger agreement attached as Appendix A
thereto, accompany and form a part of this notice.
To ensure that your vote will be counted, please complete, date and sign
the enclosed proxy card and return it promptly in the enclosed postage-paid
envelope, whether or not you currently plan to attend the
<PAGE> 5
First Security special meeting. You may revoke your proxy in the manner
described in the accompanying proxy statement/prospectus at any time before it
is voted at the First Security special meeting.
FIRST SECURITY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE
"FOR" APPROVAL OF THE MERGER PROPOSAL AND APPROVAL OF THE AMENDMENT AND
RESTATEMENT OF THE FIRST SECURITY CERTIFICATE OF INCORPORATION.
By Order of the Board of Directors,
/s/ BRAD D. HARDY
Secretary
Salt Lake City, Utah
November 23, 1999
<PAGE> 6
REFERENCES TO ADDITIONAL INFORMATION
This proxy statement/prospectus incorporates important business and
financial information about Zions and First Security from documents that are not
included in or delivered with this proxy statement/ prospectus. You can obtain
documents incorporated by reference in this proxy statement/prospectus, other
than certain exhibits to those documents, by requesting them in writing or by
telephone from the appropriate company at the following addresses:
<TABLE>
<S> <C>
ZIONS BANCORPORATION FIRST SECURITY CORPORATION
One South Main, Suite 1380 79 South Main, Second Floor
Salt Lake City, Utah 84111 Salt Lake City, Utah 84130
Attention: Dale M. Gibbons, Secretary Attention: Brad D. Hardy, Secretary
Telephone: (801) 524-4787 Telephone: (801) 246-5976
</TABLE>
You will not be charged for any of these documents that you request. If you
would like to request documents, please do so by December 17, 1999 in order to
receive them before your shareholders meeting.
See "Where You Can Find More Information" on page 85.
i
<PAGE> 7
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
REFERENCES TO ADDITIONAL INFORMATION........................ i
QUESTIONS AND ANSWERS ABOUT THE MERGER AND RELATED
TRANSACTIONS................................................ 1
SUMMARY..................................................... 2
Market Price and Dividend Information..................... 4
Comparison of Unaudited Per Share Data.................... 10
Selected Financial Data of Zions.......................... 11
Selected Financial Data of First Security................. 13
Unaudited Pro Forma Zions/First Security Financial Data... 14
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS... 16
THE FIRST SECURITY SPECIAL MEETING.......................... 17
General................................................... 17
Record Date............................................... 17
Solicitation and Revocability of Proxies.................. 17
Vote Required............................................. 18
Recommendation of Board of Directors...................... 19
THE ZIONS SPECIAL MEETING................................... 20
General................................................... 20
Record Date............................................... 20
Solicitation and Revocability of Proxies.................. 20
Vote Required............................................. 21
Recommendation of Board of Directors...................... 21
THE MERGER.................................................. 22
General................................................... 22
The Reclassification...................................... 23
Amendment and Restatement of First Security Certificate of
Incorporation and By-laws.............................. 24
Background of the Merger.................................. 25
Reasons of Zions for the Merger and Recommendation of the
Zions Board............................................ 26
Reasons of First Security for the Merger and
Recommendation of the First Security Board............. 27
Opinion of Zions' Financial Advisor....................... 29
Opinion of First Security's Financial Advisor............. 33
Interests of Management and Directors in the Merger....... 40
Regulation and Supervision................................ 47
Regulatory Approvals...................................... 49
Litigation Relating to the Merger......................... 51
Federal Income Tax Considerations of the Merger and
Related Transactions................................... 51
THE MERGER AGREEMENT........................................ 54
Introduction.............................................. 54
Terms of the Merger....................................... 54
Closing and Effective Time of the Merger.................. 55
Corporate Governance after the Merger..................... 55
Conditions of the Merger.................................. 55
Post-Merger Compensation and Benefits..................... 57
Treatment of Stock Options under Employee Stock Plans..... 57
Distribution of Certificates.............................. 58
Amendment, Waiver and Termination......................... 58
</TABLE>
ii
<PAGE> 8
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Conduct of Business Pending the Merger.................... 59
Expenses and Fees......................................... 60
Accounting Treatment...................................... 60
Nasdaq Listing of First Security Common Stock............. 60
Resales of the Combined Company Common Stock.............. 61
STOCK OPTION AGREEMENTS..................................... 62
General................................................... 62
Exercise of the Option.................................... 63
Registration Rights....................................... 64
Repurchase of Option or Option Shares..................... 64
Surrender of Option for Cash Payment...................... 65
Substitute Option......................................... 65
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL
STATEMENTS................................................ 66
DESCRIPTION OF FIRST SECURITY CAPITAL STOCK FOLLOWING THE
MERGER.................................................... 77
Preferred Stock........................................... 77
Common Stock.............................................. 77
Stockholder Rights Plan................................... 78
COMPARISON OF SHAREHOLDERS' RIGHTS.......................... 79
General................................................... 79
Comparison of Shareholders' Rights........................ 79
DISCUSSION OF CERTAIN PROVISIONS IN COMBINED COMPANY
CERTIFICATE OF INCORPORATION AND BY-LAWS.................. 84
General................................................... 84
Classified Board of Directors............................. 84
Stockholder Meetings...................................... 84
Supermajority Amendment Provisions........................ 85
EXPERTS..................................................... 85
VALIDITY OF FIRST SECURITY COMMON STOCK..................... 85
OTHER MATTERS............................................... 85
WHERE YOU CAN FIND MORE INFORMATION......................... 85
</TABLE>
APPENDICES:
Appendix A -- Agreement and Plan of Merger, dated as of June 6, 1999, by and
between Zions Bancorporation and First Security Corporation
Appendix B -- Stock Option Agreement, dated as of June 8, 1999, by and between
First Security Corporation, as grantee, and Zions Bancorporation,
as issuer
Appendix C -- Stock Option Agreement, dated as of June 8, 1999, by and between
Zions Bancorporation, as grantee, and First Security Corporation,
as issuer
Appendix D -- Opinion of Goldman, Sachs & Co.
Appendix E -- Opinion of J.P. Morgan Securities Inc.
iii
<PAGE> 9
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 Zions special meeting
or the First Security special meeting.
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. Your
failure to instruct your broker to vote your shares will be the equivalent of
voting against the adoption of the merger agreement and, for First Security
stockholders, the other proposals described in this proxy
statement/prospectus.
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: SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A: No. You should not send in your stock certificates at this time.
Zions shareholders will not exchange their certificates in the merger unless
we determine that such exchange is required by applicable law, rule or
regulation. The certificates currently representing shares of Zions common
stock will represent an equal number of shares of common stock of the
combined company after the merger.
First Security stockholders will exchange their certificates representing
First Security common stock as a result of the merger and related
transactions and First Security stockholders will receive instructions for
exchanging those certificates after the merger is completed. Holders of First
Security preferred stock will not exchange their certificates as a result of
the merger, and their certificates representing shares of First Security
preferred stock will continue to represent the same number of shares of First
Security preferred stock after the merger.
Q: WHEN DO YOU EXPECT TO MERGE?
A: We are working towards completing the merger as quickly as possible. In
addition to the approval of the Zions shareholders and First Security
stockholders, we must also obtain certain regulatory approvals. We expect to
complete the merger in the fourth quarter of 1999.
Q: WHOM SHOULD I CALL WITH QUESTIONS OR TO OBTAIN ADDITIONAL COPIES OF THIS
PROXY STATEMENT/PROSPECTUS?
ZIONS BANCORPORATION
One South Main, Suite 1380
Salt Lake City, Utah 84111
Attention: Dale M. Gibbons
Telephone: (801) 524-4787; or
FIRST SECURITY CORPORATION
79 South Main, Second Floor
Salt Lake City, Utah 84111
Attention: Brad D. Hardy
Telephone: (801) 246-5976
1
<PAGE> 10
SUMMARY
This summary, together with the preceding Question and Answer section,
highlights selected information from this proxy statement/prospectus. It does
not contain all of the information that is important to you. We urge you to read
carefully the entire proxy statement/prospectus and the other documents to which
we refer to fully understand the merger and other related transactions. See
"Where You Can Find More Information" on page 85. Each item in this summary
includes a page reference directing you to a more complete description of that
item, if applicable. The merger agreement is attached as Appendix A to this
proxy statement/prospectus. We encourage you to read the merger agreement
because it is the legal document that governs the merger.
WHAT YOU WILL RECEIVE
FIRST SECURITY STOCKHOLDERS WILL RECEIVE 0.442 OF A SHARE OF THE COMBINED
COMPANY COMMON STOCK FOR EACH SHARE OF FIRST SECURITY COMMON STOCK (SEE PAGE 22)
As a result of the change in First Security common stock discussed below
and the merger, First Security stockholders will receive 0.442 of a share of the
combined company common stock for each share of First Security common stock they
hold. No fractional shares of First Security common stock will be issued in
connection with such change and the merger. Instead of fractional shares, First
Security stockholders will be entitled to receive an amount in cash based on the
market value of Zions common stock on the last trading day prior to the date on
which the change becomes effective. Holders of First Security preferred stock
will continue to own one share of First Security preferred stock for each share
of First Security preferred stock that they currently own.
For example, a First Security stockholder that owns 100 shares of First
Security common stock will own 44 shares of the combined company common stock
and will be entitled to receive a cash payment instead of the 0.2 of a share of
the combined company common stock which otherwise would have been issued.
ZIONS SHAREHOLDERS WILL RECEIVE ONE SHARE OF THE COMBINED COMPANY COMMON STOCK
FOR EACH SHARE OF ZIONS COMMON STOCK (SEE PAGE 22)
As a result of the merger, Zions shareholders will receive one share of the
combined company common stock for each share of Zions common stock they hold.
Each certificate currently representing shares of Zions common stock will
represent an equal number of shares of the combined company common stock after
the merger.
For example, a Zions shareholder that owns 100 shares of Zions common stock
will own 100 shares of the combined company common stock following the merger.
FIRST SECURITY COMMON STOCK TO BE RECLASSIFIED PRIOR TO MERGER (SEE PAGE 23)
In the merger agreement, we have agreed that immediately prior to the
completion of the merger First Security will change its common stock in what is
legally known as a "reclassification". This reclassification will reduce the
number of shares of common stock that are held by First Security stockholders.
In the reclassification, First Security stockholders will receive 0.442 of a
share of First Security common stock for each share of First Security common
stock that they hold before the reclassification. In the merger, the shares of
First Security common stock will not be further affected, but will thereafter be
shares of the combined company common stock. This 0.442 of a share of the
combined company common stock into which each share of First Security common
stock will be reclassified and converted is referred to in this proxy
statement/prospectus as the "exchange ratio".
The reclassification is accomplished by amending First Security's
certificate of incorporation which will be effected by the amendment and
restatement of the certificate discussed further in this proxy
statement/prospectus. Because the reclassification occurs before the
2
<PAGE> 11
merger, First Security stockholders are being asked to vote upon a separate
proposal to approve the amendment and restatement of the First Security
certificate of incorporation. However, the merger cannot be completed unless the
amendment and restatement of the First Security certificate is approved by the
First Security stockholders and the other conditions to the merger disclosed
below (see page 55) are satisfied or waived. The reclassification will have no
effect on the shares of the combined company common stock to be issued to Zions
shareholders in the merger.
GENERALLY, TAX FREE TRANSACTION FOR FIRST SECURITY STOCKHOLDERS AND ZIONS
SHAREHOLDERS (SEE PAGE 51)
We expect that for U.S. federal income tax purposes, no gain or loss will
be recognized by (1) First Security stockholders upon the reclassification of
their First Security common stock into the combined company common stock
pursuant to the amendment and restatement of the First Security certificate of
incorporation, except with respect to any cash received instead of fractional
shares or (2) Zions shareholders upon the conversion of their Zions common stock
into the combined company common stock pursuant to the merger.
We will not be obligated to complete the merger unless we receive legal
opinions that the merger will be treated as a reorganization for federal income
tax purposes, that each of Zions and First Security will be a party to that
reorganization and that no gain or loss will be recognized by Zions shareholders
or First Security stockholders, except with respect to any cash received by
First Security stockholders instead of fractional shares.
This tax treatment may not apply to certain Zions shareholders and First
Security stockholders, including shareholders who are non-U.S. persons. The
actual tax consequences to you of the merger will depend on your specific
situation and on factors not within our control. You should consult your own tax
advisor for a full understanding of the tax consequences in your particular
circumstances.
ZIONS AND FIRST SECURITY BOARDS UNANIMOUSLY RECOMMEND SHAREHOLDER APPROVAL
Each of the Zions and First Security boards of directors believes that the
merger and the exchange ratio are fair to, and in the best interests of, their
respective shareholders.
ZIONS (SEE PAGE 27)
Zions' board of directors recommends that Zions shareholders vote "FOR"
approval of the merger proposal.
FIRST SECURITY (SEE PAGE 27)
First Security's board of directors recommends that First Security
stockholders vote "FOR" approval of the merger proposal and "FOR" the amendment
and restatement of the certificate of incorporation.
FINANCIAL ADVISORS SAY EXCHANGE RATIO IS FAIR TO FIRST SECURITY STOCKHOLDERS AND
ZIONS SHAREHOLDERS (SEE PAGE 29)
J.P. Morgan Securities Inc. has served as financial advisor to First
Security in connection with the merger and has rendered an opinion to the First
Security board of directors that the exchange ratio pursuant to the merger
agreement is fair, from a financial point of view, to First Security
stockholders. Goldman, Sachs & Co. has served as financial advisor to Zions in
connection with the merger and has rendered an opinion to the Zions board of
directors that the ratio of one share of combined company common stock for one
share of Zions common stock, following the reclassification, pursuant to the
merger agreement is fair, from a financial point of view, to Zions shareholders.
You should read the opinions of J.P. Morgan and Goldman Sachs completely in
order to understand the assumptions made, matters considered and limitations of
the review undertaken in providing the opinions.
3
<PAGE> 12
MARKET PRICE AND DIVIDEND INFORMATION
The following table sets forth, for the calendar quarters indicated, the
high and low sales prices per share of Zions common stock and First Security
common stock, as reported on the Nasdaq National Market, and the dividends per
share declared on Zions common stock and First Security common stock.
<TABLE>
<CAPTION>
FIRST SECURITY
ZIONS COMMON STOCK(A) COMMON STOCK(B)
----------------------------- -----------------------------
CALENDAR QUARTER HIGH LOW DIVIDENDS HIGH LOW DIVIDENDS
---------------- ------ ------ --------- ------ ------ ---------
<S> <C> <C> <C> <C> <C> <C>
1997
First Quarter.............................. $ 34.88 $25.44 $0.11 $16.67 $14.11 $0.10
Second Quarter........................... 37.69 28.25 0.12 19.42 14.11 0.11
Third Quarter............................ 41.63 34.25 0.12 21.58 17.50 0.11
Fourth Quarter........................... 46.00 36.88 0.12 28.42 17.83 0.11
1998
First Quarter............................ $ 56.50 $38.50 $0.12 $27.92 $21.83 $0.13
Second Quarter........................... 55.25 47.00 0.14 25.13 20.81 0.13
Third Quarter............................ 58.30 37.88 0.14 24.13 15.50 0.13
Fourth Quarter........................... 62.50 37.88 0.14 23.44 15.63 0.13
1999
First Quarter............................ $ 68.50 $56.38 $0.14 $23.94 $17.50 $0.14
Second Quarter........................... 75.80 54.00 0.29 27.31 17.81 0.14
Third Quarter............................ 64.63 48.25 0.29 27.56 18.38 0.14
Fourth Quarter (through November 18)..... 65.19 52.50 -- 28.00 22.75 0.14
</TABLE>
- -------------------------
(a) All Zions common stock information has been adjusted to reflect a
four-for-one stock split effective as of May 15, 1997.
(b) All First Security common stock information has been adjusted to reflect a
three-for-two stock split effective as of February 24, 1998 and a
three-for-two stock split effective as of May 15, 1997.
DIVIDEND INFORMATION
We have agreed that the combined company will pay dividends at an annual
rate of $1.16 per share, although the board of directors of the combined company
may change this dividend rate at any time. In addition, restrictions under
applicable banking laws and regulations will limit the amount of dividends that
can be paid to the combined company from its bank subsidiaries without prior
approval by regulatory authorities.
RECENT CLOSING PRICES
Shares of Zions common stock are quoted on the Nasdaq National Market under
the symbol "ZION". Shares of First Security common stock are quoted on the
Nasdaq National Market under the symbol "FSCO".
The following table sets forth the last sales prices per share of Zions
common stock and First Security common stock on the Nasdaq National Market on
June 4, 1999, the last trading day before public announcement of the merger, and
on November 18, 1999, the last practicable trading day prior to the date of this
proxy statement/prospectus. The table also presents implied equivalent per share
values
4
<PAGE> 13
for First Security common stock by multiplying the price per share of Zions
common stock on the dates indicated by the exchange ratio of 0.442.
<TABLE>
<CAPTION>
FIRST SECURITY
COMMON STOCK
EQUIVALENT VALUE
FIRST SECURITY ZIONS (0.442X ZIONS
COMMON STOCK COMMON STOCK COMMON STOCK)
-------------- ------------ ----------------
<S> <C> <C> <C>
June 4, 1999.............................. 1$8.625 $65.375 $28.896
November 18, 1999......................... 28.00 64.375 28.454
</TABLE>
The market price of both First Security common stock and Zions common stock
will fluctuate prior to the merger; similarly, the market value of the shares of
the combined company common stock that First Security stockholders and Zions
shareholders will receive in the merger will fluctuate following the merger. You
should obtain current market quotations for First Security common stock and
Zions common stock. The future prices for First Security common stock or Zions
common stock cannot be predicted.
NUMBER OF STOCKHOLDERS
As of November 18, 1999, there were approximately 12,315 stockholders of
record who held shares of First Security common stock as shown on the records of
First Security's transfer agent for such shares and approximately 451
stockholders of record who held shares of First Security preferred stock as
shown on the records of First Security's transfer agent for such shares.
As of November 18, 1999, there were approximately 6,399 shareholders of
record who held shares of Zions common stock, as shown on the records of Zions'
transfer agent for such shares.
5
<PAGE> 14
THE ZIONS SPECIAL MEETING
SPECIAL MEETING TO BE HELD ON DECEMBER 28, 1999 (SEE PAGE 20)
The Zions special meeting will be held on December 28, 1999 at 9:00 a.m.,
local time, at the Salt Lake City Marriott Hotel, 75 South West Temple, Salt
Lake City, Utah 84101. At the Zions special meeting, you will be asked:
1. to adopt the merger agreement; and
2. to act on other matters that may be properly brought before the Zions
special meeting.
RECORD DATE SET AT NOVEMBER 18, 1999; MAJORITY VOTE OF OUTSTANDING SHARES IS
REQUIRED TO APPROVE MERGER (SEE PAGE 20)
You can vote at the Zions special meeting if you owned Zions common stock
at the close of business on November 18, 1999. As of that date, there were
85,513,098 shares of Zions common stock entitled to be voted at the special
meeting. Approval of the merger agreement requires that a majority of the
outstanding shares of Zions common stock be voted at the special meeting in
favor of the merger proposal.
As of November 18, 1999, directors and executive officers of Zions and
their affiliates, together with First Security, owned an aggregate of
approximately 9.5% of the outstanding shares of Zions common stock. The
directors and executive officers have indicated their intention to vote the
shares held by them and their affiliates in favor of the adoption of the merger
agreement.
THE FIRST SECURITY SPECIAL MEETING
SPECIAL MEETING TO BE HELD ON DECEMBER 28, 1999 (SEE PAGE 17)
The First Security special meeting will be held on December 28, 1999 at
1:00 p.m., local time, at the Salt Lake City Marriott Hotel, 75 South West
Temple, Salt Lake City, Utah 84101. At the First Security special meeting, you
will be asked:
1. to adopt the merger agreement;
2. to approve the amendment and restatement of the First Security
certificate of incorporation; and
3. to act on other matters that may be properly brought before the First
Security special meeting.
A vote to adopt the merger agreement is also a vote to approve the
transactions contemplated by the merger agreement, including, among others, the
merger, the issuance of the combined company common stock to Zions shareholders
pursuant to the merger agreement and the amendment and restatement of each of
the First Security certificate of incorporation and by-laws. The changes to
First Security's certificate of incorporation and by-laws are explained more
fully on page 24.
RECORD DATE SET AT NOVEMBER 18, 1999; MAJORITY VOTE OF OUTSTANDING SHARES IS
REQUIRED TO APPROVE MERGER AND AMENDMENT AND RESTATEMENT OF CERTIFICATE OF
INCORPORATION (SEE PAGE 17)
You can vote at the First Security special meeting if you owned First
Security common stock or First Security preferred stock at the close of business
on November 18, 1999. As of that date, there were 195,851,315 shares of First
Security common stock and 8,691 shares of First Security preferred stock
entitled to vote at the First Security special meeting. Adoption of the merger
agreement and approval of the amendment and restatement of the First Security
certificate of incorporation requires a majority of the outstanding shares of
First Security common stock and First Security preferred stock, voting as one
class, to be voted at the First Security special meeting in favor of each of
those proposals.
As of November 18, 1999, directors and executive officers of First Security
and Zions and their affiliates owned, together with Zions, an aggregate of
approximately 11.7% of the outstanding shares of First Security common
6
<PAGE> 15
stock. The directors and executive officers and Zions have indicated their
intention to vote the shares held by them and their affiliates in favor of the
adoption of the merger agreement and the amendment and restatement of the
certificate of incorporation.
INFORMATION REGARDING ZIONS AND FIRST SECURITY
ZIONS BANCORPORATION
Zions is a Utah corporation. It is the parent holding company for Zions
First National Bank, headquartered in Salt Lake City, Utah, and several other
subsidiaries that engage in banking or banking-related services.
Through its banking subsidiaries, Zions operated 342 branches in the states
of Arizona, California, Colorado, Idaho, Nevada, New Mexico, Utah and Washington
as of September 30, 1999. At that date, Zions had consolidated assets of $18.6
billion, deposits of $13.0 billion and shareholders' equity of $1.1 billion.
FIRST SECURITY CORPORATION
First Security is the nation's oldest multistate bank holding company and
is the parent corporation for First Security Bank, N.A. and several other
subsidiaries that engage in banking or banking-related services.
Through its subsidiaries, First Security operated 334 branches in the
states of California, Idaho, Nevada, New Mexico, Oregon, Utah and Wyoming as of
September 30, 1999. At that date, First Security had consolidated assets of
$23.3 billion, deposits of $13.2 billion and common stockholders' equity of $1.8
billion.
STOCKHOLDERS DO NOT HAVE APPRAISAL RIGHTS
Zions is incorporated under Utah law and First Security is incorporated
under Delaware law. Under Utah law and Delaware law, neither Zions shareholders
nor First Security stockholders have any right to a court determination, in a
proceeding known as an appraisal, of the value of their shares in connection
with the merger.
THE MERGER (SEE PAGE 22)
We propose a merger in which Zions and First Security will merge. The
combined company will operate under the First Security name. This proposed
merger will create the second largest bank holding company headquartered in the
western United States.
Zions and First Security believe that the merger offers both companies'
shareholders the opportunity to benefit from the synergies and growth
opportunities expected to result from combining the two companies. For a more
detailed discussion of the reasons for the merger, see pages 25 through 29.
After the merger, Zions shareholders will initially own approximately 49%
of the combined company common stock and First Security stockholders will
initially own approximately 51% of the combined company common stock.
CERTAIN MEMBERS OF OUR MANAGEMENT AND DIRECTORS HAVE INTERESTS IN THE MERGER
(SEE PAGE 40)
The directors and executive officers of First Security and Zions have
interests in the merger in addition to their interests as shareholders
generally. These interests include the following:
- - The merger agreement provides that all of the members of the current Zions
board and some of the members of the First Security board will be members of
the board of directors of the combined company, and that some of the current
members of Zions' and First Security's senior management will comprise a
portion of the senior management of the combined company.
- - Some First Security officers have entered into employment agreements with
First Security pursuant to which each may receive compensation and benefits as
a result of, and/or in connection with employment following, the merger.
7
<PAGE> 16
- - Following the merger, the combined company will indemnify and provide
liability insurance to the officers and directors of Zions and First Security.
- - Officers and directors of First Security have rights pursuant to the terms of
benefit and compensation plans maintained by First Security which will allow
for rights under stock-based awards to be available for exercise earlier.
The Zions and First Security boards of directors were aware of these interests
and took them into account in approving the merger agreement.
COMBINED COMPANY TO USE POOLING-OF-INTERESTS ACCOUNTING TREATMENT (SEE PAGE 60)
Zions and First Security anticipate that the combined company will account
for the merger as a pooling of interests for financial reporting purposes. Zions
and First Security have conditioned the merger on receipt of the opinion of
their respective independent auditors that the merger will qualify for
pooling-of-interests accounting treatment.
CONDITIONS THAT MUST BE SATISFIED FOR THE MERGER TO OCCUR (SEE PAGE 55)
Completion of the merger is subject to various conditions, including:
- - approval of the merger agreement by the Zions shareholders and the First
Security stockholders;
- - receipt of all governmental consents and approvals that are necessary to
permit completion of the merger; and
- - other usual conditions.
If the law permits, either of us could choose to waive a condition to our
obligation to complete the merger even though that condition has not been
satisfied. We cannot be certain when, or if, the conditions to the merger will
be satisfied or waived, or that the merger will be completed.
REGULATORY APPROVALS WE MUST OBTAIN FOR THE MERGER (SEE PAGE 49)
We cannot complete the merger unless it is approved by the Board of
Governors of the Federal Reserve System. We have submitted an application and a
notice to the Federal Reserve regarding the merger. In addition, we cannot
complete the merger without the approval of the California Commissioner of
Financial Institutions because Zions has a state-charted banking subsidiary in
California. We have filed an application with the California Commissioner. On
October 28, 1999, we received the approval of the Commissioner of Financial
Institutions in Nevada with respect to the merger.
Although we do not know of any reason why we cannot obtain the remaining
regulatory approvals, we cannot be certain when or if we will obtain them. We
expect that some amount of divestitures of certain branches, deposits and loans
will be required by governmental authorities before we can complete the merger.
MERGER EXPECTED TO OCCUR IN FOURTH QUARTER OF 1999
The merger will occur shortly after all of the conditions to its completion
have been satisfied. It is currently anticipated that the merger will occur in
the fourth quarter of 1999.
TERMINATION OF THE MERGER AGREEMENT (SEE PAGE 58).
We can agree to abandon the merger, and terminate the merger agreement, at
any time prior to the time the merger is completed, even if our shareholders
have adopted the merger agreement. Also, either Zions or First Security can
decide, without the consent of the other, to abandon the merger if any of the
following occurs:
- - The other party breaches a provision contained in the merger agreement and
does not (or cannot) correct the breach within 30 days.
- - The merger has not been completed by March 31, 2000.
8
<PAGE> 17
- - Any regulatory authority denies an approval we need to complete the merger or
issues any order preventing the merger.
AMENDMENT AND RESTATEMENT OF FIRST SECURITY CERTIFICATE OF INCORPORATION AND
BY-LAWS (SEE PAGE 79)
In addition to amending and restating its certificate of incorporation to
provide for the reclassification, as part of the merger First Security will
further amend each of its then-existing certificate of incorporation and by-laws
so that after the merger, they will read in their entirety as the parties have
agreed.
The rights of First Security stockholders currently are governed by
Delaware law, the First Security certificate of incorporation and the First
Security by-laws. The rights of Zions shareholders currently are governed by
Utah law, the Zions amended and restated articles of incorporation and the Zions
amended and restated by-laws. After the merger, the rights of stockholders in
the combined company will be governed by Delaware law, the combined company
certificate of incorporation and the combined company by-laws, which are
attached as Exhibit A-1 and A-2, respectively, to the merger agreement, attached
as Appendix A to this proxy statement/prospectus. The certificate of
incorporation and by-laws of the combined company will differ in material
respects from the current certificate or articles of incorporation and by-laws
of First Security and Zions.
STOCK OPTION AGREEMENTS (SEE PAGE 62)
The stock option agreements are attached to this proxy statement/prospectus
as Appendices B and C. Please read each of them carefully and in its entirety.
In connection with the merger agreement, we have entered into stock option
agreements with each other in which we have each granted the other party an
option to purchase up to 19.9% of our outstanding shares of common stock in the
event of certain circumstances. The exercise price under the option granted by
First Security is $21.50 and the exercise price under the option granted by
Zions is $64.25.
Neither of us can exercise the option unless certain events occur. These
events can generally be described as business combinations or acquisition
transactions relating to the other party and certain related events. In addition
to the option to purchase common stock, the holder of the option may, under
certain circumstances, require the company granting the option to repurchase the
option for an agreed upon cash price. We do not know of any event that has
occurred as of the date of this proxy statement/prospectus that would allow
either Zions or First Security to exercise the option.
We agreed to grant the options in order to induce the other party to enter
into the merger agreement. The option could have the effect of discouraging
other companies from trying to acquire either First Security or Zions.
9
<PAGE> 18
COMPARISON OF UNAUDITED PER SHARE DATA
The following table shows information about our per share net income, cash
dividends and book value after giving effect to the merger, which we refer to as
"pro forma" information. The pro forma information gives effect to the merger
under the pooling-of-interests method of accounting in accordance with generally
accepted accounting principles. In presenting the pro forma information for
certain periods, we assumed that Zions and First Security had been merged
throughout those periods. The pro forma comparative per share data is derived
from the unaudited pro forma condensed combined financial statements and notes
thereto beginning on page 66 of this proxy statement/prospectus. The combined
pro forma net income per share amounts for the year ended December 31, 1998
include earnings for The Sumitomo Bank of California for the nine months ended
September 30, 1998, after giving effect to certain pro forma adjustments. The
pro forma equivalent per share data is derived by multiplying the pro forma
comparative per share amounts by the exchange ratio of 0.442. The pro forma data
does not attempt to predict or suggest future results, or show how the combined
company would actually have performed had the companies been combined throughout
those periods.
You should read the following table together with the historical financial
information that we have presented in our prior filings with the Securities and
Exchange Commission. We have incorporated this material into this proxy
statement/prospectus by reference to those other filings. See "Where You Can
Find More Information" on page 85 on how to obtain this information.
HISTORICAL
<TABLE>
<CAPTION>
PRO FORMA
FIRST EQUIVALENT OF
FIRST SECURITY COMBINED ONE FIRST
ZIONS SECURITY PRO FORMA(2) PRO FORMA SECURITY SHARE
------ -------- ------------ --------- --------------
<S> <C> <C> <C> <C> <C>
NET INCOME PER COMMON SHARE -- BASIC:
Nine Months Ended September 30, 1999.... $ 1.98 $1.08 $ 2.44 $ 2.23 $0.99
Year Ended December 31, 1998.......... 1.93 1.32 2.99 2.42 1.07
Year Ended December 31, 1997.......... 1.88 1.18 2.67 2.30 1.02
Year Ended December 31, 1996.......... 1.69 1.03 2.32 2.03 0.90
NET INCOME PER COMMON SHARE -- DILUTED:
Nine Months Ended September 30,
1999............................... $ 1.96 $1.05 $ 2.38 $ 2.18 $0.96
Year Ended December 31, 1998.......... 1.91 1.28 2.89 2.36 1.05
Year Ended December 31, 1997.......... 1.84 1.14 2.58 2.23 0.99
Year Ended December 31, 1996.......... 1.66 1.00 2.26 1.97 0.87
CASH DIVIDENDS PER SHARE OF COMMON
STOCK:(1)
Nine Months Ended September 30,
1999............................... $ 0.72 $0.42 $ 0.95 $ 0.72 $0.32
Year Ended December 31, 1998.......... 0.54 0.52 1.18 0.54 0.24
Year Ended December 31, 1997.......... 0.47 0.44 1.00 0.47 0.21
Year Ended December 31, 1996.......... 0.425 0.38 0.86 0.425 0.19
BOOK VALUE PER SHARE OF COMMON STOCK AS
OF:
September 30, 1999.................... $14.09 $8.99 $20.34 $16.22 $7.16
December 31, 1998..................... 12.89 8.54 19.33 16.19 7.15
</TABLE>
- -------------------------
(1) See page 4 for a discussion of the expected dividend policy of the combined
company.
(2) Reflects the reverse stock split in which each outstanding share of First
Security common stock will be converted into 0.442 of a share of combined
company common stock.
10
<PAGE> 19
SELECTED FINANCIAL DATA OF ZIONS
The following table presents selected historical financial data of Zions
derived from Zions' previously filed financial statements. The interim financial
information has been derived from unaudited financial statements of Zions. Zions
believes that these financial statements include all adjustments of a normal,
recurring nature and all disclosures that are necessary for a fair statement of
the results for the unaudited interim periods. Results for the interim periods
do not necessarily indicate results which may be expected for any other interim
or annual period.
You should read the following table together with the historical financial
information that Zions has presented in its prior filings with the SEC. Zions
has incorporated this material into this proxy statement/prospectus by reference
to those other filings. See "Where You Can Find More Information" on page 85 on
how to obtain this information.
<TABLE>
<CAPTION>
AT OR FOR THE
NINE MONTHS ENDED
SEPTEMBER 30, AT OR FOR THE YEAR ENDED DECEMBER 31,
--------------------- ------------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
--------- --------- --------- --------- -------- -------- --------
(IN MILLIONS, EXCEPT PER SHARE AND OTHER DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF INCOME DATA:
Interest income.............................. $ 940.4 $ 667.8 $ 976.1 $ 779.5 $ 594.7 $ 504.3 $ 405.2
Interest expense............................. 422.6 298.8 432.3 367.0 257.0 231.9 172.5
--------- --------- --------- --------- -------- -------- --------
Net interest income........................ 517.8 369.0 543.8 412.5 337.7 272.5 232.7
Provision for loan losses.................... 11.9 9.3 12.2 7.8 6.5 4.7 3.1
--------- --------- --------- --------- -------- -------- --------
Net interest income after provision for loan
losses..................................... 505.9 359.7 531.6 404.7 331.2 267.8 229.6
Noninterest income........................... 185.3 142.2 200.7 146.4 122.0 95.8 79.0
Noninterest expense.......................... 448.8 331.0 514.1 344.6 273.1 229.7 207.2
--------- --------- --------- --------- -------- -------- --------
Income before income taxes................... 242.4 170.9 218.2 206.5 180.1 133.9 101.4
Income taxes................................. 83.0 56.2 70.9 72.2 59.7 43.8 32.6
--------- --------- --------- --------- -------- -------- --------
Net income before minority interest.......... 159.4 114.7 147.3 134.3 120.4 90.1 68.8
Minority interest............................ 2.9 -- .5 -- -- -- --
--------- --------- --------- --------- -------- -------- --------
Net income................................... $ 156.5 $ 114.7 $ 146.8 $ 134.3 $ 120.4 $ 90.1 $ 68.8
========= ========= ========= ========= ======== ======== ========
Earnings per common share:
Basic...................................... $ 1.98 $ 1.53 $ 1.93 $ 1.88 $ 1.69 $ 1.38 $ 1.10
Diluted.................................... $ 1.96 $ 1.50 $ 1.91 $ 1.84 $ 1.66 $ 1.36 $ 1.08
Shares on which earnings per common share
were based:
Basic...................................... 78.9 75.0 75.9 70.5 70.4 64.7 62.1
Diluted.................................... 80.0 76.2 77.0 72.8 72.2 66.0 63.1
Cash dividends paid per common share......... $ 0.72 $ 0.40 $ 0.54 $ 0.47 $ 0.425 $ 0.3525 $ 0.29
CONSOLIDATED BALANCE SHEETS DATA:
Total assets................................. $18,595.5 $12,385.4 $16,648.9 $10,869.2 $8,224.3 $6,904.2 $5,713.7
Loans, net of unearned income................ 11,416.5 6,763.2 10,633.5 5,668.9 4,503.2 3,533.4 2,791.4
Deposits..................................... 13,008.8 8,932.0 13,321.2 7,956.2 6,009.3 5,148.8 4,250.8
Long-term borrowings(1)...................... 570.5 498.0 510.5 491.3 340.6 157.7 165.4
Total shareholders' equity................... 1,112.9 977.3 1,013.7 742.1 641.3 535.0 412.9
</TABLE>
11
<PAGE> 20
<TABLE>
<CAPTION>
AT OR FOR THE
NINE MONTHS ENDED
SEPTEMBER 30, AT OR FOR THE YEAR ENDED DECEMBER 31,
--------------------- ------------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
--------- --------- --------- --------- -------- -------- --------
(IN MILLIONS, EXCEPT PER SHARE AND OTHER DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER DATA:
Return on average assets..................... 1.16%(2) 1.29%(2) 1.11% 1.29% 1.53% 1.37% 1.12%
Return on average common equity.............. 19.37(2) 17.90(2) 16.38 19.08 20.47 19.36 17.90
Tier 1 risk-based capital ratio.............. 8.45 12.88 8.46 11.55 14.43 11.41 11.69
Total risk-based capital ratio............... 11.27 16.01 11.48 13.42 16.65 13.93 14.57
Leverage capital ratio....................... 6.14 8.51 5.98 6.83 9.05 6.50 6.33
</TABLE>
- -------------------------
(1) Consists of long-term debt and Federal Home Loan Bank advances and other
borrowings over one year.
(2) Interim amounts are annualized.
12
<PAGE> 21
SELECTED FINANCIAL DATA OF FIRST SECURITY
The following table presents selected historical financial data of First
Security derived from First Security's previously filed financial statements.
The interim financial information has been derived from unaudited financial
statements of First Security. First Security believes that these financial
statements include all adjustments of a normal, recurring nature and all
disclosures that are necessary for a fair statement of the results for the
unaudited interim periods. Results for the interim periods do not necessarily
indicate results which may be expected for any other interim or annual period.
You should read the following table together with the historical financial
information that First Security has presented in its prior filings with the SEC.
First Security has incorporated this material into this proxy
statement/prospectus by reference to those other filings. See "Where You Can
Find More Information" on page 85 on how to obtain this information.
<TABLE>
<CAPTION>
AT OR FOR THE
NINE MONTHS ENDED
SEPTEMBER 30, AT OR FOR THE YEAR ENDED DECEMBER 31,
--------------------- ----------------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
--------- --------- --------- --------- --------- --------- ---------
(IN MILLIONS, EXCEPT PER SHARE AND OTHER DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF INCOME DATA:
Interest income........................ $ 1,157.3 $ 1,051.5 $ 1,420.7 $ 1,213.4 $ 1,039.4 $ 974.0 $ 801.6
Interest expense....................... 583.3 534.5 717.0 587.4 485.3 469.8 322.0
--------- --------- --------- --------- --------- --------- ---------
Net interest income.................... 574.0 517.0 703.7 626.0 554.1 504.2 479.6
Provision for loan losses.............. 40.3 49.1 71.9 63.4 41.3 22.7 1.5
--------- --------- --------- --------- --------- --------- ---------
Net interest income after provision for
loan losses.......................... 533.7 467.9 631.8 562.6 512.8 481.5 478.1
Noninterest income..................... 399.7 342.0 474.4 357.1 306.4 270.6 202.0
Noninterest expense.................... 620.0 529.6 723.1 588.9 531.2 555.2 455.3
--------- --------- --------- --------- --------- --------- ---------
Income before income taxes............. 313.4 280.3 383.1 330.8 288.0 196.9 224.8
Income taxes........................... 106.4 99.9 135.4 115.5 103.5 72.3 81.1
--------- --------- --------- --------- --------- --------- ---------
Net income............................. $ 207.0 $ 180.4 $ 247.7 $ 215.3 $ 184.5 $ 124.6 $ 143.7
========= ========= ========= ========= ========= ========= =========
Earnings per common share:
Basic................................ $ 1.08 $ 0.96 $ 1.32 $ 1.18 $ 1.03 $ 0.71 $ 0.83
Diluted.............................. $ 1.05 $ 0.93 $ 1.28 $ 1.14 $ 1.00 $ 0.69 $ 0.81
Shares on which earnings per common
share were based:
Basic................................ 191.7 187.3 187.6 182.2 179.8 176.1 172.6
Diluted.............................. 196.9 193.9 193.8 188.7 185.0 180.0 176.4
Cash dividends paid per common share... $ 0.42 $ 0.39 $ 0.52 $ 0.44 $ 0.38 $ 0.33 $ 0.31
CONSOLIDATED BALANCE
SHEETS DATA:
Total assets........................... $23,346.6 $19,859.3 $21,689.1 $18,151.8 $15,456.6 $13,529.7 $12,602.1
Loans, net of unearned income.......... 13,817.2 12,926.9 14,013.4 11,230.8 9,697.4 8,616.8 8,442.3
Deposits............................... 13,213.0 11,943.6 12,658.6 11,417.6 10,103.0 9,202.8 8,442.0
Long-term borrowings(1)................ 2,536.9 1,749.5 2,609.6 1,304.5 944.1 720.5 685.4
Total shareholders' equity............. 1,759.1 1,609.5 1,595.0 1,400.3 1,217.3 1,082.4 936.7
OTHER DATA:
Return on average assets............... 1.25%(2) 1.27%(2) 1.28% 1.35% 1.35% 0.98% 1.25%
Return on average common equity........ 16.65(2) 16.11(2) 16.21 16.60 16.23 12.02 15.69
Tier 1 risk-based capital ratio........ 8.82 9.63 8.41 10.62 11.34 10.44 10.02
Total risk-based capital ratio......... 10.78 11.91 10.45 13.42 14.41 13.85 12.13
Leverage capital ratio................. 7.12 7.64 6.90 7.53 8.15 7.22 6.98
</TABLE>
- -------------------------
(1) Consists of long-term debt (which includes Federal Home Loan Bank advances
over one year).
(2) Interim amounts are annualized.
13
<PAGE> 22
UNAUDITED PRO FORMA ZIONS/FIRST SECURITY FINANCIAL DATA
The following table presents summary financial data for Zions and First
Security after giving effect to the merger, which we refer to as "pro forma"
information. The pro forma financial data gives effect to the merger under the
pooling-of-interests accounting method in accordance with generally accepted
accounting principles. In presenting the pro forma information for certain time
periods, we assumed that Zions and First Security had been merged throughout
those periods. Net income per share amounts and weighted average shares have
been adjusted to reflect the conversion of each outstanding share of First
Security common stock into 0.442 of a share of the combined company common stock
in the reclassification. The pro forma combined statement of income data for the
year ended December 31, 1998 includes results of operations for The Sumitomo
Bank of California for the nine months ended September 30, 1998, after giving
effect to certain pro forma adjustments. Zions acquired Sumitomo in a
transaction accounted for as a purchase on October 1, 1998.
We expect to incur reorganization and restructuring expenses as a result of
combining our companies. The unaudited pro forma statement of income information
does not reflect any anticipated reorganization and restructuring expenses
resulting from the merger. We also anticipate that the merger will provide the
combined company with certain financial benefits that include reduced operating
expense and opportunities to earn more revenue. However, we do not reflect any
of these anticipated cost savings or benefits in the pro forma information.
Finally, the pro forma financial information does not reflect any divestitures
of branches, deposits or loans that will be required in connection with the
merger. Therefore, the pro forma information, while helpful in illustrating the
financial characteristics of the combined company under one set of assumptions,
does not attempt to predict or suggest future results. The pro forma information
also does not attempt to show how the combined company would actually have
performed had the companies been combined throughout those periods. All
adjustments, consisting of only normal recurring adjustments, necessary for a
fair statement of results of the unaudited historical interim periods have been
included.
We have based the information in the following tables on our historical
financial information that we have presented in our prior filings with the SEC.
When you read the summary financial information provided in the following
tables, you should also read the historical financial information and the more
detailed financial information we provide in this proxy statement/prospectus,
which you can find beginning at page 66, as well as the historical financial
information in the other documents to which we refer. See "Where You Can Find
More Information" on page 85 on how to obtain this information. The information
in the following table does not give effect to other pending and completed
merger
14
<PAGE> 23
transactions of Zions or First Security, none of which is material to the pro
forma financial information set forth below.
<TABLE>
<CAPTION>
AT OR FOR THE
NINE MONTHS FOR THE YEAR ENDED
ENDED DECEMBER 31,
SEPTEMBER 30, ------------------------------
1999 1998 1997 1996
------------- -------- -------- --------
(IN MILLIONS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C>
PRO FORMA COMBINED STATEMENTS OF INCOME DATA:
Interest income................................. $2,096.9 $2,652.4 $1,992.9 $1,634.1
Interest expense.............................. 1,005.9 1,273.3 954.4 742.3
-------- -------- -------- --------
Net interest income........................ 1,091.0 1,379.1 1,038.5 891.8
Provision for loan losses..................... 52.2 90.1 71.2 47.8
-------- -------- -------- --------
Net interest income after provision for
loan losses.............................. 1,038.8 1,289.0 967.3 844.0
Noninterest income............................ 627.4 735.9 519.6 440.3
Noninterest expense........................... 1,112.0 1,427.9 949.6 816.2
-------- -------- -------- --------
Income before income taxes.................... 554.2 597.0 537.3 468.1
Income taxes.................................. 189.0 206.4 187.7 163.2
-------- -------- -------- --------
Net income before minority interest........ 365.2 390.6 349.6 304.9
Minority interest............................. 2.9 1.1 -- --
-------- -------- -------- --------
Net income.................................... $ 362.3 $ 389.5 $ 349.6 $ 304.9
======== ======== ======== ========
Earnings per common share:
Basic........................................... $ 2.23 $ 2.42 $ 2.30 $ 2.03
Diluted......................................... $ 2.18 $ 2.36 $ 2.23 $ 1.97
Shares on which earnings per common share were
based (in thousands):
Basic........................................... 162,620 159,978 151,078 149,839
Diluted......................................... 165,963 163,868 156,229 153,921
PRO FORMA COMBINED BALANCE SHEET DATA:
Total assets.................................... $ 41,619
Loans, net of unearned income................... 25,234
Deposits........................................ 26,222
Long-term borrowings............................ 3,107
Total shareholders' equity...................... 2,457
</TABLE>
15
<PAGE> 24
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This proxy statement/prospectus contains certain forward-looking statements
with respect to the financial condition, results of operations and business of
each of First Security and Zions. These statements may be made directly in this
proxy statement/prospectus referring to First Security or Zions, or may be
incorporated in this proxy statement/prospectus by reference to other documents
and may include statements regarding the projected performance of Zions and
First Security for the period following the completion of the merger. You can
find many of these statements by looking for words such as "believes",
"expects", "anticipates", "estimates" or similar words or expressions. These
forward-looking statements involve substantial risks and uncertainties. Some of
the factors that may cause actual results to differ materially from those
contemplated by such forward-looking statements include, but are not limited to,
the following possibilities:
- combining the businesses of First Security and Zions may cost more than
we expect;
- the timing of the completion of the proposed merger and new operations
may be delayed or prohibited;
- there may be increases in competitive pressure among financial
institutions;
- general economic conditions, either nationally or locally in areas in
which Zions and First Security conduct their operations, or conditions in
securities markets may be less favorable than we currently anticipate;
- combining the businesses of Zions and First Security may require
divestitures of branches, deposits or loans as a result of the merger in
an amount greater than expected;
- expected cost savings from the merger may not be fully realized or
realized within the expected time frame;
- legislation or regulatory changes may adversely affect the ability of the
combined company to conduct, or the accounting for, business combinations
and new operations;
- the transition to the year 2000 may have an adverse impact on Zions,
First Security or the banking industry in general;
- integrating the businesses of Zions and First Security and retaining key
personnel may be more difficult than we expect;
- our revenues after the merger may be lower than we expect;
- we may lose more business or customers after the merger than we expect,
or our operating costs may be higher than we expect; or
- changes in the interest rate environment may reduce interest margins.
Because such statements are subject to risks and uncertainties, actual
results may differ materially from those expressed or implied by such
statements. First Security stockholders and Zions shareholders are cautioned not
to place undue reliance on such statements, which speak only as of the date of
this proxy statement/prospectus or the date of any document incorporated by
reference.
All subsequent written and oral forward-looking statements attributable to
First Security or Zions or any person acting on their behalf are expressly
qualified in their entirety by the cautionary statements contained or referred
to in this section. Neither First Security nor Zions undertakes any obligation
to release publicly any revisions to such forward-looking statements to reflect
events or circumstances after the date of this proxy statement/prospectus or to
reflect the occurrence of unanticipated events.
16
<PAGE> 25
THE FIRST SECURITY SPECIAL MEETING
GENERAL
The First Security board of directors is providing this proxy
statement/prospectus to the First Security stockholders in connection with the
solicitation of proxies for use at the special meeting of First Security
stockholders and at any adjournments or postponements of the meeting. The
special meeting is scheduled to be held at the Salt Lake City Marriott Hotel, 75
South West Temple, Salt Lake City, Utah 84101 at 1:00 p.m. on December 28, 1999.
The purpose of the First Security special meeting is to consider and vote
on:
1. the adoption of the merger agreement;
2. the approval of the amendment and restatement of the First Security
certificate of incorporation; and
3. such other business as may properly come before the First Security
special meeting.
RECORD DATE
The First Security board has fixed the close of business on November 18,
1999 as the record date for determining which First Security stockholders are
entitled to receive notice of and vote at the special meeting. You have the
right to vote your shares at the meeting only if you owned First Security common
stock or First Security preferred stock on the record date. As of that date,
there were issued and outstanding 195,851,315 shares of First Security common
stock and 8,691 shares of First Security preferred stock. Each outstanding share
of First Security common stock and First Security preferred stock as of the
record date is entitled to vote upon each matter properly submitted at the First
Security special meeting.
The presence, in person or by properly executed proxy, of the holders of a
majority of the outstanding shares of First Security common stock and First
Security preferred stock is necessary to constitute a quorum at the special
meeting. Abstentions and broker non-votes (as described below) will be counted
solely for the purpose of determining whether a quorum is present. Under the
applicable rules of the National Association of Securities Dealers, Inc.,
brokers or members who hold shares in street name for customers who are the
beneficial owners of such shares are prohibited from giving a proxy to vote
those shares with respect to the approval of the matters to be considered at the
First Security special meeting. We refer to these as "broker non-votes".
Abstentions and broker non-votes will not be deemed to be cast either "FOR" or
"AGAINST" any of the matters to be voted upon at the First Security special
meeting.
SOLICITATION AND REVOCABILITY OF PROXIES
This proxy statement/prospectus is accompanied by a form of proxy for use
at the First Security special meeting. If you complete the enclosed proxy card
and return in it time, your proxy holder will vote your shares in accordance
with the instructions indicated on the proxy. Except for broker non-votes, if no
instructions are indicated, such proxies will be voted "FOR" approval of the
merger proposal and the amendment and restatement of the First Security
certificate of incorporation and, as determined by a majority of the First
Security board, as to any other matter that may come before the First Security
special meeting. Those other matters may include, among other things, a motion
to adjourn or postpone the First Security special meeting to another time and/or
place for the purpose of soliciting additional proxies or otherwise. No proxy
with instructions to vote against the merger proposal or the amendment
17
<PAGE> 26
and restatement of the First Security certificate of incorporation, however,
will be voted in favor of any adjournment or postponement of the First Security
special meeting.
In addition to solicitation by mail, directors, officers and employees of
First Security, none of whom will be specifically compensated for such services
but may be reimbursed for reasonable out-of-pocket expenses in connection
therewith, may solicit proxies from stockholders of First Security personally or
by telephone, fax or other forms of communication. Brokerage houses, nominees,
fiduciaries and other custodians will be requested to forward soliciting
materials to beneficial owners and will be reimbursed for their reasonable
expenses incurred in sending such material to beneficial owners.
A stockholder who has given a proxy may revoke it at any time prior to its
exercise at the First Security special meeting by:
- giving written notice of revocation to the secretary of First
Security;
- properly submitting a duly executed proxy bearing a later date; or
- voting in person at the First Security special meeting.
All written notices of revocation and other communications with respect to the
revocation of proxies should be addressed to First Security Corporation, 79
South Main, 2nd Floor, Salt Lake City, Utah 84111, Attention: Secretary. A
stockholder whose shares are held in street name should follow the instructions
of his or her broker regarding revocation of proxies. A proxy appointment will
not be revoked by the death or incapacity of the stockholder executing the proxy
unless, before the shares are voted, notice of such death or incapacity is filed
with the secretary of First Security or other person responsible for tabulating
votes on behalf of First Security.
First Security stockholders should not send First Security stock
certificates with their proxy cards. If the reclassification and the merger are
completed, holders of First Security common stock will be mailed a transmittal
form with instructions on how to exchange their current stock certificates for
stock certificates of the combined company. Holders of certificates representing
First Security preferred stock will not exchange their certificates as a result
of the reclassification and the merger, and their certificates representing
shares of First Security preferred stock will continue to represent the same
number of shares of First Security preferred stock.
VOTE REQUIRED
Approval of the merger proposal and the amendment and restatement of the
First Security certificate of incorporation requires the affirmative vote at the
First Security special meeting of a majority of the outstanding shares of First
Security common stock and First Security preferred stock, voting as one class.
As of the record date, Zions held approximately 4.8% of the outstanding
shares of First Security common stock and Zions' executive officers and
directors and their affiliates held under one percent of the outstanding shares
of First Security common stock. In addition, the directors and executive
officers of First Security are entitled to vote approximately 6.9% of the
outstanding shares of First Security common stock. Zions, the directors and
officers of Zions and the directors and officers of First Security have
indicated their intention to vote the shares of First Security common stock held
by them or their affiliates in favor of the merger proposal and the amendment
and restatement of the First Security certificate of incorporation.
18
<PAGE> 27
RECOMMENDATION OF BOARD OF DIRECTORS
The First Security board of directors has unanimously approved, and
believes to be in the best interests of First Security and its stockholders, the
merger agreement and the amendment and restatement of the First Security
certificate of incorporation. The First Security board of directors recommends
that the stockholders of First Security vote "FOR" adoption of the merger
agreement and approval of the amendment and restatement of the First Security
certificate of incorporation. See "The Merger -- Reasons of First Security for
the Merger and Recommendation of the First Security Board".
19
<PAGE> 28
THE ZIONS SPECIAL MEETING
GENERAL
The Zions board of directors is providing this proxy statement/prospectus
to the Zions shareholders in connection with the solicitation of proxies for use
at the special meeting of Zions shareholders and at any adjournments or
postponements of the meeting. The special meeting is scheduled to be held at the
Salt Lake City Marriott Hotel, 75 South West Temple, Salt Lake City, Utah 84101
at 9:00 a.m. on December 28, 1999. First Security is also providing this proxy
statement/ prospectus to Zions shareholders as a prospectus for the offer and
sale by First Security of shares of First Security common stock to Zions
shareholders in connection with the merger of Zions into First Security.
The purpose of the Zions special meeting is to consider and vote on:
1. the adoption of the merger agreement; and
2. such other business as may properly come before the Zions special
meeting.
RECORD DATE
The Zions board has fixed the close of business on November 18, 1999 as the
record date for determining which Zions shareholders are entitled to receive
notice of and vote at the special meeting. You have the right to vote your
shares at the meeting only if you owned Zions common stock on the record date.
As of that date, there were issued and outstanding 85,513,098 shares of Zions
common stock. Each outstanding share of Zions common stock as of the record date
is entitled to vote upon each matter properly submitted at the Zions special
meeting.
The presence, in person or by properly executed proxy, of the holders of a
majority of the outstanding shares is necessary to constitute a quorum at the
special meeting. Abstentions and broker non-votes will be counted solely for the
purpose of determining whether a quorum is present. Abstentions and broker
non-votes will not be deemed to be cast either "FOR" or "AGAINST" the merger
proposal.
SOLICITATION AND REVOCABILITY OF PROXIES
This proxy statement/ prospectus is accompanied by a form of proxy for use
at the Zions special meeting. If you complete the enclosed proxy card and return
it in time, your proxy holder will vote your shares according to the
instructions indicated on the proxy. Except for broker non-votes, if no
instructions are indicated, such proxies will be voted "FOR" approval of the
merger proposal and, as determined by a majority of the Zions board, as to any
other matter that may come before the Zions special meeting. Those other matters
may include, among other things, a motion to adjourn or postpone the Zions
special meeting to another time and/or place for the purpose of soliciting
additional proxies or otherwise. No proxy with instructions to vote against the
merger proposal, however, will be voted in favor of any adjournment or
postponement of the Zions special meeting.
In addition to solicitation by mail, directors, officers and employees of
Zions, none of whom will be specifically compensated for such services but may
be reimbursed for reasonable out-of-pocket expenses in connection therewith, may
solicit proxies from shareholders of Zions personally or by telephone, fax or
other forms of communication. Brokerage houses, nominees, fiduciaries and other
custodians will be requested to forward soliciting materials to beneficial
owners and will be reimbursed for their reasonable expenses incurred in sending
such material to beneficial owners.
20
<PAGE> 29
A shareholder who has given a proxy may revoke it at any time prior to its
exercise at the special meeting by:
- giving written notice of revocation to the secretary of Zions;
- properly submitting a duly executed proxy bearing a later date; or
- voting in person at the Zions special meeting.
All written notices of revocation and other communications with respect to the
revocation of proxies should be addressed to Zions Bancorporation, One South
Main, Suite 1380, Salt Lake City, Utah 84111, Attention: Secretary. A
shareholder whose shares are held in street name should follow the instructions
of his or her broker regarding revocation of proxies. A proxy appointment will
not be revoked by the death or incapacity of the shareholder executing the proxy
unless, before the shares are voted, notice of such death or incapacity is filed
with the secretary of Zions or other person responsible for tabulating votes on
behalf of Zions.
Zions shareholders should not send Zions common stock certificates with
their proxy cards. Unless we determine that the exchange of certificates
representing Zions common stock for certificates representing common stock of
the combined company is required by law, Zions shareholders will not exchange
their certificates in the merger. If there is no such exchange, the certificates
currently representing the shares of Zions common stock will represent an equal
number of shares of the combined company common stock after the merger.
VOTE REQUIRED
Approval of the merger proposal requires the affirmative vote at the Zions
special meeting of a majority of the outstanding shares of Zions common stock.
As of the record date, First Security held approximately 1.8% of the
outstanding shares of Zions common stock, but none of its executive officers or
directors held any shares of Zions common stock. The directors and executive
officers of Zions and their affiliates are entitled to vote approximately 7.8%
of the outstanding shares of Zions common stock. The directors and executive
officers of Zions have indicated their intention to vote the shares of Zions
common stock held by them or their affiliates in favor of the merger proposal.
RECOMMENDATION OF BOARD OF DIRECTORS
The Zions board of directors has unanimously approved the merger agreement,
believes that the merger is in the best interests of Zions and its shareholders
and unanimously recommends that shareholders of Zions vote "FOR" approval of the
merger proposal. See "The Merger -- Reasons of Zions for the Merger and
Recommendation of the Zions Board".
21
<PAGE> 30
THE MERGER
The discussion in this proxy statement/prospectus of the merger of Zions
and First Security and the principal terms of each of:
- the Agreement and Plan of Merger, dated as of June 6, 1999, between Zions
and First Security,
- the Stock Option Agreement, dated as of June 8, 1999, between First
Security, as Issuer, and Zions, as Grantee (the "First Security Option
Agreement"), and
- the Stock Option Agreement, dated as of June 8, 1999, between Zions, as
Issuer, and First Security, as Grantee (the "Zions Option Agreement"),
does not purport to be complete and is subject to, and qualified in its entirety
by reference to, the merger agreement, the Zions Option Agreement and the First
Security Option Agreement each of which is incorporated herein by reference.
Copies of the merger agreement, the Zions Option Agreement and the First
Security Option Agreement are attached as Appendices A, B and C, respectively,
to this proxy statement/prospectus. We urge you to read the Appendices in their
entirety.
GENERAL
We are furnishing this proxy statement/prospectus to Zions shareholders and
First Security stockholders in connection with the solicitation of proxies by
the boards of directors of Zions and First Security for use at their respective
meetings of shareholders, and at any adjournments or postponements thereof.
At the Zions special meeting, Zions shareholders will be asked to consider
and to vote on a proposal to adopt the merger agreement. At the First Security
special meeting, First Security stockholders will be asked to consider and to
vote upon a proposal to adopt the merger agreement. Adoption of the merger
agreement will also constitute approval of the transactions contemplated
thereby, including, among others, the merger and, in the case of First Security,
the issuance of common stock of the combined company to holders of Zions common
stock, and the amendment and restatement of the First Security by-laws. Further,
First Security stockholders will be asked to consider and to vote upon a
proposal to approve an amendment and restatement of the First Security
certificate of incorporation to, among other things, effect the reclassification
of its issued and outstanding shares of common stock. We refer to this amendment
and restatement as the "First Security Certificate Amendment and Restatement". A
more detailed description of the First Security Certificate Amendment and
Restatement is found under "-- The Reclassification" on page 23.
The merger agreement provides that, prior to the completion of the merger,
First Security will effect the First Security Certificate Amendment and
Restatement and each share of First Security common stock issued and outstanding
immediately prior to the effective time of the First Security Certificate
Amendment and Restatement will be reclassified and converted into 0.442 of a
share of First Security common stock. Immediately after the reclassification is
complete, First Security and Zions will complete the merger and Zions will be
merged with and into First Security, with First Security as the surviving
corporation. Upon completion of the merger, First Security will operate under
the "First Security" name. In addition, in the merger:
(1) each share of Zions common stock issued and outstanding immediately
prior to the merger, other than shares of Zions common stock owned by
First Security or Zions, will be converted into one share of First
Security common stock; and
22
<PAGE> 31
(2) each share of First Security common stock issued and outstanding
immediately prior to the merger will remain an issued and outstanding
share of First Security common stock after the merger.
With respect to First Security stockholders, the effect of the reclassification
and the merger together is that such stockholders will receive 0.442 of a share
of common stock of the combined company for each share of First Security common
stock they own, which fraction is referred to in this proxy statement/prospectus
as the "exchange ratio". Holders of First Security preferred stock will continue
to own one share of First Security preferred stock for each share of First
Security preferred stock that they currently own.
The merger will become effective when a certificate of merger is duly filed
with the Secretary of State of the State of Delaware and articles of merger are
filed with the Utah Division of Corporations and Commercial Code, or at such
subsequent date or time as First Security and Zions shall agree and specify in
the certificate of merger and the articles of merger.
The transaction is intended to qualify as a "pooling of interests" for
accounting and financial reporting purposes and is intended to qualify as a
tax-free "reorganization" within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended, for federal income tax purposes.
Based on the last sales price per share of Zions common stock on the Nasdaq
National Market on June 4, 1999, the last trading day prior to public
announcement of the merger, of $65.375, giving effect to the exchange ratio, the
implied per share value of First Security common stock in the merger was $28.896
as of such date. The last sales price per share of Zions common stock on the
Nasdaq National Market on November 18, 1999, the last practicable trading day
prior to the date of this proxy statement/prospectus, was $64.375, and the
implied per share value of First Security common stock in the merger was $28.454
as of such date. As a result of the merger, on a pro forma basis Zions
shareholders immediately prior to the merger initially will own approximately
49% and First Security stockholders immediately prior to the merger initially
will own approximately 51% of the combined company common stock, based on the
number of shares of First Security common stock and Zions common stock
outstanding as of June 4, 1999 and on the exchange ratio.
THE RECLASSIFICATION
In connection with the merger, the First Security board of directors has
declared advisable, authorized and approved the First Security Certificate
Amendment and Restatement. To approve the First Security Certificate Amendment
and Restatement, the holders of not less than a majority of the shares of First
Security common stock issued and outstanding on the First Security record date
must vote in favor of doing so. The reclassification of the First Security
common stock is a condition to the merger and the merger will not be completed
if the First Security Certificate Amendment and Restatement is not approved. If
the First Security stockholders approve the First Security Certificate Amendment
and Restatement and the other conditions to the merger, other than the
reclassification, are met, the amended and restated certificate of incorporation
to, among other things, effect the reclassification will be filed with the
Secretary of State of the State of Delaware, and the reclassification will be
effected, immediately prior to the completion of the merger.
As a result of the First Security Certificate Amendment and Restatement,
each share of First Security common stock issued and outstanding immediately
prior to the effective time of the First Security Certificate Amendment and
Restatement will be reclassified and converted into 0.442 of a share of First
Security common stock. Fractional shares will not be issued to First Security
stockholders pursuant to the reclassification of First Security common stock.
Instead of fractional shares, First
23
<PAGE> 32
Security stockholders will be entitled to receive an amount in cash, without
interest, equal to the product of:
(1) the fraction of a share of First Security common stock to which such
holder, after taking into account all shares of First Security common
stock held immediately prior to the effective time of the First
Security Certificate Amendment and Restatement, would otherwise be
entitled to, and
(2) the closing price per share of Zions common stock on the Nasdaq
National Market on the last trading day prior to the date on which the
effective time of the First Security Certificate Amendment and
Restatement occurs.
The First Security Certificate Amendment and Restatement will not apply to
common stock of the combined company issued to Zions shareholders in the merger.
The form of the First Security Certificate Amendment and Restatement is attached
to the merger agreement as Exhibit A-1, which in turn is attached to this proxy
statement/prospectus as Appendix A.
AMENDMENT AND RESTATEMENT OF FIRST SECURITY CERTIFICATE OF INCORPORATION AND
BY-LAWS
The merger agreement provides that, as a condition to the completion of the
merger, the First Security certificate of incorporation and the First Security
by-laws will be amended and restated so that after the merger, the combined
company will be governed by the amended and restated certificate of
incorporation and the amended and restated by-laws, attached as Exhibits A-1 and
A-2, respectively, to the merger agreement which is attached as Appendix A to
this proxy statement/prospectus.
The combined company certificate of incorporation and the combined company
by-laws will differ in material respects from the current First Security
certificate of incorporation and First Security by-laws and the current Zions
amended and restated articles of incorporation and Zions amended and restated
by-laws. See "Comparison of Shareholders' Rights" on page 79. The combined
company certificate of incorporation and the combined company by-laws will,
among other things:
(1) provide that the name of the combined company will be "First Security
Corporation";
(2) provide for an authorized capital stock of 435 million shares;
(3) provide for the classification of the board of directors into three
classes, with each class serving an overlapping three-year term;
(4) require that the stockholders of the combined company take action only
at a meeting of the stockholders, and not by written consent;
(5) permit only a majority of the combined company board of directors to
call a special meeting of the stockholders;
(6) implement arrangements to govern the combined company agreed to by
First Security and Zions, such as the initial composition of the
combined company board of directors and the management of the combined
company after the merger and management succession; and
(7) require a vote of two-thirds of the board of directors and two-thirds
of the outstanding shares of capital stock entitled to vote to amend
the sections of the certificate of incorporation and by-laws containing
the provisions referred to in clauses (3) through (6) above.
The governance arrangements referred to in clauses (3) through (7) above
are explained more fully under "-- Corporate Governance After the Merger" on
page 55.
24
<PAGE> 33
BACKGROUND OF THE MERGER
Early in March 1999, Mr. Harris Simmons, President and Chief Executive
Officer of Zions, consulted with Goldman Sachs, Zions' financial advisor, and
Sullivan & Cromwell, Zions' legal advisor, regarding various aspects of a
possible strategic business combination with First Security. Mr. Simmons also
consulted informally with members of the Zions board.
On March 18, 1999, Mr. Simmons met with Mr. Spencer Eccles, Chairman and
Chief Executive Officer of First Security. During the course of this meeting,
Mr. Simmons indicated that Zions would be interested in discussing the
possibility of a strategic business combination of Zions and First Security. At
the conclusion of this meeting, Mr. Eccles indicated that he may be interested
in the possibility of such a combination and would give the matter further
thought.
Thereafter, Mr. Simmons and Mr. Eccles met informally to hold exploratory
discussions regarding a possible business combination. During these informal
meetings, Messrs. Simmons and Eccles preliminarily determined that such a
combination could be beneficial for each of Zions and First Security and their
respective stockholders. At the Zions board meeting of April 23, 1999, Mr.
Simmons advised the Zions directors of the status of the discussions. During
May, 1999, informal discussions continued regarding a potential business
combination between the two companies and the potential terms and structure of
such a transaction, but no definitive agreement concerning such terms was
reached as a result of these preliminary meetings. From time to time throughout
this period, Mr. Simmons and Mr. Eccles advised members of the Zions board and
the First Security executive committee of the board of directors, respectively,
of the status of such discussions. Mr. Eccles also consulted with J.P. Morgan
Securities Inc., First Security's financial advisor, and Wachtell, Lipton, Rosen
& Katz, First Security's legal advisor, throughout this period.
During late May and early June of 1999, Messrs. Simmons and Eccles and
certain members of their senior management teams conducted more advanced
discussions with respect to the terms of a potential transaction. At that time,
Zions and First Security entered into a confidentiality agreement with respect
to a potential business combination.
On June 2, 1999, Messrs. Simmons and Eccles continued discussions
concerning the proposed combination. After meetings held on June 3, 1999,
Messrs. Simmons and Eccles agreed upon the terms of the proposed transaction,
subject to the completion of mutually satisfactory due diligence by each party,
agreement on certain employment arrangements, satisfaction with a definitive
merger agreement and approvals of the Zions board and First Security board. The
parties completed their due diligence on June 5, 1999.
At a special meeting of the First Security board on June 6, 1999, Mr.
Eccles reviewed the reasons for and the potential benefits of the merger in
light of First Security's due diligence review of Zions' business. At the
meeting, First Security's financial advisor made a presentation regarding Zions
and the financial terms and fairness, from a financial point of view, of the
exchange ratio to holders of First Security's common stock. Also at the meeting,
First Security's legal advisor reviewed the terms of the merger agreement, the
First Security Option Agreement, the Zions Option Agreement and related
documents and advised the members of the First Security board of the legal
standards applicable to their consideration of these arrangements. After
discussion and consideration of the factors discussed under "-- Reasons of First
Security for the Merger and Recommendation of the First Security Board", the
members of the First Security board approved and authorized the execution of the
merger agreement and the First Security Option Agreement.
At a special meeting of the Zions board on the same date, Mr. Simmons
reviewed the reasons for and the potential benefits of the merger in light of
Zions' due diligence review of First Security's business. At the meeting, Zions'
financial advisor made a presentation regarding the financial terms and
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<PAGE> 34
fairness, from a financial point of view, of the exchange ratio pursuant to the
merger agreement to holders of Zions common stock. Also at the meeting, Zions'
legal advisor reviewed the terms of the merger agreement, the Zions Option
Agreement, the First Security Option Agreement and related documents and advised
the members of the Zions' board of the legal standards applicable to their
consideration of these arrangements. After discussion and consideration of the
factors discussed under "-- Reasons of Zions for the Merger and Recommendation
of the Zions Board", the members of the Zions board approved and authorized the
execution of the merger agreement and the Zions Option Agreement.
The merger agreement was entered into on June 6, 1999 and the Zions Option
Agreement and the First Security Option Agreement were entered into on June 8,
1999.
REASONS OF ZIONS FOR THE MERGER AND RECOMMENDATION OF THE ZIONS BOARD
In determining to approve the merger agreement and to recommend approval of
the merger proposal by the Zions shareholders, the Zions board of directors
consulted with Zions executive management, as well as its financial and legal
advisors, and considered a number of factors, including the following:
- Exchange Ratio, Transaction Structure and Merger Agreement. The Zions
board of directors considered the relationship of the exchange ratio to
the current and historical market prices for Zions common stock and First
Security common stock and the contributions of each company to the
combined company's earnings, assets and capital. The Zions board of
directors also reviewed the form of the merger consideration and the
structure of the merger, which permit Zions shareholders to receive, on a
tax-free basis, registered shares of the combined company representing
approximately 49% of the total outstanding shares of common stock of the
combined company.
- Management of the Combined Company. The Zions board of directors
considered favorably that the terms of the merger and related
transactions provide that Harris H. Simmons will continue as a Chief
Executive Officer of the combined company, together with the current
Chairman of the Board of First Security, and will also serve as Chief
Operating Officer of the combined company, Co-Chairman of the Executive
Committee of the board of directors of the combined company and President
of the combined company's principal banking subsidiary. The Zions board
of directors also considered that Dale M. Gibbons, the current Chief
Financial Officer of Zions, will continue as the Chief Financial Officer
of the combined company. In addition, the Zions board considered that the
board of directors of the combined company will initially be comprised of
an equal number of directors designated by Zions and First Security.
- Size and Competitiveness of Combined Company. The Zions board of
directors took into account the unprecedented consolidation and
increasing competition in the banking and related industries, and the
competitive strength and positioning of the resulting "super-banks,"
particularly in the western United States. In that light, the Zions board
of directors considered the expectation that the combined company would
be the second largest bank holding company headquartered in the western
United States and that, as such, it would potentially have access to
greater financial, managerial and technological resources than either of
Zions or First Security on a stand-alone basis and be able to compete
more effectively in such a competitive environment.
- Financial Impact. The Zions board of directors considered the anticipated
financial impact of the proposed transaction on the combined company's
future financial performance and on Zions' shareholders, including,
without limitation, that the transaction is expected to be accretive to
the holders of Zions common stock substantially on both a reported
earnings and a cash earnings basis.
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<PAGE> 35
- Due Diligence Review. The Zions board of directors considered the results
of the due diligence investigations of First Security conducted by Zions
management and its financial advisor, including, among other things,
assessments of First Security's credit policies, asset quality, adequacy
of loan loss reserves and interest rate risk.
- Presentation of Financial Advisor and Fairness Opinion. The Zions board
of directors considered the financial presentation of Goldman Sachs on
June 6, 1999 and the opinion of Goldman Sachs rendered to the Zions board
on June 6, 1999 that, as of such date, the ratio of one share of combined
company common stock for one share of Zions common stock, following the
reclassification, pursuant to the merger agreement was fair from a
financial point of view to the holders of Zions common stock.
- Opportunities for Efficiencies and Cost Savings. The Zions board of
directors took into account that, although there can be no assurances,
there were likely to be significant cost savings, operating efficiencies
and synergies available to the combined company.
- Certain Financial Information Concerning Zions and First Security. The
Zions board of directors took into account the business, operations,
financial condition, earnings and prospects of Zions and First Security
both on a historical and a prospective basis.
- Zions' Strategy. The Zions board of directors considered the consistency
of the merger with Zions' long-terms business strategy.
- Tax and Pooling-of-Interests Treatment. The Zions board of directors took
into account the expectation that the merger will generally be a tax-free
transaction to Zions and its shareholders and the anticipation that the
combined company will account for the merger as a pooling of interests.
- Regulatory Approvals and Clearances. The Zions board of directors
considered its belief, after consultation with legal counsel, that the
required regulatory approvals and clearances could be obtained for the
merger. In this connection the Zions board of directors considered that
some amount of divestitures of certain branches, deposits and loans was
likely to be required by governmental authorities in connection with the
merger.
The foregoing discussion of the information and factors considered by the
Zions board of directors is not intended to be exhaustive but includes all
material factors it considered. In view of the factors considered with its
evaluation of the merger and related transactions, the Zions board of directors
did not find it practicable to and did not quantify or otherwise assign relative
weights to the factors considered in reaching its determination. In addition,
individual members of the Zions board of directors may have given different
weights to different factors.
BASED ON THE FOREGOING, THE ZIONS BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
THAT ZIONS SHAREHOLDERS VOTE "FOR" ADOPTION OF THE MERGER AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE MERGER.
REASONS OF FIRST SECURITY FOR THE MERGER AND RECOMMENDATION OF THE FIRST
SECURITY BOARD
THE FIRST SECURITY BOARD BELIEVES THAT THE MERGER IS FAIR TO, AND IN THE
BEST INTERESTS OF, FIRST SECURITY AND FIRST SECURITY STOCKHOLDERS. ACCORDINGLY,
THE FIRST SECURITY BOARD HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND
UNANIMOUSLY RECOMMENDS THAT FIRST SECURITY STOCKHOLDERS VOTE "FOR" ADOPTION OF
THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE
MERGER.
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<PAGE> 36
First Security believes that the consummation of the merger presents a
unique opportunity to combine two of the nation's oldest, most established
western franchises to create a premier financial services company uniquely
positioned in some of the best growth markets in the country.
In reaching its decision to approve the merger agreement and related
transactions and the stock option agreements, the First Security board consulted
with First Security management, as well as with its financial and legal
advisors, and considered a number of factors, including the following:
- Its knowledge of First Security's business, operations, financial
condition, earnings and prospects.
- The business, operations, financial condition, earnings and prospects of
Zions. In making its determination, the First Security board of directors
took into account the results of First Security's due diligence review of
Zions.
- The consistency of the merger with First Security's long-term business
strategy.
- The unique strategic opportunity presented by the merger of Zions and
First Security to create the second largest banking franchise
headquartered in the west and one of the top 20 bank holding companies in
the United States, ranked by total assets.
- The expectation of the First Security board of directors that the
combined company would benefit from significantly greater economies of
scale than either Zions or First Security as well as greater size to
seize growth opportunities.
- The view of the First Security board of directors that the combination of
Zions and First Security presents manageable execution risk in view of
the similar markets and customer demographics served by Zions and First
Security, the similar business lines and business cultures of the two
companies, the established relationships among the boards and management
teams of the two companies and the experience of the management of both
companies in the integration of prior acquisitions.
- While there can be no assurances as to future results, the expectations
of the First Security board of directors of the financial impact of the
merger on the combined company, including the pro forma capital ratios
and asset quality; the expectation that the combined company will show
immediate accretion to earnings per share; and the expectation that
non-interest expenses could be reduced by 8% to 10% on a pre-tax basis,
with half of these savings to be achieved in 2000 and the remainder in
2001 and that a pre-tax restructuring charge would be taken to address
merger-related expenses.
- The complementary nature of the businesses of Zions and First Security.
- The belief of the First Security board of directors and that of First
Security's senior management that Zions and First Security share a common
vision about the importance of delivering financial performance and
shareholder value and that the managements and employees of Zions and
First Security possess complementary skills and expertise.
- The structure of the merger and the terms of the merger agreement and the
stock option agreements, and the fact that the merger is intended to
qualify as a reorganization for federal income tax purposes and for
"pooling-of-interests" accounting treatment.
- The proposed arrangements with members of management of Zions and First
Security, including the fact that Mr. Simmons will serve as the
President, Co-Chief Executive Officer and Chief Operating Officer of the
combined company and President of the combined company's principal
banking unit; Mr. Eccles will serve as Chairman and Co-Chief Executive
Officer of the combined company until April 2002; Mr. Simmons will become
sole Chief Executive Officer in April 2002;
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<PAGE> 37
and the board of directors of the combined company will be comprised of
11 representatives from Zions and 11 representatives from First Security.
The First Security board of directors also considered the fact that
directors and executive officers of First Security could be expected to
receive benefits in the merger under existing severance and compensation
arrangements with First Security. See "-- Interests of Management and
Directors in the Merger".
- The opinion of J.P. Morgan that, as of June 6, 1999, the exchange ratio
pursuant to the merger agreement was fair from a financial point of view
to First Security stockholders. See "-- Opinion of First Security's
Financial Advisor".
- The likelihood that the merger will be approved by the appropriate
regulatory authorities. See "-- Regulatory Approvals". In this
connection, the First Security board of directors considered that some
amount of divestitures of certain branches, deposits and loans was likely
to be required by governmental authorities in connection with the merger.
This discussion of the information and factors considered by the board of
directors of First Security is not intended to be exhaustive but includes all
material factors it considered. In reaching its determination to approve and
recommend the merger, the First Security board did not assign any relative or
specific weights to the foregoing factors, and individual directors may have
given differing weights to different factors. THE FIRST SECURITY BOARD IS
UNANIMOUS IN ITS RECOMMENDATION THAT FIRST SECURITY STOCKHOLDERS VOTE FOR
APPROVAL OF THE MERGER AGREEMENT.
For a discussion of the interests of the executive officers and directors
of First Security in the merger, see "-- Interests of Management and Directors
in the Merger".
OPINION OF ZIONS' FINANCIAL ADVISOR
Zions retained Goldman Sachs to act as its financial advisor and to render
an opinion as to the fairness from a financial point of view to the holders of
the outstanding shares of Zions common stock of the exchange ratio pursuant to
the merger agreement. At a meeting of the Zions board of directors on June 6,
1999, Goldman Sachs made a presentation on financial aspects of the proposed
merger and delivered its oral opinion (which opinion was later delivered to the
board in written form dated June 6, 1999) to the effect that, as of the date of
such opinion, based on the matters set forth in such opinion, the exchange ratio
was fair from a financial point of view to the holders of Zions common stock.
Goldman Sachs has confirmed its June 6, 1999 opinion by delivery of its written
opinion to the Zions board, dated the date of this proxy statement/prospectus,
stating that, as of the date hereof and based on the matters set forth in such
opinion, the exchange ratio is fair from a financial point of view to the
holders of Zions common stock.
Goldman Sachs has consented to the inclusion of its opinion (the "Goldman
Sachs Opinion") in this proxy statement/prospectus.
The full text of the Goldman Sachs opinion, which sets forth the
assumptions made, procedures followed, matters considered and limits on the
review undertaken, is attached as Appendix D to this Proxy Statement/Prospectus
and is incorporated herein by reference. The Goldman Sachs opinion, which is
addressed to the Zions board, is directed only to the fairness from a financial
point of view of the exchange ratio to the holders of Zions common stock and
does not constitute a recommendation to any shareholder as to how such
shareholder should vote with respect to the proposed merger. The description of
the Goldman Sachs opinion set forth herein is qualified in its entirety by
reference to Appendix D. The Goldman Sachs opinion is substantially identical to
the opinion delivered to the Zions board dated June 6, 1999. Zions shareholders
are urged to read the Goldman Sachs opinion in its entirety.
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<PAGE> 38
In connection with rendering its opinions dated June 6, 1999 and the date
hereof, Goldman Sachs, among other things:
- reviewed the merger agreement;
- reviewed the Annual Reports to Shareholders and Annual Reports on Form
10-K of Zions and First Security for the five years ended December 31,
1998;
- reviewed certain interim reports to stockholders and Quarterly Reports on
Form 10-Q of Zions and First Security;
- reviewed certain other communications from Zions and First Security to
their respective shareholders;
- reviewed certain internal financial analyses and forecasts for Zions and
First Security prepared by their respective managements, including
certain cost savings, operating synergies and the impact of certain
divestitures projected by the managements of Zions and First Security to
result from the proposed merger;
- held discussions with members of the senior managements of Zions and
First Security regarding the strategic rationale for, and the potential
benefits of, the proposed merger and the past and current business
operations, financial condition and future prospects of the respective
companies and of the companies as combined pursuant to the proposed
merger;
- reviewed the reported price and trading activity for Zions common stock
and First Security common stock;
- compared certain financial and stock market information for Zions and
First Security with similar information for certain other companies the
securities of which are publicly traded;
- reviewed the financial terms of certain recent business combinations in
the commercial banking industry specifically and in other industries
generally; and
- performed such other studies and analyses as Goldman Sachs considered
appropriate.
In connection with rendering the Goldman Sachs Opinion, Goldman Sachs
relied upon the accuracy and completeness of all the financial and other
information reviewed by it and assumed that accuracy and completeness for
purposes of such opinion. In that regard, Goldman Sachs assumed with the consent
of Zions that the internal financial forecasts of Zions and First Security
prepared by their respective managements as well as the synergies projected by
the managements of Zions and First Security were reasonably prepared on a basis
reflecting the best currently available estimates and judgments of Zions and
First Security, and that these forecasts and synergies will be realized in the
amounts and time periods contemplated thereby.
Goldman Sachs is not an expert in the evaluation of loan and lease
portfolios for purposes of assessing the adequacy of the allowance for losses
with respect thereto and assumed, with the consent of Zions, that these
allowances for each of Zions and First Security are in the aggregate adequate to
cover all these losses. In addition, Goldman Sachs did not review individual
credit files nor did Goldman Sachs make an independent evaluation or appraisal
of the assets and liabilities (including any hedge or derivative positions) of
Zions or First Security or any of their subsidiaries and Goldman Sachs was not
furnished with any such evaluation or appraisal. Goldman Sachs also assumed with
the consent of Zions that the proposed merger will be accounted for as a pooling
of interests under generally accepted accounting principles, and that all
material governmental, regulatory or other consents and approvals necessary for
the consummation of the proposed merger will be obtained without any adverse
effect, other than the impact of the divestitures as reflected in the forecasts,
on Zions or First Security or on the
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<PAGE> 39
expected benefits of the proposed merger. In connection with the Goldman Sachs
Opinion, Goldman Sachs reviewed the analyses used to render its June 6, 1999
opinion to the Zions board by performing procedures to update certain of these
analyses and by reviewing the assumptions upon which these analyses were based
and the factors considered in connection therewith. In addition, in connection
with rendering the Goldman Sachs Opinion, Goldman Sachs reviewed this proxy
statement/prospectus.
The following is a summary of the material financial analyses presented by
Goldman Sachs to the Zions board in connection with providing its opinion to the
Zions board on June 6, 1999. The summary of financial analyses includes
information presented in tabular format. The tables should be read together with
the text.
Selected Companies Analysis. Goldman Sachs reviewed and compared certain
financial and stock market information as well as certain asset quality and
profitability ratios of Zions and First Security with selected large and mid-cap
bank holding companies (the "Super-Regional Banks"), including Firstar Corp.,
Fifth Third Bancorp, KeyCorp, BB&T Financial Corporation, AmSouth Bancorporation
and Huntington Bancshares Inc. Unless otherwise indicated, the financial data
used were for the latest 12 months ("LTM") ended March 31, 1999 and the market
data and earnings estimates were as of June 4, 1999. Projected earnings per
share were based on median analysts' estimates from the Institutional Brokerage
Estimate System ("IBES"), a data service that compiles estimates of securities
research analysts.
The following table compares information derived by Goldman Sachs with
respect to Zions and First Security and the medians indicated for the comparable
Super-Regional Banks:
<TABLE>
<CAPTION>
MEDIAN FOR
SUPER REGIONAL
ZIONS FIRST SECURITY BANKS
----- -------------- --------------
<S> <C> <C> <C>
Price to projected earnings multiple, based on estimates
of 1999 earnings per share............................ 24.2x 13.0x 18.6x
Price to projected earnings multiple, based on estimates
of 2000 earnings per share.............................. 21.0x 11.9x 16.8x
Projected five-year growth rate of earnings per share... 14.5% 10.5% 11.0%
Multiple of price to book value......................... 4.8x 2.1x 3.6x
Multiple of price to tangible book value per share...... 6.3x 2.7x 4.9x
Dividend yield.......................................... 0.9% 3.0% 2.1%
Non-performing assets as a percentage of total loans and
other real estate owned............................... 0.7% 0.4% 0.5%
Reserve for loan and lease losses as a percentage of
nonperforming loans................................... 265% 354% 331%
Return on average assets................................ 1.29% 1.25% 1.30%
Return on average common equity......................... 19.8% 16.0% 16.0%
Efficiency ratio (noninterest expense, excluding
amortization of goodwill, divided by the sum of net
interest income and noninterest income)............... 68.2% 61.4% 54.7%
Net interest margin..................................... 4.5% 4.1% 4.1%
Tangible common equity as a percentage of tangible
assets................................................ 5.0% 6.3% 6.8%
</TABLE>
Pro Forma Analyses. Goldman Sachs analyzed the pro forma impact of the
merger on earnings per share from the point of view of the holders of the Zions
common stock. Based on estimates from Zions and First Security, this analysis
indicated that the merger would be accretive to holders of the Zions common
stock by 10.3% in 2000 and 13.6% in 2001 on a reported earnings basis, and
accretive by 10.9% in 2000 and 14.0% in 2001 on a cash earnings basis. Goldman
Sachs also considered the earnings per
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share impact using a range of assumptions for projected cost savings and
earnings levels for First Security.
Goldman Sachs also analyzed the pro forma impact of the merger on certain
profitability measures, assuming that the merger occurred on March 31, 1999.
This analysis indicated, assuming fully phased-in cost savings, that, for the 12
months ended March 31, 1999, return on average assets for the combined company
would have been 1.47% and return on average common equity would have been 20.2%.
Contribution Analysis. Goldman Sachs analyzed and compared respective
contributions of each of Zions and First Security to the combined company based
on a comparison of actual net income for 1998 and projected net income for 1999
and 2000. This analysis indicated that (i) Zions would have contributed 40% of
net income to the combined company in 1998, and (ii) Zions would contribute 45%
and 46% of net income to the combined company in 1999 and 2000, respectively. In
addition, this analysis indicated that as of March 31, 1999, Zions would have
contributed to the combined company 39% of common equity, 39% of tangible common
equity and 45% of total assets.
Selected Transactions Analysis. Goldman Sachs reviewed certain information
relating to 32 selected pending or completed domestic bank merger transactions
since January 1, 1993 (the "Selected Transactions").
The following table compares information with respect to the merger and the
medians for the Selected Transactions:
<TABLE>
<CAPTION>
SELECTED TRANSACTIONS
-------------------------------------------
MEDIAN FOR SELECTED
TRANSACTIONS
MEDIAN FOR ALL ANNOUNCED AFTER
THE MERGER SELECTED TRANSACTIONS JANUARY 1, 1997
---------- --------------------- -------------------
<S> <C> <C> <C>
Price to LTM earnings multiple............ 22.2x 19.2x 24.0x
Premium to market price, based on the
target's market price six days prior to
the announcement of the transaction....... 55.1%* 30.8% 32.2%
Multiple of price to book value per
share................................... 3.2x 2.3x 3.4x
Multiple of price to tangible book value
per share............................... 4.1x 2.5x 4.0x
</TABLE>
- -------------------------
* Based on closing market prices as of June 4, 1999.
Discounted Cash Flow Analysis. Goldman Sachs performed a discounted cash
flow analysis to determine a range of present values per share of the First
Security common stock, including projected cost savings. The range was
determined using a dividend discount model, with all cash flows discounted back
to June 30, 1999. Using discount rates ranging from 10.0% to 15.0%, and terminal
price to earnings multiples ranging from 13.0x to 23.0x, this analysis resulted
in a range of net present values from $19.92 to $42.00 per share of First
Security common stock.
Other Analyses. Goldman Sachs also performed a price to forward earnings
comparison of Zions and First Security, an analysis of the premium paid in the
transaction on a historical basis based on the Zions Exchange Ratio and a pro
forma deposit analysis. In addition, Goldman Sachs prepared a summary of the
historical financial performance of Zions and First Security and reviewed, among
other things, selected investment research reports on, and earnings estimates
for, Zions common stock and First Security common stock.
The summary set forth above describes the material analyses that Goldman
Sachs performed and presented to the Zions board on June 6, 1999, and does not
purport to be a complete description of such
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analyses. The preparation of a fairness opinion is a complex process involving
various determinations as to the most appropriate and relevant methods of
financial analysis and the applications of these methods to the particular
circumstances and, therefore, such an opinion is not readily susceptible to
partial analysis or summary description. Goldman Sachs believes that its
analyses must be considered as a whole and that selecting portions of its
analyses and of the factors considered by it without considering all analyses
and factors would create an incomplete view of the evaluation process underlying
its opinion. In performing its analyses, Goldman Sachs relied upon numerous
assumptions made by Zions and First Security with respect to industry
performance, general business and economic conditions, and other matters, many
of which are beyond the control of Zions or First Security. Analyses based upon
forecasts of future results are not necessarily indicative of actual values,
which may be significantly more or less favorable than suggested by such
analyses. No company or transaction used as a comparison in the analyses is
identical to Zions or First Security or to the merger. Additionally, estimates
of the value of businesses do not purport to be appraisals or necessarily
reflective of the prices at which businesses actually may be sold. Because such
estimates are inherently subject to uncertainty, being based upon numerous
factors or events beyond the control of Zions or First Security, none of Zions,
First Security, Goldman Sachs or any other person assumes responsibility if
future results or actual values are materially different from these forecasts or
assumptions. Goldman Sachs' analyses were prepared solely for purposes of its
opinions rendered June 6, 1999 and the date of this proxy statement/prospectus
provided to the Zions board regarding the fairness of the exchange ratio from a
financial point of view to holders of the Zions common stock, and do not purport
to be appraisals or necessarily reflect the prices at which Zions or its
securities actually may be sold.
Pursuant to the terms of a letter agreement dated June 1, 1999, Zions shall
pay Goldman Sachs fees of $7.5 million for acting as its financial advisor in
connection with the merger, including rendering its opinions. In addition, Zions
has agreed to pay Goldman Sachs an additional $7.5 million upon the consummation
of the merger, less certain fees that may become payable to Goldman Sachs in
connection with the divestiture of branches and associated assets and
liabilities. Goldman Sachs may also be entitled to an additional fee in
connection with such divestitures. Zions has also agreed to reimburse Goldman
Sachs for its reasonable out-of-pocket expenses, including the fees and
disbursements of its counsel, and to indemnify Goldman Sachs against certain
liabilities, including certain liabilities arising under the federal securities
laws. Goldman Sachs has provided certain investment banking and advisory
services to Zions from time to time, for which it has received customary
compensation.
Goldman Sachs, as part of its investment banking business, is continually
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for estate, corporate and other purposes. Zions selected Goldman
Sachs as its financial advisor because Goldman Sachs is a nationally recognized
investment banking firm that has substantial experience in investment banking in
general, including transactions similar to the proposed merger, and because of
its familiarity with, and prior work for, Zions.
Goldman Sachs has advised Zions that, in the ordinary course of its
business as a full-service securities firm, Goldman Sachs may, from time to
time, effect transactions and hold securities, including derivative securities,
of Zions or First Security for its own account or for the accounts of customers.
In addition, Goldman Sachs has provided, and may provide in the future, certain
investment banking services to First Security, for which it has received
customary compensation.
OPINION OF FIRST SECURITY'S FINANCIAL ADVISOR
First Security retained J.P. Morgan as its financial advisor and to deliver
a fairness opinion in connection with the proposed merger. At the meeting of
First Security's board of directors on June 6, 1999, J.P. Morgan
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gave its oral opinion, subsequently confirmed in writing, to the board that, as
of that date and based upon and subject to the various considerations set forth
in the opinion, the exchange ratio pursuant to the merger agreement was fair
from a financial point of view to First Security's stockholders. J.P. Morgan has
confirmed its June 6, 1999 opinion by delivering its written opinion to the
First Security board, dated the date of this proxy statement/prospectus, to the
same effect. First Security's board did not limit J.P. Morgan in any way in the
investigations it made or the procedures it followed in giving its opinion.
We have attached as Appendix E to this proxy statement/prospectus the full
text of J.P. Morgan's updated opinion. This opinion sets forth the assumptions
made, matters considered and limits on the review undertaken. We incorporate
J.P. Morgan's opinion into this proxy statement/prospectus by reference and urge
you to read the opinion in its entirety. J.P. Morgan addressed its opinion to
the First Security board. The opinion addresses only the exchange ratio pursuant
to the merger agreement and is not a recommendation to any First Security
stockholder as to how that stockholder should vote with respect to the merger.
In arriving at its opinions, J.P. Morgan reviewed:
- the merger agreement;
- in the case of its updated opinion, this proxy statement/prospectus;
- various publicly available information concerning the business of First
Security and Zions and of several other companies engaged in businesses
comparable to those of First Security and Zions, and the reported market
prices for other companies' securities deemed comparable;
- the terms of various transactions involving companies comparable to First
Security and Zions and the consideration received for such companies;
- current and historical market prices of First Security and Zions common
stock;
- the audited financial statements of First Security and Zions for the
fiscal years ended December 31, 1994, 1995, 1996, 1997 and 1998;
- the unaudited financial statements of First Security and Zions for the
period ended March 31, 1999;
- in the case of its updated opinion, the unaudited financial statements of
First Security and Zions for the period ended September 30, 1999;
- certain internal financial analyses and forecasts prepared by First
Security and Zions and their respective managements; and
- the terms of other business combinations that J.P. Morgan deemed
relevant.
J.P. Morgan also held discussions with several members of the managements
of First Security and Zions on numerous aspects of the merger, the past and
current business operations of First Security and Zions, the financial condition
and future prospects and operations of First Security and Zions, the effects of
the merger on the financial condition and future prospects of First Security and
Zions and other matters that J.P. Morgan believed necessary or appropriate to
its inquiry. In addition, J.P. Morgan reviewed other financial studies and
analyses and considered such other information that it deemed appropriate for
the purposes of its opinion.
J.P. Morgan relied upon and assumed, without independent verification, the
accuracy and completeness of all information that was publicly available or that
was furnished to it by First Security and Zions or otherwise reviewed by J.P.
Morgan. J.P. Morgan is not responsible or liable for that information or its
accuracy. J.P. Morgan did not conduct any valuations or appraisals of any assets
or liabilities, and valuations or appraisals were not provided to J.P. Morgan.
J.P. Morgan was not requested to review individual credit files or make any
independent assessment as to the future performance or non-performance of First
Security's or Zions' assets. J.P. Morgan assumed that current allowances and
reserves for loan losses for both First Security and Zions are sufficient to
cover all such losses. In relying on financial analyses and forecasts provided
to it, J.P. Morgan has assumed that they were reasonably
34
<PAGE> 43
prepared based on assumptions reflecting the best currently available estimates
and judgments by management as to the expected future results of operations and
financial conditions of First Security and Zions to which those analyses or
forecasts relate. J.P. Morgan also assumed that, in the course of obtaining
regulatory and third party consents for the merger and the other transactions
contemplated by the merger agreement and this proxy statement/prospectus, no
restriction will be imposed that will have a material adverse effect on the
future results of operations or financial conditions of First Security or Zions.
J.P. Morgan also assumed that the merger will be accounted for as a
pooling-of-interests under generally accepted accounting principles and that it
will qualify as a tax-free reorganization for U.S. federal income tax purposes.
J.P. Morgan relied as to all legal matters relevant to rendering its opinion
upon the advice of counsel.
The projections furnished to J.P. Morgan for First Security and Zions were
prepared by the managements of each company. Neither First Security nor Zions
publicly discloses internal management projections of the type provided to J.P.
Morgan in connection with J.P. Morgan's analysis of the merger, and the
projections were not prepared with a view toward public disclosure. The
projections were based on numerous variables and assumptions that are inherently
uncertain and may be beyond the control of management, including, without
limitation, factors related to general economic and competitive conditions and
prevailing interest rates. Accordingly, actual results could vary significantly
from those set forth in the projections.
As is customary in the rendering of fairness opinions, J.P. Morgan based
its opinion on economic, market and other conditions as in effect on, and the
information made available to J.P. Morgan as of the date of its opinion.
Subsequent developments may affect the opinion, and J.P. Morgan does not have
any obligation to update, revise or reaffirm its opinion. J.P. Morgan expressed
no opinion as to the price at which First Security's stock will trade at any
future time.
In accordance with customary investment banking practice, J.P. Morgan
employed generally accepted valuation methods in reaching its opinion. The
following is a summary of the material financial analyses that J.P. Morgan
utilized in providing its June 6, 1999 opinion. J.P. Morgan utilized
substantially the same types of analyses in connection with providing its
updated opinion. We have presented some of the summaries of financial analyses
in tabular format. In order to understand the financial analyses used by J.P.
Morgan more fully, you should read the tables together with the text of each
summary. The tables alone do not constitute a complete description of J.P.
Morgan's financial analyses.
Offer Valuation. J.P. Morgan reviewed the terms of the proposed merger,
including the historical relationship between the stock prices of First Security
and Zions and the aggregate transaction value. J.P. Morgan also reviewed the
value of the consideration offered based upon the $65.375 closing price of Zions
common stock on June 4, 1999, the last trading day prior to the June 6, 1999
meeting of First Security's board of directors. This analysis indicated that the
implied value of Zions' proposal was approximately $28.90 per share of First
Security common stock. J.P. Morgan calculated that, based on this proposal,
First Security common stockholders would receive a premium of 55.1% to the
$18.625 closing price of First Security common stock on June 4, 1999. J.P.
Morgan also calculated the premiums implied by the exchange ratio to the
respective average market prices of First Security and Zions common stock for
the period 10 and 30 trading days prior to June 4, 1999, and determined that the
implied premiums were 49.9% and 50.4%, respectively. J.P. Morgan further
calculated that Zions' proposal implied the following premiums based upon Zions'
closing stock price on June 4, 1999:
<TABLE>
<CAPTION>
FIRST SECURITY BASIS VALUE
-------------------- -----
<S> <C>
Last 12 months' earnings per share.......................... 21.9x
Forward 12 months' earnings per share (IBES estimate)....... 19.5x
Forward 24 months' earnings per share (IBES estimate)....... 17.6x
Tangible book value......................................... 4.0x
</TABLE>
35
<PAGE> 44
Finally, J.P. Morgan determined that First Security's stockholders would
own approximately 51% of the combined company immediately following the merger.
Pro Forma Merger Analysis. J.P. Morgan analyzed pro forma earnings per
share forecasts for 2000 and 2001 based upon estimates provided by IBES and
management of the companies. Assuming transaction synergies phased in 50% in
2000 and 100% thereafter, the analysis showed that the merger would be accretive
to the GAAP earnings per share, cash earnings per share and tangible book value
per share of the combined company in 2000 and 2001. In addition, J.P. Morgan
reviewed performance measures, including profitability, capital and asset
quality ratios for First Security, Zions and the combined entity.
Contribution Analysis. J.P. Morgan reviewed and analyzed the relative
contributions to be made by First Security and Zions to the combined entity.
These contributions were compared to the approximately 51% continuing ownership
stake that First Security's stockholders would have in the combined company
following the merger.
The following table illustrates the relative contribution by First Security
to a combined First Security/Zions entity as of March 31, 1999, excluding
transaction synergies:
<TABLE>
<CAPTION>
FIRST SECURITY BASIS CONTRIBUTION
-------------------- ------------
<S> <C>
Assets...................................................... 54.9%
Gross loans................................................. 53.5%
Deposits.................................................... 47.4%
Common equity............................................... 60.5%
Tangible common equity...................................... 61.2%
1999 GAAP net income (IBES estimate)........................ 54.9%
2000 GAAP net income (IBES estimate)........................ 54.0%
1999 cash net income (IBES estimate)........................ 55.0%
2000 cash net income (IBES estimate)........................ 54.1%
</TABLE>
J.P. Morgan also determined the market value contributed by First Security
and Zions to the combined entity. This analysis indicated that as of June 4,
1999, First Security contributed 39.8% of the combined entity based on its
closing price of $18.625 that day, and 51.2% of the combined entity based on the
price of $28.90 per share implied by the terms of Zions' proposal. For
comparative purposes, J.P. Morgan also reviewed publicly available information
regarding selected bank merger-of-equals transactions in the United States.
Public Trading Multiples. Using publicly available information, J.P. Morgan
compared selected financial data of First Security with similar data for
selected publicly traded companies (the "Regional bank peers") engaged in
businesses which J.P. Morgan judged to be reasonably comparable to those of
First Security. These companies were:
AmSouth Bancorporation
BancWest Corporation
Commerce Bancshares, Inc.
Compass Bancshares, Inc.
FirstMerit Corporation
First Tennessee National
First Virginia Banks Inc.
Huntington Bancshares
Hibernia Corporation
Marshall & Ilsley Corp
M & T Bank Corp.
Old Kent Financial Corp.
Regions Financial Corp.
SouthTrust Corporation
Summit Bancorp
UnionBanCal Corporation
Union Planters Corp.
Zions Bancorporation
Mercantile Bankshares Corp.
36
<PAGE> 45
These companies were selected because of their operating, organizational
and overall business similarities with First Security. Based upon a review of
such information and closing stock prices on June 4, 1999, J.P. Morgan
determined the following:
<TABLE>
<CAPTION>
REGIONAL BANK PEERS
----------------------------
FIRST BOTTOM TOP
PRICE AS A MULTIPLE OF: SECURITY MEDIAN QUARTILE QUARTILE
----------------------- -------- ------ -------- --------
<S> <C> <C> <C> <C>
1999E EPS (IBES estimate)............................... 13.1x 15.6x 13.6x 20.4x
2000E EPS (IBES estimate)............................... 11.9x 14.0x 11.7x 18.1x
Book value.............................................. 2.1x 2.7x 2.0x 4.5x
Tangible book value..................................... 2.6x 3.1x 2.3x 5.2x
</TABLE>
J.P. Morgan also calculated a range of imputed values for a share of First
Security common stock based on the ratios for the regional bank peers. This
analysis resulted in a range of imputed values for First Security common stock
of between $16.33 and $40.32.
J.P. Morgan also reviewed and compared certain public market data related
to Zions to the publicly available corresponding data for two groups of selected
banks which J.P. Morgan deemed to be relevant:
<TABLE>
<CAPTION>
REGIONAL BANK PEERS HIGH-PERFORMING BANKS
------------------- ---------------------
<S> <C> <C>
AmSouth Bancorporation Mercantile Bankshares Corp Fifth Third Bancorp
BancWest Corporation Marshall & Ilsley Corp Firstar Corp.
Commerce Bancshares, Inc. M & T Bank Corp Marshall & Ilsley Corp.
Compass Bancshares, Inc. Old Kent Financial Corp Bank of New York Co.
FirstMerit Corporation Regions Financial Corp Old Kent Financial Corp.
First Security Corporation SouthTrust Corporation BB&T Corporation
First Tennessee National Summit Bancorp SunTrust Banks, Inc.
First Virginia Banks Inc. UnionBanCal Corporation AmSouth Bancorporation
Huntington Bancshares Union Planters Corp.
Hibernia Corporation
</TABLE>
Based on its review of such information, J.P. Morgan determined the
following:
<TABLE>
<CAPTION>
PRICE AS A MULTIPLE OF:
-------------------------------------
1999E 1999E 2000E 2000E TANG. IBES
GAAP CASH GAAP CASH BOOK DIVIDEND LONG-TERM
EPS EPS EPS EPS VALUE YIELD GROWTH
----- ----- ----- ----- ----- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Zions............................. 24.2x 22.9x 21.0x 20.0x 6.3x 0.9% 14.5%
High-performing bank median....... 19.7x 18.6x 17.5x 16.6x 4.8x 1.7% 12.0%
Regional bank peer median......... 15.6x 14.2x 14.0x 13.0x 3.1x 2.4% 10.0%
First Security.................... 13.1x 12.3x 11.9x 11.2x 2.6x 3.0% 10.5%
</TABLE>
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<PAGE> 46
Selected Transaction Analysis. Using publicly available information, J.P.
Morgan examined the following bank transactions, each of which had a value
greater than $1 billion and was announced since January 1, 1997:
<TABLE>
<CAPTION>
BUYER SELLER
- ------------------------------------------------- ------------------------------
<S> <C>
AmSouth Bancorporation First American Corp.
Firstar Corp. Mercantile Bancorporation Inc.
Fleet Financial Group Inc. BankBoston Corp.
SunTrust Banks, Inc. Crestar Financial
Star Banc Corp. Firstar Corp.
Norwest Corporation Wells Fargo & Co.
NationsBank Corp. BankAmerica Corp.
Banc One Corp. First Chicago NBD
Union Planters Corp. Magna Group
Regions Financial Corp. First Commercial Corp.
First American Corporation Deposit Guaranty Corp.
National City Corp. First of America Bank Corp.
First Union Corp. CoreStates Financial Corp.
NationsBank Corporation Barnett Banks, Inc.
First Union Corp. Signet Banking Corporation
Wachovia Corporation Central Fidelity Banks, Inc.
First Bank System, Inc. U.S. Bancorp
</TABLE>
J.P. Morgan calculated the high, median and low premiums represented by the
purchase price paid in such acquisitions to the average market price for the
five days prior to announcement, estimates of the next 12 months' projected
earnings per share and tangible book value per share. J.P. Morgan then compared
these premiums to those offered to First Security in the merger:
<TABLE>
<CAPTION>
COMPARABLE TRANSACTIONS
------------------------- ZIONS'
HIGH MEDIAN LOW PROPOSAL
------ ------- ------ --------
<S> <C> <C> <C> <C>
5-day premium.............................................. 43.9% 29.7% (1.2)% 52.6%
12-month est. forward EPS.................................. 25.8x 20.8x 16.2x 19.5x
Tangible book value........................................ 8.60x 4.21x 3.02x 4.04x
</TABLE>
J.P. Morgan also calculated a range of imputed values for a share of First
Security common stock based on the ratios for the comparable transactions. This
analysis resulted in a range of imputed values for First Security common stock
of between $18.71 and $61.58.
Discounted Cash Flow Analysis. Using a discounted cash flow analysis, J.P.
Morgan estimated the net present value of the future streams of after-tax cash
flows that First Security could produce on a stand-alone basis from 1999 through
2008 and distribute to First Security's stockholders. In this analysis, J.P.
Morgan used IBES earnings estimates for 1999 and 2000 and assumed that First
Security's earnings were grown thereafter at an annual rate ranging from 6% to
10%. For each growth rate, J.P. Morgan calculated the sum of: (i) the estimated
1999-2008 distributable income streams per share, projected such that First
Security's dividend payout ratio would be maintained at 38%, and discounted to
present values at an assumed discount rate of 10%, and (ii) the terminal values
per share of First Security common stock based on assumed multiples of First
Security's projected 2009 earnings ranging from 12.0x to 16.0x. This discounted
cash flow analysis indicated a reference range of $17.02 to $27.99 per share of
First Security common stock.
J.P. Morgan also used a discounted cash flow analysis to estimate the net
present value of transaction synergies assumed to result from the merger. These
synergies were assumed to produce cash
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<PAGE> 47
flows resulting from: (i) cost savings, which were assumed to be phased in 50%
in 2000 and 100% thereafter, grown at 5% annually; (ii) a restructuring charge
based on fully phased-in cost savings; and (iii) an assumed amount of deposit
divestitures, with associated assumptions for return on deposits (i.e., return
on assets) and a deposit sale premium. The transaction synergy cash flows were
discounted to present values at an assumed discount rate of 10%, and terminal
values were based on assumed multiples of projected 2009 transaction synergies
ranging from 12.0x to 16.0x. This discounted cash flow analysis indicated a
reference range for transaction synergies of $4.15 to $4.82 per share of First
Security common stock.
In addition, J.P. Morgan tested the sensitivity of the values for First
Security on a stand-alone basis and for transaction synergies by varying certain
assumptions. The reference ranges were not materially changed by reasonable
variations of key assumptions.
J.P. Morgan also performed a discounted cash flow analysis to estimate the
distributable income from 1999 through 2008 for Zions on a stand-alone basis. In
this analysis, J.P. Morgan used IBES earnings estimates for 1999 and 2000 and
assumed that Zions' earnings were grown thereafter at an annual rate ranging
from 8% to 16%. For each growth rate, J.P. Morgan calculated the sum of: (i) the
estimated 1999-2008 distributable income streams per share, projected such that
Zions' dividend payout ratio would be maintained at 28%, and discounted to
present values at assumed discount rates ranging from 10% to 11%; and (ii) the
terminal values per share of Zions common stock based on assumed multiples of
Zions' projected 2009 earnings ranging from 16.0x to 20.0x. This discounted cash
flow analysis indicated a reference range of $40.96 to $105.24 per share of
Zions common stock.
This summary does not purport to be a complete description of the analyses
or data presented by J.P. Morgan. The preparation of a fairness opinion is a
complex process and is not necessarily susceptible to partial analysis or
summary description. J.P. Morgan believes that one must consider its opinion,
the summary and its analyses as a whole. Selecting portions of this summary and
these analyses, without considering the analyses as a whole, would create an
incomplete view of the processes underlying the analyses and opinion. In
arriving at its opinion, J.P. Morgan considered the results of all of the
analyses as a whole. No single factor or analysis was determinative of J.P.
Morgan's fairness determination. Rather, the totality of the factors considered
and analyses performed operated collectively to support its determination. J.P.
Morgan based its analyses on assumptions that it deemed reasonable, including
those concerning general business and economic conditions and industry-specific
factors. This summary sets forth under the description of each analysis the
other principal assumptions upon which J.P. Morgan based that analysis. J.P.
Morgan's analyses are not necessarily indicative of actual values or actual
future results that either company or the combined company might achieve, which
values may be higher or lower than those indicated. Analyses based upon
forecasts of future results are inherently uncertain, as they are subject to
numerous factors or events beyond the control of the parties and their advisors.
Accordingly, these forecasts and analyses are not necessarily indicative of
actual future results, which may be significantly more or less favorable than
suggested by those analyses. Therefore, none of First Security, Zions, J.P.
Morgan or any other person assumes responsibility if future results are
materially different from those forecasted. Moreover, J.P. Morgan's analyses are
not and do not purport to be appraisals or otherwise reflective of the prices at
which businesses actually could be bought or sold.
As a part of its investment banking business, J.P. Morgan and its
affiliates are continually engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, investments for passive
and control purposes, negotiated underwritings, secondary distributions of
listed and unlisted securities, private placements and valuations for estate,
corporate and other purposes. First Security selected J.P. Morgan to advise it
and deliver a fairness opinion with respect to the merger on the basis of such
experience and its familiarity with First Security.
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<PAGE> 48
First Security has paid J.P. Morgan a fee of $250,000, and has agreed to
pay J.P. Morgan a fee of 0.45% of the aggregate purchase price paid in the
merger upon consummation of the merger, less the $250,000 previously paid. First
Security also agreed to reimburse J.P. Morgan for its reasonable expenses,
including the fees and disbursements of counsel, and to indemnify J.P. Morgan
against various liabilities, including liabilities which might arise under the
federal securities laws.
J.P. Morgan and its affiliates have provided financial advisory, capital
markets and commercial banking services to First Security, for which they
receive customary fees. In the ordinary course of their businesses, J.P. Morgan
and its affiliates may actively trade the debt and equity securities of First
Security or Zions for their own accounts or for the accounts of customers and,
accordingly, they may at any time hold long or short positions in such
securities.
INTERESTS OF MANAGEMENT AND DIRECTORS IN THE MERGER
In considering the respective recommendations of the First Security board
of directors and the Zions board of directors, First Security stockholders and
Zions shareholders should be aware that certain members of First Security's
management and Zions' management and of the First Security board of directors
and the Zions board of directors have certain interests in the merger that are
different from, or in addition to, the interests of shareholders generally. The
members of the First Security board of directors and the Zions board of
directors knew about these additional interests, and considered them, when they
approved the merger agreement.
INDEMNIFICATION AND DIRECTORS' AND OFFICERS' INSURANCE
The merger agreement provides that the combined company will indemnify each
present and former director and officer of Zions and First Security and their
subsidiaries as provided in Zions', First Security's or such subsidiary's
certificates of incorporation or by-laws or comparable organizational documents.
The merger agreement further provides that, for a period of six years
following the merger, the combined company will use its reasonable best efforts
to provide directors' and officers' liability insurance covering acts or
omissions occurring prior to the merger. This insurance will provide coverage
and amounts no less favorable than those of the policies in effect on the date
of the merger agreement.
BOARD OF DIRECTORS AND SENIOR MANAGEMENT FOLLOWING THE MERGER
The by-laws of the combined company provide that the board of directors of
the combined company initially will consist of 22 members, 11 of whom initially
will be designated by First Security and 11 of whom initially with be designated
by Zions.
Upon the effectiveness of the merger, each of Harris H. Simmons, the
current President and Chief Executive Officer of Zions, and Spencer F. Eccles,
the current Chairman of the Board and Chief Executive Officer of First Security,
will serve as Co-Chief Executive Officers of the combined company. Pursuant to
the by-laws of the combined company, at the annual meeting of stockholders in
the year 2002, Mr. Simmons will become the sole Chief Executive Officer of the
combined company. While Mr. Simmons and Mr. Eccles serve as Co-Chief Executive
Officers of the combined company, neither can be removed from such position
except upon the affirmative vote of two-thirds of the members of the board of
directors of the combined company. Upon the effectiveness of the merger, Mr.
Eccles will also serve, pursuant to the by-laws, as Chairman of the Board of the
combined company and will serve in that position until his 70th birthday. Upon
Mr. Eccles' 70th birthday, according to the by-laws of the combined company, Mr.
Simmons will succeed Mr. Eccles as Chairman of the Board. Upon effectiveness of
the merger, Mr. Simmons will also serve as President and Chief Operating Officer
of the
40
<PAGE> 49
combined company and, pursuant to the merger agreement, as President of the
combined company's principal banking subsidiary.
The merger agreement provides that the board of directors of the combined
company will be divided into three classes. Initially, the first class will
consist of 10 directors, the second class will consist of seven directors and
the third class will consist of five directors. Pursuant to the certificate of
incorporation of the combined company, at and after the annual meeting of
stockholders in the year 2000, the first class of directors will be comprised of
six directors, with no change in the size of the second or third classes of
directors. At and after the annual meeting of stockholders in the year 2001, the
first class will continue to consist of six directors and each of the second
class and third class will consist of five directors. At all times through the
annual meeting of stockholders in the year 2002, pursuant to the certificate of
incorporation, the board of directors of the combined company will consist of an
even number of Zions-designated directors and First Security-designated
directors. Each class of directors elected at an annual meeting of stockholders
of the combined company after the merger will be elected for a three-year term.
The merger agreement provides that Zions initially will have the right to
designate five directors of the board for the first class, three directors for
the second class and three directors for the third class; and First Security
initially will have the right to designate five directors for the first class,
four directors for the second class and two directors for the third class.
If any director initially appointed to the combined company board pursuant
to the merger agreement is unable or unwilling to serve as director of the
combined company, the party which designated such individual will designate
another individual to serve in such individual's place.
Set forth below is a table of the persons expected to serve as senior
executive officers of the combined company immediately following the merger.
<TABLE>
<CAPTION>
NAME POSITION IN COMBINED COMPANY
---- ----------------------------------------------------------
<S> <C>
Spencer F. Eccles.................... Chairman of the Board, Co-Chief Executive Officer and
Co-Chairman of the Executive Committee of the Board of
Directors
Harris H. Simmons.................... Co-Chief Executive Officer, President, Chief Operating
Officer, Co-Chairman of the Executive Committee of the
Board of Directors and President of the combined company's
principal banking subsidiary
Morgan J. Evans...................... Senior Executive Vice President
Dale M. Gibbons...................... Executive Vice President and Chief Financial Officer
A. Scott Anderson.................... Executive Vice President
Danne L. Buchanan.................... Executive Vice President
Michael P. Caughlin.................. Executive Vice President
David R. Golden...................... Executive Vice President
Brad D. Hardy........................ Executive Vice President
W. David Hemingway................... Executive Vice President
Mark D. Howell....................... Executive Vice President
J. Patrick McMurray.................. Executive Vice President
L. Scott Nelson...................... Executive Vice President
Robert G. Sarver..................... Executive Vice President
Scott C. Ulbrich..................... Executive Vice President
</TABLE>
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<PAGE> 50
EMPLOYMENT AGREEMENTS
In connection with the signing of the merger agreement, First Security
entered into employment agreements with Spencer F. Eccles, current Chairman of
the Board and Chief Executive Officer of First Security and Morgan J. Evans,
current President and Chief Operating Officer of First Security. In addition,
First Security entered into employment agreements with the following four
executive vice presidents of First Security (the "Other Executives") (as well as
with three other officers of First Security): Brad D. Hardy, J. Pat McMurray, L.
Scott Nelson and Scott C. Ulbrich.
Employment Agreements with First Security Executive Officers. The term of
Mr. Eccles' employment agreement begins on the completion of the merger and
expires on the last day of the month in which he attains age 70. Pursuant to Mr.
Eccles' employment agreement, Mr. Eccles will serve as Co-Chief Executive
Officer of First Security and Co-Chairman of the executive committee of the
board of directors until the annual stockholders' meeting in 2002, and
thereafter may continue to serve as Co-Chairman of the executive committee of
the board of directors at his discretion. During the term of his employment
agreement, Mr. Eccles will also serve as Chairman of the board of directors of
First Security, as a member of the executive management committee of First
Security and as a member of the board of directors of First Security's principal
banking unit. After the expiration of the employment agreement, Mr. Eccles will
serve as Chairman Emeritus of First Security for so long as Mr. Eccles serves on
the board of directors of First Security.
Pursuant to Mr. Eccles' employment agreement, for each year until the
annual stockholders' meeting in 2002, he will receive (1) an annual base salary
equal to the annual base salary paid to the other Co-Chief Executive Officer of
First Security, but in no event less than Mr. Eccles' annual base salary as in
effect prior to the merger, and (2) an annual cash bonus in an amount equal to
the annual bonus payable to the other Co-Chief Executive Officer of First
Security with respect to the year in question, but in no event less than the
annual bonus earned by Mr. Eccles for 1998. In addition, Mr. Eccles will be
entitled to receive both annual and long-term incentive compensation equal to,
and on the same terms and conditions as, the incentive compensation paid or
granted to the other Co-Chief Executive Officer of First Security.
Upon completion of the merger, First Security will grant Mr. Eccles an
option to acquire 60,000 shares of First Security common stock, which will vest
in three equal installments over the period ending on the annual stockholders'
meeting in 2002, will have an exercise price equal to the fair market value of
First Security common stock on the date of grant and will have a term of, and
remain exercisable for, 10 years from the date of grant without regard to Mr.
Eccles' earlier termination of employment. Mr. Eccles' employment agreement
further provides that he will receive a bonus equal to $1,500,000 upon his
resignation from his position as Chairman of the board of directors of First
Security.
In addition, Mr. Eccles' employment agreement provides for an annual
retirement benefit of $800,000 commencing in May 2002, which will increase to
$1,000,000 per year commencing upon the date Mr. Eccles resigns as Chairman of
the board of directors of First Security, less any amounts accrued under First
Security's defined benefit retirement plans. Upon the death of Mr. Eccles, his
current spouse (if she survives him) will receive an annual benefit in an amount
equal to 50% of the retirement benefit determined in accordance with the
preceding sentence (based on the higher amount). Mr. Eccles will also be
entitled to participate in First Security's medical and dental benefit plans
until the annual stockholders' meeting in 2002, and thereafter (notwithstanding
any earlier termination of his employment for any reason) Mr. Eccles will be
entitled to receive post-retirement welfare benefits based on the greater of the
benefits that he would have been eligible to receive if he had retired at the
completion of the merger and the benefits that are provided to retired executive
officers of First Security at any time after the annual stockholders' meeting in
2002 subject to the terms of such plans as in effect from time to time.
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<PAGE> 51
Mr. Eccles' employment agreement additionally provides that First Security
and Mr. Eccles will enter into a change in control severance agreement, with a
term commencing upon the completion of the merger and ending on the last day of
the month in which Mr. Eccles attains age 70, without regard to whether Mr.
Eccles remains Chairman of the board of directors of First Security through such
date, and which provides that any payments to be made under such agreement will,
at Mr. Eccles' election, be paid either to Mr. Eccles or his charitable
foundation. The change in control severance agreement will be on substantially
the same terms as, and upon completion of the merger will supersede, Mr. Eccles'
existing change in control employment agreement with First Security.
In the event that Mr. Eccles' employment with First Security is terminated
prior to the annual stockholders' meeting in 2002 by First Security other than
for cause or disability, or by Mr. Eccles for good reason (each as defined in
Mr. Eccles' employment agreement), Mr. Eccles will be entitled to receive, in
addition to accrued salary and amounts under First Security benefit plans, the
following benefits:
- payment of a pro rata annual bonus through the date of termination, based
on the highest annual bonus paid to Mr. Eccles for any of the three years
prior to the termination date;
- payment of an amount equal to the product of (1) the sum of Mr. Eccles'
annual base salary and the highest annual bonus paid to Mr. Eccles for
any of the three years prior to the termination date, times (2) the
number of months and portions thereof from the date of termination
through the annual stockholders' meeting in 2002, divided by 12;
- the 60,000 stock options granted to Mr. Eccles as described above will
immediately vest;
- continued medical and dental benefits to Mr. Eccles and his spouse,
through the last day of the month in which Mr. Eccles attains age 70, on
the same basis such benefits were provided immediately prior to the date
of termination; and
- payment of the annual retirement benefit described above (based on the
lower amount until such time as Mr. Eccles resigns as Chairman and,
thereafter, based on the higher amount), commencing at such time as Mr.
Eccles' benefits commence under First Security's tax-qualified defined
benefit retirement plan.
Mr. Eccles' employment agreement also provides that if his employment
terminates for any reason following the annual stockholders' meeting in 2002,
First Security will provide continuation of medical and dental benefits and the
annual retirement benefit, each as described in the immediately preceding two
bullets.
If any amounts payable to Mr. Eccles under the employment agreement or
otherwise would be subject to the excise tax under section 4999 of the Code, an
additional payment will be made so that after the payment of all income and
excise taxes, Mr. Eccles will be in the same after-tax position as if no excise
tax under section 4999 had been imposed. However, if these additional payments
(excluding any additional amounts payable due to the excise tax) do not exceed
110% of the greatest amount that could be paid without requiring payment of the
excise tax, no additional payments will be made on account of the excise tax.
Instead, the payments otherwise due will be reduced as necessary to prevent the
application of the excise tax. On completion of the merger, Mr. Eccles' new
employment agreement will supersede his change of control severance agreement
described below. See "-- Existing First Security Change of Control Severance
Agreements".
The term of Mr. Evans' employment agreement is six months and the term of
each employment agreement with the Other Executives is one year, in each case
commencing on the completion of the
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merger. Pursuant to the employment agreements, Mr. Evans and the Other
Executives will serve in the following positions for First Security:
<TABLE>
<S> <C>
Mr. Evans............................ Senior Executive Vice President -- Integration
Mr. Hardy............................ General Counsel
Mr. McMurray......................... Regional Manager, Community Banking
Mr. Nelson........................... Manager, Retail Lending
Mr. Ulbrich.......................... Manager, Capital Markets
</TABLE>
Pursuant to the employment agreements, each of Mr. Evans and the Other
Executives will receive an annual base salary of no less than the annual base
salary in effect on the date of the merger agreement. In addition, Mr. Evans
will receive an annual cash bonus equal to the annual bonus he earned for 1998,
and each of the Other Executives will receive an annual cash bonus equal to his
annual bonus opportunity for the 1999 calendar year under the First Security
Management Annual Cash Incentive Bonus Plan.
The employment agreements also provide for the payment of a retention
bonus. Mr. Evans' employment agreement provides for the payment of a retention
bonus of $500,000 upon the expiration of the term of the employment agreement.
The employment agreements for the Other Executives provide for the payment of a
retention bonus on the first anniversary of the completion of the merger, in an
amount equal to 35% of the sum of the executive's annual base salary and bonus
for 1998.
Mr. Evans' employment agreement provides that at the time that his
retirement benefit commences under First Security's tax-qualified defined
benefit retirement plan, he will receive an additional annual retirement benefit
of $100,000. Upon the death of Mr. Evans, his current spouse (if she survives
him) will receive an annual benefit for her life in an amount equal to 50% of
the additional retirement benefit.
Pursuant to Mr. Evans' employment agreement, upon the first to occur of the
termination of Mr. Evans' employment or the expiration of six months following
the merger, Mr. Evans will serve as a consultant to First Security for two
years, provided that his employment was not terminated during the term of his
employment agreement as a result of death, disability, by First Security for
cause or by Mr. Evans other than for good reason (each as defined in Mr. Evans'
employment agreement). During the two-year consulting period, Mr. Evans will be
available to perform consulting services for First Security for up to 200 hours
per year, will receive as compensation for such services an annual consulting
fee of $500,000 and will receive continued welfare benefits and outplacement
services. Upon the termination of Mr. Evans' consulting services other than for
cause, Mr. Evans will be entitled to receive a lump sum payment in an amount
equal to the consulting fees for the remainder of the two year consulting
period, and will continue to receive the welfare benefits and outplacement
benefits for the remainder of the periods provided in Mr. Evans' existing change
of control severance agreement with First Security.
The employment agreements for the Other Executives provide that upon the
completion of the merger, each Other Executive will be granted an option to
acquire 25,000 shares of First Security common stock. The stock option will vest
in full on the first anniversary of the completion of the merger, will have an
exercise price equal to the fair market value of First Security common stock on
the date of grant and will have a term of, and remain exercisable for, 10 years
from the date of grant without regard to any earlier termination of employment
of an Other Executive.
In the event that the employment of Mr. Evans or the Other Executives is
terminated prior to the expiration of the term of the relevant employment
agreement by First Security other than for cause or disability, or by Mr. Evans
or the Other Executives for good reason (each as defined in the respective
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employment agreement), Mr. Evans and/or the Other Executives will be entitled to
receive, in addition to accrued amounts, the following benefits:
- a payment of a pro rata annual bonus through the date of termination,
which in the case of Mr. Evans will be based on the target annual bonus
in respect of calendar year 1999, and in the case of an Other Executive
will be based on the highest annual bonus paid to the Other Executive for
any of the three years prior to the termination date;
- payment of an amount equal to the product of (1) the sum of the annual
base salary and either the target annual bonus in respect of calendar
year 1999 (in the case of Mr. Evans) or the highest annual bonus paid for
any of the three years prior to the termination date (in the case of the
Other Executives), times (2) the number of months and portions thereof
from the date of termination through the expiration of the term of the
employment agreement, divided by 12;
- in the case of the Other Executives, the grant of 25,000 stock options
described above will immediately vest;
- payment of the retention bonus described above;
- welfare benefits and outplacement services for the periods provided in
the Other Executives' existing change of control severance agreements
with First Security (and for Mr. Evans, continued medical and dental
benefits through the expiration of the term of the employment agreement
and, thereafter, the welfare benefits and outplacement services provided
for under his change of control severance agreement with First Security);
and
- in the case of Mr. Evans, payment of the additional annual retirement
benefit described above, commencing when otherwise payable.
If any amounts payable to Mr. Evans or the Other Executives under the
employment agreements or otherwise would be subject to the excise tax under
section 4999 of the Code, an additional payment will be made so that after the
payment of all income and excise taxes, Mr. Evans or the Other Executives, as
applicable, will be in the same after-tax position as if no excise tax under
section 4999 had been imposed. However, if these additional payments (excluding
any additional amounts payable due to the excise tax) do not exceed 110% of the
greatest amount that could be paid without requiring payment of the excise tax,
no additional payments will be made on account of the excise tax. Instead, the
payments otherwise due will be reduced as necessary to prevent the application
of the excise tax. On completion of the merger, Mr. Evans' and the Other
Executives' new employment agreements will supersede their change of control
severance agreements described below. See "-- Existing First Security Change of
Control Severance Agreements".
Existing First Security Change of Control Severance Agreements. Change of
control severance agreements are in effect between First Security and a number
of its executive officers, including Mr. Eccles, Mr. Evans and each of the Other
Executives.
Under the change of control severance agreements, if, during the three-year
period following a change of control, the employment of a covered executive is
terminated by First Security other than for cause or due to death or disability,
or by the covered executive for good reason, the covered executive will be
entitled to receive a payment consisting of:
- a pro rata annual bonus through the date of termination, based on the
higher of (1) the annual bonus earned in the year prior to the change of
control and (2) the average annual bonus earned in the three years before
the change of control (the "highest annual bonus"), plus
- three times the sum of the covered executive's base salary and the
highest annual bonus, plus
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- an amount generally equal to the value of three years' additional service
credit under First Security's tax-qualified and supplemental retirement
plans.
In addition, on a covered termination following a change of control, each
covered executive will be entitled to continued welfare benefit coverage for
three years after the date of termination and outplacement services.
If any amounts payable under the change of control severance agreements or
otherwise would be subject to the excise tax under section 4999 of the Internal
Revenue Code, an additional payment will be made so that after the payment of
all income and excise taxes, the covered executive will be in the same after-tax
position as if no excise tax under section 4999 had been imposed. However, if
these additional payments (excluding additional amounts payable due to the
excise tax) do not exceed 110% of the greatest amount that could be paid to the
covered executive without requiring payment of the excise tax, no additional
payments will be made on account of the excise tax. Instead, the payments
otherwise due to the covered executive will be reduced as necessary to prevent
the application of the excise tax.
The transactions contemplated by the merger agreement will constitute a
change of control under the change of control severance agreements. Upon
completion of the merger, Mr. Evans' and the Other Executives' employment will
be deemed to be terminated other than for cause for purposes of the change of
control severance agreements and, accordingly, the officers will be entitled to
receive payment of the amounts called for by those agreements. Thereafter, the
new employment agreement will supersede the change of control severance
agreements. See "-- Employment Agreements with First Security Executive
Officers."
First Security Supplemental Retirement Plan. Under the First Security
supplemental retirement plan, on a change of control of First Security, certain
limitations under the plan will be waived, including the noncompetition
restriction under the plan. The transactions provided for by the merger
agreement will, or will be deemed to, constitute a change of control for
purposes of the supplemental retirement plan.
First Security Stock-Based Rights. Upon completion of the merger, each
option granted under First Security stock plans, whether vested or unvested,
which is outstanding immediately prior to the effectiveness of the
reclassification of First Security common stock, will be converted upon the
effectiveness of the reclassification of First Security common stock into a new
option to acquire a number of shares of the combined company common stock equal
to the number of shares of First Security common stock subject to the old option
multiplied by the exchange ratio (rounded to the nearest whole share), and the
exercise price of the new option will be equal to the exercise price of the old
option divided by the exchange ratio (rounded to the nearest whole cent).
Under First Security's stock-based plans, unvested stock options will
become fully vested and exercisable on a change of control of First Security. In
addition, upon a change of control of First Security, each option holder will
have the right to elect, during the 60-day period following shareholder approval
of the merger, to exercise each outstanding option and receive in respect
thereof the number of shares of First Security common stock with a fair market
value equal to the difference between (a) the higher of the merger price or the
highest reported sales price during the 60-day period prior to and including the
date of shareholder approval and (b) the exercise price. The transactions
provided for by the merger agreement will constitute a change of control under
the First Security stock-based plans.
Employment Agreements with Zions' Executive Officers. Robert G. Sarver, the
chief executive officer of California Bank & Trust, a subsidiary of Zions, and a
director and executive vice president of Zions, is party to an employment
agreement with Zions and California Bank & Trust. Under the employment
agreement, which provides for the employment of Mr. Sarver through December 31,
2002, the merger of Zions and First Security will be considered an
"acquisition", pursuant to which Mr. Sarver
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will have the right to terminate his services with respect to California Bank &
Trust under the employment agreement and be paid an amount equal to the sum of:
- the product of the base annual salary payable to Mr. Sarver as of the
date of determination and the number of years (and fractions of a year)
then remaining in Mr. Sarver's period of employment pursuant to the
employment agreement, and
- the product of the average of the bonuses payable to Mr. Sarver pursuant
to the employment agreement during the three fiscal years immediately
preceding the date of termination and the number of years (and fractions
of a year) then remaining in Mr. Sarver's period of employment pursuant
to the employment agreement.
REGULATION AND SUPERVISION
The following discussion sets forth the material elements of the regulatory
framework applicable to bank holding companies and their subsidiaries and
provides certain specific information relevant to Zions and First Security. This
regulatory framework is intended primarily for the protection of depositors and
the federal deposit insurance funds and not for the protection of security
holders. To the extent that the following information describes statutory and
regulatory provisions, it is qualified in its entirety by reference to those
provisions. A change in the statutes, regulations or regulatory policies
applicable to Zions and First Security or their respective subsidiaries may have
a material effect on the business of Zions and First Security, as the case may
be. Further information is contained in the documents incorporated herein by
reference. See "Where You Can Find More Information" on page 85.
General. As a bank holding company, each of Zions and First Security is
subject to regulation under the Bank Holding Company Act of 1956, as amended
(the "BHCA"), and to inspection, examination and supervision by the Board of
Governors of the Federal Reserve System (the "Federal Reserve"). Under the BHCA,
bank holding companies generally may not acquire the ownership or control of
more than 5% of the voting shares or substantially all the assets of any
company, including a bank, without the Federal Reserve's prior approval. In
addition, bank holding companies generally may engage, directly or indirectly,
only in banking and such other activities as are determined by the Federal
Reserve to be closely related to banking.
Each of Zions' and First Security's subsidiary national banking
associations are subject to regulation and examination primarily by the Office
of the Comptroller of the Currency (the "OCC") and, secondarily, by the Federal
Deposit Insurance Corporation (the "FDIC") and the Federal Reserve. Each of
Zions' and First Security's subsidiary state-chartered banks are subject to
primary federal regulation and examination by the FDIC or the Federal Reserve
and, in addition, are regulated and examined by their respective state banking
departments. Zions, First Security and their respective subsidiaries also are
affected by the fiscal and monetary policies of the federal government and the
Federal Reserve, and by various other governmental requirements and regulations.
Capital Requirements. Each of Zions and First Security is subject to
risk-based capital requirements and guidelines imposed by the Federal Reserve,
which are substantially similar to the capital requirements and guidelines
imposed by the OCC and the FDIC on the depository institutions within their
respective jurisdictions. For this purpose, a depository institution's or
holding company's assets and certain specified off-balance sheet commitments and
obligations are assigned to various risk categories. A depository institution's
or holding company's capital, in turn, is classified in one of three tiers: core
("Tier 1") capital, which includes common equity, non-cumulative perpetual
preferred stock, a limited amount of cumulative perpetual preferred stock at the
holding company level and minority interests in equity accounts of consolidated
subsidiaries, less goodwill, and most intangible assets; supplementary ("Tier
2") capital, which includes, among other items, perpetual preferred stock not
meeting the Tier 1
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definition, mandatory convertible securities, subordinated debt and allowances
for loan and lease losses, subject to certain limitations; and market risk
("Tier 3") capital, which includes qualifying unsecured subordinated debt.
Each of Zions and First Security, like other bank holding companies,
currently is required to maintain Tier 1 capital and "Total Capital" (the sum of
Tier 1, Tier 2 and Tier 3 capital) equal, respectively, to at least 4% and 8% of
its total risk-weighted assets (including certain off-balance-sheet items, such
as standby letters of credit). In addition, in order for a holding company or
depository institution to be considered "well capitalized" for regulatory
purposes, its Tier 1 and total capital ratios must be 6% and 10% on a
risk-adjusted basis, respectively. At September 30, 1999, each of Zions and
First Security met both requirements, with Tier 1 and total capital equal to
8.45% and 11.27% (in the case of Zions) and 8.82% and 10.78% (in the case of
First Security) of its respective total risk-weighted assets.
The Federal Reserve, the FDIC and the OCC have adopted rules to incorporate
market and interest rate risk components into their risk-based capital
standards. Amendments to the risk-based capital requirements, incorporating
market risk, became effective January 1, 1998. Under the new market risk
requirements, capital will be allocated to support the amount of market risk
related to a financial institution's ongoing trading activities.
The Federal Reserve also requires bank holding companies to maintain a
minimum "leverage ratio" (Tier 1 capital to adjusted total assets) of 3% if the
holding company has the highest regulatory rating and meets certain other
requirements, or of 3% plus an additional "cushion" of at least 100 to 200 basis
points if the holding company does not meet these requirements. At September 30,
1999 Zions' leverage ratio was 6.14% and First Security's leverage ratio was
7.12%.
The Federal Reserve may set capital requirements higher than the minima
noted above for holding companies whose circumstances warrant it. For example,
holding companies experiencing or anticipating significant growth may be
expected to maintain capital positions substantially above the minimum
supervisory levels without significant reliance on intangible assets.
Furthermore, the Federal Reserve has indicated that it will consider a "tangible
Tier 1 capital leverage ratio" (deducting all intangibles) and other indicia of
capital strength in evaluating proposals for expansion or new activities.
Each of Zions' and First Security's banking subsidiaries is subject to
similar risk-based and leverage capital requirements adopted by its applicable
federal banking agency, and each was in compliance with the applicable capital
requirements as of September 30, 1999.
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.
On June 3, 1999, the Basle Committee on Banking Supervision, which formerly
was known as the Basle Committee on Banking Regulations and Supervisory
Practices, proposed a new capital adequacy framework. The new capital framework
would consist of minimum capital requirements, a supervisory review process and
effective use of market discipline. The minimum capital requirements would be
based on the current framework, but, among other changes, would replace the
existing risk weights for sovereigns, banks, securities firms, corporate
borrowers and asset securitizations with risk weights based on external credit
ratings, including risk weights greater than 100% for low quality exposure. The
new framework would include capital charges for interest rate risk, for banks
with interest rate risk that is significantly above average and for other risks,
principally operational risk. The supervisory review aspect of the new framework
would seek to ensure that a bank's capital position is consistent with its
overall risk profile and strategy. The supervisory process would also encourage
early supervisory intervention when a bank's capital position deteriorates. The
third aspect of the new framework, market discipline, would press for detailed
disclosure of banks' capital adequacy in order to enhance the role of market
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participants in encouraging banks to hold adequate capital. The Basle Committee
plans to set forth more definitive proposals regarding the new framework in the
year 2000. We cannot predict at this time whether the new capital adequacy
framework will be adopted or in what form, or the effect it would have on our or
our subsidiaries' financial conditions or results of operations.
Dividend Restrictions. Various federal and state statutory provisions limit
the amount of dividends Zions' and First Security's affiliate banks can pay to
Zions or First Security as the case may be, without regulatory approval.
Dividend payments by national banks are limited to the lesser of (i) the level
of undivided profits and (ii) absent regulatory approval, an amount not in
excess of net income for the current year combined with retained net income for
the preceding two years. Likewise, the approval of the Federal Reserve is
required for any dividend by a state-chartered bank that is a member of the
Federal Reserve System (a "state member bank") if the total of all dividends
declared by the bank in any calendar year would exceed the total of its net
profits (as defined by regulatory agencies) for such year combined with its
retained net profits for the preceding two years. In addition, a state member
bank may not pay a dividend in an amount greater than its net profits then on
hand. At September 30, 1999, $42.8 million of the total stockholders' equity of
Zions' affiliate banks was available for payment of dividends to Zions without
approval by the applicable regulatory authority, while up to $120.0 million
could be paid with approval by the applicable regulatory authority and still
leave the banks "well-capitalized". In addition, Zions' non-bank subsidiaries
could have declared dividends totaling $6.7 million at September 30, 1999. At
September 30, 1999, $561.7 million of the total stockholders' equity of First
Security' s affiliate banks was available for payment of dividends to First
Security without approval by the applicable regulatory authority. In addition,
First Security' s non-bank subsidiaries could have declared dividends totaling
$51.7 million at September 30, 1999.
In addition, federal bank regulatory authorities have authority to prohibit
Zions' and First Security's affiliate banks from engaging in unsafe or unsound
practices in conducting their business. The payment of dividends, depending upon
the financial condition of the bank in question, could be deemed such an unsafe
or unsound practice. The ability of Zions' and First Security's affiliate banks
to pay dividends in the future is currently, and could be further, influenced by
bank regulatory policies and capital guidelines.
REGULATORY APPROVALS
Federal Approvals. The merger of Zions into First Security is subject to
prior approval of the Federal Reserve under Sections 3 and 4 of the BHCA.
Section 3 of the BHCA requires the Federal Reserve, when considering a
transaction like the merger, to take into consideration the financial and
managerial resources (including the competence, experience and integrity of the
officers, directors and principal shareholders) and future prospects of the
institutions and the convenience and needs of the communities to be served. In
addition, under the Community Reinvestment Act of 1977, the Federal Reserve must
take into account the record of performance of the acquiring institution in
meeting the credit needs of the entire community, including low- and
moderate-income neighborhoods, served by the institution. We filed an
application and a notice regarding the merger with the Federal Reserve on
September 16, 1999.
Section 3 of the BHCA also prohibits the Federal Reserve from approving a
merger if it would result in a monopoly or be in furtherance of any combination
or conspiracy to monopolize or to attempt to monopolize the business of banking
in any part of the United States, or if its effect would be substantially to
lessen competition or to tend to create a monopoly, or if it would in any other
manner result in a restraint of trade, unless the Federal Reserve finds that the
anticompetitive effects of the merger are clearly outweighed in the public
interest by the probable effect of the merger in meeting the convenience and
needs of the communities to be served.
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Zions and First Security anticipate that, in order to alleviate what the
Federal Reserve, the Department of Justice and certain Utah authorities believe
would otherwise be an adverse competitive effect of the merger, the combined
company will divest branches in various markets in Utah and Idaho having
aggregate deposits of approximately $2.0 billion. Zions and First Security
expect that the Federal Reserve will require that sale agreements with respect
to these divestitures be entered into not later than the closing of the merger.
Although such divestitures may affect certain pro forma combined financial
statement amounts, merger and restructuring costs, cost savings and revenues,
Zions and First Security believe that the aggregate amount and financial impact
of any such divestitures will not have a material adverse effect on the combined
company.
Under Section 4 of the BHCA, the Federal Reserve must consider whether the
performance of First Security's and Zions' nonbanking activities on a combined
basis can reasonably be expected to produce benefits to the public (such as
greater convenience, increased competition and gains in efficiency) that
outweigh possible adverse effects (such as undue concentration of resources,
decreased or unfair competition, conflicts of interest and unsound banking
practices). This consideration includes an evaluation of the financial and
managerial resources of First Security and Zions and the effect of the proposed
transaction on those resources.
Assuming Federal Reserve approval, the merger may not be consummated until
30 days after such approval, during which time the United States Department of
Justice may challenge the merger on antitrust grounds. The commencement of an
antitrust action would stay the effectiveness of the Federal Reserve approval
unless a court specifically ordered otherwise. With the approval of the Federal
Reserve and the concurrence of the Department of Justice, the waiting period may
be reduced to no less than 15 days.
State Approvals. The merger of Zions into First Security is also subject to
prior approval of the relevant banking regulatory authorities in California and
Nevada, where Zions has state-chartered banking subsidiaries. In California, an
application with respect to an acquisition of control of a bank must be denied
if the Commissioner of Financial Institutions finds any of the following:
- that the proposed acquisition would result in a monopoly and would be in
furtherance of any combination or conspiracy to monopolize or to attempt
to monopolize the business of banking in any part of the state;
- that the effect of the proposed acquisition in any section of the state
may be to substantially lessen competition or to tend to create a
monopoly, or would otherwise be in restraint of trade, and that the
anticompetitive effects are not clearly outweighed in the public interest
by the probable effect of the transaction in meeting the convenience and
needs of the community to be served;
- that the financial condition of the acquiring person is such as might
jeopardize the financial stability of the bank, or prejudice the
interests of depositors, creditors or shareholders of the bank;
- that plans to liquidate the bank, to sell the assets of the bank, to
merge or consolidate the bank, or to make any other major change in the
business, corporation structure or management of the bank are not fair
and reasonable to the depositors, creditors and shareholders of the bank;
- that the competence, experience or integrity of the acquiring person
indicates that it would not be in the interests of the depositors,
creditors or shareholders of the bank or in the interest of the public to
permit such person to control the bank; or
- that the proposed acquisition is unfair, unjust or inequitable to the
bank or the depositors, creditors or shareholders of the bank.
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We submitted an application for prior approval of the merger with the
California Commissioner on October 25, 1999.
On October 28, 1999, we received the approval of the Nevada banking
regulatory authority with respect to the merger.
Status of Regulatory Approvals and Other Information. First Security and
Zions and their respective subsidiaries have filed all applications and notices
and taken other appropriate action with respect to any necessary approvals or
other action of any governmental authority of which they have knowledge. The
merger agreement provides that the obligation of each of Zions and First
Security to consummate the merger is conditioned upon (1) the receipt of all
requisite regulatory approvals, including the approvals of the Federal Reserve
and (2) the termination or expiration of all statutory or regulatory waiting
periods.
THE MERGER CANNOT PROCEED IN THE ABSENCE OF THE NECESSARY REGULATORY
APPROVALS. THERE CAN BE NO ASSURANCE THAT THESE REGULATORY APPROVALS WILL BE
OBTAINED OR AS TO THE DATES OF SUCH APPROVALS.
See "-- Closing and Effective Time of the Merger", "-- Conditions of the
Merger" and "-- Amendment, Waiver and Termination".
LITIGATION RELATING TO THE MERGER
On September 23, 1999, three individuals and three corporations, all Utah
residents, filed a complaint against Zions in the United States District Court
for the District of Utah seeking to enjoin the merger. The complaint alleged
that the merger would tend to lessen competition and create a monopoly in
certain markets in Utah County and other parts of Southern and Eastern Utah in
violation of the Sherman and Clayton Antitrust Acts. Zions and the plaintiffs
entered into a stipulation staying the action pending a decision from the
Federal Reserve with respect to our application and notice. The stipulation,
which was signed by the district court on November 3, 1999, permits any party to
withdraw from the stipulation upon 10 days written notice from such party to the
other that it has elected to lift the agreed-upon stay. As of November 18, 1999,
the stay remained in place and neither party had notified the other that it had
elected to lift the stay.
FEDERAL INCOME TAX CONSIDERATIONS OF THE MERGER AND RELATED TRANSACTIONS
The following section describes the material U.S. federal income tax
consequences of the merger to holders of Zions common stock or First Security
common stock who hold their common stock as a capital asset within the meaning
of Section 1221 of the Internal Revenue Code of 1986, as amended (the "Code"),
and is the opinion of Sullivan & Cromwell, counsel to Zions, and Wachtell,
Lipton, Rosen & Katz, special counsel to First Security. This section does not
apply to particular classes of taxpayers subject to special treatment for U.S.
federal income tax purposes, such as:
- financial institutions,
- insurance companies,
- tax-exempt organizations,
- dealers in securities or currencies,
- traders in securities that elect to use a mark to market method of
accounting,
- persons that hold common stock as part of a straddle, hedge or conversion
transaction,
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- persons who are not citizens or residents of the United States, and
- shareholders who acquired their shares of common stock through the
exercise of an employee stock option or otherwise as compensation.
The following represents general information only and is based upon the
Code, its legislative history, existing and proposed regulations thereunder and
published rulings and decisions, all as currently in effect as of the date
hereof, and all of which are subject to change, possibly with retroactive
effect. Tax considerations under state, local and foreign laws are not addressed
in this proxy statement/prospectus. ALL SHAREHOLDERS SHOULD CONSULT WITH THEIR
OWN TAX ADVISORS AS TO THE TAX CONSEQUENCES OF THE MERGER AND RELATED
TRANSACTIONS IN THEIR PARTICULAR CIRCUMSTANCES, INCLUDING THE APPLICABILITY AND
EFFECT OF THE ALTERNATIVE MINIMUM TAX AND ANY STATE, LOCAL OR FOREIGN INCOME AND
OTHER TAX LAWS AND OF CHANGES IN THOSE TAX LAWS.
Tax Consequences of the Merger and Related Transactions Generally. Zions
and First Security will not be obligated to complete the merger unless they
receive the tax opinions described under "The Merger Agreement -- Conditions of
the Merger". In rendering these opinions and the opinions set out below,
Sullivan & Cromwell and Wachtell, Lipton, Rosen & Katz may require and rely upon
representations contained in letters to be received from First Security, Zions
and Zions shareholders. None of these tax opinions will be binding on the
Internal Revenue Service, but neither Zions nor First Security intends to
request any ruling from the Internal Revenue Service as to the U.S. federal
income tax consequences of the merger.
Based on the above assumptions and qualifications, for U.S. federal income
tax purposes:
- the merger will be treated for federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code;
- each of Zions and First Security will be a party to that reorganization
within the meaning of Section 368(b) of the Code;
- no gain or loss will be recognized by shareholders of Zions who receive
shares of common stock of the combined company in exchange for shares of
Zions common stock pursuant to the merger;
- the holding period of the common stock of the combined company exchanged
for shares of Zions common stock pursuant to the merger will include the
holding period of the Zions common stock for which it is exchanged,
assuming the shares of Zions common stock are held as capital assets at
the effective time of the merger;
- the basis of the common stock of the combined company received in the
merger will be the same as the basis of the Zions common stock for which
it is exchanged;
- no gain or loss will be recognized by stockholders of First Security who
receive shares of common stock of the combined company in the
reclassification, except with respect to cash received in lieu of
fractional share interests;
- the holding period of the common stock of the combined company exchanged
for shares of First Security common stock in the reclassification will
include the holding period of the First Security common stock for which
it is exchanged, assuming the shares of First Security common stock are
held as capital assets at the effective time of the merger; and
- the basis of the common stock of the combined company received in the
reclassification (including fractional shares deemed received and
redeemed as described below) will be the same as the basis of the First
Security common stock for which it is exchanged.
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Cash Received in Lieu of a Fractional Share of Combined Company Common
Stock. A First Security stockholder who receives cash in lieu of a fractional
share of the common stock of the combined company will be treated as having
received the fractional share pursuant to the reclassification and then as
having exchanged the fractional share for cash in a redemption by First Security
subject to Section 302 of the Code. As a result, a First Security stockholder
will generally recognize gain or loss equal to the difference between the amount
of cash received and the portion of the basis of the shares of First Security
common stock allocable to his or her fractional interest. This gain or loss will
generally be capital gain or loss, and will be long-term capital gain or loss
if, as of the date of the exchange, the holding period for such shares is
greater than one year. Long-term capital gain of a non-corporate holder is
generally subject to tax at a maximum federal tax rate of 20%.
Backup Withholding and Information Reporting. Payments of cash to a holder
surrendering shares of First Security common stock will be subject to
information reporting and backup withholding (whether or not the holder also
receives common stock of the combined company) at a rate of 31% of the cash
payable to the holder, unless the holder furnishes its taxpayer identification
number in the manner prescribed in applicable treasury regulations, certifies
that such number is correct, certifies as to no loss of exemption from backup
withholding and meets certain other conditions. Any amounts withheld from
payments to a holder under the backup withholding rules will be allowed as a
refund or credit against the holder's U.S. federal income tax liability,
provided the required information is furnished to the Internal Revenue Service.
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THE MERGER AGREEMENT
The following describes certain aspects of the proposed merger, including
material provisions of the merger agreement. The following description of the
merger agreement does not purport to be complete and is subject to, and
qualified in its entirety by reference to, the merger agreement, which is
attached as Appendix A to this proxy statement/prospectus and is incorporated
herein by reference. All Zions shareholders and First Security stockholders are
urged to read the merger agreement carefully and in its entirety.
INTRODUCTION
The merger agreement provides for the merger of Zions into First Security,
with First Security surviving the merger as the combined company. The combined
company, which will continue to operate under the First Security name, will be
governed by the laws of Delaware. This transaction is intended to qualify for
accounting and financial reporting treatment as a "pooling of interests", and
for federal income tax treatment as a tax-free "reorganization" within the
meaning of Section 368(a) of the Code.
TERMS OF THE MERGER
Immediately prior to the completion of the merger, First Security will
effect the reclassification of First Security common stock, and each share of
First Security common stock immediately prior to the effectiveness of the First
Security Certificate Amendment and Restatement will be converted and
reclassified into 0.442 of a share of First Security common stock.
Immediately following the completion of the reclassification, Zions and
First Security will complete the merger. In the merger:
(1) each share of Zions common stock issued and outstanding immediately
prior to the merger, other than shares of Zions common stock owned by
First Security or Zions, will be converted into one share of the common
stock of the combined company; and
(2) each share of First Security common stock issued and outstanding
immediately prior to the merger will remain an issued and outstanding
share of the common stock of the combined company.
With respect to First Security stockholders, the effect of the reclassification
and the merger is that such stockholders will receive 0.442 of a share of the
common stock of the combined company for each share of First Security common
stock they own immediately prior to the completion of the reclassification.
Fractional shares of First Security common stock will not be issued to
First Security stockholders pursuant to the reclassification of First Security
common stock. Instead of fractional shares, First Security stockholders will be
entitled to receive an amount in cash, without interest, equal to the product
of:
(1) the fraction of a share of First Security common stock to which the
stockholder would otherwise be entitled after taking into account all
shares of First Security common stock held immediately prior to the
First Security Certificate Amendment and Restatement, and
(2) the last sales price of Zions common stock on the Nasdaq National
Market on the trading day immediately preceding the date on which the
effective time of the First Security Certificate Amendment and
Restatement occurs.
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CLOSING AND EFFECTIVE TIME OF THE MERGER
Under the Merger Agreement, the closing of the merger will occur at 10:00
a.m. on the third business day after satisfaction or waiver of the conditions in
the merger agreement, other than those conditions that by their nature are to be
satisfied at the closing, or at such other time as we may agree. For a
discussion of those conditions, see "-- Conditions of the Merger".
As soon as practicable on the closing date, Zions and First Security will
acknowledge and file a certificate of merger in accordance with the applicable
provisions of the Delaware General Corporation Law and articles of merger in
accordance with the Utah Revised Business Corporation Act, as well as any other
appropriate documents under Delaware or Utah law.
CORPORATE GOVERNANCE AFTER THE MERGER
FIRST SECURITY CERTIFICATE OF INCORPORATION AND BY-LAWS
The merger agreement provides that immediately prior to the effectiveness
of the merger, the First Security certificate of incorporation will be amended
and restated to read in its entirety as provided in Exhibit A-1 to the merger
agreement and the First Security by-laws will be amended and restated to read in
their entirety as provided in Exhibit A-2 to the merger agreement. For a summary
of the material differences between the certificate and by-laws of First
Security before the merger and the certificate and by-laws of the combined
company after the merger, see "Comparison of Stockholders' Rights" on page 79.
DIRECTORS AND OFFICERS OF THE COMBINED COMPANY
Zions and First Security have agreed to various corporate governance
arrangements, including the composition of the board of directors of the
combined company, and have agreed that certain persons will constitute part of
the senior management of the combined company, as more fully set forth under
"The Merger -- Interests of Management and Directors in the Merger" on page 40.
CONDITIONS OF THE MERGER
The respective obligations of each of Zions and First Security to complete
the merger are subject to the satisfaction or waiver of the following
conditions:
- the adoption of the merger agreement and the merger by the Zions
shareholders and the First Security stockholders;
- the approval by the First Security stockholders of:
- the First Security Certificate Amendment and Restatement; and
- the issuance of First Security common stock to Zions shareholders
pursuant to the merger agreement;
- the receipt of any consents, waivers, clearances, approvals and
authorizations of governmental entities necessary to complete the merger
(see "The Merger -- Regulatory Approvals" on page 49);
- the absence of any legal restriction or action by a governmental entity
that prohibits the completion of the merger;
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- the Registration Statement of which this proxy statement/prospectus is a
part having been declared effective by the SEC, and no stop order having
been issued and no proceedings for that purpose having been initiated and
not withdrawn;
- the common stock of the combined company having been approved for
quotation on the Nasdaq National Market;
- each of Zions and First Security having received letters from their
independent public auditors to the effect that the merger will qualify
for pooling-of-interests accounting treatment; and
- the reclassification having become effective.
The obligations of Zions to complete the merger are also subject to the
satisfaction or waiver of the following conditions:
- the representations and warranties of First Security being true and
correct at the effective time of the merger, other than any inaccuracies
that would not be reasonably likely, individually or in the aggregate, to
have a material adverse effect on First Security; First Security having
performed in all material respects all of the obligations required to be
performed by it pursuant to the merger agreement; and First Security
having delivered an officer's certificate confirming satisfaction of the
foregoing requirements;
- Receipt of an opinion of Sullivan & Cromwell that:
- the merger will be treated as a reorganization within the meaning of
Section 368(a) of the Code;
- Zions and First Security will each be a party to that reorganization
within the meaning of Section 368(b) of the Code; and
- no gain or loss will be recognized by shareholders of Zions who
receive shares of the common stock of the combined company in exchange
for Zions common stock; and
- the certificate and by-laws of First Security having been amended and
restated as described under "The Merger -- Amendment and Restatement of
First Security Certificate of Incorporation and By-laws" on page 24.
The obligations of First Security to complete the merger are also subject
to the satisfaction or waiver of the following conditions:
- the representations and warranties of Zions being true and correct at the
effective time of the merger, other than any inaccuracies that would not
be reasonably likely, individually or in the aggregate, to have a
material adverse effect on Zions; Zions having performed in all material
respects all of the obligations required to be performed by it pursuant
to the merger agreement; and Zions having delivered an officer's
certificate confirming satisfaction of the foregoing requirements;
- Receipt of an opinion of Wachtell, Lipton, Rosen & Katz that:
- the merger will be treated as a reorganization within the meaning of
Section 368(a) of the Code;
- Zions and First Security will each be a party to that reorganization
within the meaning of Section 368(b) of the Code; and
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- no gain or loss will be recognized by holders of First Security common
stock who receive shares of the common stock of the combined company
in the reclassification, except with respect to cash received instead
of a fractional share interest in the common stock of the combined
company;
No assurances can be provided as to when or if all of the conditions to the
merger can or will be satisfied or waived by the appropriate party. As of the
date of this proxy statement/prospectus, we have no reason to believe that any
of these conditions will not be satisfied.
POST-MERGER COMPENSATION AND BENEFITS
After completion of the merger, the combined company will take the
following actions with respect to Zions employee benefit plans and former
employees of Zions who remain employees of the combined company ("continuing
employees"):
- comply with Zions' benefit plans in accordance with their terms;
- provide continuing employees with employee benefit plans no less
favorable in the aggregate than those provided to similarly situated
employees of First Security;
- provide continuing employees credit for years of service with Zions or
any of its subsidiaries prior to the completion of the merger, for the
purpose of eligibility and vesting;
- cause all pre-existing condition limitations (to the extent such
limitations did not apply to a pre-existing condition under comparable
Zions benefit plans) and eligibility waiting periods under group health
plans to be waived with respect to those same employees who become
participants in such group health plans; and
- cause to be credited to any deductible or out-of-pocket expense of First
Security benefit plans any deductibles or out-of-pocket expenses incurred
by employees of Zions and their beneficiaries and dependents during the
portion of the calendar year prior to their participation in the First
Security benefit plans.
In addition, Zions and First Security will cause the combined company to
honor in accordance with their terms all vested or accrued benefit obligations
to and contractual rights of current and former employees of Zions and First
Security and their respective subsidiaries including, among other things, the
employment agreements of certain First Security officers described under "The
Merger -- Interests of Management and Directors in the Merger" on page 40.
TREATMENT OF STOCK OPTIONS UNDER EMPLOYEE STOCK PLANS
ZIONS STOCK OPTIONS
Under the merger agreement, the combined company will assume all of Zions'
obligations under the Zions' stock plans. Upon completion of the merger, each
then outstanding option granted under Zions' stock plans, whether vested or
unvested, will be amended and converted into an option, subject to the prior
effectiveness of the reclassification of First Security common stock, to acquire
an equal number of shares of common stock of the combined company.
FIRST SECURITY STOCK OPTIONS
Upon completion of the merger, each option granted under First Security
stock plans, whether vested or unvested, which is outstanding immediately prior
to the effectiveness of the reclassification of First Security common stock,
will be converted upon the effectiveness of the reclassification of First
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Security common stock into a new option to acquire a number of shares of the
combined company common stock equal to the number of shares of First Security
common stock subject to the old option multiplied by the exchange ratio (rounded
to the nearest whole share), and the exercise price of the new option will be
equal to the exercise price of the old option divided by the exchange ratio
(rounded to the nearest whole cent). In addition, upon a change of control of
First Security, each option holder will have the right to elect, during the
60-day period following shareholder approval of the merger, to exercise each
outstanding option and receive in respect thereof the number of shares of First
Security common stock with a fair market value equal to the difference between
(a) the highest reported sales price during the 60-day period prior to and
including the date of shareholder approval and (b) the exercise price. The
transaction provided for by the merger agreement will constitute a change of
control under the First Security stock-based plans.
DISTRIBUTION OF CERTIFICATES
Promptly following completion of the merger, First Security will send
transmittal materials to each First Security stockholder with instructions for
exchanging his or her certificates representing shares of First Security common
stock for shares of common stock of the combined company and cash in lieu of
fractional shares. The exchange agent will deliver certificates for common stock
of the combined company and/or a check for any fractional share interests or
dividends or distributions once it receives the certificates representing a
holder's shares of First Security common stock. Holders of First Security
preferred stock will not exchange their certificates as a result of the merger,
and their certificates representing shares of First Security preferred stock
will continue to represent the same number of shares of First Security preferred
stock after the merger.
Zions shareholders will not exchange their certificates in the merger
unless we determine that such exchange is required by applicable law, rule or
regulation. The certificates currently representing shares of Zions common stock
will represent an equal number of shares of First Security common stock after
the merger.
AMENDMENT, WAIVER AND TERMINATION
Prior to the completion of the merger, provisions of the merger agreement
may be waived by the party benefitted by such provision or may be amended or
modified, by written agreement between Zions and First Security. However, after
the Zions special meeting the merger agreement may not be amended in violation
of Utah law or if it would reduce the consideration to be received by Zions
shareholders in the merger and after the First Security special meeting the
merger agreement may not be amended in violation of Delaware law.
The merger agreement may be terminated, and the merger abandoned, at any
time prior to the completion of the merger by the mutual consent of First
Security and Zions. In addition, the merger agreement may be terminated, and the
merger abandoned, prior to the completion of the merger by either Zions or First
Security if:
- the other party breaches (a) a representation or warranty contained in
the merger agreement or (b) a covenant or other agreement contained in
the merger agreement, which is reasonably likely, individually or in the
aggregate, to have a material adverse effect on the breaching party, and
in either case (a) or (b), which cannot be or has not been cured within
30 days after giving written notice to the breaching party;
- the merger is not completed by March 31, 2000; or
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- the approval of a governmental authority required for completion of the
merger and the other transactions contemplated by the merger agreement is
denied by final, nonappealable action of such authority.
CONDUCT OF BUSINESS PENDING THE MERGER
Zions and First Security have agreed that from the date of the merger
agreement to the completion of the merger, they and their subsidiaries will
conduct their activities in the ordinary course of business, and refrain from
engaging in certain other transactions that might jeopardize or complicate the
merger. The following description is only a summary of the agreements between
Zions and First Security, and we urge you to read the merger agreement (which is
attached to this proxy statement/prospectus as Appendix A) for a more complete
description of these agreements. Zions and First Security have each agreed,
among other things, that it will not, and will cause each of its subsidiaries
not to:
- issue, sell, or enter into agreements to issue or sell additional shares
of stock or additional rights to acquire stock, nor will they allow their
stock to become subject to new grants of employee or director stock
options;
- make any dividends or distributions other than regular dividends on
common and preferred stock, and except for dividends or distributions
solely from a wholly-owned subsidiary to it or another wholly owned
subsidiary;
- repurchase, redeem or otherwise acquire, directly or indirectly, any
shares of its capital stock, nor will it adjust, split, combine, redeem,
reclassify, purchase or otherwise acquire any shares of its capital
stock;
- hire any employee above the level of vice president, enter into or amend
any employment-related agreements, grant any salary or wage increase or
increase any employee benefits, except for normal individual increases in
the ordinary course of business, as required by law, to satisfy
contractual obligations existing on the date of the merger agreement;
- enter into or amend (except as may be required by law or contemplated by
the merger agreement or to satisfy obligations existing on the date of
the merger agreement) any employee-related benefit plan or take any
action to accelerate the vesting or exercisability of stock options,
restricted stock or other benefits payable under any employee-related
benefit plans;
- sell, encumber or otherwise dispose of any of its assets, business or
properties, except in the ordinary course of business consistent with
past practice and in a transaction or transactions that are not material
to it and its subsidiaries taken as a whole;
- acquire any assets, business, deposits or properties of any other entity,
except in the ordinary course of business consistent with past practice
and in a transaction or transactions that are not material to it and its
subsidiaries taken as a whole;
- amend its articles or certificate of incorporation and by-laws or amend
the similar organizational documents of its subsidiaries;
- implement or adopt any change in its accounting principles, practices or
methods, other than as may be required by GAAP or regulatory accounting
requirements;
- enter into, renew or terminate, or make any payment not then required
under any contract that calls for aggregate annual payments of $1,000,000
or more and is not terminable on 60 days notice without a penalty, other
than transactions in the ordinary course of banking business;
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- settle any claim, action or proceeding, except in the ordinary course of
business and except for any such claims, actions or proceedings in an
amount or for such consideration that is not material to it and its
subsidiaries taken as a whole and would not impose any material
restriction on the business of the combined company or create a precedent
for claims likely to be material to the combined company and its
subsidiaries taken as a whole;
- take any action which would or is reasonably likely to prevent or impede
the merger from qualifying for pooling-of-interests accounting treatment,
prevent or impede the merger from qualifying as a reorganization under
Section 368(a) of the Code, prevent satisfaction of the conditions to the
obligations of the parties to complete the merger or constitute a
material violation of the merger agreement;
- make any capital expenditures exceeding $1,000,000 individually or
$3,000,000 in the aggregate, except in the ordinary course of business;
- borrow money, other than in the ordinary course of business; or
- agree or commit to do any of the foregoing.
Each of Zions and First Security has also agreed that it will not, and will
not allow others under its control to, solicit or encourage any inquiries or
proposals relating to a merger, consolidation or other business combination
involving such party or its subsidiaries or an offer to acquire a substantial
equity interest in, or a substantial portion of the assets or deposits of, such
party or any of its significant subsidiaries. In addition, each of Zions and
First Security will not negotiate or provide any confidential information to, or
have any discussions with, any person relating to such an acquisition proposal,
or waive or amend the terms of their respective stockholder protection rights
agreements.
EXPENSES AND FEES
Each party will be responsible for all expenses incurred by it in
connection with the merger agreement and the transactions contemplated by the
merger agreement, except for printing expenses and SEC fees which will be shared
equally.
ACCOUNTING TREATMENT
Zions and First Security expect to account for the merger as a pooling of
interests in accordance with generally accepted accounting principles. Under the
pooling-of-interests accounting method, the previously recorded assets and
liabilities of Zions and First Security would be carried forward to the combined
company at their recorded amounts. In addition, in the combined company's
financial reporting following the completion of the merger, its income and
expenses would include income and expenses of Zions and First Security for the
entire fiscal year in which the merger occurs and the reported results of the
separate corporations for prior periods would be combined and restated as the
results of the combined company.
NASDAQ LISTING OF FIRST SECURITY COMMON STOCK
First Security has agreed to use commercially reasonable best efforts to
cause the common stock of the combined company to be issued in the merger to be
approved for quotation on the Nasdaq National Market.
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RESALES OF THE COMBINED COMPANY COMMON STOCK
The shares of common stock of the combined company issuable to Zions
shareholders in the merger have been registered under the Securities Act of
1933. Such shares may be traded freely and without restriction by those
shareholders not deemed to be "affiliates" of Zions prior to the date of the
Zions special meeting, or of the combined company following the completion of
the merger, as that term is defined in the rules under the Securities Act.
"Affiliates" are generally defined as persons who control, are controlled by or
are under common control with, Zions at the time of the Zions special meeting or
of the combined company following the completion of the merger. Shares of the
combined company common stock received by those shareholders of Zions who are
deemed to be "affiliates" of Zions may be resold without registration as
provided for by Rule 144 or 145, or as otherwise permitted under the Securities
Act, subject to the provisions of the Zions' affiliates letter referred to
below. The Registration Statement to register the shares of the combined company
common stock to be issued in the merger, of which this proxy
statement/prospectus is a part, does not cover any resales of the combined
company common stock received by affiliates of Zions in the merger or by certain
of their family members or related interests.
Pursuant to the merger agreement, each of Zions and First Security has
agreed to deliver to the other a list identifying all persons who are or are
reasonably likely to be at the time the merger agreement is submitted for
adoption by its shareholders, "affiliates" of such company for purposes of
qualifying the merger for "pooling-of-interests" accounting treatment and, in
the case of "affiliates" of Zions, for purposes of Rule 145 under the Securities
Act. Each of Zions and First Security has agreed to use its respective
reasonable best efforts to cause each person who is identified as an "affiliate"
in the list referred to above to deliver to First Security, in the event such
person is a Zions shareholder, and to Zions, in the event such person is a First
Security stockholder, a written agreement in the form attached to the merger
agreement. The provisions of the agreement executed by affiliates of Zions
restrict sales by such affiliates of securities of Zions prior to the merger and
of securities of the combined company following the merger. The provisions of
the agreement executed by affiliates of First Security restrict sales by such
affiliates of securities of First Security, and the combined company after
completion of the merger, at certain times prior to and following the merger.
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STOCK OPTION AGREEMENTS
The following description sets forth the material provisions of the Zions
Option Agreement and the First Security Option Agreement, but does not purport
to be complete and is subject to, and qualified in its entirety by reference to,
such agreements, which are attached as Appendices B and C, respectively, to this
proxy statement/prospectus and are incorporated herein by reference. All Zions
shareholders and First Security stockholders are urged to read the Zions Option
Agreement and the First Security Option Agreement carefully and in their
entirety.
GENERAL
Following the execution of the merger agreement, Zions and First Security
entered into two option agreements, each dated June 8, 1999. Pursuant to the
Zions Option Agreement, Zions granted to First Security an option to purchase
Zions common stock from Zions on the conditions described below. Pursuant to the
First Security Option Agreement, First Security granted to Zions an option to
purchase First Security common stock from First Security on the conditions
described below. Except as otherwise noted, the terms of the Zions Option
Agreement and the First Security Option Agreement are identical in all material
respects.
Zions and First Security entered into the option agreements in order to
increase the likelihood that the merger will be completed in accordance with the
terms of the merger agreement, and to compensate each option holder for the
efforts undertaken and the expenses, losses and opportunity costs incurred in
the transactions in the event of certain acquisitions or potential acquisitions
of the issuer of the option by a third party. The stock option agreements may
have the effect of discouraging offers by third parties to acquire either party
prior to the completion of the merger, even if such persons were prepared to
offer to pay consideration having a higher market price than the First Security
common stock to be received by Zions and First Security shareholders under the
merger agreement.
THE ZIONS OPTION AGREEMENT
Pursuant to the Zions Option Agreement, Zions granted First Security an
option to purchase up to 15,724,539 shares of Zions common stock. Although the
number of shares First Security may purchase is subject to adjustment in certain
circumstances (described below), it will never exceed 19.9% of the number of
shares of Zions common stock outstanding immediately before exercise of the
option. Shares that are subject to or issued pursuant to the option are not
taken into account in determining the maximum number of shares that may be
issued under the option. The exercise price of the option is $64.25 per share,
and is also subject to adjustment in certain cases. We refer to that exercise
price, as adjusted, as the "Zions Option Price".
THE FIRST SECURITY OPTION AGREEMENT
Pursuant to the First Security Option Agreement, First Security granted
Zions an option to purchase up to 38,798,410 shares of First Security common
stock. Although the number of shares Zions may purchase is subject to adjustment
in certain circumstances (described below), it will never exceed 19.9% of the
number of shares of First Security common stock outstanding immediately before
exercise of the option. Shares that are subject to or issued pursuant to the
option are not taken into account in determining the maximum number of shares
that may be issued under the option. The exercise price of the option is $21.50
per share, and is also subject to adjustment in certain cases. We refer to that
exercise price, as adjusted, as the "First Security Option Price".
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EXERCISE OF THE OPTION
The option holder (Zions or First Security) may exercise the option only
after the occurrence of both an Initial Triggering Event (as defined below) and
a Subsequent Triggering Event (as defined below), but before the occurrence of
an Exercise Termination Event (as defined below). The purchase of any shares of
common stock of the issuer pursuant to the option is subject to compliance with
applicable law, including the prior approval of the Federal Reserve.
The stock option agreements generally define the term "Initial Triggering
Event" to mean any of the following events or transactions with respect to each
of Zions or First Security:
- the issuer of the option or any of its subsidiaries enters into an
agreement to engage in an "Acquisition Transaction" (as defined below)
with a third party or the board of directors of the issuer of the option
recommends that its shareholders approve or accept any Acquisition
Transaction, other than the merger;
- a third party acquires beneficial ownership or the right to acquire
beneficial ownership of 10% or more of the shares of the outstanding
common stock of the issuer;
- the shareholders of the issuer vote but fail to approve the merger
agreement at the applicable special meeting or such special meeting is
canceled or otherwise not held in violation of the merger agreement and
prior to the shareholder vote or cancellation it has been publicly
announced that any third party has made or disclosed an intention to make
an Acquisition Transaction;
- the board of directors of the issuer withdraws or adversely modifies or
qualifies, or publicly announces its intention to withdraw, modify or
qualify, its recommendation that the shareholders of the issuer approve
the transaction contemplated by the merger agreement, or the issuer or
any of its subsidiaries authorizes, recommends or proposes, or publicly
announces its intention to authorize, recommend or propose, an agreement
to engage in an Acquisition Transaction with a third party;
- a third party files with the SEC a registration statement or tender offer
materials with respect to a potential exchange offer or tender offer that
would constitute an Acquisition Transaction, or files a preliminary proxy
statement with the SEC with respect to a potential vote by its
shareholders to approve the issuance of shares to be offered in such an
exchange offer;
- the issuer willfully breaches any covenant or obligation contained in the
merger agreement in anticipation of an Acquisition Transaction, and
following such breach the grantee of the option would be entitled to
terminate the merger agreement; or
- a third party files an application with the Federal Reserve or another
governmental authority for approval to engage in an Acquisition
Transaction.
As used in the stock option agreements, the term "Acquisition Transaction"
means:
- a merger, consolidation or similar transaction involving the issuer of
the option or any of its subsidiaries;
- a purchase, lease or other acquisition of all or substantially all of the
assets or deposits of the issuer of the option or any of its
subsidiaries; or
- a purchase or other acquisition of securities representing 10% or more of
the voting power of the issuer of the option or any of its subsidiaries.
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The stock option agreements generally define the term "Subsequent
Triggering Event" to mean any of the following events or transactions:
- the acquisition by a third party of beneficial ownership of 25% or more
of the outstanding common stock of the issuer of the option; or
- the issuer of the option or any of its subsidiaries entering into an
agreement to engage in an Acquisition Transaction with a third party or
the board of directors of the issuer recommends that its shareholders
approve or accept any Acquisition Transaction, other than the merger;
however, if such Acquisition Transaction contemplates the acquisition of
securities of the issuer of the option, the acquisition must be of
securities representing 25% (not just 10%) or more of the voting power of
the issuer of the option or any of its subsidiaries.
Under the stock option agreements, an "Exercise Termination Event" will
occur, preventing the further exercise of the stock options of Zions or First
Security:
- upon the completion of the merger;
- immediately upon termination of the merger agreement so long as such
termination:
- occurs prior to an Initial Triggering Event, and
- is not a termination under that section of the merger agreement
providing for termination due to material breaches of representations,
warranties, covenants or agreements by the other party; or
- 18 months after the termination of the merger agreement if such
termination:
- is as a result of breaches of representations, warranties, covenants
or agreements by the other party, or
- occurs subsequent to the occurrence of an Initial Triggering Event.
The right of the option holder (Zions or First Security) to exercise the
option and certain other rights under the stock option agreements are subject to
extension in order to obtain required regulatory approvals, to comply with
applicable regulatory waiting periods, to avoid liability under Section 16(b) of
the Securities Exchange Act of 1934 or in the event of an injunction, order or
judgment prohibiting or delaying such exercise. The Zions Option Price or the
First Security Option Price and the number of shares issuable under the
applicable option are subject to adjustment in the event of specified changes in
the capital stock of the issuer of the option.
REGISTRATION RIGHTS
Upon the occurrence of a Subsequent Triggering Event that occurs prior to
an Exercise Termination Event, the holder of the option (Zions or First
Security) will have the right, on two occasions, to require the issuer of the
option to file, at the issuer's expense, a registration statement with the SEC
covering the shares of common stock issued or issuable pursuant to the option.
REPURCHASE OF OPTION OR OPTION SHARES
The stock option agreements also provide that, upon the occurrence of a
Repurchase Event, the holder of the option (Zions or First Security) may require
the issuer of the option to repurchase the option and all or any part of the
shares then issued under the option. The repurchase of the option shall be at a
price per share equal to the amount by which the market/offer price (as defined
in the stock
64
<PAGE> 73
option agreements) exceeds the Zions Option Price or the First Security Option
Price, as applicable. A repurchase of any shares issued under the option will be
at a price per share equal to the market/offer price.
Under the stock option agreements, a "Repurchase Event" will be deemed to
have occurred upon the occurrence of any of the following events:
- the acquisition by any third party of (1) beneficial ownership of 50% or
more of the then outstanding shares of common stock of the issuer or (2)
beneficial ownership of 15% or more of the then outstanding shares of
common stock of the issuer if the issuer has violated the provisions of
the merger agreement relating to its stockholder protection rights plan;
or
- the completion of any Acquisition Transaction; however, if such
Acquisition Transaction contemplates the acquisition of securities of the
issuer of the option, the acquisition must be of securities representing
25% (not just 10%) or more of the voting power of the issuer of the
option or any of its subsidiaries.
SURRENDER OF OPTION FOR CASH PAYMENT
Following the occurrence of a Repurchase Event prior to the occurrence of
an Exercise Termination Event, the holder of the option (Zions or First
Security) may relinquish the option to the issuer in exchange for a cash payment
by the issuer of $160 million (1) plus, if applicable, the purchase price paid
by the holder of the option for shares of common stock of the issuer upon any
previous exercise of the option and (2) minus the excess of the net price
received by the holder of the option upon sale of shares acquired upon exercise
of the option over the purchase price for such shares.
SUBSTITUTE OPTION
If, prior to an Exercise Termination Event, the issuer of the option enters
into an agreement:
(1) to merge with a third party or engage in a plan of exchange, and the
issuer of the option is not the surviving or acquiring corporation;
(2) to merge with a third party or engage in a plan of exchange, and the
common stock of the issuer is converted into or exchanged for
securities of a third party or cash or other property or the shares of
common stock of the issuer after the merger or plan of exchange
represent less than 50% of the outstanding shares and share equivalents
of the merged company; or
(3) to sell all or a substantial part of its or its subsidiaries' assets or
deposits,
the option will be converted into or exchangeable for a substitute option. The
substitute option will be issued, at the election of the holder of the option,
by:
- (1) the continuing or surviving person of a consolidation or merger, (2)
the acquiring person in a plan of exchange, (3) the issuer of the option
in a merger or plan of exchange in which the issuer is the continuing or
surviving or acquiring person or (4) the transferee of all or a
substantial portion of the issuer's assets or deposits; or
- any person that controls any such entity.
The substitute option must have the same terms and conditions as the option.
However, if the terms of the substitute option cannot, for legal reasons, be the
same as those of the option, the terms of the substitute option must be as
similar as possible and in no event less advantageous to the holder of the
option.
65
<PAGE> 74
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The following Unaudited Pro Forma Condensed Combined Balance Sheet as of
September 30, 1999 combines the historical consolidated balance sheets of Zions
and First Security as if the merger had been effective on September 30, 1999,
after giving effect to certain adjustments described in the attached Notes to
Unaudited Pro Forma Condensed Combined Financial Statements. The Unaudited Pro
Forma Condensed Combined Statements of Income for the nine months ended
September 30, 1999 and the years ended December 31, 1998, 1997 and 1996 present
the combined results of operations of Zions and First Security as if the merger
had been effective at the beginning of each period presented, after giving
effect to certain adjustments described in the attached Notes to Unaudited Pro
Forma Condensed Combined Financial Statements. Zions' historical financial
statements are incorporated by reference from its Annual Report on Form 10-K for
the year ended December 31, 1998 and its Form 10-Q for the quarter ended
September 30, 1999. First Security's historical financial statements are
incorporated by reference from its Annual Report on Form 10-K for the year ended
December 31, 1998 and its Form 10-Q for the quarter ended September 30, 1999.
The Unaudited Pro Forma Condensed Combined Statement of Income for the year
ended December 31, 1998 also includes historical results of operations for The
Sumitomo Bank of California for the nine months ended September 30, 1998, after
giving effect to certain adjustments described in the attached Notes to
Unaudited Pro Forma Condensed Combined Financial Statements. Zions acquired The
Sumitomo Bank of California on October 1, 1998 in a transaction accounted for as
a purchase. The Unaudited Pro Forma Condensed Combined Financial Statements
should be read in conjunction with the historical financial statements of Zions
and First Security.
The Unaudited Pro Forma Condensed Combined Financial Statements and related
notes reflect the application of the "pooling-of-interests" accounting method.
Under this method of accounting, the previously recorded assets and liabilities
of Zions and First Security are carried forward to the combined company at their
recorded amounts. In addition, in the combined company's financial reporting
following the completion of the merger, its income and expenses would include
income and expenses of Zions and First Security for the entire fiscal year in
which the merger occurs and the reported results of the separate corporations
for prior periods would be combined and restated as the results of the combined
company.
The Unaudited Pro Forma Condensed Combined Financial Statements and related
notes do not give effect to other pending mergers or merger transactions that
First Security or Zions have recently completed, none of which are material to
the Unaudited Pro Forma Condensed Combined Financial Statements and related
notes.
We expect that we will incur reorganization and restructuring expenses as a
result of combining our companies. The Unaudited Pro Forma Condensed Combined
Statement of Income and related notes do not reflect any anticipated
reorganization and restructuring expenses resulting from the merger. We also
anticipate that the merger will provide the combined company with certain
financial benefits that include reduced operating expenses and opportunities to
earn more revenue. However, we do not reflect any of these anticipated cost
savings or benefits in the Unaudited Pro Forma Condensed Combined Financial
Statements and related notes. Net income per share amounts and weighted average
shares have been adjusted to reflect the conversion of each outstanding share of
First Security common stock into 0.442 of a share of the combined company common
stock in the reclassification. Finally, the Unaudited Pro Forma Condensed
Combined Financial Statements do not reflect the expected required divestiture
of branches and deposits in connection with the merger. Therefore, the Unaudited
Pro Forma Condensed Combined Financial Statements and related notes, while
helpful in illustrating the financial characteristics of the combined company
under one set of assumptions, do not attempt to predict or suggest future
results. The Unaudited Pro Forma Condensed Combined Financial Statements and
related notes also do not attempt to show how the combined company would
actually have performed had the companies been combined throughout these
periods. All adjustments, consisting of only normal recurring adjustments,
necessary for a fair statement of results of the unaudited historical interim
periods have been included.
66
<PAGE> 75
ZIONS BANCORPORATION AND FIRST SECURITY CORPORATION
PRO FORMA CONDENSED COMBINED BALANCE SHEET
SEPTEMBER 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
ZIONS AND
HISTORICAL FIRST
------------------ SECURITY
FIRST PRO FORMA PRO FORMA
ZIONS SECURITY ADJUSTMENTS COMBINED
------- -------- ----------- ---------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and due from banks................. $ 743 $ 964 $ 1,707
Money market investments................ 663 547 1,210
Investment securities:
Held to maturity, at cost........... 3,324 -- 3,324
Available for sale, at market....... 614 6,147 (265) (A) 6,496
Trading............................. 532 90 622
Loans, net of unearned income........... 11,417 13,817 25,234
Allowance for loan losses............... 199 174 373
------- ------- ---- -------
Net loans........................... 11,218 13,643 -- 24,861
Intangible assets....................... 258 567 (190) (H) 635
Other assets............................ 1,243 1,389 132 (H)(I) 2,764
------- ------- ---- -------
Total assets................... $18,595 $23,347 (323) $41,619
======= ======= ==== =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Noninterest-bearing deposits............ $ 3,020 $ 2,568 $ 5,588
Interest-bearing deposits............... 9,989 10,645 20,634
------- ------- ---- -------
Total deposits................. 13,009 13,213 -- 26,222
Federal funds purchased and securities
sold under repurchase agreements...... 1,956 4,508 6,464
Other short-term borrowings............. 1,325 641 1,966
Long-term borrowings.................... 570 2,537 3,107
Other liabilities....................... 584 688 93 (B)(G) 1,365
(I)(S)
------- ------- ---- -------
Total liabilities.............. 17,444 21,587 93 39,124
------- ------- ---- -------
Minority interest....................... 38 38
Shareholders' equity:
Preferred stock..................... -- -- --
Common stock........................ 327 247 (373) (C) 201
Surplus............................. -- 287 64 (D)(R)(S) 351
Accumulated other comprehensive
loss............................. (8) (94) 3 (E) (99)
Retained earnings................... 794 1,360 (150) (G)(Q)(R)(S) 2,004
Common treasury stock, at cost.......... -- (40) 40 (F) --
------- ------- ---- -------
Total shareholders' equity..... 1,113 1,760 (416) 2,457
------- ------- ---- -------
Total liabilities and
shareholders' equity........ $18,595 $23,347 (323) $41,619
======= ======= ==== =======
</TABLE>
See Notes to Pro Forma Condensed Combined Financial Statements
67
<PAGE> 76
ZIONS BANCORPORATION AND FIRST SECURITY CORPORATION
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL ZIONS AND
----------------- FIRST SECURITY
FIRST PRO FORMA PRO FORMA
ZIONS SECURITY ADJUSTMENTS COMBINED
------ -------- ----------- --------------
(IN MILLIONS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans and leases........... $710.2 $ 862.3 $1,572.5
Interest on money market investments.......... 47.0 10.4 57.4
Interest on securities........................ 183.2 284.6 (.8)(Q) 467.0
------ -------- ---- --------
Total interest income................. 940.4 1,157.3 (.8) 2,096.9
------ -------- ---- --------
Interest expense:
Interest on deposits.......................... 285.7 300.0 585.7
Interest on borrowed funds.................... 136.9 283.3 420.2
------ -------- ---- --------
Total interest expense................ 422.6 583.3 -- 1,005.9
------ -------- ---- --------
Net interest income................... 517.8 574.0 (.8) 1,091.0
Provision for loan losses..................... 11.9 40.3 52.2
------ -------- ---- --------
Net interest income after provision for loan
losses..................................... 505.9 533.7 (.8) 1,038.8
------ -------- ---- --------
Noninterest income:
Service charges on deposit accounts........... 54.1 65.8 119.9
Other service charges, commissions and fees... 47.6 119.4 167.0
Trust income.................................. 10.6 24.7 35.3
Loan sales and servicing income............... 38.2 169.1 43.2(P) 250.5
Other......................................... 34.8 20.7 (.8)(R) 54.7
------ -------- ---- --------
Total noninterest income.............. 185.3 399.7 42.4 627.4
------ -------- ---- --------
Noninterest expense:
Salaries and employee benefits................ 247.8 355.3 603.1
Occupancy, net................................ 33.4 34.8 68.2
Furniture and equipment....................... 30.6 51.6 82.2
Amortization of goodwill and core deposit
intangibles................................ 10.2 13.0 23.2
Other......................................... 126.8 165.3 43.2(P) 335.3
------ -------- ---- --------
Total noninterest expense............. 448.8 620.0 43.2 1,112.0
------ -------- ---- --------
Income before income taxes and minority
interest...................................... 242.4 313.4 (1.6) 554.2
Income taxes.................................... 83.0 106.4 (.4)(S) 189.0
------ -------- ---- --------
Net income before minority interest............. 159.4 207.0 (1.2) 365.2
Minority interest............................... 2.9 -- 2.9
------ -------- ---- --------
Net income...................................... $156.5 $ 207.0 (1.2) $ 362.3
====== ======== ==== ========
Net income per share (basic) -- See Note 3...... $ 1.98 $ 2.44 $ 2.23
Net income per share (diluted) -- See Note 3.... $ 1.96 $ 2.38 $ 2.18
Weighted-average common and common-equivalent
shares outstanding during the period (in
thousands)
-- See Note 3................................ 79,964 87,026 165,963
</TABLE>
See Notes to Pro Forma Condensed Combined Financial Statements
68
<PAGE> 77
ZIONS BANCORPORATION AND FIRST SECURITY CORPORATION
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL ZIONS,
-------------------- ---------- SUMITOMO
SUMITOMO ZIONS AND AND
NINE MONTHS SUMITOMO FIRST SECURITY
ENDED PRO FORMA PRO FORMA FIRST PRO FORMA PRO FORMA
ZIONS 9/30/98 ADJUSTMENTS COMBINED SECURITY ADJUSTMENTS COMBINED
------ ----------- ----------- --------- ---------- ----------- --------------
(IN MILLIONS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest income:
Interest and fees on loans and
leases......................... $681.2 $233.6 $ 0.7 (J) $ 915.5 $1,111.4 $2,026.9
Interest on money market
investments................ 88.5 18.1 (16.8) (K) 89.8 5.7 95.5
Interest on securities....... 206.4 20.0 226.4 303.6 530.0
------ ------ ------ -------- -------- ---- --------
Total interest income...... 976.1 271.7 (16.1) 1,231.7 1,420.7 -- 2,652.4
------ ------ ------ -------- -------- ---- --------
Interest expense:
Interest on deposits......... 293.7 121.3 415.0 403.9 818.9
Interest on borrowed funds... 138.6 2.7 141.3 313.1 454.4
------ ------ ------ -------- -------- ---- --------
Total interest expense..... 432.3 124.0 -- 556.3 717.0 -- 1,273.3
------ ------ ------ -------- -------- ---- --------
Net interest income............ 543.8 147.7 (16.1) 675.4 703.7 -- 1,379.1
Provision for loan losses.... 12.2 6.0 18.2 71.9 90.1
------ ------ ------ -------- -------- ---- --------
Net interest income after
provision for loan
losses..................... 531.6 141.7 (16.1) 657.2 631.8 -- 1,289.0
------ ------ ------ -------- -------- ---- --------
Noninterest income:
Service charges on deposit
accounts................... 58.2 3.8 62.0 90.8 152.8
Other service charges,
commissions and fees....... 54.7 7.0 61.7 120.0 181.7
Trust income................. 9.4 2.7 12.1 29.5 41.6
Loan sales and servicing
income..................... 50.4 1.9 52.3 221.7 41.5(P) 315.5
Other........................ 28.0 3.9 31.9 12.4 44.3
------ ------ ------ -------- -------- ---- --------
Total noninterest income... 200.7 19.3 -- 220.0 474.4 41.5 735.9
------ ------ ------ -------- -------- ---- --------
Noninterest expense:
Salaries and employees
benefits................... 249.6 66.6 316.2 386.7 702.9
Occupancy, net............... 30.1 12.5 0.1 (L) 42.7 39.1 81.8
Furniture and equipment...... 36.2 5.7 41.9 58.2 100.1
Amortization of goodwill and
core deposit intangibles... 10.7 -- 3.2 (M) 13.9 11.7 25.6
Other........................ 187.5 61.1 248.6 227.4 41.5(P) 517.5
------ ------ ------ -------- -------- ---- --------
Total noninterest
expense.................. 514.1 145.9 3.3 663.3 723.1 41.5 1,427.9
------ ------ ------ -------- -------- ---- --------
Income before income taxes and
minority interest............ 218.2 15.1 (19.4) 213.9 383.1 597.0
Income taxes................... 70.9 5.4 (5.3) (N) 71.0 135.4 206.4
------ ------ ------ -------- -------- ---- --------
Net income before minority
interest..................... 147.3 9.7 (14.1) 142.9 247.7 390.6
Minority interest.............. 0.5 -- 0.6 (O) 1.1 -- 1.1
------ ------ ------ -------- -------- ---- --------
Net income..................... $146.8 $ 9.7 $(14.7) $ 141.8 $ 247.7 -- $ 389.5
====== ====== ====== ======== ======== ==== ========
Net income per share
(basic) -- See Note 3........ $ 1.93 $ 1.81 $ 2.99 $ 2.42
Net income per share
(diluted) -- See Note 3...... $ 1.91 $ 1.79 $ 2.89 $ 2.36
Weighted-average common and
common-equivalent shares
outstanding during the year
(in thousands) -- See Note
3............................ 76,988 78,198 85,677 163,868
</TABLE>
See Notes to Pro Forma Condensed Combined Financial Statements
69
<PAGE> 78
ZIONS BANCORPORATION AND FIRST SECURITY CORPORATION
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL ZIONS AND FIRST
----------------------- PRO FORMA SECURITY PRO FORMA
ZIONS FIRST SECURITY ADJUSTMENTS COMBINED
------ -------------- ----------- ------------------
(IN MILLIONS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans and leases............. $500.5 $ 955.0 $ 1,455.5
Interest on money market investments............ 85.5 4.3 89.8
Interest on securities.......................... 193.5 254.1 447.6
------ ------- ---- ---------
Total interest income.................... 779.5 1,213.4 -- 1,992.9
------ ------- ---- ---------
Interest expense:
Interest on deposits............................ 208.0 352.6 560.6
Interest on borrowed funds...................... 159.0 234.8 393.8
------ ------- ---- ---------
Total interest expense................... 367.0 587.4 -- 954.4
------ ------- ---- ---------
Net interest income...................... 412.5 626.0 1,038.5
Provision for loan losses....................... 7.8 63.4 71.2
------ ------- ---- ---------
Net interest income after provision for loan
losses........................................ 404.7 562.6 -- 967.3
------ ------- ---- ---------
Noninterest income:
Service charges on deposit accounts............. 48.5 90.8 139.3
Other service charges, commissions and fees..... 40.5 106.7 147.2
Trust income.................................... 6.8 26.2 33.0
Loan sales and servicing income................. 40.4 119.3 16.1(P) 175.8
Other........................................... 10.2 14.1 24.3
------ ------- ---- ---------
Total noninterest income................. 146.4 357.1 16.1 519.6
------ ------- ---- ---------
Noninterest expense:
Salaries and employee benefits.................. 184.7 304.9 489.6
Occupancy, net.................................. 18.9 36.7 55.6
Furniture and equipment......................... 28.1 46.3 74.4
Amortization of goodwill and core deposit
intangibles................................... 6.7 7.5 14.2
Other........................................... 106.2 193.5 16.1(P) 315.8
------ ------- ---- ---------
Total noninterest expense................ 344.6 588.9 16.1 949.6
------ ------- ---- ---------
Income before income taxes and minority
interest........................................ 206.5 330.8 -- 537.3
Income taxes...................................... 72.2 115.5 187.7
------ ------- ---- ---------
Net income before minority interest............... 134.3 215.3 -- 349.6
Minority interest................................. -- -- --
------ ------- ---- ---------
Net income........................................ $134.3 $ 215.3 -- $ 349.6
====== ======= ==== =========
Net income per share (basic) -- See Note 3........ $ 1.88 $ 2.67 $ 2.30
Net income per share (diluted) -- See Note 3...... $ 1.84 $ 2.58 $ 2.23
Weighted-average common and common-equivalent
shares outstanding during the year (in
thousands) -- See Note 3........................ 72,813 83,423 156,229
</TABLE>
See Notes to Pro Forma Condensed Combined Financial Statements
70
<PAGE> 79
ZIONS BANCORPORATION AND FIRST SECURITY CORPORATION
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL ZIONS AND FIRST
------------------------ PRO FORMA SECURITY PRO
ZIONS FIRST SECURITY ADJUSTMENTS FORMA COMBINED
------- -------------- ----------- ---------------
(IN MILLIONS, EXCEPT SHARES AND PER SHARE DATA)
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans and leases................. $ 395.3 $ 830.6 $1,225.9
Interest on money market investments................ 52.7 6.8 59.5
Interest on securities.............................. 146.7 202.0 348.7
------- -------- ---- --------
Total interest income........................ 594.7 1,039.4 -- 1,634.1
------- -------- ---- --------
Interest expense:
Interest on deposits................................ 168.9 326.8 495.7
Interest on borrowed funds.......................... 88.1 158.5 246.6
------- -------- ---- --------
Total interest expense....................... 257.0 485.3 -- 742.3
------- -------- ---- --------
Net interest income.......................... 337.7 554.1 891.8
Provision for loan losses........................... 6.5 41.3 47.8
------- -------- ---- --------
Net interest income after provision for loan
losses............................................ 331.2 512.8 -- 844.0
------- -------- ---- --------
Noninterest income:
Service charges on deposit accounts................. 39.5 83.9 123.4
Other service charges, commissions and fees......... 30.5 92.0 122.5
Trust income........................................ 5.2 23.1 28.3
Loan sales and servicing income..................... 36.6 88.4 11.9(P) 136.9
Other............................................... 10.2 19.0 29.2
------- -------- ---- --------
Total noninterest income..................... 122.0 306.4 11.9 440.3
------- -------- ---- --------
Noninterest expense:
Salaries and employee benefits...................... 150.4 277.7 428.1
Occupancy, net...................................... 15.5 33.1 48.6
Furniture and equipment............................. 21.0 43.3 64.3
Amortization of goodwill and core deposit
intangibles....................................... 3.3 9.2 12.5
Other............................................... 82.9 167.9 11.9(P) 262.7
------- -------- ---- --------
Total noninterest expense.................... 273.1 531.2 11.9 816.2
------- -------- ---- --------
Income before income taxes and minority interest...... 180.1 288.0 468.1
Income taxes.......................................... 59.7 103.5 163.2
------- -------- ---- --------
Net income before minority interest................... 120.4 184.5 -- 304.9
Minority interest..................................... -- -- --
------- -------- ---- --------
Net income............................................ $ 120.4 $ 184.5 -- $ 304.9
======= ======== ==== ========
Net income per share (basic) -- See Note 3............ $ 1.69 $ 2.32 $ 2.03
Net income per share (diluted) -- See Note 3.......... $ 1.66 $ 2.26 $ 1.97
Weighted average common and common-equivalent shares
outstanding during the year (in thousands) -- See
Note 3.............................................. 72,158 81,770 153,921
</TABLE>
See Notes to Pro Forma Condensed Combined Financial Statements
71
<PAGE> 80
ZIONS BANCORPORATION AND FIRST SECURITY CORPORATION
NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE (1): BASIS OF PRESENTATION
The Unaudited Pro Forma Condensed Combined Balance Sheet as of September
30, 1999 combines the historical consolidated balance sheets of Zions and First
Security as if the merger had taken place on September 30, 1999. The Unaudited
Pro Forma Condensed Combined Statements of Income for the nine months ended
September 30, 1999, and each of the years ended December 31, 1998, 1997 and
1996, combine the historical statements of income for Zions and First Security
as if the merger had been consummated at the beginning of each period presented.
On October 1, 1998, Zions acquired The Sumitomo Bank of California in a
transaction accounted for as a purchase. The Unaudited Pro Forma Condensed
Combined Statement of Income for the year ended December 31, 1998 includes
historical results of operations for The Sumitomo Bank of California for the
nine months ended September 30, 1998, after giving effect to certain adjustments
as described in Note 2.
The Unaudited Pro Forma Condensed Combined Financial Statements give effect
to the merger of Zions and First Security under the pooling-of-interests
accounting method. The Unaudited Pro Forma Condensed Combined Statements of
Income do not give effect to nonrecurring merger charges related to the
transaction or anticipated cost savings resulting from the centralization of
administrative functions, consolidation of data processing operations or
optimization of delivery systems. It is expected that the combined company will
incur a one-time pre-tax merger charge of approximately $210 million. Pre-tax
noninterest expense reductions expected are approximately $108 million annually
with approximately half the savings to be achieved in 2000 and the remainder in
2001. In addition, the Unaudited Pro Forma Condensed Combined Balance Sheet and
Statements of Income do not reflect a charge to income, an increase in deferred
tax assets and an increase in equity related to accelerated vesting and
activation of limited stock appreciation rights in the First Security
Comprehensive Management Incentive Plan that will result from approval of the
merger by the First Security stockholders. The amounts are not precisely
determinable at this time because they depend on the price of First Security
stock in the quarter in which the First Security stockholders vote on the
merger. If this price were the same as the closing price of First Security stock
on September 30, 1999, First Security would recognize an after-tax charge to
earnings of approximately $95 million, an increase in deferred tax assets of
approximately $59 million and a net increase in equity of approximately $59
million. This charge to earnings is not included in the $210 million pre-tax
merger charge previously discussed. The Unaudited Pro Forma Condensed Financial
Statements also do not reflect the divestiture of branches, loans and deposits
that are expected to be required in connection with the merger. Divestitures of
approximately $2 billion in deposits, $0.6 billion in loans and $25 million in
premises and equipment are currently anticipated.
Under the terms of the merger agreement, Zions will be merged with and into
First Security with First Security as the surviving corporation. On the
effective date of the merger, each outstanding share of Zions common stock will
be converted into one share of common stock, par value $1.25 per share, of First
Security. Immediately prior to the effectiveness of the merger, First Security
will effect a reverse stock split in which each outstanding share of common
stock of First Security will be reclassified and converted into 0.442 of a share
of First Security common stock. Each share of any treasury stock of First
Security at the merger date will be canceled and retired.
72
<PAGE> 81
ZIONS BANCORPORATION AND FIRST SECURITY CORPORATION
NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
NOTE (2): DESCRIPTION OF PRO FORMA ADJUSTMENTS
The following pro forma adjustments were made to the September 30, 1999
Unaudited Pro Forma Condensed Combined Balance Sheet to reflect the merger of
Zions and First Security:
<TABLE>
<CAPTION>
(SHARES IN THOUSANDS)
(DOLLAR AMOUNTS
IN MILLIONS)
---------------------
<S> <C> <C>
(A) INVESTMENT SECURITIES AVAILABLE FOR SALE, AT MARKET
Adjustment for First Security common stock owned by Zions
and Zions stock owned by First Security treated as
treasury stock in the pooling transaction................. (265)
(B) OTHER LIABILITIES
Adjustment to the net deferred tax liability to eliminate
the deferred income tax asset related to unrealized loss
on First Security common stock owned by Zions and
unrealized gain on Zions stock owned by First Security.... 1
(C) COMMON STOCK:
First Security common shares issued September 30, 1999...... 197,381
Less: First Security shares owned by Zions.................. (9,457)
Less: Treasury stock shares on September 30, 1999........... (1,636)
186,288
Multiplied by reverse stock split conversion rate........... 0.442
-------
First Security common shares outstanding after reverse stock
split and retirement of treasury shares................... 82,339
Zions common shares outstanding September 30, 1999.......... 78,992
Less: Zions shares owned by First Security.................. (731)
-------
Total First Security common shares outstanding effected for
the merger................................................ 160,600
Multiplied by par value of First Security common stock...... 1.25
-------
Pro forma balance of First Security common stock, par value
$1.25 per share, after merger............................. $ 201
Combined Zions and First Security common stock amount prior
to pro forma adjustments.................................. 574
-------
Pro forma adjustment to common stock........................ $ (373)
=======
(D) SURPLUS:
Pro forma adjustment to common stock........................ $ 373
Retirement of treasury stock owned by First Security at
September 30, 1999........................................ (40)
Zions stock owned by First Security at September 30, 1999... (39)
First Security common stock owned by Zions at September 30,
1999...................................................... (230)
-------
Pro forma adjustment to surplus............................. $ 64
=======
(E) ACCUMULATED OTHER COMPREHENSIVE LOSS
Adjustment for net unrealized loss on First Security common
stock owned by Zions and unrealized gain on Zions stock
owned by First Security................................... $ 3
=======
</TABLE>
73
<PAGE> 82
ZIONS BANCORPORATION AND FIRST SECURITY CORPORATION
NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
<TABLE>
<CAPTION>
(SHARES IN THOUSANDS)
(DOLLAR AMOUNTS
IN MILLIONS)
---------------------
<S> <C> <C>
(F) COMMON TREASURY STOCK TO BE RETIRED:
First Security treasury stock at September 30, 1999......... $ 40
=======
(G) OTHER LIABILITIES AND RETAINED EARNINGS:
Adjustment for estimated $210 million of pre-tax merger
charges, net of estimated tax benefit of $60 million on
deductible charges........................................ $ 150
=======
(H) INTANGIBLE ASSETS AND OTHER ASSETS:
Reclassification of First Security loan servicing rights to
reflect the planned future combined classification........ $ 190
=======
(I) OTHER ASSETS AND OTHER LIABILITIES:
Reclassification of Zions net deferred tax asset to reflect
the planned future combined classification................ $ (58)
=======
</TABLE>
The following pro forma adjustments were made to the Unaudited Pro Forma
Condensed Combined Statements of Income:
ADJUSTMENTS TO THE UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF
INCOME FOR THE YEAR ENDED DECEMBER 31, 1998 TO REFLECT THE ACQUISITION OF
THE SUMITOMO BANK OF CALIFORNIA BY ZIONS:
(J) INTEREST AND FEES ON LOANS AND LEASES
The $0.7 million adjustment increasing interest and fees on loans
represents the interest income for the nine months ended September 30,
1998 from a $14.9 million loan made by Zions to Robert G. Sarver, a
director of Zions and the chief executive officer of California Bank &
Trust, a subsidiary of Zions. The loan was made to finance a portion of a
5% equity investment made by Mr. Sarver in California Bank & Trust in
connection with the acquisition of The Sumitomo Bank of California.
(K) INTEREST ON MONEY MARKET INVESTMENTS
The $16.8 million adjustment reducing interest income on money market
investments represents the decrease in interest for the nine months ended
September 30, 1998 as the result of reducing approximately $397 million of
money market investments to obtain part of the cash consideration paid by
Zions for The Sumitomo Bank of California.
(L) OCCUPANCY, NET
The $0.1 million increase in occupancy, net represents depreciation
expense for the nine months ended September 30, 1998 on approximately $6.3
million of excess purchase price allocated to premises and equipment in
The Sumitomo Bank of California acquisition.
74
<PAGE> 83
ZIONS BANCORPORATION AND FIRST SECURITY CORPORATION
NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
(M) AMORTIZATION OF GOODWILL AND CORE DEPOSIT INTANGIBLES
The $3.2 million adjustment increasing amortization of goodwill represents
the amortization expense for the nine months ended September 30, 1998 on
approximately $107 million of goodwill recorded in The Sumitomo Bank of
California purchase. The amortization is calculated using the straight
line method over a life of 25 years.
(N) INCOME TAXES
The $5.3 million adjustment reducing income taxes represents the income
tax provision reduction resulting from the previous adjustments affecting
taxable earnings.
(O) MINORITY INTEREST
The $0.6 million adjustment increasing minority interest represents the 5%
California Bank & Trust minority shareholders' interest in adjusted
earnings of California Bank & Trust including The Sumitomo Bank of
California for the nine months ended September 30, 1998.
ADJUSTMENTS TO THE UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF
INCOME TO RECLASSIFY FIRST SECURITY AMORTIZATION OF LOAN SERVICING RIGHTS
TO REFLECT THE PLANNED FUTURE COMBINED CLASSIFICATION:
(P) LOAN SALES AND SERVICING INCOME AND OTHER NONINTEREST EXPENSE
<TABLE>
<S> <C>
Nine months ended September 30, 1999........................ $43.2
Year ended December 31, 1998................................ 41.5
Year ended December 31, 1997................................ 16.1
Year ended December 31, 1996................................ 11.9
</TABLE>
The following pro forma adjustments were made to the Unaudited Pro Forma
Condensed Combined Balance Sheet and Statement of Income as of and for the nine
months ended September 30, 1999:
(Q) INTEREST INCOME ON SECURITIES
<TABLE>
<S> <C>
Adjustment to eliminate dividend income on First Security
stock owned by Zions and Zions stock owned by First
Security.................................................. (.8)
</TABLE>
(R) OTHER NONINTEREST INCOME AND SURPLUS
<TABLE>
<S> <C>
Adjustment to eliminate Zions gain on sale of First Security
stock..................................................... (.8)
</TABLE>
(S) INCOME TAXES EXPENSE AND OTHER LIABILITIES
<TABLE>
<S> <C>
Adjustment to eliminate the income taxes related to the gain
on sale of First Security stock and dividend income....... (.4)
</TABLE>
75
<PAGE> 84
ZIONS BANCORPORATION AND FIRST SECURITY CORPORATION
NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
NOTE (3): EARNINGS PER SHARE
In connection with the purchase of The Sumitomo Bank of California, Zions
completed a stock offering in June 1998 and issued 2,760,000 shares of common
stock. Weighted average shares used in the calculation of basic and fully
diluted earnings per share for the year ended December 31, 1998 have been
increased by 1,210,000 shares to include the shares as if they were issued on
January 1, 1998.
Weighted-average shares used in the calculation of pro forma combined and
First Security historical basic and diluted net income per share for all periods
presented have been determined by adjusting average shares for the reverse stock
split to be effected by First Security immediately prior to the effectiveness of
the merger. Weighted-average common and common-equivalent shares of First
Security have been adjusted to reflect the conversion of each outstanding share
of First Security into 0.442 shares of new First Security common stock.
Weighted-average shares used in the calculation of pro forma combined basic
and diluted net income per share for all periods presented have been adjusted
for average First Security common shares owned by Zions, converted using the
0.442 exchange ratio, and average Zions shares owned by First Security. Average
shares have been reduced by 1,027,000 shares for the nine months ended September
30, 1999 and 7,000 shares for each of the years ended December 31, 1998, 1997
and 1996.
76
<PAGE> 85
DESCRIPTION OF FIRST SECURITY CAPITAL STOCK FOLLOWING
THE MERGER
The following statements are brief summaries of the material provisions of
First Security's preferred stock and First Security's common stock following the
merger and are qualified in their entirety by the provisions of First Security's
certificate of incorporation, as it is proposed to be amended and restated in
the merger. The form of amended and restated certificate of incorporation of the
combined company is attached to this Proxy Statement/Prospectus as Exhibit A-1
to the merger agreement attached as Appendix A. References in this section to
the certificate of incorporation are to the certificate of incorporation as so
amended and restated.
PREFERRED STOCK
The certificate of incorporation will authorize the issuance of 10,000,000
shares of preferred stock with no par value. It is expected that based on the
8,691 shares of $3.15 cumulative convertible preferred stock, Series "A" of
First Security outstanding on November 18, 1999, there will be 8,691 shares of
$3.15 cumulative convertible preferred stock, Series "A" (the "Series A
Preferred Stock") of the combined company outstanding immediately following
completion of the merger. Holders of Series A Preferred Stock will have the
right to receive semi-annual dividends at the annual rate of $3.15 per share.
Such right will be cumulative and such dividends will be payable before
dividends may be paid on the First Security common stock. The Series A Preferred
Stock will be convertible into common stock of the combined company at a ratio
of 18.123 shares of common stock for each share of Series A Preferred Stock.
This conversion right will be subject to adjustment in certain events to protect
against dilution of the conversion rights attached to the Series A Preferred
Stock. In the event of a liquidation, dissolution or winding up of the combined
company, the holders of Series A Preferred Stock will be entitled to receive the
cash value of $52.50 per share plus unpaid accumulated preferred dividends
before any distribution is made to holders of common stock. The combined company
may, at the option of the board of directors, redeem the whole or any part of
the outstanding Series A Preferred Stock at the redemption price of $52.50 per
share plus unpaid accumulated preferred dividends.
Holders of Series A Preferred Stock will be entitled to one vote per share
on all matters submitted to a vote of stockholders. Voting for the election of
directors will not be cumulative. If at any time four or more semi-annual
dividends on the Series A Preferred Stock are in default, in whole or in part,
the holders of the Series A Preferred Stock as a class will be entitled to elect
four directors and the holders of the combined company common stock will be
entitled to elect the remaining directors. Holders of any additional preferred
stock hereafter issued may have such full or limited voting rights as are
provided by the board of directors of the combined company.
The board of directors of the combined company will be authorized by the
certificate of incorporation to provide, without further stockholder action, for
the issuance of one or more series of preferred stock. The board of directors of
the combined company will have the power to fix various terms with respect to
each series, including voting powers, designations, preferences and relative,
participating, optional or other special rights, qualifications, limitations,
restrictions and redemption, conversion or exchangeability provisions. Holders
of preferred stock will have no preemptive rights. The Series A Preferred Stock
will not be publicly traded.
COMMON STOCK
The combined company will be authorized to issue 425,000,000 shares of
common stock with a par value of $1.25 per share. It is expected that based on
the 85,513,098 shares of Zions common stock and the 195,851,315 shares of First
Security common stock outstanding on November 18, 1999, there will be
approximately 172,079,379 shares of common stock of the combined company
outstanding immediately
77
<PAGE> 86
following completion of the merger. Payment of dividends on the common stock of
the combined company will be subject to the prior rights of outstanding Series A
Preferred Stock.
The holders of common stock of the combined company will be entitled to
voting rights for the election of directors and for other purposes, subject to
the voting rights of the holders of preferred stock conferred by law and to the
specific voting rights granted to each series of preferred stock and to voting
rights which may in the future be granted to subsequently created series of
preferred stock.
Shares of the combined company common stock will not have cumulative voting
rights.
Holders of the combined company common stock will be entitled to receive
dividends when and if declared by the board of directors of the combined company
out of any funds legally available therefor, and are entitled upon liquidation,
after claims of creditors and preferences of the Series A Preferred Stock and
any other series of preferred stock hereafter authorized, to receive pro rata
the net assets of the combined company. Common stock of the combined company
will have no preemptive or conversion rights.
STOCKHOLDER RIGHTS PLAN
As of August 28, 1999, First Security adopted a Stockholder Rights
Agreement (the "First Security Rights Plan"). In connection with that plan, the
board of directors of First Security (1) declared a dividend of one right for
each share of common stock held of record as of the close of business on August
28, 1999 and (2) authorized the issuance of one right to attach to each share of
common stock issued after August 28, 1999, and prior to the occurrence of
certain events described in the First Security Rights Plan. The rights are
attached to all common stock certificates that were outstanding on August 29,
1989, or have been issued since that date, and no separate rights certificates
have been or will be distributed until the occurrence of certain events
described in the First Security Rights Plan. Until such separation, no right may
be exercised or traded separately from the common stock certificate to which it
is attached. Following separation, the rights may, depending upon the occurrence
of certain events described in the First Security Rights Plan, entitle the
holders thereof to either purchase or receive additional shares of common stock.
The rights will expire at the close of business on October 27, 2008, unless
earlier redeemed by First Security in accordance with the terms of the First
Security Rights Plan.
The First Security Rights Plan is designed to protect the interests of
First Security's stockholders in the event of an unsolicited attempt to acquire
First Security, including a gradual accumulation of shares in the open market.
First Security believes the plan provides protection against a partial or
two-tier tender offer that does not treat all stockholders equally and against
other coercive takeover tactics which could impair First Security's board of
directors' ability to represent First Security's stockholders fully. Management
believes that the rights should also deter any attempt by a controlling
stockholder to take advantage of First Security through self-dealing
transactions. The First Security Rights Plan is not intended to prevent a
takeover of First Security. Issuing the rights has no dilutive effect, does not
affect reported earnings per share and does not change the way in which First
Security's shares are traded. However, the exercise of rights by some but not
all of First Security's stockholders would have a dilutive effect on
nonexercising stockholders. Moreover, some may argue that the First Security
Rights Plan has the potential for "entrenching" current management by allowing
current voting stockholders to increase their voting shares, thus making a
tender offer more difficult and costly.
78
<PAGE> 87
COMPARISON OF SHAREHOLDERS' RIGHTS
GENERAL
First Security is incorporated under the laws of the state of Delaware and,
accordingly, the rights of First Security stockholders are governed by the First
Security certificate of incorporation, the First Security by-laws and the laws
of the state of Delaware. Zions is incorporated under the laws of the state of
Utah, and accordingly, the rights of Zions shareholders are governed by the
Zions amended and restated articles of incorporation, the Zions amended and
restated by-laws and the laws of the state of Utah.
As a result of the merger, Zions shareholders will become stockholders of
the combined company and each of the First Security certificate of incorporation
and the by-laws will be amended and restated in its entirety. Accordingly,
following the merger, the rights of the First Security stockholders and of the
Zions shareholders who become stockholders of the combined company in the merger
will be governed by the combined company certificate of incorporation, the
combined company by-laws and the laws of the state of Delaware. The combined
company certificate of incorporation and the combined company by-laws are
attached as Exhibits A-1 and A-2, respectively, to the merger agreement which is
attached as Appendix A to this proxy statement/prospectus.
COMPARISON OF SHAREHOLDERS' RIGHTS
Set forth on the following pages is a summary comparison of material
differences among the rights of a First Security stockholder under the current
First Security certificate of incorporation and First Security by-laws (right
column), the rights of a Zions shareholder under the current Zions amended and
restated articles of incorporation and Zions amended and restated by-laws (left
column), and the rights of a combined company stockholder following the merger
under the combined company certificate of incorporation and combined company
by-laws (middle column). The summary set forth below is not intended to provide
a comprehensive summary of each of such company's governing documents. This
summary is qualified in its entirety by reference to the full text of each of
such documents.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
ZIONS COMBINED COMPANY FIRST SECURITY
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CAPITAL STOCK
- ------------------------------------------------------------------------------------------------------------
AUTHORIZED CAPITAL
- ------------------------------------------------------------------------------------------------------------
200,000,000 shares of common 425,000,000 shares of common 600,000,000 shares of common
stock, no par value. stock, par value $1.25 per stock, par value $1.25 per
share. share.
- ------------------------------------------------------------------------------------------------------------
3,000,000 shares of preferred 10,000,000 shares of preferred 400,000 shares of preferred
stock, no par value. stock, no par value. stock, no par value.
- ------------------------------------------------------------------------------------------------------------
ISSUED CAPITAL
- ------------------------------------------------------------------------------------------------------------
As of November 18, 1999, Based on the number of shares of As of November 18, 1999,
85,513,098 shares of Zions Zions common stock and First 195,851,315 shares of First
common stock were issued and Security common stock Security common stock were
outstanding and no shares of outstanding as of November 18, issued and outstanding and 8,691
Zions preferred stock were 1999, approximately 172,079,379 shares of First Security
issued and outstanding. shares of common stock of the preferred stock were issued and
combined company and 8,691 outstanding.
shares of preferred stock of the
combined company will be issued
and outstanding after the
merger.
- ------------------------------------------------------------------------------------------------------------
</TABLE>
79
<PAGE> 88
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
ZIONS COMBINED COMPANY FIRST SECURITY
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
SHAREHOLDERS
- ------------------------------------------------------------------------------------------------------------
SPECIAL MEETINGS
- ------------------------------------------------------------------------------------------------------------
Only the president or the board Only the board of directors may Only the chairman of the board
of directors may call a special call a special meeting of or a majority of the board of
meeting of shareholders. stockholders. directors may call a special
meeting.
- ------------------------------------------------------------------------------------------------------------
SHAREHOLDER ACTION BY WRITTEN CONSENT
- ------------------------------------------------------------------------------------------------------------
Permitted if written consents to Not permitted. Permitted if all stockholders
taking an action without a give written consent to taking
meeting are given by holders of an action without a meeting.
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 Notice of any proposal to be Notice of any proposal to be
presented by a shareholder or of presented by a stockholder or of presented by a stockholder or of
any person to be nominated as a any person to be nominated as a any person to be nominated as a
director must be given at least director must be given not less director must be given not less
120 days before the shareholder than 90 or more than 120 days than 90 nor more than 120 days
meeting. Notice must include the before the stockholder meeting. before the first anniversary of
name of the nominee, the number Notice must include the text of the prior year's stockholder
and class of stock owned by such the proposal and a brief written meeting. Notice must include,
person, the information statement of the reasons in with respect to any nominee for
regarding such person required support of such proposal, the director, the information
by Regulation S-K of the SEC, a stockholder's name and address, regarding such person required
signed consent of such person, the number and class of all by Regulation S-K of the SEC
the shareholder's name and shares owned by such and, with respect to all
address and the number and class stockholder, the name and proposals, a brief description
of stock owned by such address of any person upon whose of the business to be conducted,
shareholder. behalf such stockholder is the reasons for conducting such
acting, or with whom such business, any material interest
stockholder is acting in in such business of the
concert, the number and class of stockholder or any owner of
all shares of each class of shares on whose behalf the
stock owned by any such person proposal is made and, with
and any material interest of respect to the stockholder
such stockholder in the giving notice and any person on
proposal. In addition, the whose behalf the proposal is
notice with respect to a nominee made, their name and address and
for director must include the the class and number of shares
name of the person to be owned by such person.
nominated, the number and class
of all shares owned by such
person, the information
regarding such person required
by Regulation S-K of the SEC and
such person's signed consent.
- ------------------------------------------------------------------------------------------------------------
</TABLE>
80
<PAGE> 89
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
ZIONS COMBINED COMPANY FIRST SECURITY
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
BOARD OF DIRECTORS
- ------------------------------------------------------------------------------------------------------------
CLASSIFICATION
- ------------------------------------------------------------------------------------------------------------
Directors are divided into three Directors are divided into three All directors are elected
classes, with each class serving classes. Following the initial annually.
a three-year term. Each class is two annual meetings of
as nearly equal in size as stockholders, each class serves
possible. a three-year term. After the
annual meeting of the
stockholders in the year 2002,
each class is as nearly equal in
size as possible. For a
description of the classes prior
to such time, see "The
Merger -- Corporate Governance
After the Merger".
- ------------------------------------------------------------------------------------------------------------
NUMBER OF DIRECTORS
- ------------------------------------------------------------------------------------------------------------
The board may consist of no The board will consist of: 20 directors.
fewer than three and no more - 22 directors until the annual
than 15 directors. meeting of stockholders in the
year 2000;
- 18 directors until the annual
meeting of stockholders in the
year 2001; and
- 16 directors commencing with
the annual meeting of
stockholders in the year 2002.
Thereafter, the number of
directors shall be as determined
by the board of directors.
- ------------------------------------------------------------------------------------------------------------
SPECIAL MEETINGS OF THE BOARD
- ------------------------------------------------------------------------------------------------------------
The president or a majority of the board of directors may call a The chairman, the secretary or a
special meeting. majority of the board of
directors may call a special
meeting.
- ------------------------------------------------------------------------------------------------------------
EXECUTIVE COMMITTEE OF THE BOARD
- ------------------------------------------------------------------------------------------------------------
The board may designate three The combined company will have No provisions.
directors as an executive an executive committee of the
committee. The committee may board. The committee will
exercise any power of the board consist of six directors
except that it may not: amend including the chief executive
the articles or by-laws of the officers of both Zions and First
corporation, adopt a plan of Security, who will act as co-
merger or consolidation, or chairmen.
recommend to shareholders the
disposition of substantially all
assets.
- ------------------------------------------------------------------------------------------------------------
NOMINATING COMMITTEE
- ------------------------------------------------------------------------------------------------------------
No provisions. From the completion of the No provisions.
merger until 2002, the board
will maintain a nominating
committee to nominate and
recommend directors to the
stockholders. The committee will
consist of one director
appointed by Zions and one
director appointed by First
Security.
- ------------------------------------------------------------------------------------------------------------
</TABLE>
81
<PAGE> 90
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
ZIONS COMBINED COMPANY FIRST SECURITY
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
VACANCIES AND NEWLY CREATED DIRECTORSHIPS
- ------------------------------------------------------------------------------------------------------------
The board may fill vacancies or Prior to the annual meeting of The board may fill vacancies or
newly-created directorships by a stockholders in the year 2002, newly-created directorships by a
majority of the directors then any vacancy created by the majority of the directors then
in office. resignation, removal, death or in office.
disability of a director will be
filled by the Co-Chief Executive
Officer designated by the same
party (Zions or First Security)
in the merger or, in his
absence, by a majority of the
continuing directors appointed
by that party. After the annual
meeting of stockholders in the
year 2002, a majority of the
remaining directors may fill
vacancies.
- ------------------------------------------------------------------------------------------------------------
REMOVAL OF DIRECTORS
- ------------------------------------------------------------------------------------------------------------
Only the shareholders, by an The stockholders, by a majority No provisions. Under Delaware
affirmative vote of two-thirds vote of the outstanding shares, law, a director may be removed
of the issued and outstanding may remove a director for cause. by a majority vote of the
shares, may remove a director. Cause will be deemed to exist outstanding shares with or
only if the director has been without cause.
convicted of a felony by a court
of competent jurisdiction or has
been adjudged by a court of
competent jurisdiction to be
liable for gross negligence or
misconduct in the performance of
such director's duty to the
corporation and such
adjudication is no longer
subject to direct appeal.
- ------------------------------------------------------------------------------------------------------------
OTHER MATTERS
- ------------------------------------------------------------------------------------------------------------
LIMITATION ON BUSINESS TRANSACTIONS
- ------------------------------------------------------------------------------------------------------------
Certain business transactions Certain business transactions with a person who owns, directly or
with a person who owns, directly indirectly, over 10% of outstanding stock must be approved by:
or indirectly, over 10% of Zions - a 2/3 vote of the continuing directors, or
stock must be approved by: - a stockholder vote of at least 80% of outstanding voting shares.
- a majority vote of the Such business transactions include mergers, consolidations, sales
continuing directors, or of all or more than 20% of the corporation's assets, issuance of
- a stockholder vote of at least securities of the corporation, reclassifications that increase
80% of outstanding voting voting power of the interested shareholder, or liquidations,
shares. spin-offs or dissolution of the corporation.
Such business transactions
include mergers, consolidations, Also subject to restrictions imposed by Delaware law on
sales of all or more than 20% of transactions with interested stockholders. These restrictions are
the corporation's assets, similar to the restrictions described above and contained in the
issuance of securities worth certificate of incorporation. In order to engage in any
$5,000,000 or more, transaction that is subject to the provisions of the certificate
reclassifications that increase
voting power of the interested of incorporation or such provisions of Delaware law, the
shareholder, or liquidations, requirements of both the certificate of incorporation and Delaware
spin-offs or dissolution of the law must be satisfied.
corporation.
- ------------------------------------------------------------------------------------------------------------
</TABLE>
82
<PAGE> 91
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
ZIONS COMBINED COMPANY FIRST SECURITY
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
AMENDMENT OF ORGANIZATIONAL DOCUMENTS
- ------------------------------------------------------------------------------------------------------------
An amendment of the articles of An amendment of the certificate Amendments of the provisions
incorporation requires approval of incorporation requires described under "Limitations on
by two-thirds of the outstanding approval by two-thirds of board Business Transactions" above
shares if the amendment relates and two-thirds of the require approval of 80% of the
to: outstanding shares if the outstanding shares.
- the number, classes, or amendment relates to the
removal of directors; classification and composition
- the duties and powers of the of the board of directors.
board, including quorum Amendments of the provisions
requirements; described under "Limitations on
- Business Transactions" above
the procedure for amendment of require approval of 80% of the
the articles of incorporation; outstanding shares.
- any other change that would
restrict, limit or alter the
powers of the board.
Amendments of the provisions
described under "Limitations on
Business Transactions" above
require approval of 80% of the
shares outstanding.
- ------------------------------------------------------------------------------------------------------------
The board may amend the by-laws The board or the stockholders The board may amend, adopt or
by a two-thirds vote of the may amend, adopt or repeal repeal by-laws by a majority
entire board. by-laws by a majority vote, vote and the stockholders may
Stockholders may amend the by- except the by-laws governing the amend, adopt or repeal by-laws
laws by a majority vote, except following matters which require by a vote of 80% of the
that a two-thirds vote is a two-thirds vote of the board outstanding shares.
required in order to: and a two-thirds vote of the
- restrict, limit or alter the outstanding shares:
power or authority of the - the persons entitled to call a
board; special meeting of
- vest powers of the corporation stockholders;
in anyone other than the board - the composition of the board
and officers and agents it has of directors;
appointed; - filling vacancies on the board
- take actions that would of directors or removing
require the approval of directors;
shareholders if taken by the - designation and powers of
board or its agents; or committees, including the
- change the number, quorum nominating and executive
requirements, voting or committees, and the
meetings of the board of composition of and certain
directors. rules concerning those
committees;
- the election of officers and
the appointment of Spencer F.
Eccles and Harris H. Simmons
to those positions described
under "The Merger -- Interests
of Management and Directors in
the Merger"; and
- these provisions dealing with
amendments.
- ------------------------------------------------------------------------------------------------------------
</TABLE>
83
<PAGE> 92
DISCUSSION OF CERTAIN PROVISIONS IN COMBINED COMPANY
CERTIFICATE OF INCORPORATION AND BY-LAWS
GENERAL
Provisions of the combined company certificate of incorporation and
by-laws, such as those providing for a classified board of directors, the
requirement that stockholder action be taken only at a meeting, the restrictions
on who may call special meetings of the stockholders, the requirement of a two-
thirds vote of the board of directors and the outstanding shares to amend
certain provisions of the certificate of incorporation or the by-laws and the
requirement of an 80% vote of the outstanding shares to amend provisions of the
certificate of incorporation governing business transactions with significant
stockholders may have anti-takeover effects. These provisions may discourage
attempts by others to acquire control of the combined company without
negotiation with the combined company's board of directors. This would enhance
the board of directors' ability to attempt to promote the interests of all of
the combined company's stockholders. However, to the extent that these
provisions make the combined company a less attractive takeover candidate, they
may not always be in the best interests of the combined company or its
stockholders. None of these provisions is the result of any specific effort by a
third party to accumulate securities of the combined company 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 certificate of incorporation of the combined company
providing for the classification of the board of directors, which are similar to
provisions in Zions' amended and restated articles of incorporation, will have
the effect of making it more difficult to change the overall composition of the
board of directors of the combined company. At least two stockholders' meetings
will be required for stockholders to effect a change in a majority of the
combined company board of directors, as is currently the case with the Zions
board of directors.
Under Delaware law, unless the certificate of incorporation provides
otherwise, directors on a classified board may be removed only for cause by the
holders of a majority of the shares then entitled to vote at an election of
directors. The provisions of the certificate of incorporation of the combined
company do not permit stockholders to remove a director without cause. In
addition, the certificate of incorporation and by-laws of the combined company
provide that cause will be deemed to exist only if the directors whose removal
has been proposed:
- has been convicted of a felony by a court of competent jurisdiction, or
- has been adjudged by a court of competent jurisdiction to be liable for
gross negligence or misconduct in the performance of such director's duty
to the combined company and such adjudication is no longer subject to
direct appeal.
Zions and First Security believe that the longer time required to elect a
majority of the board of directors of the combined company, and the restrictive
definition of cause for purposes of removal, will help assure continuity and
stability in the management of the business and affairs of the combined company
after the merger.
STOCKHOLDER MEETINGS
The limitation on persons authorized to call a special meeting of
stockholders and the requirement that stockholders action be taken only pursuant
to a meeting are intended to ensure that any action taken by the stockholders of
the combined company not be taken precipitously, and only after giving
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<PAGE> 93
opportunity for reasoned discussion among stockholders and the management and
directors of the combined company.
SUPERMAJORITY AMENDMENT PROVISIONS
The provisions of the certificate of incorporation and by-laws of the
combined company that require the affirmative vote of (1) two-thirds of the
members of the board and two-thirds of the outstanding shares or (2) 80% of the
outstanding shares are intended to prevent a large minority of stockholders of
the combined company from being adversely affected by the amendment of key
governance provisions contained in the certificate of incorporation and by-laws.
EXPERTS
The consolidated financial statements of Zions as of December 31, 1998 and
1997 and for each of the years in the three-year period ended December 31, 1998
have been incorporated by reference herein and in the Registration Statement in
reliance upon the report of KPMG LLP, independent certified public accountants,
incorporated by reference herein, and upon the authority of said firm as experts
in accounting and auditing.
The consolidated financial statements of First Security as of December 31,
1998 and 1997 and for each of the years in the three-year period ended December
31, 1998, incorporated by reference in this proxy statement/prospectus from
First Security's 1998 Annual Report on Form 10-K, have been audited by Deloitte
& Touche LLP, independent auditors as stated in their report which is
incorporated herein by reference, and have been so incorporated in reliance upon
the report of such firm given upon their authority as experts in accounting and
auditing.
VALIDITY OF FIRST SECURITY COMMON STOCK
The validity of the shares of First Security common stock being offered
hereby will be passed upon for First Security by Wachtell, Lipton, Rosen & Katz,
New York, New York.
OTHER MATTERS
As of the date of this proxy statement/prospectus, the Zions and First
Security boards know of no matters that will be presented for consideration at
the special meetings other than as described in this proxy statement/prospectus.
However, if any other matter shall come before the relevant special meeting or
any adjournments or postponements thereof and shall be voted upon, the proposed
proxy will be deemed to confer authority to the individuals named as authorized
therein to vote the shares represented by such proxy as to any such matters that
fall within the purposes set forth in the relevant notice of special meeting as
determined by a majority of the relevant board; provided, however, that no proxy
that is voted against any proposal described herein will be voted in favor of
any adjournment or postponement of the relevant special meeting.
WHERE YOU CAN FIND MORE INFORMATION
First Security has filed with the SEC a Registration Statement under the
Securities Act that registers the distribution to Zions shareholders of the
shares of First Security common stock to be issued in connection with the
merger. The Registration Statement, including the attached exhibits and
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<PAGE> 94
schedules, contains additional relevant information about First Security and
First Security common stock. The rules and regulations of the SEC allow us to
omit certain information included in the Registration Statement from this proxy
statement/prospectus.
In addition, Zions and First Security file reports, proxy statements and
other information with the SEC under the Exchange Act. You may read and copy
this information at the following locations of the SEC:
<TABLE>
<S> <C> <C>
Public Reference Room New York Regional Office Chicago Regional Office
450 Fifth Street, N.W. 7 World Trade Center Citicorp Center
Room 1024 Suite 1300 500 West Madison Street
Washington, D.C. 20549 New York, New York 10048 Suite 1400
Chicago, Illinois 60661-2511
</TABLE>
You may also obtain copies of this information by mail from the Public
Reference Section of the SEC, 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549, at prescribed rates. The SEC also maintains an Internet world wide
web site that contains reports, proxy statements and other information about
issuers, like Zions and First Security, who file electronically with the SEC.
The address of the site is http://www.sec.gov.
You should also be able to inspect reports, proxy statements and other
information about Zions and First Security at the offices of NASDAQ Operations,
1735 K Street, N.W., Washington, D.C. 20006.
The SEC allows Zions and First Security to "incorporate by reference"
information into this proxy statement/prospectus. This means that Zions and
First Security can disclose important information to you by referring you to
another document filed separately with the SEC. The information incorporated by
reference is considered to be a part of this proxy statement/prospectus, except
for any information that is superseded by information that is included directly
in this proxy statement/prospectus.
This proxy statement/prospectus incorporates by reference the documents
listed below that Zions and First Security previously filed with the SEC. They
contain important information about the companies and their financial condition.
<TABLE>
<CAPTION>
ZIONS SEC FILINGS PERIOD/FILING DATE
----------------- ------------------
<S> <C>
Annual Report on Form 10-K........................ Year ended December 31, 1998
Quarterly Reports on Form 10-Q.................... Quarters ended March 31, 1999, June 30,
1999 and September 30, 1999
Current Reports on Form 8-K....................... June 7, 1999; August 30, 1999
The descriptions 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.
</TABLE>
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<PAGE> 95
<TABLE>
<CAPTION>
FIRST SECURITY SEC FILINGS PERIOD/FILING DATE
-------------------------- ------------------
<S> <C>
Annual Report on Form 10-K........................ Year ended December 31, 1998
Quarterly Reports on Form 10-Q.................... Quarters ended March 31, 1999, June 30,
1999 and September 30, 1999
Current Reports on Form 8-K....................... January 25, 1999; February 1, 1999;
February 9, 1999; June 8, 1999;
September 1, 1999; November 19, 1999
The description of First Security common stock,
included in First Security's registration
statement on Form S-3 filed with the SEC on
September 13, 1991.
</TABLE>
Zions incorporates by reference additional documents that it may file with
the SEC between the date of this proxy statement/prospectus and the date of the
Zions special meeting. First Security incorporates by reference additional
documents that it may file with the SEC between the date of this proxy
statement/prospectus and the date of the First Security special meeting. These
documents include periodic reports, such as Annual Reports on Form 10-K,
Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, as well as proxy
statements.
Zions has supplied all information contained or incorporated by reference
in this proxy statement/ prospectus relating to Zions, and First Security has
supplied all information relating to First Security.
Documents incorporated by reference are available from Zions and First
Security without charge, excluding any exhibits to those documents unless the
exhibit is specifically incorporated by reference as an exhibit in this proxy
statement/prospectus. You can obtain documents incorporated by reference in this
proxy statement/prospectus by requesting them in writing or by telephone from
the appropriate company at the following addresses:
<TABLE>
<S> <C>
ZIONS BANCORPORATION FIRST SECURITY CORPORATION
One South Main, Suite 1380 79 South Main, Second Floor
Salt Lake City, Utah 84111 Salt Lake City, Utah 84130
Attention: Dale M. Gibbons, Secretary Attention: Brad D. Hardy, Secretary
Telephone: (801) 524-4787 Telephone: (801) 246-5976
</TABLE>
IF YOU WOULD LIKE TO REQUEST DOCUMENTS, PLEASE DO SO BY DECEMBER 17, 1999
TO RECEIVE THEM BEFORE THE SPECIAL MEETING. IF YOU REQUEST ANY INCORPORATED
DOCUMENTS FROM ZIONS OR FIRST SECURITY, ZIONS OR FIRST SECURITY WILL MAIL THEM
TO YOU BY FIRST CLASS MAIL, OR ANOTHER EQUALLY PROMPT MEANS, WITHIN ONE BUSINESS
DAY AFTER IT RECEIVES YOUR REQUEST.
NEITHER ZIONS NOR FIRST SECURITY HAS AUTHORIZED ANYONE TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATION ABOUT THE MERGER OR OUR COMPANIES THAT IS
DIFFERENT FROM, OR IN ADDITION TO, THAT CONTAINED IN THIS PROXY
STATEMENT/PROSPECTUS OR IN ANY OF THE MATERIALS THAT HAVE BEEN INCORPORATED INTO
THIS PROXY STATEMENT/PROSPECTUS. THEREFORE, IF ANYONE DOES GIVE YOU INFORMATION
OF THIS SORT, YOU SHOULD NOT RELY ON IT. IF YOU ARE IN A JURISDICTION WHERE
OFFERS TO EXCHANGE OR SELL, OR SOLICITATIONS OF OFFERS TO EXCHANGE OR PURCHASE,
THE SECURITIES OFFERED BY THIS PROXY STATEMENT/PROSPECTUS OR THE SOLICITATION OF
PROXIES IS UNLAWFUL, OR IF YOU ARE A PERSON TO WHOM IT IS UNLAWFUL TO DIRECT
THESE TYPES OF ACTIVITIES, THEN THE OFFER PRESENTED IN THIS PROXY
STATEMENT/PROSPECTUS DOES NOT EXTEND TO YOU. THE INFORMATION CONTAINED IN THIS
PROXY STATEMENT/PROSPECTUS SPEAKS ONLY AS OF THE DATE OF THIS PROXY
STATEMENT/PROSPECTUS UNLESS THE INFORMATION SPECIFICALLY INDICATES THAT ANOTHER
DATE APPLIES.
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<PAGE> 96
APPENDIX A
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
dated as of June 6, 1999
by and between
ZIONS BANCORPORATION
and
FIRST SECURITY CORPORATION
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 97
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS; INTERPRETATIONS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
1.01 Certain Definitions................................... A-1
1.02 Interpretation........................................ A-6
</TABLE>
ARTICLE II
THE MERGER; THE REVERSE STOCK SPLIT
<TABLE>
<S> <C>
2.01 The Merger............................................ A-6
2.02 Closing............................................... A-6
2.03 Effective Time........................................ A-7
2.04 Effects of the Merger................................. A-7
2.05 Certificate of Incorporation and By-laws.............. A-7
2.06 Board of Directors and Officers....................... A-7
2.07 Reverse Stock Split................................... A-7
</TABLE>
ARTICLE III
CONSIDERATION; EXCHANGE PROCEDURES
<TABLE>
<S> <C>
3.01 Effect on Capital Stock............................... A-8
3.02 Rights as Stockholders; Stock Transfers............... A-8
3.03 Exchange Procedures................................... A-9
3.04 Anti-Dilution Provisions.............................. A-9
3.05 Stock Options......................................... A-10
</TABLE>
ARTICLE IV
CONDUCT OF BUSINESS PENDING MERGER
<TABLE>
<S> <C>
4.01 Forebearances......................................... A-12
4.02 Coordination of Dividends............................. A-13
</TABLE>
ARTICLE V
REPRESENTATIONS AND WARRANTIES
<TABLE>
<S> <C>
5.01 Disclosure Schedules.................................. A-14
5.02 Standard.............................................. A-14
5.03 Representations and Warranties........................ A-14
</TABLE>
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<PAGE> 98
ARTICLE VI
COVENANTS
<TABLE>
<S> <C>
6.01 Reasonable Best Efforts............................... A-23
6.02 Stockholder Approvals................................. A-23
6.03 Registration Statement and Joint Proxy Statement...... A-24
6.04 Press Releases........................................ A-25
6.05 Access; Information................................... A-25
6.06 Acquisition Proposals................................. A-25
6.07 Affiliate Agreements.................................. A-26
6.08 Takeover Laws......................................... A-26
6.09 NASDAQ................................................ A-26
6.10 Regulatory Applications............................... A-26
6.11 Indemnification....................................... A-27
6.12 Benefit Plans......................................... A-28
6.13 Accountants' Letters.................................. A-28
6.14 Notification of Certain Matters....................... A-28
6.15 Financial Statements.................................. A-29
6.16 Rights Agreements..................................... A-29
</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-29
7.02 Conditions to Obligation of First Security............ A-30
7.03 Conditions to Obligation of Zions..................... A-30
</TABLE>
ARTICLE VIII
TERMINATION
<TABLE>
<S> <C>
8.01 Termination........................................... A-31
8.02 Effect of Termination and Abandonment................. A-32
</TABLE>
ARTICLE IX
MISCELLANEOUS
<TABLE>
<S> <C>
9.01 Survival.............................................. A-32
9.02 Waiver; Amendment..................................... A-32
9.03 Counterparts.......................................... A-32
9.04 Governing Law......................................... A-32
9.05 Expenses.............................................. A-32
9.06 Notices............................................... A-33
9.07 Entire Understanding; No Third Party Beneficiaries.... A-33
9.08 Effect................................................ A-33
9.09 Severability.......................................... A-33
9.10 Alternative Structure................................. A-34
9.11 Enforcement of the Agreement.......................... A-34
</TABLE>
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<PAGE> 99
EXHIBIT A-1 Form of Amended and Restated Certificate of Incorporation of
Surviving Corporation
EXHIBIT A-2 Form of Amended and Restated By-laws of Surviving Corporation
EXHIBIT B Certain Provisions Concerning Officers and Directors of Surviving
Corporation
EXHIBIT C Zions Affiliate Letter
EXHIBIT D First Security Affiliate Letter
EXHIBIT E Stock Option Agreement for Zions
EXHIBIT F Stock Option Agreement for First Security
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<PAGE> 100
AGREEMENT AND PLAN OF MERGER, dated as of June 6, 1999 (this "Agreement"),
by and between Zions Bancorporation, a Utah corporation ("Zions"), and First
Security Corporation, a Delaware corporation ("First Security").
RECITALS
A. The Proposed Transaction. This Agreement provides for a business
combination to be effected through the merger of Zions with and into First
Security (the "Merger"), with First Security as the surviving corporation (the
"Surviving Corporation"), whereby each outstanding share of common stock, no par
value per share, of Zions ("Zions Common Stock"), other than certain excluded
shares, will be converted into one share of common stock, par value $1.25 per
share, of the Surviving Corporation ("Surviving Corporation Common Stock").
Immediately prior to the effectiveness of the Merger, First Security will effect
a reverse stock split in which each outstanding share of common stock, par value
$1.25 per share, of First Security ("First Security Common Stock") will be
reclassified and converted into 0.442 of a share of Surviving Corporation Common
Stock.
B. Board Approvals. The respective boards of directors of Zions and First
Security have each determined that the Merger and the other transactions
contemplated hereby are consistent with, and in furtherance of, their respective
business strategies and goals.
C. Intended Tax Treatment. For federal income tax purposes, it is intended
that the Merger will be treated as a reorganization under the provisions of
Section 368(a) of the Internal Revenue Code of 1986, as amended, and the rules
and regulations promulgated thereunder (the "Code").
D. Intended Accounting Treatment. For financial accounting purposes, it is
intended that the Merger will be accounted for as a pooling-of-interests
transaction.
E. Stock Option Agreements. Immediately following the due execution and
delivery of this Agreement, First Security and Zions will enter into a stock
option agreement (the "First Security Stock Option Agreement"), pursuant to
which First Security will grant Zions the option (the "First Security Option")
to purchase shares of First Security Common Stock, upon the terms and subject to
the conditions set forth therein. Simultaneously with the due execution and
delivery of this Agreement, Zions and First Security will enter into a stock
option agreement (the "Zions Stock Option Agreement" and, together with the
First Security Stock Option Agreement, the "Option Agreements"), pursuant to
which Zions will grant First Security the option (the "Zions Option") to
purchase shares of Zions Common Stock, upon the terms and subject to the
conditions set forth therein.
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
DEFINITIONS; INTERPRETATIONS
1.01 Certain Definitions. The following terms are used in this Agreement
with the meanings set forth below:
"Acquisition Proposal", with respect to either Zions or First
Security, means any tender or exchange offer, proposal for a merger,
consolidation or other business combination involving Zions or First
Security, as the case may be, or any of its Subsidiaries or any proposal or
offer to
A-1
<PAGE> 101
acquire in any manner a substantial equity interest in, or a substantial
portion of the assets or deposits of, Zions or First Security, as the case
may be, or any of its Significant Subsidiaries, other than the transactions
contemplated by this Agreement.
"Adjusted Option" has the meaning set forth in Section 3.05.
"Agreement" means this Agreement, as amended or modified from time to
time in accordance with Section 9.02.
"Articles of Merger" has the meaning set forth in Section 2.03.
"Benefit Plans" has the meaning set forth in Section 5.03(n).
"Certificate of Merger" has the meaning set forth in Section 2.03.
"Closing" has the meaning set forth in Section 2.02.
"Closing Date" has the meaning set forth in Section 2.02.
"Code" has the meaning set forth in the Recitals.
"Constituent Documents" means, with respect to Zions, the Zions
Articles and the Zions By-Laws, and, with respect to First Security, the
First Security Certificate and the First Security By-Laws.
"Conversion Ratio" has the meaning set forth in Section 3.01(b).
"Corporation Division" has the meaning set forth in Section 2.03.
"Costs" has the meaning set forth in Section 6.11(a).
"Delaware Secretary" means the Secretary of the State of Delaware.
"DGCL" means the Delaware General Corporation Law.
"Disclosure Schedule" has the meaning set forth in Section 5.01.
"Effective Date" means the date on which the Effective Time occurs.
"Effective Time" has the meaning set forth in Section 2.03.
"Employees" has the meaning set forth in Section 5.03(n).
"Environmental Laws" means any federal, state or local law,
regulation, order, decree, permit, authorization, opinion, common law or
agency requirement relating to: (i) the protection or restoration of the
environment, health, safety, or natural resources, (ii) the handling, use,
presence, disposal, release or threatened release of any Hazardous
Substance or (iii) noise, odor, wetlands, indoor air, pollution,
contamination or any injury or threat of injury to persons or property in
connection with any Hazardous Substance including, without limitation, the
Resource Conservation and Recovery Act, the Comprehensive Environmental
Response, Compensation, and Liability Act, the Clean Water Act, the Federal
Clean Air Act, and the Occupational Safety and Health Act, each as amended,
regulations promulgated thereunder, and state counterparts.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" has the meaning set forth in Section 5.03(n).
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<PAGE> 102
"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 3.03(a).
"First Security" has the meaning set forth in the preamble to this
Agreement.
"First Security Affiliate" has the meaning set forth in Section
6.07(a).
"First Security Benefit Plans" has the meaning set forth in Section
6.12.
"First Security Board" means the Board of Directors of First Security.
"First Security By-Laws" means the Restated By-laws of First Security,
as amended.
"First Security Certificate" means the Certificate of Incorporation of
First Security, as amended.
"First Security Common Stock" has the meaning set forth in the
Recitals.
"First Security Common Stock Option" has the meaning set forth in
Section 3.05.
"First Security Meeting" has the meaning set forth in Section 6.02.
"First Security Option" has the meaning set forth in the Recitals.
"First Security Current Rights Agreement" has the meaning set forth in
Section 5.03(b).
"First Security Replacement Rights Agreement" has the meaning set
forth in Section 5.03(b).
"First Security Rights" has the meaning set forth in Section 5.03(b).
"First Security Stock" means collectively First Security Common Stock
and Series A Preferred Stock.
"First Security Stock Option Agreement" has the meaning set forth in
the Recitals.
"First Security Stock Plans" has the meaning set forth in Section
5.03(b).
"GAAP" means generally accepted accounting principles applied on a
consistent basis.
"Governmental Authority" means any court, administrative agency or
commission or other federal, state or local governmental authority or
instrumentality.
"Hazardous Substance" means any substance in any concentration that
is: (i) listed, classified or regulated pursuant to any Environmental Law;
(ii) any petroleum product or by-product, asbestos-containing material,
lead-containing paint or plumbing, polychlorinated biphenyls, radioactive
materials or radon; or (iii) any other substance which is or may be the
subject of regulatory action by any Governmental Authority in connection
with any Environmental Law.
"Indemnified Party" has the meaning set forth in Section 6.11(a).
"Insurance Policies" has the meaning set forth in Section 5.03(t).
"Joint Proxy Statement" has the meaning set forth in Section 6.03(a).
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<PAGE> 103
"Lien" means any charge, mortgage, pledge, security interest,
restriction, claim, lien, or encumbrance.
"Material Adverse Effect" means, with respect to Zions or First
Security, any effect that (a) is material and adverse to the financial
condition, results of operations or business of Zions and its Subsidiaries,
taken as a whole, or First Security and its Subsidiaries, taken as a whole,
respectively, excluding the impact of (i) changes in banking and other laws
of general applicability or interpretations thereof by Governmental
Authorities, (ii) changes in GAAP or regulatory accounting requirements
applicable to banks and their holding companies generally, (iii) changes in
general economic conditions affecting banks and their holding companies
generally, provided that, with respect to each of clause (i), (ii) or
(iii), to the extent that a change does not materially affect it in a way
that materially differs from other banking organizations, (iv) actions or
omissions of a party to this Agreement taken with the prior written consent
of the other party to this Agreement, in contemplation of the transactions
contemplated hereby, and (v) any modifications or changes to valuation
policies and practices in connection with the Merger or restructuring
charges, in each case taken with the prior approval of Zions or First
Security, as the case may be, in connection with the Merger, in each case
in accordance with GAAP; or (b) would materially impair the ability of
Zions or First Security to perform its obligations under this Agreement or
to consummate the transactions contemplated hereby.
"Merger" has the meaning set forth in the Recitals.
"NASDAQ" means the Nasdaq National Market.
"New Certificate" has the meaning set forth in Section 3.03(a).
"Old Certificate" has the meaning set forth in Section 3.03(a).
"Option Agreements" has the meaning set forth in the Recitals.
"Pension Plan" has the meaning set forth in Section 5.03(n).
"Person" means any individual, savings association, bank, corporation,
limited liability company, partnership, association, joint-stock company,
business trust or unincorporated organization.
"Plan" has the meaning set forth in Section 5.03(n).
"Previously Disclosed" by a party means information set forth in the
applicable paragraph of its Disclosure Schedule, or any other paragraph of
its Disclosure Schedule so long as it is clear from the context of the
disclosure that the disclosure in such other paragraph of its Disclosure
Schedule is also applicable to the section of this Agreement in question.
"Ratio" has the meaning set forth in Section 2.07.
"Registration Statement" has the meaning set forth in Section 6.03(a).
"Regulatory Authorities" has the meaning set forth in Section 5.03(j).
"Regulatory Filings" has the meaning set forth in Section 5.03(h).
"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.
"Reverse Stock Split" has the meaning set forth in Section 2.07.
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<PAGE> 104
"Rights" means, with respect to any Person, securities or obligations
convertible into or exercisable or exchangeable for, or giving any other
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
first Person.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations thereunder.
"Series A Preferred Stock" has the meaning set forth in Section
5.03(b).
"Subsidiary" and "Significant Subsidiary" have the meaning ascribed to
those terms in Rule 1-02 of Regulation S-X of the SEC.
"Surviving Corporation" has the meaning set forth in the Recitals.
"Surviving Corporation Common Stock" has the meaning set forth in the
Recitals.
"Takeover Laws" has the meaning set forth in Section 5.03(v).
"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 Zions Common Stock held by First
Security 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.
"UBCA" means the Utah Business Corporation Act.
"Zions" has the meaning set forth in the preamble to this Agreement.
"Zions Affiliate" has the meaning set forth in Section 6.07(a).
"Zions Articles" means the Amended and Restated Articles of
Incorporation of Zions.
"Zions Benefit Plans" has the meaning set forth in Section 6.12.
"Zions Board" means the Board of Directors of Zions.
"Zions By-Laws" means the Amended and Restated By-laws of Zions.
"Zions Common Stock" has the meaning set forth in the Recitals.
"Zions Common Stock Option" has the meaning set forth in Section 3.05.
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<PAGE> 105
"Zions Meeting" has the meaning set forth in Section 6.02.
"Zions Option" has the meaning set forth in the Recitals.
"Zions Rights" has the meaning set forth in Section 5.03(c).
"Zions Rights Agreement" has the meaning set forth in Section 5.03(c).
"Zions Stock Option Agreement" has the meaning set forth in the
Recitals.
"Zions Stock Plans" has the meaning set forth in Section 5.03(c).
1.02 Interpretation.
(a) In this Agreement, unless the context otherwise requires,
references:
(i) to the Recitals, Sections, Exhibits or Schedules are to a
Recital or Section of, or Exhibit or Schedule to, this Agreement;
(ii) to any agreement (including this Agreement), contract, statute
or regulation are to the agreement, contract, statute or regulation as
amended, modified, supplemented or replaced from time to time, and to
any section of any statute or regulation are to any successor to the
section;
(iii) to any Governmental Authority include any successor to that
Governmental Authority; and
(iv) to this Agreement are to this Agreement, the Exhibits and
Schedules to it, taken as a whole.
(b) The table of contents and headings contained herein are for
reference purposes only and do not limit or otherwise affect any of the
provisions of this Agreement.
(c) Whenever the words "include," "includes" or "including" are used
in this Agreement, they will be deemed to be followed by the words "without
limitation."
(d) Whenever the words "herein" or "hereunder" are used in this
Agreement, they will be deemed to refer to this Agreement as a whole and
not to any specific Section.
(e) This Agreement is the product of negotiation by the parties,
having the assistance of counsel and other advisors. It is the intention of
the parties that this Agreement not be construed more strictly with regard
to one party than with regard to the other party.
ARTICLE II
THE MERGER; THE REVERSE STOCK SPLIT
2.01 The Merger. Upon the terms and subject to the conditions set forth in
this Agreement, and in accordance with the DGCL and the UBCA, Zions shall be
merged with and into First Security at the Effective Time with First Security as
the Surviving Corporation. The Surviving Corporation shall retain the First
Security name and will be headquartered in Salt Lake City, Utah.
2.02 Closing. The closing of the Merger (the "Closing") will take place at
10:00 a.m. on the third business day after satisfaction or waiver of the
conditions set forth in Article VII (other than those conditions that by their
nature are to be satisfied at the Closing, but subject to the fulfillment
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or waiver of those conditions), unless another time or date is agreed to by the
parties hereto (the "Closing Date").
2.03 Effective Time. Subject to the provisions of this Agreement, as soon
as practicable on the Closing Date, the parties shall acknowledge and file a
certificate of merger or other appropriate documents (in any such case, the
"Certificate of Merger") executed in accordance with the relevant provisions of
the DGCL and articles of merger or other appropriate documents (in any such
case, the "Articles of Merger") executed in accordance with the relevant
provisions of the UBCA. The parties shall make all other filings or recordings
required under the DGCL and the UBCA and the Merger shall become effective at
such time as the Certificate of Merger is duly filed with the Delaware Secretary
and the Articles of Merger are filed in the office of the Utah Division of
Corporation and Commercial Code (the "Corporation Division"), or at such
subsequent date or time as Zions and First Security shall agree and specify in
the Certificate of Merger and the Articles of Merger (the time the Merger
becomes effective being hereinafter referred to as the "Effective Time").
2.04 Effects of the Merger. The Merger shall have the effects set forth in
Section 259 of the DGCL and Section 16-10a-1106 of the UBCA.
2.05 Certificate of Incorporation and By-laws.
(a) The First Security Certificate, as in effect immediately prior to
the Effective Time, shall be amended and restated as of the Effective Time
so as to read in its entirety in the form set forth as Exhibit A-1 and, as
so amended and restated, such certificate of incorporation shall be the
certificate of incorporation of the Surviving Corporation until thereafter
changed or amended as provided therein or by applicable law.
(b) The First Security By-laws, as in effect immediately prior to the
Effective Time, shall be amended and restated as of the Effective Time so
as to read in their entirety in the form set forth as Exhibit A-2 and, as
so amended and restated, such by-laws shall be the by-laws of the Surviving
Corporation until thereafter changed or amended as provided therein or by
applicable law.
2.06 Board of Directors and Officers. The board of directors and certain
officers of the Surviving Corporation shall be as set forth on or designated in
accordance with Exhibit B hereto until the earlier of the resignation or removal
of any individual set forth on or designated in accordance with Exhibit B or
until their respective successors are duly elected and qualified, as the case
may be, it being agreed that if any director shall be unable or unwilling to
serve as a director at the Effective Time the party which designated such
individual as indicated in Exhibit B shall designate another individual to serve
in such individual's place. If any officer set forth on or designated in
accordance with Exhibit B ceases to be a full-time employee of either First
Security or Zions at or before the Effective Time or shall be unable or
unwilling to serve as an officer of the Surviving Corporation at the Effective
Time, the parties will agree upon another individual to serve in such
individual's stead.
2.07 Reverse Stock Split. First Security shall take all actions necessary
to effect the reclassification of the First Security Common Stock such that,
immediately prior to the Effective Time, each outstanding share (which shall
include for this purpose any First Security Common Stock held by First Security
as Treasury Stock) of First Security Common Stock shall be automatically
reclassified and converted into 0.442 (the "Ratio") of a validly issued, fully
paid and nonassessable share of Surviving Corporation Common Stock (the "Reverse
Stock Split") (with the resulting number of shares of each registered holder of
First Security Common Stock being rounded down to the nearest whole number and
with each such registered holder being entitled to receive from First Security
in lieu of any fractional share of Surviving Corporation Common Stock prior to
such rounding down an amount in cash (without interest) equal to the product
obtained by multiplying
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(x) the fraction of a share of Surviving Corporation Common Stock to which such
holder (after taking into account all shares of First Security Common Stock held
immediately prior to the effective time of the Reverse Stock Split by such
holder) would otherwise be entitled to and (y) the last sales price per share of
Zions Common Stock on NASDAQ on the last trading day prior to the date on which
the Reverse Stock Split occurs), including arranging for the exchange of
certificates representing First Security Common Stock for certificates
representing Surviving Corporation Common Stock following the effectiveness of
the Reverse Stock Split. Anything to the contrary notwithstanding, First
Security's obligation to cause the Reverse Stock Split to become effective shall
be subject to the prior satisfaction or waiver, as applicable, of each of the
conditions to the respective obligation of each party to effect the Merger set
forth in Article VII (other than Section 7.01(g)) shall have been satisfied or
waived.
ARTICLE III
CONSIDERATION; EXCHANGE PROCEDURES
3.01 Effect on Capital Stock. As of the Effective Time, by virtue of the
Merger and without any action on the part of the holder of any shares of First
Security Stock or Zions Common Stock:
(a) Cancellation of Treasury Stock. Each share of Treasury Stock shall
automatically be canceled and retired and shall cease to exist, and no
consideration shall be delivered in exchange therefor.
(b) Zions and First Security Common Stock and Series A Preferred
Stock.
(i) Except as set forth in Section 3.01(a), each issued and
outstanding share of Zions Common Stock immediately prior to the
Effective Time shall be converted into, subject to the prior
effectiveness of the Reverse Stock Split, one fully paid and
nonassessable share of Surviving Corporation Common Stock (the
"Conversion Ratio"). As of the Effective Time, all shares of Zions
Common Stock shall no longer be outstanding and shall automatically be
canceled and shall cease to exist, and from and after the Effective
Time, certificates representing Zions Common Stock (other than shares to
be canceled in accordance with Section 3.01(a)) immediately prior to the
Effective Time shall be deemed for all purposes to represent the number
of shares of Surviving Corporation Common Stock into which they were
converted pursuant to this subparagraph (b) (provided that if an
exchange of certificates formerly representing Zions Common Stock for
certificates representing Surviving Corporation Common Stock is required
by law or applicable rule or regulation, the parties will cause the
Surviving Corporation to arrange for such exchange on a one
share-for-one share basis).
(ii) Each share of First Security Common Stock and each share of
Series A Preferred Stock issued and outstanding immediately prior to the
Effective Time, assuming the prior effectiveness of the Reverse Stock
Split, shall remain an issued and outstanding share of Surviving
Corporation Common Stock and a share of Series A Preferred Stock of the
Surviving Corporation, respectively.
3.02 Rights as Stockholders; Stock Transfers. At the Effective Time,
holders of Zions Common Stock shall cease to be, and shall have no rights as,
shareholders of Zions, other than to receive any dividend or other distribution
with respect to such Zions Common Stock with a record date occurring prior to
the Effective Date and the conversion rights provided under this Article III.
After the Effective Time, there shall be no transfers on the stock transfer
books of Zions or the Surviving Corporation of shares of Zions Common Stock.
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3.03 Exchange Procedures. If, pursuant to Section 3.01(b)(i), an exchange
of certificates will occur:
(a) At or prior to the Effective Time, First Security shall deposit,
or shall cause to be deposited, with First Security's transfer agent or a
depository or trust institution of recognized standing selected by First
Security and reasonably satisfactory to Zions (in such capacity, the
"Exchange Agent"), which may be an affiliate of the Surviving Corporation,
for the benefit of the holders of certificates formerly representing shares
of Zions Common Stock ("Old Certificates") to be exchanged in accordance
with this Article III, certificates representing the shares of First
Security Common Stock ("New Certificates") to which the holders of the Old
Certificates are entitled pursuant to this Agreement.
(b) Promptly after the Effective Date, First Security shall send or
cause to be sent to each former holder of record of shares of Zions Common
Stock immediately prior to the Effective Time transmittal materials for use
in exchanging such shareholder's Old Certificates for the New Certificates
provided for in this Article III. First Security shall cause the New
Certificates and/or any check in respect of dividends or distributions
which such Person shall be entitled to receive to be delivered to such
shareholder upon delivery to the Exchange Agent of Old Certificates
representing such shares of Zions Common Stock (or indemnity reasonably
satisfactory to First Security and the Exchange Agent, if any of such
certificates are lost, stolen or destroyed) owned by such shareholder. No
interest will be paid on any such cash to 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.
(c) Neither the Exchange Agent nor any party hereto shall be liable to
any former holder of Zions Common Stock for any amount properly delivered
to a public official pursuant to applicable abandoned property, escheat or
similar laws.
(d) From and after the 30th day following the Effective Date, no
dividends or other distributions with respect to First Security Common
Stock with a record date occurring after the Effective Date shall be paid
in respect of any unsurrendered Old Certificate representing shares of
Zions Common Stock converted in the Merger into the right to receive shares
of First Security Common Stock. Upon surrender of Old Certificates (or
indemnity reasonably satisfactory to First Security and the Exchange Agent,
if any of such certificates are lost, stolen or destroyed) in accordance
with this Section 3.03, the record holder thereof 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
First Security Common Stock such holder had the right to receive upon
surrender of Old Certificates (or delivery of such indemnity).
3.04 Anti-Dilution Provisions. In the event that, with the other party's
consent, Zions or First Security changes (or establishes a record date for
changing) the number or kind of shares of Zions Common Stock or First Security
Common Stock, as the case may be, issued and outstanding prior to the Effective
Date as a result of a stock split, stock dividend, recapitalization,
reclassification, reorganization or similar transaction with respect to the
outstanding Zions Common Stock or First Security Common Stock, as the case may
be (other than, with respect to First Security, the Reverse Stock Split), and
the record date therefor shall be prior to the Effective Date, the ratio
contemplated by Section 3.01(b) or Section 2.07, as the case may be, shall be
proportionately adjusted in such manner as First Security and Zions shall agree,
which adjustment may include, as appropriate, the issuance of securities,
property or cash on the same basis as that on which any of the foregoing shall
have been issued, distributed or paid to the holders of Zions Common Stock or
First Security Common Stock, as the case may be, generally.
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3.05 Stock Options.
(a) As soon as practicable following the date of this Agreement, the
Zions Board (or, if appropriate, any committee administering the Zions
Stock Plans) shall adopt such resolutions or take such other actions as may
be required to effect the following:
(i) adjust the terms of all outstanding options to purchase shares
of Zions Common Stock ("Zions Common Stock Options") granted under the
Zions Stock Plans, whether vested or unvested, as necessary to provide
that, at the Effective Time, each such Zions Common Stock Option
outstanding immediately prior to the Effective Time shall be amended and
converted, subject to the prior effectiveness of the Reverse Stock
Split, into an option to acquire one share of Surviving Corporation
Common Stock for each share of Zions Common Stock subject to such Zions
Common Stock Option (each, as so adjusted, an "Adjusted Option"); and
(ii) make such other changes to the Zions Stock Plans as First
Security and Zions may agree are appropriate to give effect to the
Merger, including as provided in paragraph (d) of this Section 3.05.
(b) As soon as practicable following the date of this Agreement, the
First Security Board (or, if appropriate, any committee administering the
First Security Stock Plans) shall adopt such resolutions or take such other
actions as may be required to effect the following:
(i) all outstanding options to purchase shares of First Security
Common Stock ("First Security Common Stock Options") granted under the
First Security Stock Plans, whether vested or unvested, shall be
adjusted in accordance with their terms to provide that at the
effectiveness of the Reverse Stock Split (A) each such First Security
Common Stock Option outstanding immediately prior to the effectiveness
of the Reverse Stock Split shall be converted into an option to acquire
a number of shares of Surviving Corporation Common Stock equal to the
number of shares of First Security Common Stock for which such First
Security Common Stock Option was exercisable immediately prior to the
Reverse Stock Split multiplied by the Ratio, provided that any
fractional shares of Surviving Corporation Common Stock resulting
therefrom shall be rounded to the nearest whole share; and (B) the
exercise price per share of Surviving Corporation Common Stock under a
First Security Common Stock Option which has been adjusted in accordance
with this Section 3.05(b)(i) shall be equal to the exercise price per
share of First Security Common Stock under the original First Security
Common Stock Option divided by the Ratio, provided that such exercise
price shall be rounded to the nearest whole cent; and
(ii) make such other changes to the First Security Stock Plans as
First Security and Zions may agree are appropriate to give effect to the
Merger, including as provided in paragraph (d) of this Section 3.05.
(c) As soon as practicable after the Effective Time, the Surviving
Corporation shall: (i) deliver to the holders of Zions Common Stock Options
appropriate notices setting forth such holders' rights pursuant to the
respective Zions Stock Plans and the agreements evidencing the grants of
such Zions Common Stock Options and that such Zions Common Stock Options
and agreements shall be assumed by the Surviving Corporation and shall
continue in effect on the same terms and conditions (subject to the
adjustments required by this Section 3.05 after giving effect to the
Merger); and (ii) deliver to the holders of First Security Common Stock
Options appropriate notices setting forth such holders' rights pursuant to
the respective First Security Stock Plans and the agreements evidencing the
grants of such First Security Common Stock Options and that such First
Security Common Stock Options and agreements shall be assumed
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by the Surviving Corporation and shall continue in effect on the same terms
and conditions (subject to the adjustments required by this Section 3.05
after giving effect to the Merger).
(d) At the Effective Time, by virtue of the Merger, the Zions Stock
Plans shall be assumed by the Surviving Corporation, with the result that
all obligations of Zions under the Zions Stock Plans, including with
respect to awards outstanding at the Effective Time under each Zions Stock
Plan, shall be obligations of the Surviving Corporation following the
Effective Time. Prior to the Effective Time, First Security shall take all
necessary actions (including, if required, to comply with Section 162(m) of
the Code (and the regulations thereunder) or applicable law, including
obtaining the approval of its stockholders at the First Security Meeting)
for the assumption of the Zions Stock Plans, including the reservation,
issuance and listing of shares of Surviving Corporation Common Stock in a
number at least equal to the number of shares of Surviving Corporation
Common Stock that will be subject to Adjusted Options. No later than the
Effective Time, First Security shall prepare and file with the SEC a
registration statement on Form S-8 (or another appropriate form)
registering a number of shares of Surviving Corporation Common Stock
determined in accordance with the preceding sentence. Such registration
statement shall be kept effective (and the current status of the prospectus
or prospectuses required thereby shall be maintained) at least for so long
as Adjusted Options or any unsettled awards granted under the Zions Stock
Plans after the Effective Time remain outstanding. Following the Effective
Time, the Surviving Corporation shall maintain the effectiveness of a
registration statement on Form S-3 or Form S-8, as the case may be (or any
successor or other appropriate forms), and shall maintain the current
status of the prospectus or prospectuses contained therein, with respect to
the First Security Common Stock subject to the First Security Common Stock
Options, for so long as such First Security Common Stock Options remain
outstanding.
(e) At the Effective Time, each right of any kind, whether vested or
unvested, contingent or accrued, to acquire or receive shares of Zions
Common Stock that may be held, awarded, outstanding, credited, payable or
reserved for issuance under the Zions Stock Plans and any other Zions
Benefit Plan, except for Zions Common Stock Options converted in accordance
with Section 3.05(a) above, shall be deemed to be converted into a right to
acquire or receive, as the case may be, subject to the prior effectiveness
of the Reverse Stock Split, the number of shares of Surviving Corporation
Common Stock equal to the number of shares of Zions Common Stock subject to
such right immediately prior to the Effective Time, and such rights with
respect to the shares of Surviving Corporation Common Stock shall otherwise
be subject to the same terms, conditions and restrictions, if any, as were
applicable to the rights with respect to the shares of Zions Common Stock
under the relevant Zions Stock Plan or Zions Benefit Plan. Similarly, all
Zions Stock Plans and other Zions Benefit Plans (and awards thereunder)
providing for benefits measured by the value of a number of shares of Zions
Common Stock shall be deemed to refer, subject to the prior effectiveness
of the Reverse Stock Split, to the same number of shares of Surviving
Corporation Common Stock, and such benefits shall otherwise be paid on the
same terms, conditions and restrictions, if any, as were applicable under
the relevant Zions Stock Plan or Zions Benefit Plan. At or prior to the
Effective Time, Zions shall adopt appropriate amendments to the Zions Stock
Plans and the Zions Benefit Plans to effectuate the provisions of this
paragraph. Without limiting the applicability of the foregoing, Zions shall
take all necessary action to ensure that the Surviving Corporation will not
be bound at the Effective Time by any options, stock appreciation rights,
warrants or other rights or arrangements under any Zions Benefit Plan that
would entitle any person to own any shares of Zions Common Stock or to
receive any payments in respect thereof, and all Zions Benefit Plans
conferring any rights to Zions Common Stock or other capital stock of Zions
shall be deemed to be amended to be in conformity with this paragraph.
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ARTICLE IV
CONDUCT OF BUSINESS PENDING MERGER
4.01 Forebearances. Each of Zions and First Security agrees that from the
date hereof until the Effective Time, except as expressly contemplated by this
Agreement or as set forth in paragraph 4.01 of First Security's Disclosure
Schedule or paragraph 4.01 of Zions' Disclosure Schedule, as the case may be,
without the prior written consent of the other party hereto (which consent shall
not be unreasonably withheld), it will not, and will cause each of its
Subsidiaries not to:
(a) Ordinary Course. Conduct its business and the business of its
Subsidiaries other than in the ordinary and usual course or fail to use
reasonable efforts to preserve intact their business organizations and
assets and maintain their rights, franchises and existing relations with
customers, suppliers, employees and business associates, or take any action
reasonably likely to have an adverse effect upon its ability to perform any
of its material obligations under this Agreement or the Option Agreements.
(b) Capital Stock. Other than pursuant to Rights outstanding on the
date hereof, (i) issue, sell or otherwise permit to become outstanding, or
authorize the creation of, any additional shares of its stock or any
Rights, (ii) enter into any agreement with respect to the foregoing or
(iii) permit any additional shares of its stock to become subject to new
grants of employee or director stock options, other Rights or other
stock-based employee rights.
(c) Dividends, Etc. (i) Make, declare, pay or set aside for payment
any dividend (other than (A) dividends from its wholly owned Subsidiaries
to it or another of its wholly owned Subsidiaries, (B) regular quarterly
dividends on its common stock at a rate equal to the rate paid by it during
the fiscal quarter immediately preceding the date hereof and (C) in the
case of First Security's Series A Preferred Stock, regular quarterly or
semiannual dividends thereon at the rate set forth in the certificate of
designation for such securities) on or in respect of, or declare or make
any distribution on any shares of its 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 of its directors, officers or employees or those of
its Subsidiaries, or hire any new employees above the rank of vice
president, 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 (including, without
limitation, annual salary increases and annual bonus payments) in the
ordinary course of business consistent with past practice, (ii) for other
changes that are required by applicable law and (iii) to satisfy Previously
Disclosed contractual obligations existing as of the date hereof.
(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 of
its directors, officers or employees or those of 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. Sell, transfer, mortgage, encumber or otherwise
dispose of or discontinue any of its assets, deposits, business or
properties except for sales, transfers, mortgages,
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encumbrances or other dispositions or discontinuances in the ordinary
course of business consistent with past practice and in a transaction that,
together with other such transactions, is not material to it and its
Subsidiaries, taken as a whole.
(g) Acquisitions. 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, together with other such transactions,
is not material to it and its Subsidiaries, taken as a whole.
(h) Constituent Documents. In the case of Zions, amend the Zions
Articles or the Zions By-Laws or the certificate of incorporation or
by-laws (or similar governing documents) of any of its Subsidiaries. In the
case of First Security, amend the First Security Certificate or the First
Security By-Laws or the certificate of incorporation or by-laws (or similar
governing documents) of any of its Subsidiaries.
(i) Accounting Methods. Implement or adopt any change in its
accounting principles, practices or methods, other than as may be required
by GAAP or regulatory accounting requirements.
(j) Contracts. Enter into, renew or terminate, or make any payment not
then required under, any contract or agreement that calls for aggregate
annual payments of $1,000,000 or more and which is not terminable at will
on 60 days or less notice without payment of a premium penalty, other than
loans and other transactions made in the ordinary course of the banking
business.
(k) Claims. Other than in the ordinary course of business, settle any
claim, action or proceeding against it, except for any claim, action or
proceeding in an amount or for such consideration, individually or in the
aggregate for all such settlements, that is not material to it and its
Subsidiaries, taken as a whole, and would not impose any material
restriction on the business of the Surviving Corporation or create
precedent for claims that are reasonably likely to be material to it and
its Subsidiaries, taken as a whole.
(l) Adverse Actions. Notwithstanding anything herein to the contrary,
(i) take any action that would, or is reasonably likely to, prevent or
impede the Merger from qualifying as a reorganization within the meaning of
Section 368(a) of the Code or qualifying for pooling-of-interests
accounting treatment or (ii) take any action that is intended or is
reasonably likely to result in (A) any of the conditions to the Merger set
forth in Article VII not being satisfied or (B) a material violation of any
provision of this Agreement except, in each case, as may be required by
applicable law or regulation.
(m) Capital Expenditures. Other than in the ordinary course of
business, make any capital expenditures in excess of (A) $1,000,000 per
project or related series of projects or (B) $3,000,000 in the aggregate.
(n) Indebtedness. Incur any indebtedness for borrowed money other than
in the ordinary course of business.
(o) Commitments. Agree or commit to do any of the foregoing.
4.02 Coordination of Dividends. Until the Effective Time, Zions and First
Security shall coordinate with the other the declaration of any dividends or
other distributions with respect to the Zions Common Stock and the First
Security Common Stock and the record dates and payment dates
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relating thereto, it being the intention of the parties that holders of shares
of Zions Common Stock or First Security Common Stock shall not receive more than
one dividend, or fail to receive one dividend, for any single calendar quarter
on their shares of Zions Common Stock or First Security Common Stock (including
any shares of Surviving Corporation Common Stock received in the Merger), as the
case may be.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.01 Disclosure Schedules. On or prior to the date hereof, Zions has
delivered to First Security a schedule and First Security 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 to one or more of its covenants contained in Article IV;
provided, that 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 was required to be disclosed therein.
5.02 Standard. No representation or warranty of First Security or Zions
contained in Section 5.03 (other than the representations and warranties
contained in Section 5.03(b) and 5.03(c)) shall be deemed untrue 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 has had or is reasonably likely to have a Material
Adverse Effect with respect to First Security or Zions, as the case may be.
5.03 Representations and Warranties. Subject to Section 5.01 and Section
5.02 and except as Previously Disclosed, First Security hereby represents and
warrants to Zions, and Zions hereby represents and warrants to First Security,
to the extent applicable, in each case with respect to itself and its
Subsidiaries, as follows:
(a) Organization, Standing and Authority. It is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware, in the case of First Security, and the State of Utah, in
the case of Zions. It 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) First Security Stock. In the case of First Security only, the
authorized capital stock of First Security consists of 300,000,000 shares
of First Security Common Stock, par value $1.25 per share, and 400,000
shares of preferred stock. At the close of business on June 4, 1999, (i)
194,966,889 shares of First Security Common Stock plus any shares of First
Security Common Stock issued upon exercise or conversion of outstanding
Rights since June 3, 1999 and 9,063 shares of $3.15 Series "A" Cumulative
Convertible Preferred Stock ("Series A Preferred Stock") were issued and
outstanding and (ii) as of April 30, 1999, 1,595,469 shares of First
Security Common Stock were held by First Security in its treasury. As of
June 4, 1999, 380,000 shares of Junior Series B Preferred Stock were
reserved for issuance in connection with the rights (the "First Security
Rights") to purchase shares of Junior Series B Preferred Stock, issued
pursuant to the Shareholder Rights Agreement dated as of August 28, 1989
(the "First Security Current Rights Agreement"), as amended, between First
Security and the First Chicago Trust Company, as rights agent, and to be
issued pursuant to the Shareholder Rights Agreement
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dated as of October 27, 1998 between First Security and the First Chicago
Trust Company of New York, as rights agent (the "First Security Replacement
Rights Agreement"). As of June 3, 1998, 11,152,250 shares of First Security
Common Stock were subject to First Security Common Stock Options granted
under the Comprehensive Management Incentive Plan of 1989 and the Non-
Employee Director Stock Option Plan of 1995 (collectively, the "First
Security Stock Plans"). As of June 4, 1999, there were 27,726,563 shares of
First Security Common Stock reserved for issuance under the First Security
Stock Plans. The outstanding shares of First Security Common 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). Except as set forth above, as of the
date hereof, there are no shares of First Security Stock authorized and
reserved for issuance, First Security does not have any Rights issued or
outstanding with respect to First Security Stock, and First Security does
not have any commitment to authorize, issue or sell any First Security
Stock or Rights, except pursuant to this Agreement, outstanding First
Security Common Stock Options, the First Security Option and the First
Security Stock Plans.
(c) Zions Stock. In the case of Zions only, the authorized capital
stock of Zions consists of 200,000,000 shares of Zions Common Stock and
3,000,000 shares of preferred stock. At the close of business on June 4,
1999, (i) 79,017,788 shares of Zions Common Stock and no shares of
preferred stock were issued and outstanding and (ii) no shares of Zions
Common Stock were held by Zions in its treasury. As of June 4, 1999,
160,000 shares of Series A Participating Preferred Stock were reserved for
issuance in connection with the rights (the "Zions Rights") to purchase
shares of Series A Participating Preferred Stock, issued pursuant to the
Shareholder Protection Rights Agreement dated as of September 27, 1996, as
amended (the "Zions Rights Agreement"), between Zions and Zions First
National Bank, as Right Agent. As of June 4, 1999, 3,295,594 shares of
Zions Common Stock were subject to Zions Common Stock Options granted under
the Key Employee Stock Option Plan, the Non-Qualified Stock Option and
Incentive Plan (You're the Owner!) and the Non-Employee Directors Stock
Option Plan (collectively, the "Zions Stock Plans"). As of June 4, 1999,
there were 5,283,710 shares of Zions Common Stock reserved for issuance
under the Zions Stock Plans. As of the date hereof, Zions is obligated to
issue approximately 1,000,000 shares of Zions Common Stock pursuant to an
Agreement and Plan of Merger, dated as of April 27, 1999, by and among
Zions, Regency Bancorp and Regency Bank, and approximately 5,500,000 shares
of Zions Common Stock pursuant to an Agreement and Plan of Merger, dated as
of May 7, 1999, by and among Zions, Pioneer Bancorporation and Pioneer
Citizens Bank of Nevada. The outstanding shares of Zions Common 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). Except as set forth above, as of the
date hereof, there are no shares of Zions Common Stock authorized and
reserved for issuance, Zions does not have any Rights issued or outstanding
with respect to Zions Common Stock, and Zions does not have any commitment
to authorize, issue or sell any Zions Common Stock or Rights, except
pursuant to this Agreement, outstanding Zions Common Stock Options, the
Zions Option and the Zions Stock Plans.
(d) Significant Subsidiaries.
(i) (A) It owns, directly or indirectly, all the issued and
outstanding equity securities of each of its Significant Subsidiaries,
(B) no equity securities of any of its Significant 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, (C) 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
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than to it or its wholly-owned Subsidiaries), (D) there are no
contracts, commitments, understandings, or arrangements relating to its
rights to vote or to dispose of such securities and (E) all the equity
securities of each Significant Subsidiary held by it or its Subsidiaries
have been duly authorized and are validly issued and outstanding, fully
paid and nonassessable (except as provided in 12 U.S.C. sec. 55 or
comparable state laws) and are owned by it or its Subsidiaries free and
clear of any Liens.
(ii) Each of its Significant 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.
(e) Corporate Power. It 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 it has the
corporate power and authority to execute, deliver and perform its
obligations under this Agreement and the Option Agreements, and to
consummate the transactions contemplated hereby and thereby.
(f) Corporate Authority.
(i) Subject to receipt of the stockholder approval described in
paragraph (ii) of this Section 5.03(f), in the case of First Security,
and in paragraph (iii) of this Section 5.03(f), in the case of Zions,
this Agreement and the Option Agreements, and the transactions
contemplated hereby and thereby have been authorized by all necessary
corporate action on or prior to the date hereof. This Agreement is a
valid and legally binding obligation of such party, 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). In
the case of First Security, the First Security Board has received the
written opinion of J.P. Morgan Securities Inc. to the effect that as of
the date hereof the Ratio is fair to the holders of First Security
Common Stock from a financial point of view. In the case of Zions, the
Zions Board has received the written opinion of Goldman, Sachs & Co. to
the effect that as of the date hereof the Conversion Ratio is fair to
the holders of Zions Common Stock from a financial point of view.
(ii) In the case of First Security, the affirmative vote of (A) the
holders of a majority of the voting power of all outstanding shares of
First Security Stock to (I) adopt this Agreement is the only vote of the
holders of any class or series of First Security's capital stock
necessary to approve and adopt this Agreement, the Option Agreements
and, other than the Reverse Stock Split and the transaction contemplated
by clause (B) below, the transactions contemplated hereby and thereby
and (II) adopt an amendment to and a restatement of the First Security
Certificate to, among other things, effect the Reverse Stock Split and
(B) the holders of a majority of all shares of First Security Stock
casting votes (provided that the total vote cast represents more than
fifty percent in interest of all capital stock of First Security
entitled to vote) is the only vote of the holders of any class or series
of First Security's capital stock necessary to approve, in accordance
with the rules of any applicable securities exchange, the issuance of
Surviving Corporation Common Stock in the Merger.
(iii) In the case of Zions, the affirmative vote of the holders of
a majority of the voting power of all outstanding shares of Zions Common
Stock to adopt this Agreement is the only vote of the holders of any
class or series of Zions' capital stock necessary to approve and
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adopt this Agreement, the Option Agreements and the transactions
contemplated hereby and thereby.
(g) 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 it or any of its Subsidiaries in connection with the
execution, delivery or performance by it of this Agreement and the
Option Agreements or to consummate the Merger except for (A) filings and
approvals of applications with and by federal and state banking
authorities, (B) filings with the SEC and state securities authorities,
(C) the stockholder approval described in paragraph (ii) of Section
5.03(f) or the shareholder approval described in paragraph (iii) of
Section 5.03(f), as applicable, (D) the filing of the Articles of Merger
with the Corporation Division pursuant to the UBCA and the Certificate
of Merger with the Delaware Secretary pursuant to the DGCL, (E) the
filing of the amended and restated First Security Certificate as
contemplated by Section 2.05 hereof and (F) such filings with applicable
securities exchanges to obtain the authorizations for listing
contemplated by this Agreement.
(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 Option
Agreements and the consummation of the transactions contemplated hereby
and thereby 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 it or of any of its Subsidiaries
or to which it or any of its Subsidiaries or properties is subject or
bound, (B) constitute a breach or violation of, or a default under, the
First Security Certificate or the Zions Articles, as the case may be, or
the First Security By-laws or the Zions By-laws, as the case may be, or
(C) require any consent or approval under any such law, rule,
regulation, judgment, decree, order, governmental permit or license,
agreement, indenture or instrument.
(h) Financial Reports and Regulatory Documents; Material Adverse
Effect.
(i) Its Annual Reports on Form 10-K for the fiscal years ended
December 31, 1998, 1997 and 1996, and all other reports, registration
statements, definitive proxy statements or information statements filed
by it or any of its Subsidiaries subsequent to December 31, 1996 under
the Securities Act, or under Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act or under the securities regulations of the SEC, in the form
filed (collectively, its "Regulatory Filings") with the SEC as of the
date filed, (A) complied 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 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 Regulatory Filing (including the related notes and schedules
thereto) fairly presented in all material respects, its financial
position and that of its Subsidiaries as of its date, and each of the
statements of income and changes in shareholders' equity and cash flows
or equivalent statements in such Regulatory Filings (including any
related notes and schedules thereto) fairly presented in all material
respects, the results of operations, changes in shareholders' equity and
changes in cash flows, as the case may be, of it and its Subsidiaries
for the periods to which they relate, in each case in accordance with
GAAP
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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, 1998, it and its Subsidiaries have not
incurred any liability other than in the ordinary course of business
consistent with past practice.
(iii) Since December 31, 1998, (A) it 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 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 it.
(i) Litigation. Except as Previously Disclosed or set forth in its
Annual Report on Form 10-K for the fiscal year ended December 31, 1998,
there is no suit, action or proceeding pending or, to the knowledge of it,
threatened against or affecting it or any of its Subsidiaries (and it is
not aware of any basis for any such suit, action or proceeding) that,
individually or in the aggregate, is (i) material to it and its
Subsidiaries, taken as a whole, or (ii) that is reasonably likely to
prevent or delay it in any material respect from performing its obligations
under, or consummating the transactions contemplated by, this Agreement or
the Option Agreements.
(j) Regulatory Matters.
(i) Neither it nor any of its Subsidiaries is a party to or is
subject to any written 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 Authority charged with the supervision or
regulation of financial institutions or issuers of securities or engaged
in the insurance of deposits 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 written order, decree, agreement, memorandum of
understanding, commitment letter, supervisory letter or similar
submission.
(k) Compliance with Laws. It 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 its
knowledge, no suspension or cancellation of any of them is threatened;
and
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(iii) has received, since December 31, 1998, no written
notification from any Governmental Authority (A) asserting that it 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.
(l) Material Contracts; Defaults. Except for those agreements and
other documents filed as exhibits to its Regulatory Filings, 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 material 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.
(m) No Brokers. No action has been taken by it 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 J.P. Morgan Securities Inc. in the case of First Security and a
Previously Disclosed fee to be paid to Goldman, Sachs & Co. in the case of
Zions.
(n) Employee Benefit Plans.
(i) All material benefit and compensation plans, contracts,
policies or arrangements covering its current employees or former
employees and those of its Subsidiaries (its "Employees") and its
current or former directors, 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 (its "Benefit Plans"), are
Previously Disclosed. 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 made available to the other party hereto.
(ii) All employee benefit plans, other than "multiemployer plans"
within the meaning of Section 3(37) of ERISA, covering its Employees
(its "Plans"), to the extent subject to ERISA, are in substantial
compliance with ERISA. Each of it Plans which is an "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 has received a favorable determination letter from the Internal
Revenue Service with respect to "TRA" (as defined in Section 1 of Rev.
Proc. 93-39), and it is not aware of any circumstances reasonably likely
to result in revocation of any such favorable determination letter.
There is no material pending or, to its knowledge, threatened litigation
relating to its Plans. Neither it nor any of its Subsidiaries has
engaged in a transaction with respect to any of its Plans that, assuming
the taxable period of such transaction expired as of the date hereof,
could be reasonably likely to subject it or any of its Subsidiaries 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.
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(iii) No liability under Subtitle C or D of Title IV of ERISA has
been or is reasonably expected to be incurred by it 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
it under Section 4001 of ERISA or Section 414 of the Code (an "ERISA
Affiliate"). None of it, any of its Subsidiaries or any of its ERISA
Affiliates 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 of its Pension Plans or by any of
its ERISA Affiliates within the 12-month period ending on the date
hereof or will be required to be filed solely as a result of the
transactions contemplated by this Agreement.
(iv) All contributions required to be made under the terms of any
of its Plans have been timely made or have been reflected on its
consolidated financial statements included in its Regulatory Filings.
None of its Pension Plans or any single-employer plan of any of its
ERISA Affiliates has an "accumulated funding deficiency" (whether or not
waived) within the meaning of Section 412 of the Code or Section 302 of
ERISA and none of its ERISA Affiliates has an outstanding funding
waiver. Neither it nor any of its Subsidiaries has provided, or is
required to provide, security to any of its Pension Plans or to any
single-employer plan of any of its ERISA Affiliates pursuant to Section
401(a)(29) of the Code.
(v) Under each of its Pension Plans 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 its
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 it nor any of its Subsidiaries has any obligations for
retiree health and life benefits under any of its Benefit Plans. It or
its Subsidiaries may amend or terminate any of its Benefit Plans at any
time without incurring any liability thereunder.
(vii) Neither its execution of this Agreement, the performance of
its obligations hereunder, the consummation of the transactions
contemplated by this Agreement, the termination of the employment of any
of its employees within a specified time of the Effective Date, nor any
other action taken or failed to be taken by it prior to the execution of
this Agreement will (w) limit its right, in its sole discretion, to
administer or amend in any respect or terminate any of its Benefit Plans
or any related trust, (x) entitle any of its employees or any employees
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 any other material obligation
pursuant to, any of its Benefit Plans or (z) result in any breach or
violation of, or a default under, any of its Benefit Plans. Without
limiting the foregoing, as a result of the consummation of the
transactions contemplated by this Agreement (including, without
limitation, as a result of the termination of the employment of any of
its employees within a specified time of the Effective Date) neither it
nor 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.
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(o) Labor Matters. Neither it 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
it 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 it or any
of its Subsidiaries to bargain with any labor organization as to wages or
conditions of employment, nor is there any strike or other material labor
dispute involving it or any of its Subsidiaries pending or, to its
knowledge, threatened, nor to its knowledge is there any activity involving
its or any of its Subsidiaries' employees seeking to certify a collective
bargaining unit or engaging in other organizational activity.
(p) Environmental Matters. To its knowledge, neither its conduct nor
its operation or the conduct or operation of its Subsidiaries nor any
condition of any property presently or previously owned, leased or operated
by any of them (including, without limitation, in a fiduciary or agency
capacity), violates or violated Environmental Laws and no condition has
existed or event has occurred with respect to any of them or any such
property that, with notice or the passage of time, or both, is reasonably
likely to result in liability under Environmental Laws. To its knowledge,
no property on which it or any of its Subsidiaries holds a Lien, violates
or violated Environmental Laws and no condition has existed or event has
occurred with respect to any such property that, with notice or the passage
of time, or both, is reasonably likely to result in liability under
Environmental Laws. Neither it nor any of its Subsidiaries has received any
written notice from any person or entity that it or its Subsidiaries or the
operation or condition of any property ever owned, leased, operated, or
held as collateral or in a fiduciary capacity by any of them are or were in
violation of or otherwise are alleged to have liability under any
Environmental Law, including, but not limited to, responsibility (or
potential responsibility) for the cleanup or other remediation of any
pollutants, contaminants, or hazardous or toxic wastes, substances or
materials at, on, beneath, or originating from, any such property.
(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 it and its Subsidiaries have been duly and timely filed, and all such
Tax Returns are complete and accurate in all material respects, (B) all
Taxes shown to be due on the Tax Returns referred to in clause (A) have
been paid in full, (C) all Taxes that it or any of its Subsidiaries is
obligated to withhold from amounts owing to any employee, creditor or
third party have been paid over to the proper Governmental Authority in
a timely manner, to the extent due and payable, (D) 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, (E) all deficiencies asserted or assessments made as a
result of such examinations have been paid in full, (F) 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 (G) no extensions or waivers of statutes of
limitation have been given by or requested with respect to any of its
Taxes or those of its Subsidiaries. It has made available to the other
party hereto true and correct copies of the U.S. federal income Tax
Returns filed by it and its Subsidiaries for each of the three most
recent fiscal years ended on or before December 31, 1997. It has made
provision in accordance with GAAP, in the financial statements included
in the Regulatory Filings filed prior to the date hereof, for all Taxes
that accrued on or before the end of the most recent period covered by
its Regulatory Filings filed prior to the date hereof. Neither it nor
any of its Subsidiaries is a party to any
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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 over which it is or was the common parent) or otherwise has any
liability for the Taxes of any person (other than its own Taxes and
those of its Subsidiaries). As of the date hereof, neither it nor any of
its Subsidiaries has any reason to believe that any conditions exist
that could reasonably be expected to prevent or impede the Merger from
qualifying as a reorganization within the meaning of Section 368(a) of
the Code. No Liens for Taxes exist with respect to any of its assets or
properties or those of its Subsidiaries, except for statutory Liens for
Taxes not yet due and payable or that are being contested in good faith
and reserved for in accordance with GAAP. Neither it nor any of its
Subsidiaries has been a party to any distribution occurring during the
last three years in which the parties to such distribution treated the
distribution as one to which Section 355 of the Code applied.
(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) Derivative Instruments. All interest rate swaps, caps, floors,
option agreements, futures and forward contracts and other similar risk
management arrangements, whether entered into for its own account, or for
the account of one or more of its Subsidiaries or their customers, 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 such party
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 it
nor its Subsidiaries, nor to its knowledge, any other party thereto, is in
breach of any of its obligations under any such agreement or arrangement.
(s) Books and Records. Its books and records and those of 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.
(t) Insurance. It has made available to the other party hereto all of
the insurance policies, binders, or bonds maintained by it or its
Subsidiaries (its "Insurance Policies"). It and its Subsidiaries are
insured with reputable insurers against such risks and in such amounts as
its management reasonably has determined to be prudent in accordance with
industry practices. All of its Insurance Policies are in full force and
effect; it and its Subsidiaries are not in material default thereunder; and
all claims thereunder for which a basis is known, or reasonably should be
known, by it have been filed in due and timely fashion.
(u) Accounting Treatment. As of the date hereof, to its knowledge,
there is no reason why the Merger will fail to qualify for
"pooling-of-interests" accounting treatment.
(v) Takeover Laws. It has taken all action required to be taken by it
in order to exempt this Agreement and the Zions Option or the First
Security Option, as applicable, and the transactions contemplated hereby
and thereby from, and this Agreement, the Zions Option or the First
Security Option, as applicable, and the transactions contemplated hereby
and thereby are exempt from, the requirements of any "moratorium", "control
share", "fair price", "affiliate transaction", "business combination" or
other antitakeover laws and regulations of any state (collectively,
"Takeover Laws"), including, without limitation, the State of Delaware in
the case of First Security and the State of Utah in the case of Zions.
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(w) Rights Agreement. It has taken all action necessary such that the
Zions Rights or the First Security Rights, as the case may be, will not
become separable, distributable, unredeemable or exercisable as a result of
the approval, execution or delivery of this Agreement or the Option
Agreements or the consummation of the transactions contemplated hereby or
thereby.
(x) Year 2000. To its knowledge, the mission critical computer
software operated by it and/or any of its Subsidiaries is currently capable
of providing, or is being adapted to provide, uninterrupted millennium
functionality to record, store, process and present calendar dates falling
on or after January 1, 2000 in substantially the same manner and with
substantially the same functionality as such mission critical software
records, stores, processes and presents such calendar dates falling on or
before December 31, 1999. To its knowledge, the costs of adaptations
referred to in this clause will not have a Material Adverse Effect with
respect to it. Neither it nor any of its Subsidiaries has received, nor to
its knowledge are there facts that would reasonably be expected to form the
basis for the issuance of, a "Year 2000 Deficiency Notification Letter" (as
such term is employed in the Federal Reserve's Supervision and Regulatory
Letter No. SR 98-3 (SUP), dated March 4, 1998) or similar notice from any
state banking authority. It has made available to the other party hereto a
complete and accurate copy of its and its Subsidiaries' plan, including an
estimate of anticipated associated costs, for addressing the issues set
forth in the Year 2000 guidance papers issued by the Federal Financial
Institutions Examination Council, including the statements dated May 5,
1997, entitled "Year 2000 Project Management Awareness," December 17, 1997,
entitled "Safety and Soundness Guidelines Concerning the Year 2000 Business
Risk," and October 14, 1998, entitled "Interagency Guidelines Establishing
Year 2000 Standards for Safety and Soundness," as such issues affect any of
it or its Subsidiaries. Between the date of this Agreement and the
Effective Time, it shall use commercially reasonable and practicable
efforts to implement such plan.
ARTICLE VI
COVENANTS
6.01 Reasonable Best Efforts. Subject to the terms and conditions of this
Agreement, each of Zions and First Security agrees to use its respective
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 Approvals.
(a) Each of Zions and First Security agrees to take in accordance with
applicable law and its respective Constituent Documents all action
necessary to convene a meeting of its respective stockholders (including
any adjournment or postponement, the "Zions Meeting" and the "First
Security Meeting", respectively), as promptly as practicable, to consider
and vote upon (i) the approval of the issuance of Surviving Corporation
Common Stock as contemplated by this Agreement, the Reverse Stock Split and
the amendment and restatement of the First Security Certificate
contemplated by Section 2.05, in the case of the First Security Meeting,
and (ii) the approval and adoption of this Agreement, as well as any other
matters required to be approved by such entity's stockholders for
consummation of the Merger, in the case of both the Zions Meeting and the
First Security Meeting.
(b) The boards of directors of Zions and First Security have adopted
resolutions recommending to the shareholders of Zions and the stockholders
of First Security, respectively,
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adoption of this Agreement and the other matters required to be approved or
adopted in order to carry out the intentions of this Agreement. Such boards
of directors shall at all times continue such recommendations in effect
without qualification and shall use, and cause Zions and First Security,
respectively, to use reasonable best efforts to obtain such adoption (it
being understood and agreed that the obligations under this sentence shall
not be altered by the commencement, proposal, disclosure or communication
of any Acquisition Proposal).
6.03 Registration Statement and Joint Proxy Statement.
(a) The parties agree jointly to prepare a registration statement on
Form S-4 or other applicable form (the "Registration Statement") to be
filed by First Security with the SEC in connection with the issuance of
Surviving Corporation Common Stock in the Merger (including the proxy
statement and prospectus and other proxy solicitation materials of Zions
and First Security constituting a part thereof (the "Joint Proxy
Statement") and all related documents). The parties agree to cooperate, and
to cause their Subsidiaries to cooperate, with the other party, its counsel
and its accountants, in the preparation of the Registration Statement and
the Joint Proxy Statement; and provided that both parties and their
respective Subsidiaries have cooperated as required above, First Security
and Zions agree to file the Joint Proxy Statement in preliminary form with
the SEC as promptly as reasonably practicable, and First Security agrees to
file the Registration Statement with the SEC as soon as reasonably
practicable after any SEC comments with respect to the preliminary Joint
Proxy Statement are resolved. Each of Zions and First Security 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. Zions agrees to furnish to First Security all information
concerning Zions, its Subsidiaries, officers, directors and stockholders as
may be reasonably requested in connection with the foregoing.
(b) Each of Zions and First Security 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 Joint Proxy Statement and
any amendment or supplement thereto will, at the date of mailing to
stockholders and at the time of the Zions Meeting or the First Security
Meeting, as the case may be, 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, in the light of the circumstances
under which such statement was made, not misleading. Each of Zions and
First Security 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 Joint Proxy Statement or the Registration 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, to promptly inform the other party thereof and to take the
necessary steps to correct the Joint Proxy Statement or the Registration
Statement.
(c) First Security agrees to advise Zions, promptly after First
Security 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 First Security Common Stock for offering or sale in any
jurisdiction, of the
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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. Zions and First Security shall consult with each
other before issuing any press release with respect to the Merger or this
Agreement and shall not issue any such press release or make any such public
statement without the prior consent of the other party, which shall not be
unreasonably withheld; provided, however, that a party may, without the prior
consent of the other party (but after prior consultation, to the extent
practicable in the circumstances) issue such press release or make such public
statement as may upon the advice of outside counsel be required by law or the
rules and regulations of NASDAQ. Zions and First Security shall cooperate to
develop all public announcement materials and make appropriate management
available at presentations related to the transactions contemplated by this
Agreement as reasonably requested by the other party.
6.05 Access; Information.
(a) Each of Zions and First Security agrees that upon reasonable
notice and subject to applicable laws relating to the exchange of
information, it 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 any party may
reasonably request and, during such period, it shall furnish promptly to
such other 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 other may reasonably
request.
(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 publicly
available 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.
(c) No investigation by either party of the business and affairs of
the other party, pursuant to this Section 6.05 or otherwise, 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.
6.06 Acquisition Proposals. Each of Zions and First Security 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 or waive any provision of
or amend the terms of the Zions Rights Agreement or the First Security Current
Rights Agreement or the First Security Replacement
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Rights Agreement, respectively, in respect of an Acquisition Proposal. Each of
Zions and First Security shall immediately cease and cause to be terminated any
activities, discussions or negotiations conducted prior to the date of this
Agreement with any Persons other than First Security or Zions, as the case may
be, 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. Each of Zions and First Security shall promptly (within 24
hours) advise the other party following the receipt by Zions or First Security,
as the case may be, of any Acquisition Proposal and the substance thereof
(including the identity of the person making such Acquisition Proposal), and
shall keep such other party apprized of any developments in respect thereof on a
constant basis.
6.07 Affiliate Agreements.
(a) Not later than the 15th day prior to the mailing of the Joint
Proxy Statement, (i) Zions shall deliver to First Security 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 Zions Meeting, deemed to be an "affiliate" of
Zions (each, a "Zions Affiliate"), as that term is used in SEC Accounting
Series Releases 130 and 135; and (ii) First Security 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 First Security Meeting,
deemed to be an "affiliate" of First Security (each, an "First Security
Affiliate") as that term is used in Rule 145 under the Securities Act or
SEC Accounting Series Releases 130 and 135.
(b) Each of Zions and First Security shall use its respective
reasonable best efforts to cause each Person who may be deemed to be a
Zions Affiliate or a First Security Affiliate to execute and deliver to
Zions and First Security on or before the date of mailing of the Joint
Proxy Statement an agreement in substantially the form attached hereto as
Exhibit C or Exhibit D, respectively.
6.08 Takeover Laws. No party hereto shall take any action that would cause
the transactions contemplated by this Agreement or the Option Agreements 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 NASDAQ. First Security shall use commercially reasonable efforts to
cause the Surviving Corporation Common Stock to be issued in the Merger to be
approved for quotation on the NASDAQ, subject to official notice of issuance, as
promptly as practicable after the date hereof, and in any event prior to the
Effective Date.
6.10 Regulatory Applications.
(a) Zions and First Security and their respective Subsidiaries shall
cooperate and use their respective reasonable best efforts to prepare as
promptly as possible 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 and First Security shall make all necessary
regulatory filings as soon as practicable. Each of Zions and First Security
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
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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 with or to any
third party or Governmental Authority.
6.11 Indemnification.
(a) Following the Effective Date, the Surviving Corporation shall
indemnify, defend and hold harmless the present and former directors and
officers of Zions, First Security and their respective Subsidiaries (each,
an "Indemnified Party") against all costs or expenses (including reasonable
attorneys' fees), judgments, fines, losses, claims, damages or liabilities
(collectively, "Costs") as incurred, in connection with any claim, action,
suit, proceeding or investigation, whether civil, criminal, administrative
or investigative, arising out of actions or omissions occurring at or prior
to the Effective Time (including, without limitation, the transactions
contemplated by this Agreement) to the fullest extent that Zions, First
Security and their respective Subsidiaries are permitted to indemnify (and
advance expenses to) their respective directors and officers under the laws
of their respective jurisdictions of incorporation, their respective
charters and their respective by-laws.
(b) For a period of six years from the Effective Time, the Surviving
Corporation shall use its reasonable best efforts to provide director's and
officer's liability insurance that serves to reimburse the present and
former officers and directors of Zions, First Security or any of their
respective Subsidiaries (determined as of the Effective Time) with respect
to claims against such directors and officers arising from facts or events
occurring at or prior to the Effective Time (including, without limitation,
the transactions contemplated by this Agreement) which insurance shall
contain at least the same coverage and amounts, and contain terms and
conditions no less advantageous, as that coverage currently provided by
Zions or First Security, as the case may be.
(c) Any Indemnified Party wishing to claim indemnification under
Section 6.11(a), upon learning of any claim, action, suit, proceeding or
investigation described above, shall promptly notify the Surviving
Corporation thereof; provided that the failure so to notify shall not
affect the obligations of the Surviving Corporation under Section 6.11(a)
unless and to the extent that the Surviving Corporation is actually and
materially prejudiced as a result of such failure.
(d) If the Surviving Corporation or any of its successors or assigns
shall consolidate with or merge into any other entity and shall not be the
continuing or surviving entity of such consolidation or merger or shall
transfer all or substantially all of its assets to any other entity, then
and in each case, the Surviving Corporation shall cause proper provision to
be made so that the successors and assigns of the Surviving Corporation
shall assume the obligations set forth in this Section 6.11.
(e) The provisions of this Section 6.11 are intended to be for the
benefit of, and shall be enforceable by, each Indemnified Party and his or
her heirs and representatives.
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6.12 Benefit Plans.
(a) The Surviving Company shall, from and after the Effective Time,
(i) comply with the Benefit Plans of Zions (the "Zions Benefit Plans") in
accordance with their terms, (ii) provide former employees of Zions who
remain as employees of the Surviving Corporation with employee benefit
plans no less favorable in the aggregate than those provided to similarly
situated employees of First Security, (iii) provide employees of Zions who
remain as employees of the Surviving Corporation credit for years of
service with Zions or any of its Subsidiaries prior to the Effective Time
for the purpose of eligibility and vesting, (iv) cause any and all
pre-existing condition limitations (to the extent such limitations did not
apply to a pre-existing condition under comparable Zions Benefit Plans) and
eligibility waiting periods under group health plans of First Security to
be waived with respect to former employees of Zions who remain as employees
of the Surviving Corporation (and their eligible dependents) and who become
participants in such group health plans and (v) cause to be credited to any
deductible or out-of-pocket expense of First Security Benefit Plans any
deductibles or out-of-pocket expenses incurred by employees of Zions and
their beneficiaries and dependents during the portion of the calendar year
prior to their participation in First Security Benefit Plans.
(b) Zions and First Security shall, and shall cause the Surviving
Corporation to, honor in accordance with their terms, all vested or accrued
benefit obligations to, and contractual rights of, current and former
employees of Zions and First Security and their respective Subsidiaries,
including, without limitation, any benefits or rights under the agreements
listed on Section 6.12 of the Zions Disclosure Schedule or the First
Security Disclosure Schedule, as the case may be, or that arise as a result
of the transactions contemplated by this Agreement (either alone or in
combination with any other event). The First Security Board or the
appropriate committee for First Security responsible for the interpretation
of the Benefit Plans of First Security (the "First Security Benefit Plans")
and agreements of First Security has determined that the transactions
contemplated by this Agreement constitute a "change of control" for
purposes of all First Security Benefit Plans and agreements of First
Security. Zions and First Security shall, and shall cause the Surviving
Corporation to, take the actions necessary to effectuate the agreements and
understandings set forth on Section 6.12 of the First Security Disclosure
Schedule.
(c) Notwithstanding anything contained herein to the contrary, prior
to the Effective Time, Zions and First Security shall take all actions
necessary with respect to the Zions Stock Plans and Zions Benefit Plans or
the First Security Stock Plans and First Security Benefit Plans, as the
case may be, and the rights thereunder to the extent required in order for
the Merger to qualify for pooling-of-interests accounting treatment.
6.13 Accountants' Letters. Each of Zions and First Security shall use its
respective reasonable best efforts to cause to be delivered to the other party a
letter of KPMG LLP and Deloitte & Touche LLP, respectively, 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, in form and substance customary for "comfort" letters
delivered by independent accountants in accordance with Statement of Accounting
Standards No. 72.
6.14 Notification of Certain Matters. Each of Zions and First Security
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.
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6.15 Financial Statements. The Surviving Corporation shall file as
promptly as practicable, and in any event within 30 days after the end of the
first full calendar month following the Effective Date, financial statements
containing at least 30 days of combined operations in form and substance
sufficient to enable Zions Affiliates to sell Surviving Corporation Common Stock
within the requirements of Accounting Series Releases 130 and 135 and Staff
Accounting Bulletin 65.
6.16 Rights Agreements. Each of Zions and First Security agrees that it
shall maintain (i) the Zions Rights Agreement and (ii) the First Security
Current Rights Agreement and the First Security Replacement Rights Agreement,
respectively, and shall not redeem the rights issued pursuant to such agreement
or agreements, as the case may be, or modify such agreement or agreements, as
the case may be, except as required to consummate the Merger and fulfill its
obligations pursuant to this Agreement, the Option Agreements and the
transactions contemplated hereby and thereby.
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 First Security to consummate the
Merger is subject to the fulfillment or written waiver by Zions and First
Security prior to the Effective Time of each of the following conditions:
(a) Stockholder Approvals.
(i) This Agreement and the Merger shall have been duly adopted by
the requisite vote of the stockholders of Zions and First Security.
(ii) The issuance of Surviving Corporation Common Stock as
contemplated by this Agreement, the Reverse Stock Split and the
amendment and restatement of the First Security Certificate contemplated
by Section 2.05 hereof shall have been duly adopted by the requisite
vote of the stockholders of First Security.
(b) Regulatory Approvals. Any consents, waivers, clearances, approvals
and authorizations of Governmental Authorities that are necessary to permit
consummation of the Merger shall have been obtained and shall remain in
full force and effect and all statutory waiting periods in respect thereof
shall have expired.
(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 Merger. No statute, rule, regulation, order, injunction
or decree shall have been enacted, entered, promulgated or enforced by any
Governmental Authority which prohibits or makes illegal the consummation of
the Merger.
(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 be
in effect and no proceedings for that purpose shall have been initiated by
the SEC and not withdrawn.
(e) Listing. The Surviving Corporation Common Stock to be issued in
the Merger shall have been approved for quotation on NASDAQ.
(f) Pooling-of-Interests. Each of Zions and First Security shall have
received a letter from its respective independent public accountants, dated
the Closing Date, in form and substance
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reasonably satisfactory to Zions and First Security, respectively, to the
effect that the Merger will qualify for pooling-of-interests accounting
treatment.
(g) Reverse Stock Split. The Reverse Stock Split shall have become
effective.
7.02 Conditions to Obligation of First Security. The obligation of First
Security to consummate the Merger is also subject to the fulfillment or written
waiver by First Security 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 shall be true and correct in all
respects as of the date of this Agreement and (except to the extent such
representations and warranties speak as of an earlier date) as of the
Closing Date as though made on and as of the Closing Date; provided,
however, that for purposes of determining the satisfaction of this
condition, no effect shall be given to any exception in such
representations and warranties relating to materiality or a Material
Adverse Effect, and provided, further, however, that, for purposes of this
condition, such representations and warranties (other than the
representations and warranties contained in Section 5.03(c), which shall be
true and correct in all material respects) shall be deemed to be true and
correct in all respects unless the failure or failures of such
representations and warranties to be so true and correct, individually or
in the aggregate, results or would reasonably be expected to result in a
Material Adverse Effect on Zions and its Subsidiaries taken as a whole.
First Security shall have received a certificate signed on behalf of Zions
by the Chief Executive Officer and Chief Financial Officer of Zions to the
foregoing 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 First Security 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 First Security's Counsel. First Security shall have
received an opinion of Wachtell, Lipton, Rosen & Katz, special counsel to
First Security, dated the Effective Date, to the effect that, on the basis
of facts, representations and assumptions set forth in such opinion, (i)
the Merger will be treated as a reorganization within the meaning of
Section 368(a) of the Code, (ii) Zions and First Security will each be a
party to that reorganization within the meaning of Section 368(b) of the
Code and (iii) no gain or loss will be recognized by holders of First
Security Common Stock who receive shares of Surviving Corporation Common
Stock in the Reverse Stock Split, except with respect to cash received in
lieu of a fractional share interest in Surviving Corporation Common Stock.
In rendering its opinion, such counsel may require and rely upon
representations contained in letters from First Security, Zions and
shareholders of Zions.
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 First Security set forth in this Agreement shall be true and correct in
all respects as of the date of this Agreement and (except to the extent
such representations and warranties speak as of an earlier date) as of the
Closing Date as though made on and as of the Closing Date; provided,
however, that for purposes of determining the satisfaction of this
condition, no effect shall be given to any exception in such
representations and warranties relating to materiality or a Material
Adverse Effect, and provided, further, however, that, for purposes of this
condition, such representations
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and warranties (other than the representations and warranties contained in
Section 5.03(b), which shall be true and correct in all material respects)
shall be deemed to be true and correct in all respects unless the failure
or failures of such representations and warranties to be so true and
correct, individually or in the aggregate, results or would reasonably be
expected to result in a Material Adverse Effect on First Security and its
Subsidiaries taken as a whole. Zions shall have received a certificate
signed on behalf of First Security by the Chief Executive Officer and Chief
Financial Officer of First Security to the foregoing effect.
(b) Performance of Obligations of First Security. First Security 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 First Security by the Chief Executive Officer and the Chief
Financial Officer of First Security to such effect.
(c) Opinion of Zions' Counsel. Zions shall have received an opinion of
Sullivan & Cromwell, counsel to Zions, dated the Effective Date, to the
effect that, on the basis of facts, representations and assumptions set
forth in such opinion, (i) the Merger will be treated as a reorganization
within the meaning of Section 368(a) of the Code, (ii) Zions and First
Security will each be a party to that reorganization within the meaning of
Section 368(b) of the Code and (iii) no gain or loss will be recognized by
shareholders of Zions who receive shares of Surviving Corporation Common
Stock in exchange for Zions Common Stock. In rendering its opinion,
Sullivan & Cromwell may require and rely upon written representations from
First Security, Zions and shareholders of Zions.
(d) First Security Certificate and First Security By-laws. The First
Security Certificate and the First Security By-laws shall have been amended
and restated substantially as contemplated by Section 2.05 hereof.
ARTICLE VIII
TERMINATION
8.01 Termination. This Agreement may be terminated, and the Merger may be
abandoned:
(a) Mutual Consent. At any time prior to the Effective Time, by the
mutual consent of Zions and First Security, 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 First
Security, 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, which
breach cannot be or has not been cured within 30 calendar 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 calendar
days after the giving of written notice to the breaching party of such
breach, provided that any such breach under clause (i) or (ii) would
entitle the non-breaching party not to consummate the Merger under Article
VII hereof.
(c) Delay. At any time prior to the Effective Time, by Zions or First
Security, 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 March 31, 2000, 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
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of the party seeking to terminate pursuant to this Section 8.01(c), which
action or inaction is in violation of its obligations under this Agreement.
(d) No Approval. By First Security 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 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.
(e) Zions Stock Option Agreement and First Security Stock Option
Agreement. By Zions or First Security if the other party shall not have
executed and delivered to Zions or First Security, as the case may be, in
exchange for the Zions Stock Option Agreement or the First Security Stock
Option Agreement, as the case may be, a stock option agreement in the form
of Exhibit E hereto, with respect to the stock option agreement to be
delivered by Zions, and in the form of Exhibit F hereto, with respect to
the stock option agreement to be delivered by First Security, by the close
of business on the second business day following the date of this
agreement.
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 the
other party hereto except as set forth below and except that termination will
not relieve a breaching party from liability for any breach of this Agreement
giving rise to such termination and except that Sections 6.05, 8.02 and Section
9.05 shall survive any termination of this Agreement.
ARTICLE IX
MISCELLANEOUS
9.01 Survival. No representations, warranties, agreements and covenants
contained in this Agreement shall survive the Effective Time (other than
Sections 6.11 and 6.12 and this Article IX which shall survive the Effective
Time).
9.02 Waiver; Amendment. Prior to the Effective Time, any provision of this
Agreement may be (a) waived by the party benefitted by the provision, or (b)
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 (i) after the
Zions Meeting, this Agreement may not be amended if it would violate Utah law or
reduce the consideration to be received by Zions shareholders in the Merger and
(ii) after the First Security Meeting, this Agreement may not be amended if it
would violate Delaware law.
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. 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 or of the DGCL are applicable).
9.05 Expenses. Each party hereto will bear all expenses incurred by it in
connection with this Agreement and the transactions contemplated hereby, except
that printing expenses and SEC fees shall be shared equally between First
Security and Zions.
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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 Zions Bancorporation, to:
Zions Bancorporation
One South Main, Suite 1830
Salt Lake City, Utah 84111
Attention: Harris H. Simmons
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
If to First Security Corporation, to:
First Security Corporation
79 South Main Street, Second Floor
Salt Lake City, Utah 84111
Attention: Spencer F. Eccles
Facsimile: (801) 359-6928
With a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Craig M. Wasserman
Facsimile: (212) 403-2000
9.07 Entire Understanding; No Third Party Beneficiaries. This Agreement,
including the Exhibits and Schedules to this Agreement, represents 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. No representation, warranty,
inducement, promise, understanding or condition not set forth in this Agreement
has been made or relied on by any party in entering into this Agreement. Except
for Section 6.11, 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 Effect. No provision of this Agreement shall be construed to require
Zions, First Security or any of their respective Subsidiaries, affiliates or
directors to take any action or omit to take any action which action or omission
would violate applicable law (whether statutory or common law), rule or
regulation.
9.09 Severability. Except to the extent that application of this Section
9.09 would have a Material Adverse Effect on either party or the Surviving
Corporation, any term or provision of this
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Agreement which is invalid or unenforceable in any jurisdiction shall, as to
that jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining terms
and provisions of this Agreement or affecting the validity or enforceability of
any of the terms or provisions of this Agreement in any other jurisdiction. If
any provision of this Agreement is so broad as to be unenforceable, the
provision shall be interpreted to be only so broad as is enforceable.
9.10 Alternative Structure. Notwithstanding anything to the contrary
contained in this Agreement, prior to the Effective Time, the parties may
mutually agree to revise the structure of the Merger and related transactions
provided that each of the transactions comprising such revised structure shall
(i) not change the amount or form of consideration to be received by the
shareholders of Zions and the holders of Zions Common Stock Options, (ii) be
capable of consummation in as timely a manner as the structure contemplated
herein and (iii) not otherwise be prejudicial to the interests of the
stockholders of either party. This Agreement and any related documents shall be
appropriately amended in order to reflect any such revised structure.
9.11 Enforcement of the Agreement. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any court of the United
States or any state having jurisdiction, this being in addition to any other
remedy to which they are entitled at law or in equity.
* * *
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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.
ZIONS BANCORPORATION
By: /s/ HARRIS H. SIMMONS
------------------------------------
Harris H. Simmons
President and Chief Executive
Officer
FIRST SECURITY CORPORATION
By: /s/ SPENCER F. ECCLES
------------------------------------
Spencer F. Eccles
Chairman of the Board
and Chief Executive Officer
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<PAGE> 135
EXHIBIT A-1
TO APPENDIX A
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
FIRST SECURITY CORPORATION
FIRST SECURITY CORPORATION, a Delaware corporation (the "Corporation"),
hereby certifies as follows:
1. The name of the Corporation is FIRST SECURITY CORPORATION. The date
of filing of its original certificate of incorporation with the Secretary
of State was August 13, 1959 and the name under which it was originally
incorporated was FIRST SECURITY INVESTMENT COMPANY.
2. This restated certificate of incorporation amends, restates and
integrates the provisions of the certificate of incorporation of said
Corporation and has been duly adopted in accordance with the provisions of
Sections 242 and 245 of the General Corporation Law of the State of
Delaware by the favorable vote of the holders of a majority of the
outstanding stock entitled to vote thereon.
3. The text of the certificate of incorporation is hereby amended and
restated to read herein as set forth in full:
FIRST. The name of the Corporation is FIRST SECURITY CORPORATION.
SECOND. The address of the Corporation's registered office in the
State of Delaware is Corporation Trust Center, 1209 Orange Street in the
City of Wilmington, County of New Castle. The name of its registered
agent at such address is The Corporation Trust Company.
THIRD. The purpose of the Corporation is to engage in any lawful
act or activity for which corporations may be organized under the
General Corporation Law of Delaware.
FOURTH. (a) (i) The total number of shares of all classes of stock
which the Corporation shall have authority to issue is 435,000,000, of
which 425,000,000 shares of the par value of $1.25 per share shall be
designated as common stock (the "Common Stock") and 10,000,000 shares
without par value shall be designated as preferred stock (the "Preferred
Stock"). Shares of Preferred Stock may be issued in one or more series
from time to time by the board of directors, and the board of directors
is expressly authorized to fix by resolution or resolutions the
designations and the powers, preferences and rights, and the
qualifications, limitations and restrictions thereof, of the shares of
each series of Preferred Stock, including without limitation the
following:
(A) the distinctive serial designation of such series which
shall distinguish it from other series;
(B) the number of shares included in such series;
(C) the dividend rate (or method of determining such rate)
payable to the holders of the shares of such series, any conditions
upon which such dividends shall be paid and the date or dates upon
which such dividends shall be payable;
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(D) whether dividends on the shares of such series shall be
cumulative and, in the case of shares of any series having cumulative
dividend rights, the date or dates or method of determining the date
or dates from which dividends on the shares of such series shall be
cumulative;
(E) the amount or amounts which shall be payable out of the
assets of the Corporation to the holders of the shares of such series
upon voluntary or involuntary liquidation, dissolution or winding up
the Corporation, and the relative rights of priority, if any, of
payment of the shares of such series;
(F) the price or prices at which, the period or periods within
which and the terms and conditions upon which the shares of such
series may be redeemed, in whole or in part, at the option of the
Corporation or at the option of the holder or holders thereof or upon
the happening of a specified event or events;
(G) the obligation, if any, of the Corporation to purchase or
redeem shares of such series pursuant to a sinking fund or otherwise
and the price or prices at which, the period or periods within which
and the terms and conditions upon which the shares of such series
shall be redeemed or purchased, in whole or in part, pursuant to such
obligation;
(H) whether or not the shares of such series shall be
convertible or exchangeable, at any time or times at the option of
the holder or holders thereof or at the option of the Corporation or
upon the happening of a specified event or events, into shares of any
other class or classes or any other series of the same or any other
class or classes of stock of the Corporation, and the price or prices
or rate or rates of exchange or conversion and any adjustments
applicable thereto; and
(I) whether or not the holders of the shares of such series
shall have voting rights, in addition to the voting rights provided
by law, and if so the terms of such voting rights.
Subject to the rights of the holders of any series of Preferred Stock,
the number of authorized shares of any class or series of Preferred
Stock may be increased or decreased (but not below the number of shares
thereof then outstanding) by the affirmative vote of the holders of a
majority of the stock of the Corporation entitled to vote thereon,
irrespective of the provisions of Section 242(b)(2) of the General
Corporation Law of Delaware or any corresponding provision hereafter
enacted.
(b) The Board of Directors has provided for the issuance of a
series of Preferred Stock of the Corporation consisting of 18,052 shares
of Three Dollar and Fifteen Cent ($3.15) Cumulative Convertible
Preferred Stock, Series "A", with the designations and the powers,
preferences and rights, and the qualifications, limitations and
restrictions as set forth in Exhibit A hereto.
(c) (i) Upon this Amended and Restated Certificate of Incorporation
of the Corporation becoming effective in accordance with the General
Corporation Law of the State of Delaware (the "Effective Time"), each
share of Common Stock of the Corporation ("Old Common Stock") issued and
outstanding immediately prior to the Effective Time shall be
automatically reclassified as and converted into 0.442 of a validly
issued, fully paid and nonassessable share of Common Stock, par value
$1.25 per share, of the Corporation ("New Common Stock").
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(ii) Notwithstanding the immediately preceding sentence, no
fractional shares of New Common Stock shall be issued in connection with
the foregoing reclassification of shares of Old Common Stock. In lieu
thereof, upon surrender after the Effective Time of a certificate
formerly representing shares of Old Common Stock, the Corporation shall
pay to the holder of the certificate an amount in cash (without
interest) equal to the product obtained by multiplying (a) the fraction
of a share of New Common Stock to which such holder (after taking into
account all shares of Old Common Stock held immediately prior to the
Effective Time by such holder) would otherwise be entitled to, by (b)
the last sales price per share of Common Stock of Zions Bancorporation,
a Utah corporation ("Zions"), on the Nasdaq National Market on the last
trading date prior to the date on which the Effective Time occurs.
(iii) Each stock certificate that, immediately prior to the
Effective Time, represented shares of Old Common Stock shall, from and
after the Effective Time, automatically and without the necessity of
presenting the same for exchange, represent that number of shares of New
Common Stock into which the shares of Old Common Stock represented by
such certificate shall have been reclassified (as well as the right to
receive cash in lieu of fractional shares of New Common Stock),
provided, however, that each person of record holding a certificate that
represented shares of Old Common Stock shall receive, upon surrender of
such certificate, a new certificate evidencing and representing the
number of shares of New Common Stock into which the shares of Old Common
Stock represented by such certificate shall have been reclassified.
FIFTH. The board of directors of the Corporation is expressly
authorized to adopt, amend or repeal by-laws of the Corporation.
SIXTH. Elections of directors need not be by written ballot except
and to the extent provided in the by-laws of the Corporation.
SEVENTH. (a) Commencing with the Effective Time, the directors of
the Corporation shall be divided into three classes, which three classes
shall be, except as provided below, as nearly equal in number as
reasonably possible, as determined by the board of directors. The
initial term of office of the first class (the "First Class") of such
directors shall expire at the first annual meeting of stockholders after
the Effective Time, the initial term of office of the second class (the
"Second Class") of such directors shall expire at the second annual
meeting of stockholders after the Effective Time and the initial term of
office of the third class (the "Third Class") of such directors shall
expire at the third annual meeting of stockholders after the Effective
Time, with each class of directors to hold office until their successors
have been duly elected and qualified.
(b) At and after the Effective Time, the First Class shall be
comprised of ten directors, the Second Class shall be comprised of seven
directors and the Third Class shall be comprised of five directors. At
and after the annual meeting of stockholders in the year 2000, the First
Class of directors shall be comprised of six directors and there shall
be no change in the number of directors in each of the Second and Third
Classes. At and after the annual meeting of stockholders in the year
2001, the First Class of directors shall be comprised of six directors
and each of the Second and Third Classes of directors shall be comprised
of five directors.
(c) Until the annual meeting of stockholders in the year 2000, the
number of directors of the Corporation shall be 22, which number shall
consist of an equal number of (a) persons previously serving as
directors of Zions (each a "Zions-Original Director") and
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(b) persons previously serving as directors of the Corporation (each a
"First Security-Original Director"), in each case as designated pursuant
to the Agreement and Plan of Merger, dated as of June 6, 1999 (the
"Merger Agreement"), by and between Zions and the Corporation.
Commencing with the annual meeting of stockholders in the year 2000, the
number of directors shall be 18, which number shall consist of an equal
number of Zions-Original Directors and First Security-Original
Directors. Commencing with the annual meeting of stockholders in the
year 2001, the number of directors shall be 16, which number shall
consist of an equal number of Zions-Original Directors and First
Security-Original Directors. If any such Zions-Original Director or
First Security-Original Director is unable to serve as a director for
any reason, the Nominating Committee of the Board of Directors shall
nominate a replacement.
(d) At each annual meeting of stockholders following the Effective
Time, directors elected to succeed the directors whose terms expire at
such annual meeting shall be elected to hold office for a term expiring
at the annual meeting of stockholders in the third year following the
year of their election and until their successors have been duly elected
and qualified. Except as provided in paragraphs (b) and (c) above, if
the number of directors is changed, any increase or decrease shall be
apportioned among the classes so as to maintain or attain a number of
directors in each class as nearly equal as reasonably possible, but no
decrease in the number of directors may shorten the term of any
incumbent director. No director may be removed except for cause. Cause
for removal shall be deemed to exist only if the director whose removal
is proposed has been convicted of a felony by a court of competent
jurisdiction or has been adjudged by a court of competent jurisdiction
to be liable for gross negligence or misconduct in the performance of
such director's duty to the Corporation and such adjudication is no
longer subject to direct appeal.
(e) In the event that the holders of any class or series of stock
of the Corporation shall be entitled, voting separately as a class, to
elect any directors of the Corporation, then the number of directors
that may be elected by such holders shall be in addition to the number
fixed pursuant to foregoing provisions of this Certificate of
Incorporation and, except as otherwise expressly provided in the terms
of such class or series, the terms of the directors elected by such
holders shall expire at the annual meeting of stockholders next
succeeding their election without regard to the classification of the
remaining directors.
(f) This Article SEVENTH may not be amended, modified or repealed
except by an amendment to this Certificate of Incorporation adopted by
the affirmative vote of (i) two-thirds of the directors of the
Corporation and (ii) the holders of not less than two-thirds of the
voting power of all outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of directors,
considered for purposes hereof as a single class.
EIGHTH. Unless the conditions set forth in clause (a) or (b) below
are satisfied, there shall be no "Business Transaction," as defined
below, between this Corporation and a "Related Person", as defined
below, except upon the affirmative vote of the holders of eighty percent
(80%) of all the shares of stock of this Corporation entitled to vote in
elections of directors, considered for the purposes of this Article
EIGHTH as one class.
The approval of eighty percent (80%) of the holders of the stock of
this Corporation shall not be required for those Business Transactions
involving a Related Person if (a) the
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Business Transaction has been approved by two-thirds of the "Continuing
Directors" of the Corporation, as defined, or (b) all of the following
conditions are satisfied:
(i) the Business Transaction is a merger or consolidation of the
Corporation and the amount paid per share to the holders of common
stock of the Corporation is at least equal in value to the highest
amount paid by the Related Person for a share of common stock of the
Corporation within two years prior to the date such person became a
Related Person or in the transaction in which the Related Person
became a Related Person (the "Highest Purchase Price");
(ii) after becoming a Related Person and prior to such merger or
consolidation, such Related Person did not acquire any additional
shares of voting stock of the Corporation; and
(iii) prior to the consummation of the merger or consolidation,
such Related Person did not receive any benefits from the Corporation
(except proportionately as a shareholder) or cause any material
change in the Corporation's business or equity capital structure.
As used for purposes of this Article EIGHTH:
"Business Transaction" means one of the following transactions
involving this Corporation and a Related Person (other than where the
Related Person is participating proportionately as a shareholder):
(a) a merger or consolidation involving the Corporation or any of its
subsidiaries, (b) the sale, exchange or other disposition by the
Corporation or any of its subsidiaries of assets constituting more
than twenty percent (20%) of the fair market value of the total
assets of the entity involved, (c) the purchase or other acquisitions
by the Corporation of any of its subsidiaries of more than twenty
percent (20%) of the fair market value of the total assets of the
entity involved (d) the issuance, transfer or other disposition of
any securities of the Corporation or of any of its subsidiaries, (e)
any recapitalization or reclassification of securities of the
Corporation or other transaction that would have the effect of
increasing the voting power of a Related Person, (f) any liquidation,
spin-off or other dissolution of the Corporation, and (g) any
agreement or other arrangement providing for any of the transactions
defined as a Business Transaction.
"Related Person" means any person or entity which is the
"beneficial owner" directly or indirectly of shares of stock of this
Corporation possessing more than ten percent (10%) of the votes of
the outstanding shares of stock of this Corporation entitled to vote
in the election of directors, considered for the purposes of this
Article EIGHTH as one class. For the purpose of this Article EIGHTH,
and without limiting the definition of "beneficial owner" or
"beneficially own," any Corporation, person or other entity shall be
deemed to be the "beneficial owner" of or to "beneficially own" any
share of stock of the Corporation: (a) which it has the right to
acquire either immediately or at some future date pursuant to any
agreement, or upon exercise of conversion rights, warrants or
options, or otherwise, or (b) which is "beneficially owned" directly
or indirectly (including shares deemed owned through application of
the foregoing clause (a) of this paragraph), by any other
Corporation, person or other entity either with which it or its
"affiliate" or "associate" has any agreement, arrangement or
understanding for the purpose of acquiring, holding voting or
disposing of stock of the Corporation, or which is its "affiliate" or
associate" as those terms are defined in Rule 12b-2 of the General
Rules and Regulations under the
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Securities Exchange Act of 1934 as in effect from time to time or any
successor provision. Also for purposes of this Article EIGHTH, the
"outstanding" shares of any class of stock of the Corporation shall
include shares deemed owned through application of the foregoing
clauses (a) and (b) of this paragraph, but shall not include any
other shares which may be issuable either immediately or at some
future date pursuant to any agreement, or upon exercise of conversion
rights, warrants or options, or otherwise.
"Continuing Director" means a director who was elected by the
public shareholders of the Corporation prior to the time that the
Related Person became a Related Person, or a person elected to
succeed a Continuing Director by a majority of the Continuing
Directors, so long as such Continuing Directors constitute a majority
of the Board of Directors of the Corporation both before and after
the Business Transaction.
This Article EIGHTH may not be amended, nor may it be repealed
in whole or in part, until authorized by the favorable vote of not
less than eight percent (80%) of all of the votes entitled to be cast
thereon by the holders of the issued and outstanding common stock of
the Corporation entitled to vote in elections of directors,
considered for the purposes of this Article to be a class, unless at
the time any such proposed amendment or repeal is submitted to vote
of the shareholders of the Corporation entitled to vote there is no
Related Person, as defined, in which event this Article EIGHTH may be
so amended or repealed by the favorable vote of not less than such
number of votes as shall otherwise be required by law at such time to
effect such amendment or repeal.
NINTH. No action required to be taken or which may be taken at any
annual or special meeting of stockholders of the Corporation may be
taken without a meeting, and the power of stockholders to consent in
writing, without a meeting, to the taking of any action is specifically
denied.
TENTH. A director of the Corporation shall not be liable to the
Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except to the extent that such exemption
from liability or limitation thereof is not permitted under the Delaware
General Corporation Law as currently in effect or as the same may
hereafter be amended. No amendment, modification or repeal of this
Article TENTH shall adversely affect any right or protection of a
director that exists at the time of such amendment, modification or
repeal.
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IN WITNESS WHEREOF, FIRST SECURITY CORPORATION has caused this certificate
to be signed by , its , on the day
of , 1999.
FIRST SECURITY CORPORATION
By:
------------------------------------
[insert name]
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<PAGE> 142
EXHIBIT A
DESIGNATIONS AND THE POWERS, PREFERENCES AND RIGHTS,
AND THE QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS OF
THE THREE DOLLAR AND FIFTEEN CENT ($3.15)
CUMULATIVE CONVERTIBLE PREFERRED STOCK, SERIES "A"
(a) Title of Series. The designation of the series of preferred stock shall
be "Three Dollar and Fifteen Cent ($3.15) Cumulative Convertible Preferred
Stock, Series 'A'," without par value (the "Series A Preferred shares").
(b) Number of Shares in Series. The number of shares of Series A Preferred
shares shall be 18,052.
(c) Dividends. The holders of record of the outstanding Series A Preferred
Shares as of January 1, and July 1, in each year shall be entitled to receive,
out of any funds legally available therefor, dividends at the rate of Three
Dollar and Fifteen Cents ($3.15) per annum per share, and no more, payable in
cash semiannually, beginning July 1, 1970, when and as declared by the Board of
Directors of the Corporation. Such dividends shall be cumulative so that if such
dividends in respect of any previous semiannual dividend period at the rate of
Three Dollars and Fifteen Cents ($3.15) per annum shall not have been paid on or
declared and set apart for all Series A Preferred shares at the time
outstanding, the deficiency shall be fully paid on or declared and set apart for
such shares before any dividend or other distribution shall be paid on or
declared or set apart for the common shares.
(d) Liquidation Preference.
(i) In the event of any liquidation, dissolution or winding up, of
this Corporation, the holders of Series A Preferred shares shall be
entitled to receive out of the assets of this Corporation, whether such
assets are capital or surplus of any nature, Fifty Two Dollars and Fifty
Cents ($52.50) per share, if the liquidation is involuntary and the
applicable redemption value, as provided in paragraph (e) of this
provision, if the liquidation is voluntary, and, in addition to such amount
a further amount equal to the dividends unpaid and accumulated thereon, as
provided in paragraph (c) of this provision, to the date that payment is
made available to the holders of Series A Preferred shares, whether earned
or declared or not, before any payment shall be made or any assets
distributed to the holders of common shares. The assets of the Corporation
remaining after such distribution shall be disbursed to the holders of the
common shares.
(ii) If upon such liquidation, dissolution or winding up, whether
voluntary or involuntary, the assets thus distributed among the holders of
Preferred shares shall be insufficient to permit the payment to such
shareholders of the full preferential amounts set forth in the respective
Certificates of Preference of each series of preferred shares, then the
entire assets of this Corporation to be distributed shall be distributed
ratably among the holders of the preferred shares.
(iii) A consolidation or merger of this Corporation with or into any
other corporation or corporations, or a sale of all or substantially all of
the assets of the Corporation, shall be deemed to be a liquidation,
dissolution or winding up, within the meaning of this paragraph.
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(e) Redemption.
(i) This Corporation, at the option of the Board of Directors, may at
any time from time to time commencing on July 1, 1975, redeem the whole or
any part of the outstanding Series A Preferred shares by paying in cash
therefor the applicable redemption value per share plus an amount equal to
all dividends on Series A Preferred shares unpaid and accumulated as
provided in paragraph (c) of this provision whether earned or declared or
not, to and including the date fixed for redemption such sum being
hereinafter sometimes referred to as the "Redemption Price." The applicable
redemption value shall be calculated in accordance with the following
table:
<TABLE>
<S> <C>
DURING TWELVE (12) MONTHS AFTER JULY 1
1975............................................ $53.75
1976....................................... $53.50
1977....................................... $53.25
1978....................................... $53.00
1979....................................... $52.75
On or after July 1, 1980
</TABLE>
In case of the redemption of a part only of the outstanding Series A
Preferred shares, this Corporation shall designate by lot, as hereinafter
set forth the shares to be redeemed, or shall effect such redemption pro
rata. Less than all of the Series A Preferred shares at any time
outstanding may not be redeemed until all dividends accrued and in arrears
upon all Series A Preferred shares outstanding shall have been paid for all
past dividend periods, and until full dividends for the then current
dividend period on all Series A Preferred shares then outstanding, other
than the shares to be redeemed, shall have been paid or declared and the
full amount thereof set apart for payment. At least thirty (30) days'
previous notice by mail, postage prepaid, shall be given to the holders of
record of the Series A Preferred shares to be redeemed, such notice to be
addressed to each such shareholder at his post office address as shown by
the records of this Corporation. On or after the date fixed for redemption
and states in such notice, each holder of any Series A Preferred shares
called for redemption shall surrender his certificate evidencing such
shares to this Corporation at the place designated in such notice and shall
thereupon be entitled to receive payment of the Redemption Price. If such
notice of redemption shall have been duly given, and if on the date fixed
for redemption funds necessary for the redemption shall be available
therefor, then, notwithstanding that the certificates evidencing any Series
A Preferred shares so called for redemption shall not have been
surrendered, the dividends with respect to the shares so called for
redemption shall cease to accrue after the date fixed for redemption and
all rights with respect to the shares so called for redemption shall
forthwith after such date cease and determine, except only the right of the
holders to receive the Redemption Price without interest upon surrender of
their certificates thereof.
(ii) If, on or prior to any date fixed for redemption of Series A
Preferred shares this Corporation deposits, with any bank or trust company,
in Salt Lake City, State of Utah, as a trust fund, a sum sufficient to
redeem, on the date fixed for redemption thereof, the shares called for
redemption, with irrevocable instructions and authority to the bank or
trust company to give the notice of redemption thereof if such notice shall
not previously have been given by this Corporation, or to complete the
giving of such notice if theretofore commenced, and to pay, on and after
the date fixed for redemption or prior thereto, the Redemption Price of the
shares to their respective holders upon the surrender of their share
certificates, then from and after the date of the deposit (although prior
to the date fixed for redemption), the shares so called shall be deemed to
be redeemed and dividends on those shares shall cease to accrue after the
date fixed for redemption. The deposit shall be deemed to constitute full
payment of the shares to
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their holders and from and after the date of the deposit the shares shall
be deemed to be no longer outstanding, and the holders thereof shall cease
to be shareholders with respect to such shares, and shall have no rights
with respect thereto except the right to receive from the bank or trust
company payment of the Redemption Price of the shares without interest,
upon the surrender of their certificates therefor and the right to convert
said shares as provided herein at any time up to but not after the close of
business on the fifth (5th) day prior to the date fixed for redemption of
such shares. Any moneys so deposited on account of the Redemption Price of
Series A Preferred shares converted subsequent to the making of such
deposit shall be repaid to the Corporation forthwith upon the conversion of
such shares, but only in that event.
(iii) Each Series A Preferred share shall bear a serial number. Each
serial number so assigned shall be shown on the share certificate
evidencing the same. In case of the redemption of a part only of the
outstanding Series A Preferred shares, other than a pro rata redemption of
the Series A Preferred shares, the board of directors shall, prior to the
giving of the notice provided for in subparagraph (e)(i) of this provision,
cause the serial numbers of the shares to be so redeemed to be drawn by lot
individually. If less than all of the Series A Preferred shares evidenced
by any share certificate are redeemed pursuant to the provisions hereof,
then each holder of the Series A Preferred shares not so redeemed shall
have the right to receive a new certificate evidencing the Series A
Preferred shares remaining outstanding, upon the surrender by him of his
old certificate.
(f) Conversion.
(i) Each holder of Series A Preferred shares may at any time on or
prior to the fifth (5th) day prior to such date, if any, as may have been
fixed for the redemption of any of the shares to be so converted in any
notice of redemption given pursuant to any provision hereof, or may at any
time with respect to any Series A Preferred shares not subject to such
notice, upon surrender of the certificates therefor, convert any or all of
his Series A Preferred shares into fully paid and non-assessable common
shares of the Corporation, at the rate of 1.35 common shares for each
Series A Preferred share so surrendered for conversion. Upon such
conversion no adjustment shall be made with respect to dividends that may
be cumulated and unpaid at the date of surrender for conversion. Such
option to convert shall be exercised by surrendering for such purpose to
the Corporation, at any place where the Corporation shall maintain a
transfer agency for its common shares or its Series A Preferred shares,
certificates representing the shares to be converted, duly endorsed in
blank or accompanied by proper instruments of transfer, and at the time of
such surrender, the person exercising such option to convert shall be
deemed to be the holder of record of the common shares issuable on such
conversion, notwithstanding that the share register of the Corporation
shall then be closed or the certificates representing such common shares
shall not then be actually delivered to him.
(ii) The number of common shares into which each Series A Preferred
share may be converted shall be subject to adjustment from time to time in
certain cases as follows:
A. In case the Corporation shall be recapitalized through the
subdivision or combination of its outstanding common shares into a
greater or smaller number of shares, then in each such case the number
of common shares into which Series A Preferred shares may be converted
shall be increased or reduced in the same proportion.
B. In case the Corporation shall take a record of the holders of
its common shares for the purpose of entitling them to receive a
dividend or other distribution payable in common shares or securities
convertible into or exchangeable for common shares, then in each such
case the maximum number of common shares issuable in payment of such
dividend or
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distribution or upon conversion of or in exchange for the securities
convertible into or exchangeable for common shares, shall be deemed to
have been issued and to be outstanding as of such record date, and in
each such case the number of common shares into which Series A Preferred
shares may be converted, shall be increased in proportion to the
increase, through such dividend or distribution, of the number of
outstanding common shares.
C. In case the Corporation shall take a record of the holders of
its common shares for the purpose of entitling them to subscribe for
additional common shares upon payment of an amount per common share less
than the market value (as hereinafter defined) per share of common
shares at the time such record is taken, then in each such case the
number of common shares deliverable upon the conversion of each Series A
Preferred share shall be increased in the ratio which (x) the sum of the
number of common shares outstanding at the time such record is taken and
the number of common shares offered bears to (y) the sum of the number
of common shares outstanding at the time such record is taken and the
number of common shares which the aggregate subscription price would
purchase at the market value per share of the common shares at the time
such record is taken. Upon the taking of a record by the Corporation of
the holders of its common shares for the purpose of entitling them to
subscribe for shares of stock or other securities convertible into,
exchangeable for, or carrying rights of purchase of, common shares, a
record shall be deemed to have been taken for the purpose of entitling
the holders of its common shares to subscribe for the number of common
shares deliverable upon the exercise of such rights of conversion,
exchange or purchase, upon payment of an aggregate price equal to the
sum of (x) the total consideration payable to the Corporation for such
stock or other securities so convertible or exchangeable, and (y) in the
case of such stock or other securities carrying such rights, but not so
convertible or exchangeable, the amount (if any) by which the
consideration payable to the Corporation for such stock or other
securities shall exceed the distributive amounts (excluding dividends)
payable on voluntary liquidation of this Corporation with respect to
such stock or the principal amount of such securities, as the case may
be, or the redemption price thereof, whichever is higher, and (z) any
additional amount thereafter payable to this Corporation upon the
exercise of such rights of conversion, exchange or purchase.
D. The market value per share of common shares at the time as of
which such market value is taken shall be deemed to be the average of
the daily closing prices for thirty (30) consecutive business days
selected by the Corporation out of the forty (40) days immediately
preceding the date as of which such market value is taken.
The closing price shall be the average of the closing bid and asked
prices for that day as determined and certified to the Corporation by
any member of the New York Stock Exchange.
E. In case of any capital reorganization or any reclassification of
the capital stock of the Corporation or in case of the consolidation or
merger of the Corporation with or into another corporation or the sale
or conveyance of all or substantially all of the assets of the
Corporation to another corporation, each Series A Preferred share shall
thereafter be convertible into the same kind and amounts of securities
(including shares of stock) or other asset, or both, which were issuable
or distributable to the holders of outstanding common shares of the
Corporation upon such reorganization, reclassification, consolidation,
merger, sale or conveyance, in respect of that number of common shares
into which such Series A Preferred share might have been converted
immediately prior to such reorganization, reclassification,
consolidation, merger, sale or conveyance; and in any such
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case, appropriate adjustments (as determined by the board of directors)
shall be made in the application of the provisions herein set forth with
respect to the rights and interest thereafter of the holders of the
Series A Preferred shares, to the end that the provisions set forth
herein (including provisions with respect to changes in, and other
adjustments of, the conversion rate) shall thereafter be applicable, as
nearly as reasonably may be, in relation to any securities or other
assets thereafter deliverable upon the conversion of the Series A
Preferred shares.
(iii) Whenever the amount of common shares or other securities
deliverable upon the conversion of Series A Preferred shares shall be
adjusted pursuant to the provisions hereof, the Corporation shall forthwith
file, at its principal office and with any transfer agent, or agents, and
registrar, or registrars, for Series A Preferred shares and for common
shares, a statement, signed by the President or one of the Vice Presidents
of the Corporation, and by its Treasurer or one of its Assistant
Treasurers, stating the adjusted amount of its common shares or other
securities deliverable per Series A Preferred share calculated to the
nearest one-hundredth (1/100) and setting forth in reasonable detail the
method of calculation and the facts requiring such adjustment and upon
which such calculation is based. Each adjustment shall remain in effect
until a subsequent adjustment hereunder is required.
(iv) The Corporation shall at all times reserve and keep available out
of its authorized but unissued common shares the full number of common
shares deliverable upon the conversion of all the then outstanding Series A
Preferred shares and shall take all such action and obtain all such permits
or orders as may be necessary to enable the Corporation lawfully to issue
such common shares upon the conversion of any Series A Preferred shares.
(v) No fractions of common shares shall be issued upon conversion.
Series A Preferred shareholders who otherwise would be entitled to receive
a fraction of a common share upon conversion of their Series A Preferred
shares will, upon exercise of the conversion privilege be permitted to sell
to, or acquire from, the Corporation a fractional common share so that all
of the shares distributed to them will be whole shares. Fractional shares
sold or acquired as aforesaid will be sold or acquired at a price equal to
the average of the closing bid and asked prices for that day as determined
and certified to the Corporation by any member of the New York Stock
Exchange.
(g) Default in Dividends.
(i) If at any time four (4) or more semi-annual dividends (whether
consecutive or not) on the Series A Preferred shares shall be in default,
in whole or in part, the holders of the Series A Preferred shares as a
class shall be entitled to elect four (4) directors and the holders of
common shares as a class shall be entitled to elect the remaining members
of the Board of Directors. At such times as all dividends accrued on the
outstanding Series A Preferred shares have been paid or declared and set
apart for payment, the rights of the holders of Series A Preferred shares
to vote as provided in this paragraph (g) shall cease, subject to renewal
from time to time upon the same terms and conditions.
(ii) Series A Preferred shareholders shall be entitled to elect four
(4) members of the Board of Directors of this Corporation at the next
annual meeting of shareholders after the voting power to elect four (4)
members of the Board of Directors shall have become vested in said
shareholders pursuant to this paragraph (g). The holders of a majority of
the then outstanding Series A Preferred shares, present in person or by
proxy, shall be sufficient to constitute a quorum for the election of the
four (4) directors as herein provided. The terms of office of all persons
who are directors of the Corporation at the time of such meeting shall
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terminate upon the election at such meeting by the holders of the Series A
Preferred shares of the number of directors they are entitled to elect, and
the persons so elected as directors by the holders of the Series A
Preferred shares, together with such persons as may be elected as directors
by the holders of the common shares, shall constitute the duly elected
directors of this Corporation.
(iii) Whenever the holders of the Series A Preferred shares shall be
divested of such voting power as hereinabove in this paragraph (f)
provided, the term of office of all persons who are at the time directors
of the Corporation shall terminate upon the election of their successors by
the holders of the common shares.
(iv) The voting rights accorded hereinabove to the Series A Preferred
shares shall be shared or pooled with any subsequent series of preferred
shares having voting rights concurrent with the Series A Preferred shares.
(h) Protective Provisions. So long as any preferred shares are outstanding
the Corporation shall not, without the approval (by vote or written consent, as
provided by law) of the holders of two-thirds ( 2/3) of the outstanding Series A
Preferred shares:
(i) amend or repeal any provision of, or add to, the Corporation's
Certificate of Incorporation if such action would alter or change the
preferences, rights, privileges, or powers of, or the restrictions provided
for the benefit of, any Series A Preferred shares so as to affect such
shares;
(ii) authorize or create shares of any class of stock having any
preference or priority superior to preference or priority of the Series A
Preferred shares, or authorize, create, or issue shares of stock of any
class or any bonds, debentures, notes or other obligations convertible into
or exchangeable for, or having optional rights to purchase, any shares of
stock of the Corporation having any such preference;
(iii) reclassify any common shares into shares having any preference
or priority as to dividends or assets superior to that of the Series A
Preferred shares; or
(iv) make any provision in the Corporation's by-laws fixing special
qualifications of persons who may be holders of Series A Preferred shares
or any restrictions upon the right to transfer or hypothecate such shares,
except any provisions required by the laws of the State of Delaware or of
the United States of America.
(i) Other Rights.
(i) The holders of both the Series A Preferred shares and the common
shares issued and outstanding, shall have and possess the right to notice
of all shareholders' meetings.
(ii) Each share of both the Series A Preferred and the common stock
shall have voting rights and powers. Subject to all of the rights of the
Series A Preferred shares, dividends may be paid on the common shares, as
and when declared by the Board of Directors, out of any funds of this
Corporation legally available for the payment of such dividends.
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EXHIBIT A-2
TO APPENDIX A
AMENDED AND RESTATED BY-LAWS
OF
FIRST SECURITY CORPORATION
ARTICLE I
STOCKHOLDERS
SECTION 1.1. Annual Meetings. The annual meeting of stockholders shall be
held for the election of directors during the month of April, on such date and
time as may be designated by the Board of Directors from time to time at the
principal office of the Corporation in Salt Lake City, Utah or at such other
place as may be designated by the Board of Directors from time to time. Any
other proper business may be transacted at the annual meeting.
SECTION 1.2. Special Meetings. Special meetings of stockholders may be
called at any time by the Board of Directors, to be held at such date, time and
place as may be stated in the notice of the meeting.
SECTION 1.3. Notice of Meetings. Whenever stockholders are required or
permitted to take any action at a meeting, a written notice of the meeting shall
be given which shall state the place, date and hour of the meeting, and, in the
case of a special meeting, the purpose or purposes for which the meeting is
called. Unless otherwise provided by law, the written notice of any meeting
shall be given not less than ten nor more than sixty days before the date of the
meeting to each stockholder entitled to vote at such meeting. If mailed, such
notice shall be deemed to be given when deposited in the United States mail,
postage prepaid, directed to the stockholder at such stockholder's address as it
appears on the records of the Corporation.
SECTION 1.4. Adjournments. Any meeting of stockholders, annual or special,
may be adjourned from time to time, to reconvene at the same or some other
place, and notice need not be given of any such adjourned meeting if the time
and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting, the Corporation may transact any business which
might have been transacted at the original meeting. If the adjournment is for
more than thirty days, or if after the adjournment a new record date is fixed
for the adjourned meeting, a notice of the adjourned meeting shall be given to
each stockholder of record entitled to vote at the meeting.
SECTION 1.5. Quorum. At each meeting of stockholders, except where
otherwise provided by law or the certificate of incorporation or these by-laws,
the holders of a majority of the outstanding shares of stock entitled to vote on
a matter at the meeting, present in person or represented by proxy, shall
constitute a quorum. For purposes of the foregoing, where a separate vote by
class or classes is required for any matter, the holders of a majority of the
outstanding shares of such class or classes, present in person or represented by
proxy, shall constitute a quorum to take action with respect to that vote on
that matter. Two or more classes or series of stock shall be considered a single
class if the holders thereof are entitled to vote together as a single class at
the meeting. In the absence of a quorum of the holders of any class of stock
entitled to vote on a matter, the holders of such class so present or
represented may, by majority vote, adjourn the meeting of such class from time
to time in the manner provided by Section 1.4 of these by-laws until a quorum of
such class shall be so present or represented. Shares of its own capital stock
belonging on the record date for the meeting to the Corporation or to another
corporation, if a majority of the shares entitled to vote in the election of
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directors of such other corporation is held, directly or indirectly, by the
Corporation, shall neither be entitled to vote nor be counted for quorum
purposes; provided, however, that the foregoing shall not limit the right of the
Corporation to vote stock, including but not limited to its own stock, held by
it in a fiduciary capacity.
SECTION 1.6. Organization. The order of business at each such meeting shall
be as determined by the person(s) presiding over the meeting (hereinafter
referred to as the chairman of the meeting). The chairman of the meeting shall
have the right and authority to prescribe such rules, regulations and procedures
and to do all such acts and things as are necessary or desirable for the proper
conduct of the meeting, including, without limitation, the establishment of
procedures for the maintenance of order and safety, limitations on the time
allotted to questions or comments on the affairs of the Corporation,
restrictions on entry to such meeting after the time prescribed for the
commencement thereof and the opening and closing of the voting polls.
SECTION 1.7. Inspectors. Prior to any meeting of stockholders, the Board of
Directors or the President shall appoint one or more inspectors to act at such
meeting and make a written report thereof and may designate one or more persons
as alternate inspectors to replace any inspector who fails to act. If no
inspector or alternate is able to act at the meeting of stockholders, the person
presiding at the meeting shall appoint one or more inspectors to act at the
meeting. Each inspector, before entering upon the discharge of his or her
duties, shall take and sign an oath faithfully to execute the duties of
inspector with strict impartiality and according to the best of his or her
ability. The inspectors shall ascertain the number of shares outstanding and the
voting power of each, determine the shares represented at the meeting and the
validity of proxies and ballots, count all votes and ballots, determine and
retain for a reasonable period a record of the disposition of any challenges
made to any determination by the inspectors and certify their determination of
the number of shares represented at the meeting and their count of all votes and
ballots. The inspectors may appoint or retain other persons to assist them in
the performance of their duties. The date and time of the opening and closing of
the polls for each matter upon which the stockholders shall vote at a meeting
shall be announced at the meeting. No ballot, proxy or vote, nor any revocation
thereof or change thereto, shall be accepted by the inspectors after the closing
of the polls. In determining the validity and counting of proxies and ballots,
the inspectors shall be limited to an examination of the proxies, any envelopes
submitted therewith, any information provided by a stockholder who submits a
proxy by telegram, cablegram or other electronic transmission from which it can
be determined that the proxy was authorized by the stockholder, ballots and the
regular books and records of the Corporation, and they may also consider other
reliable information for the limited purpose of reconciling proxies and ballots
submitted by or on behalf of banks, brokers, their nominees or similar persons
which represent more votes than the holder of a proxy is authorized by the
record owner to cast or more votes than the stockholder holds of record. If the
inspectors consider other reliable information for such purpose, they shall, at
the time they make their certification, specify the precise information
considered by them, including the person or persons from whom they obtained the
information, when the information was obtained, the means by which the
information was obtained and the basis for the inspectors' belief that such
information is accurate and reliable.
SECTION 1.8. Voting; Proxies. Unless otherwise provided in the certificate
of incorporation, each stockholder entitled to vote at any meeting of
stockholders shall be entitled to one vote for each share of stock held by such
stockholder which has voting power upon the matter in question. Each stockholder
entitled to vote at a meeting of stockholders may authorize another person or
persons to act for such stockholder by proxy, but no such proxy shall be voted
or acted upon after three years from its date, unless the proxy provides for a
longer period. A duly executed proxy shall be irrevocable if it states that it
is irrevocable and if, and only as long as, it is coupled with an interest
sufficient in law to support an irrevocable power, regardless of whether the
interest with which it is
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coupled is an interest in the stock itself or an interest in the Corporation
generally. A stockholder may revoke any proxy which is not irrevocable by
attending the meeting and voting in person or by filing an instrument in writing
revoking the proxy or another duly executed proxy bearing a later date with the
Secretary of the Corporation. Voting at meetings of stockholders need not be by
written ballot unless the holders of a majority of the outstanding shares of all
classes of stock entitled to vote thereon present in person or represented by
proxy at such meeting shall so determine. Directors shall be elected by a
plurality of the votes of the shares present in person or represented by proxy
at the meeting and entitled to vote on the election of directors. In all other
matters, unless otherwise provided by law or by the certificate of incorporation
or these by-laws, the affirmative vote of the holders of a majority of the
shares present in person or represented by proxy at the meeting and entitled to
vote on the subject matter shall be the act of the stockholders. Where a
separate vote by class or classes is required, the affirmative vote of the
holders of a majority of the shares of such class or classes present in person
or represented by proxy at the meeting shall be the act of such class or
classes, except as otherwise provided by law or by the certificate of
incorporation or these by-laws.
SECTION 1.9. Fixing Date for Determination of Stockholders of Record. In
order that the Corporation may determine the stockholders entitled to notice of
or to vote at any meeting of stockholders or any adjournment thereof, the Board
of Directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the Board of
Directors, and which record date shall not be more than sixty nor less than ten
days before the date of such meeting. If no record date is fixed by the Board of
Directors, the record date for determining stockholders entitled to notice of or
to vote at a meeting of stockholders shall be at the close of business on the
day next preceding the day on which notice is given, or, if notice is waived, at
the close of business on the day next preceding the day on which the meeting is
held. A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
In order that the Corporation may determine the stockholders entitled to
receive payment of any dividend or other distribution or allotment of any rights
or the stockholders entitled to exercise any rights in respect of any change,
conversion or exchange of stock, or for the purpose of any other lawful action,
the Board of Directors may fix a record date, which record date shall not
precede the date upon which the resolution fixing the record date is adopted,
and which record date shall be not more than sixty days prior to such action. If
no record date is fixed, the record date for determining stockholders for any
such purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto.
Section 1.10. List of Stockholders Entitled to Vote. The Secretary shall
prepare and make, at least ten days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof and may be inspected by any stockholder who is present.
SECTION 1.11. Advance Notice of Stockholder Proposals. At any annual or
special meeting of stockholders, proposals by stockholders and nominations for
persons for election as directors by stockholders shall be considered only if
advance notice thereof has been timely given as provided herein and such
proposals or nominations are otherwise proper for consideration under applicable
law
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and the certificate of incorporation and by-laws of the Corporation. Notice of
any proposal to be presented by any stockholder or of the name of any person to
be nominated by any stockholder for election as a director of the Corporation at
any meeting of stockholders shall be delivered to the Secretary of the
Corporation at its principal executive office not less than 90 nor more than 120
days prior to the date of the meeting; provided, however, that if the date of
the meeting is first publicly announced or disclosed (in a public filing or
otherwise) less than 100 days prior to the date of the meeting, such advance
notice shall be given not more than ten days after such date is first so
announced or disclosed. Public notice shall be deemed to have been given more
than 100 days in advance of the annual meeting if the Corporation shall have
previously disclosed, in these by-laws or otherwise, that the annual meeting in
each year is to be held on a determinable date, unless and until the Board of
Directors determines to hold the meeting on a different date. Any stockholder
who gives notice of any such proposal shall deliver therewith the text of the
proposal to be presented and a brief written statement of the reasons why such
stockholder favors the proposal and setting forth such stockholder's name and
address, the number and class of all shares of each class of stock of the
Corporation beneficially owned by such stockholder, the name and address of any
person upon whose behalf such stockholder is acting, or with whom such
stockholder is acting in concert, the number and class of all shares of each
class of stock of the Corporation beneficially owned by any such person, and any
material interest of such stockholder in the proposal (other than as a
stockholder). Any stockholder desiring to nominate any person for election as a
director of the Corporation shall deliver with such notice a statement in
writing setting forth the name of the person to be nominated, the number and
class of all shares of each class of stock of the Corporation beneficially owned
by such person, the information regarding such person required by paragraphs
(a), (e) and (f) of Item 401 of Regulation S-K adopted by the Securities and
Exchange Commission (or the corresponding provisions of any regulation
subsequently adopted by the Securities and Exchange Commission applicable to the
Corporation), such person's signed consent to serve as a director of the
Corporation if elected, such stockholder's name and address, the number and
class of all shares of each class of stock of the Corporation beneficially owned
by such stockholder and the name and address of any person upon whose behalf
such stockholder is acting or with whom such stockholder is acting in concert.
As used herein, shares "beneficially owned" shall mean all shares as to which
such person, together with such person's affiliates and associates (as defined
in Rule 12b-2 under the Securities Exchange Act of 1934), may be deemed to
beneficially own pursuant to Rules 13d-3 and 13d-5 under the Securities Exchange
Act of 1934, as well as all shares as to which such person, together with such
person's affiliates and associates, has the right to become the beneficial owner
pursuant to any agreement or understanding, or upon the exercise of warrants,
options or rights to convert or exchange (whether such rights are exercisable
immediately or only after the passage of time or the occurrence of conditions).
The person presiding at the meeting, in addition to making any other
determinations that may be appropriate to the conduct of the meeting, shall
determine whether such notice has been duly given and shall direct that
proposals and nominees not be considered if such notice has not been given.
ARTICLE II
BOARD OF DIRECTORS
SECTION 2.1. Powers; Number; Qualifications. The business and affairs of
the Corporation shall be managed by or under the direction of the Board of
Directors, except as may be otherwise provided by law or in the certificate of
incorporation. After the annual meeting of stockholders in the year 2002, the
Board of Directors shall consist of one or more members, the number thereof to
be determined from time to time by the Board of Directors. Prior to and through
the annual meeting of
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stockholders in the year 2002, the number of directors shall be as set forth in
the certificate of incorporation. Directors need not be stockholders.
SECTION 2.2. Election; Term of Office; Resignation; Removal;
Vacancies. Each director shall hold office until the next election of the class
for which such director shall have been chosen, and until his or her successor
is elected and qualified or until his or her earlier resignation or removal. Any
director may resign at any time upon written notice to the Board of Directors or
to the President or the Secretary of the Corporation. Such resignation shall
take effect at the time specified therein, and unless otherwise specified
therein no acceptance of such resignation shall be necessary to make it
effective. Any director or the entire Board of Directors may be removed, with
cause, by the holders of a majority of the shares then entitled to vote at an
election of directors. Cause for removal shall be deemed to exist only if the
director whose removal is proposed has been convicted of a felony by a court of
competent jurisdiction or has been adjudged by a court of competent jurisdiction
to be liable for gross negligence or misconduct in the performance of such
director's duty to the Corporation and such adjudication is no longer subject to
direct appeal. Except as provided in the next sentence, and unless otherwise
provided in the certificate of incorporation or elsewhere in these by-laws,
vacancies and newly created directorships resulting from any increase in the
authorized number of directors elected by all of the stockholders having the
right to vote as a single class or from any other cause may be filled by a
majority of the directors then in office, although less than a quorum, or by the
sole remaining director. Prior to the annual meeting of stockholders in the year
2002, vacancies shall be filled (i) by the designation of the Zions Chief
Executive Officer, or in the absence of the Zions Chief Executive Officer, by
the affirmative vote of a majority of the continuing Zions -- Original
Directors, if the vacancy was created as a result of the resignation, removal,
death or disability of a Zions -- Original Director (as defined in the
certificate of incorporation), or (ii) by the designation of the First Security
Chief Executive Officer, or in the absence of the First Security Chief Executive
Officer, by the affirmative vote of a majority of the continuing First
Security -- Original Directors, if the vacancy was created as a result of the
resignation, removal, death or disability of a First Security -- Original
Director (as defined in the certificate of incorporation). Whenever the holders
of any class or classes of stock or series thereof are entitled to elect one or
more directors by the certificate of incorporation, vacancies and newly created
directorships of such class or classes or series may be filled by a majority of
the directors elected by such class or classes or series thereof then in office,
or by the sole remaining director so elected. Any director elected or appointed
to fill a vacancy shall hold office until the next election of the class of
directors of the director which such director replaced, and until and his or her
successor is elected and qualified or until his or her earlier resignation or
removal. Upon retirement of the First Security Chief Executive Officer from the
Board of Directors, which shall be at his discretion, he shall be replaced by a
member of the family of the First Security Chief Executive Officer, subject to
applicable legal duties of the Board of Directors.
SECTION 2.3. Regular Meetings. Regular meetings of the Board of Directors
shall be held at the Corporation's offices or any other place within or without
the State of Delaware and at such times as the Board of Directors may from time
to time determine, and if so determined notice thereof need not be given.
SECTION 2.4. Special Meetings. Special meetings of the Board of Directors
may be held at any time or place within or without the State of Delaware
whenever called by the President or by the majority of the Board of Directors.
Reasonable notice thereof shall be given by the person or persons calling the
meeting.
SECTION 2.5. Participation in Meetings by Conference Telephone
Permitted. Members of the Board of Directors, or any committee designated by the
Board of Directors, may participate in a meeting of the Board of Directors or of
such committee, as the case may be, by means of conference telephone or similar
communications equipment by means of which all persons participating in the
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meeting can hear each other, and participation in a meeting pursuant to this
by-law shall constitute presence in person at such meeting.
SECTION 2.6. Quorum; Vote Required for Action. At all meetings of the Board
of Directors a majority of the entire Board of Directors shall constitute a
quorum for the transaction of business. The vote of a majority of the directors
present at a meeting at which a quorum is present shall be the act of the Board
of Directors unless the certificate of incorporation or these by-laws shall
require a vote of a greater number. In case at any meeting of the Board of
Directors a quorum shall not be present, the members of the Board of Directors
present may adjourn the meeting from time to time until a quorum shall be
present.
SECTION 2.7. Action by Directors Without a Meeting. Unless otherwise
restricted by the certificate of incorporation or these by-laws, any action
required or permitted to be taken at any meeting of the Board of Directors, or
of any committee thereof, may be taken without a meeting if all members of the
Board of Directors or of such committee, as the case may be, consent thereto in
writing, and the writing or writings are filed with the minutes of proceedings
of the Board of Directors or committee.
SECTION 2.8. Compensation of Directors. Unless otherwise restricted by the
certificate of incorporation or these by-laws, the Board of Directors shall have
the authority to fix the compensation of directors.
ARTICLE III
COMMITTEES
SECTION 3.1.* Committees. The Board of Directors may designate one or more
committees, each committee to consist of one or more of the directors of the
Corporation; provided, however, that until the annual meeting of stockholders in
the year 2002, any committee of the Board of Directors shall be comprised of an
equal number of Zions -- Original Directors and First Security -- Original
Directors. The Board of Directors may designate one or more directors as
alternate members of any committee; such alternate member may replace any absent
or disqualified member at any meeting of the committee but only if, prior to the
annual meeting of stockholders in the year 2002, after such replacement and
giving effect thereto, the committee would continue to be comprised of an equal
number of Zions -- Original Directors and First Security -- Original Directors.
In the absence or disqualification of a member of a committee, the member or
members thereof present at any meeting and not disqualified from voting, whether
or not such member or members constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absent or disqualified member, but only if, prior to the annual meeting
of stockholders in the year 2002, after the appointment of such a replacement
and giving effect thereto, the committee would continue to be comprised of an
equal number of Zions -- Original Directors and First Security -- Original
Directors. Any such committee, to the extent provided in the resolution of the
Board of Directors or in these by-laws, shall have and may exercise all the
powers and authority of the Board of Directors in the management of the business
and affairs of the Corporation, and may authorize the seal of the Corporation to
be affixed to all papers which may require it; but no such committee shall have
the power or authority in reference to the following matters: (i) approving or
adopting, or recommending to the stockholders, any action or matter expressly
required by law to be
- ---------------
* The First Security Board needs to adopt a resolution electing to be governed
by paragraph (c)(2) of Section 141 of the DGCL. Otherwise, a committee can
only be established by a majority of the whole board and this Section 3.1 will
need to be conformed to paragraph (c)(1) of Section 141 of the DGCL.
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submitted to stockholders for approval, (ii) adopting, amending or repealing
these by-laws or (iii) removing or indemnifying directors.
SECTION 3.2. Executive and Nominating Committees.
(a) (i) The Board of Directors shall designate an Executive Committee
of the Board of Directors, which Executive Committee shall consist of six
directors including both the Zions Chief Executive Officer and the First
Security Chief Executive Officer of the Corporation each of whom shall be
the Co-Chairman of the Executive Committee. The four remaining members of
the Executive Committee shall be comprised of an equal number of
Zions -- Original Directors and First Security -- Original Directors. Each
of the Zions Chief Executive Officer and the First Security Chief Executive
Officer shall be a Chairman or a Co-Chairman of the Executive Committee for
so long as he serves as a Chief Executive Officer or a Co-Chief Executive
Officer of the Corporation. The First Security Chief Executive Officer
shall continue to serve as a member of the Executive Committee after he
ceases to serve as Co-Chief Executive Officer at his discretion for so long
as he is a director of the Surviving Corporation.
(ii) The Executive Committee, when the Board of Directors is not in
session, shall have and may exercise all the powers and authority of the
Board of Directors except to the extent, if any, that such authority may
be limited by the resolution appointing the members of the Executive
Committee, except to the extent any such powers and authority have been
delegated to any other committee of the Board of Directors, or reserved
by the Board of Directors to itself, and except that the Executive
Committee shall not have the authority of the Board of Directors in
reference to amending the certificate of incorporation, adopting a plan
of merger or consolidation, recommending to the stockholders the sale,
lease or other disposition of all or substantially all the property and
assets of the Corporation otherwise than in the usual and regular course
of its business or amending these by-laws.
(iii) Each member of the Executive Committee shall hold office
until the next regular annual meeting of the Board of Directors
following his or her designation and until his successor is designated
as a member of the Executive Committee and is elected and qualified.
(iv) Regular and special meetings of the Executive Committee may be
called by a Chairman of the Executive Committee, which notice may be
written or oral, and if mailed, shall be deemed to be delivered when
deposited in the United states mail addressed to the member of the
Executive Committee at his or her business address, to be held at such
date, time and place as may be stated in the notice of the meeting. Any
member of the Executive Committee may waive notice of any meeting and no
notice of any meeting need be given to any member thereof who attends in
person. The notice of a meeting of the Executive Committee need not
state the business proposed to be transacted at the meeting.
(v) A majority of the members of the Executive Committee shall
constitute a quorum for the transaction of business at a meeting
thereof. The vote of a majority of the members of the Executive
Committee present at a meeting at which a quorum is present shall be the
act of the Executive Committee unless the certificate of incorporation
or these by-laws shall require a vote of a greater number.
(vi) Unless otherwise restricted by the certificate of
incorporation or these by-laws, any action required or permitted to be
taken at any meeting of the Executive Committee may be taken without a
meeting if all members of the Executive Committee consent thereto in
writing, and the writing or writings are filed with the minutes of
proceedings of the Executive Committee.
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(vii) Until the annual meeting of stockholders in the year 2002,
any vacancy in the Executive Committee resulting from the removal,
resignation, death or disability of a member who was a Zions -- Original
Director shall be filled by the Zions Chief Executive Officer of the
Corporation or by the affirmative vote of a majority of the continuing
Zions -- Original Directors, and any vacancy in the Executive Committee
resulting from the removal, resignation, death or disability of a member
who was a First Security -- Original Director shall be filled by the
First Security Chief Executive Officer of the Corporation or by the
affirmative vote of a majority of the continuing First
Security -- Original Directors. After the annual meeting of stockholders
the year 2002, any vacancy in the Executive Committee may be filled by a
resolution adopted by the Board of Directors.
(b) (i) For the period beginning with the effective time (the
"Effective Time") specified in the certificate of merger of the Corporation
filed with respect to the merger contemplated by the Agreement and Plan of
Merger, dated as of June 6, 1999 (the "Merger Agreement"), by and between
Zions Bancorporation, a Utah corporation ("Zions"), and the Corporation,
and continuing through the annual meeting of stockholders in the year 2002,
the following provisions of this paragraph (b) shall apply. The Board of
Directors shall designate a Nominating Committee of the Board of Directors,
which Nominating Committee shall consist of two directors and shall have
and may exercise all the powers and authority of the Board of Directors in
respect of the nomination of persons to be recommended to the stockholders
for election to the Board of Directors. Until the annual meeting of
stockholders in the year 2002, the Nominating Committee shall consist of
two directors, one initially designated by Zions and one initially
designated by the Corporation, as provided in the Merger Agreement (the
"Zions Designee" and the "First Security Designee", respectively).
(ii) In the event that either the Zions Designee or the First
Security Designee cannot serve on the Nominating Committee for any
reason, then the Zions Chief Executive Officer of the Corporation and
the First Security Chief Executive Officer of the Corporation shall
mutually select a replacement. In the event that the Zions Chief
Executive Officer and the First Security Chief Executive Officer cannot
agree upon a replacement, then the replacement member of the Nominating
Committee shall be (i) a director initially appointed by Zions pursuant
to the Merger Agreement, if the director to be replaced was a
Zions -- Original Director, or (ii) a director initially appointed by
the Corporation pursuant to the Merger Agreement, if the director to be
replaced was a First Security -- Original Director, such replacement to
be selected by the remaining members of the Board of Directors initially
nominated by Zions or the Corporation, as the case may be, pursuant to
the Merger Agreement.
(iii) Unless otherwise restricted by the certificate of
incorporation or these by-laws, any action required or permitted to be
taken at any meeting of the Nominating Committee may be taken without a
meeting if both members of the Nominating Committee consent thereto in
writing, and the writing or writings are filed with the minutes of
proceedings of the Nominating Committee.
SECTION 3.3. Committee Rules. Unless the Board of Directors otherwise
provides, each committee designated by the Board of Directors may adopt, amend
and repeal rules for the conduct of its business. In the absence of a provision
by the Board of Directors or a provision in the rules of such committee or a
provision of these by-laws to the contrary, a majority of the entire authorized
number of members of such committee shall constitute a quorum for the
transaction of business, the vote of a majority of the members present at a
meeting at the time of such vote if a quorum is then present shall be the act of
such committee, and in other respects each committee shall conduct its
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business in the same manner as the Board of Directors conducts its business
pursuant to Article II of these by-laws.
ARTICLE IV
OFFICERS
SECTION 4.1. Officers; Election.
(a) Except as provided in paragraphs (a) and (b) of this Section 4.1, as
soon as practicable after the annual meeting of stockholders in each year, the
Board of Directors shall elect a Chief Executive Officer or Chief Executive
Officers, a Chairman, who shall be a member of the Board, a President and a
Secretary. The Board of Directors may also elect one or more Executive Vice
Presidents, one or more Vice Presidents, one or more Assistant Secretaries, a
Treasurer and one or more Assistant Treasurers and such other officers as the
Board of Directors may deem desirable or appropriate and may give any of them
such further designations or alternate titles as it considers desirable. Any
number of offices may be held by the same person unless the certificate of
incorporation or these by-laws otherwise provide.
(b) Upon the Effective Time, each of Harris H. Simmons and Spencer F.
Eccles shall serve as a Co-Chief Executive Officer of the Corporation (the
"Zions Chief Executive Officer" and the "First Security Chief Executive
Officer," respectively). At and after the annual meeting of stockholders in the
year 2002, there shall be only one Chief Executive Officer of the Corporation
who shall be Harris H. Simmons and who shall hold such office until his
successor is elected and qualified or until his earlier resignation or removal.
Prior to the annual meeting of stockholders in the year 2002, if Harris H.
Simmons is unable to serve as Co-Chief Executive Officer or Chief Executive
Officer, as the case may be, for any reason, the Board of Directors shall
appoint a special committee to select a replacement. At least two-thirds of the
members of such special committee of the Board of Directors shall consist of the
remaining members of the Board of Directors originally nominated by Zions to the
Board of Directors pursuant to the Merger Agreement. Neither Harris H. Simmons
nor Spencer F. Eccles shall be removed from his position as Co-Chief Executive
Officer of the Corporation except upon the affirmative vote of two-thirds of the
Board of Directors.
(c) Upon the Effective Time, Spencer F. Eccles shall serve as Chairman of
the Board of Directors and he shall hold such office until his seventieth
birthday. Upon the seventieth birthday of Spencer F. Eccles, (i) Harris H.
Simmons shall succeed him as Chairman of the Board and shall hold such office
until his successor is elected and qualified or until his earlier resignation or
removal and (ii) Spencer F. Eccles shall serve as Chairman Emeritus of the
Board.
(d) Upon the Effective Time, Harris H. Simmons shall serve as President of
the Corporation and as Chief Operating Officer of the Corporation and shall hold
such offices for so long as he serves as a Chief Executive Officer or a Co-Chief
Executive Officer of the Corporation or until his earlier resignation or
removal.
SECTION 4.2. Term of Office; Resignation; Removal; Vacancies. Unless
otherwise provided in the resolution of the Board of Directors electing any
officer and except as provided in Section 4.1, each officer shall hold office
until his or her successor is elected and qualified or until his or her earlier
resignation or removal. Any officer may resign at any time upon written notice
to the Board of Directors or to the President or the Secretary of the
Corporation. Such resignation shall take effect at the time specified therein,
and unless otherwise specified therein no acceptance of such resignation shall
be necessary to make it effective. Except as set forth in Section 4.1, the Board
of Directors may remove any officer with or without cause at any time. Any such
removal shall be without prejudice to
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the contractual rights of such officer, if any, with the Corporation, but the
election of an officer shall not of itself create contractual rights. Except as
set forth in Section 4.1, any vacancy occurring in any office of the Corporation
by death, resignation, removal or otherwise may be filled by the Board of
Directors at any regular or special meeting.
SECTION 4.3. Powers and Duties. The officers of the Corporation shall have
such powers and duties in the management of the Corporation as shall be stated
in these by-laws or in a resolution of the Board of Directors which is not
inconsistent with these by-laws and, to the extent not so stated, as generally
pertain to their respective offices, subject to the control of the Board of
Directors. The Secretary shall have the duty to record the proceedings of the
meetings of the stockholders, the Board of Directors and any committees in a
book to be kept for that purpose. The Board of Directors may require any
officer, agent or employee to give security for the faithful performance of his
or her duties.
ARTICLE V
STOCK
SECTION 5.1. Certificates. Every holder of stock in the Corporation shall
be entitled to have a certificate signed by or in the name of the Corporation by
the Chairman or Vice Chairman of the Board of Directors, if any, or the
President or a Vice President, and by the Treasurer or an Assistant Treasurer,
or the Secretary or an Assistant Secretary, of the Corporation, representing the
number of shares of stock in the Corporation owned by such holder. If such
certificate is manually signed by one officer or manually countersigned by a
transfer agent or by a registrar, any other signature on the certificate may be
a facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent or registrar before such certificate is
issued, it may be issued by the Corporation with the same effect as if such
person were such officer, transfer agent or registrar at the date of issue.
If the Corporation is authorized to issue more than one class of stock or
more than one series of any class, the powers, designations, preferences and
relative, participating, optional or other special rights of each class of stock
or series thereof and the qualifications or restrictions of such preferences
and/or rights shall be set forth in full or summarized on the face or back of
the certificate which the Corporation shall issue to represent such class or
series of stock, provided that, except as otherwise provided by law, in lieu of
the foregoing requirements, there may be set forth on the face or back of the
certificate which the Corporation shall issue to represent such class or series
of stock a statement that the Corporation shall furnish without charge to each
stockholder who so requests the powers, designations, preferences and relative,
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of such preferences
and/or rights.
SECTION 5.2. Lost, Stolen or Destroyed Stock Certificates; Issuance of New
Certificates. The Corporation may issue a new certificate of stock in the place
of any certificate theretofore issued by it, alleged to have been lost, stolen
or destroyed, and the Corporation may require the owner of the lost, stolen or
destroyed certificate, or such owner's legal representative, to give the
Corporation a bond sufficient to indemnify it against any claim that may be made
against it on account of the alleged loss, theft or destruction of any such
certificate or the issuance of such new certificate.
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ARTICLE VI
MISCELLANEOUS
SECTION 6.1. Fiscal Year. The fiscal year of the Corporation shall be
determined by the Board of Directors.
SECTION 6.2. Seal. The Corporation may have a corporate seal which shall
have the name of the Corporation inscribed thereon and shall be in such form as
may be approved from time to time by the Board of Directors. The corporate seal
may be used by causing it or a facsimile thereof to be impressed or affixed or
in any other manner reproduced.
SECTION 6.3. Waiver of Notice of Meetings of Stockholders, Directors and
Committees. Whenever notice is required to be given by law or under any
provision of the certificate of incorporation or these by-laws, a written waiver
thereof, signed by the person entitled to notice, whether before or after the
time stated therein, shall be deemed equivalent to notice. Attendance of a
person at a meeting shall constitute a waiver of notice of such meeting, except
when the person attends a meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened. Neither the business to be transacted at,
nor the purpose of, any regular or special meeting of the stockholders,
directors or members of a committee of directors need be specified in any
written waiver of notice unless so required by the certificate of incorporation
or these by-laws.
SECTION 6.4. Indemnification of Directors, Officers and Employees. The
Corporation shall indemnify to the full extent permitted by law any person made
or threatened to be made a party to any action, suit or proceeding, whether
civil, criminal, administrative or investigative, by reason of the fact that
such person or such person's testator or intestate is or was a director, officer
or employee of the Corporation or serves or served at the request of the
Corporation any other enterprise as a director, officer or employee. Expenses,
including attorneys' fees, incurred by any such person in defending any such
action, suit or proceeding shall be paid or reimbursed by the Corporation
promptly upon receipt by it of an undertaking of such person to repay such
expenses if it shall ultimately be determined that such person is not entitled
to be indemnified by the Corporation. The rights provided to any person by this
by-law shall be enforceable against the Corporation by such person who shall be
presumed to have relied upon it in serving or continuing to serve as a director,
officer or employee as provided above. No amendment of this by-law shall impair
the rights of any person arising at any time with respect to events occurring
prior to such amendment. For purposes of this by-law, the term "Corporation"
shall include any predecessor of the Corporation and any constituent corporation
(including any constituent of a constituent) absorbed by the Corporation in a
consolidation or merger; the term "other enterprise" shall include any
corporation, partnership, joint venture, trust or employee benefit plan; service
"at the request of the Corporation" shall include service as a director, officer
or employee of the Corporation which imposes duties on, or involves services by,
such director, officer or employee with respect to an employee benefit plan, its
participants or beneficiaries; any excise taxes assessed on a person with
respect to an employee benefit plan shall be deemed to be indemnifiable
expenses; and action by a person with respect to an employee benefit plan which
such person reasonably believes to be in the interest of the participants and
beneficiaries of such plan shall be deemed to be action not opposed to the best
interests of the Corporation.
SECTION 6.5. Interested Directors; Quorum. No contract or transaction
between the Corporation and one or more of its directors or officers, or between
the Corporation and any other corporation, partnership, association or other
organization in which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the
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Board of Directors or committee thereof which authorizes the contract or
transaction, or solely because his or her or their votes are counted for such
purpose, if: (1) the material facts as to his or her relationship or interest
and as to the contract or transaction are disclosed or are known to the Board of
Directors or the committee, and the Board of Directors or committee in good
faith authorizes the contract or transaction by the affirmative votes of a
majority of the disinterested directors, even though the disinterested directors
be less than a quorum; or (2) the material facts as to his or her relationship
or interest and as to the contract or transaction are disclosed or are known to
the stockholders entitled to vote thereon, and the contract or transaction is
specifically approved in good faith by vote of the stockholders; or (3) the
contract or transaction is fair as to the Corporation as of the time it is
authorized, approved or ratified, by the Board of Directors, a committee thereof
or the stockholders. Common or interested directors may be counted in
determining the presence of a quorum at a meeting of the Board of Directors or
of a committee which authorizes the contract or transaction.
SECTION 6.6. Form of Records. Any records maintained by the Corporation in
the regular course of its business, including its stock ledger, books of account
and minute books, may be kept on, or be in the form of, punch cards, magnetic
tape, photographs, microphotographs or any other information storage device,
provided that the records so kept can be converted into clearly legible form
within a reasonable time. The Corporation shall so convert any records so kept
upon the request of any person entitled to inspect the same.
SECTION 6.7. Amendment of By-Laws. These by-laws may be amended or
repealed, and new by-laws adopted, by the Board of Directors, but the
stockholders entitled to vote may adopt additional by-laws and may amend or
repeal any by-law whether or not adopted by the Board of Directors.
Notwithstanding the foregoing, no amendment shall be made to Section 1.2,
Section 2.1, Section 2.2, Section 3.1, Section 3.2, Section 4.1, Section 4.2 or
Section 6.7 except upon the affirmative vote of (i) two-thirds of the directors
of the Corporation and (ii) the holders of not less than two-thirds of the
voting power of all outstanding shares of capital stock of the Corporation
entitled to vote generally in the election of directors, considered for purposes
hereof as a single class.
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EXHIBIT B
TO APPENDIX A
CORPORATE GOVERNANCE OF SURVIVING CORPORATION
FOLLOWING THE EFFECTIVE TIME
BOARD OF DIRECTORS
Composition. The By-laws of the Surviving Corporation shall provide that
the Board of Directors of the Surviving Corporation shall be comprised of 22
members, 11 designated by Zions Bancorporation and 11 designated by First
Security Corporation. Following the execution of the Agreement, each party shall
designate in writing the individual directors that it is entitled to designate
to the Board of Directors of the Surviving Corporation and shall designate the
class to which each is to be assigned understanding that Zions Bancorporation
shall designate five directors, three directors and three directors to each of
classes one, two and three, respectively, and First Security Corporation shall
designate five directors, four directors and two directors to each of classes
one, two and three, respectively.
Composition of the Nominating Committee. The By-Laws of the Surviving
Corporation will provide that the Board of Directors shall have a Nominating
Committee the initial members of which shall be R.D. Cash and Scott S. Parker.
OFFICERS
Composition. The Executive Officers of the Surviving Corporation shall
initially consist of the following individuals in the following positions:
<TABLE>
<CAPTION>
NAME TITLE
---- -----
<S> <C>
Spencer F. Eccles....................... Chairman of the Board, Co-Chief Executive Officer
and Co-Chairman of the Executive Committee of the
Board of Directors
Harris H. Simmons....................... Co-Chief Executive Officer, President, Chief
Operating Officer, Co-Chairman of the Executive
Committee of the Board of Directors and President
of the Surviving Corporation's principal banking
subsidiary
Morgan J. Evans......................... Senior Executive Vice President
Dale M. Gibbons......................... Executive Vice President and Chief Financial Officer
A. Scott Anderson....................... Executive Vice President
Danne L. Buchanan....................... Executive Vice President
Michael P. Caughlin..................... Executive Vice President
David R. Golden......................... Executive Vice President
Brad D. Hardy........................... Executive Vice President
W. David Hemingway...................... Executive Vice President
Mark D. Howell.......................... Executive Vice President
J. Patrick McMurray..................... Executive Vice President
L. Scott Nelson......................... Executive Vice President
Robert G. Sarver........................ Executive Vice President
Scott C. Ulbrich........................ Executive Vice President
</TABLE>
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EXHIBITS C-F
TO APPENDIX A
[omitted]
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APPENDIX B
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of June 8, 1999, between First Security
Corporation, a Delaware corporation ("Grantee"), and Zions Bancorporation, a
Utah corporation ("Issuer").
RECITALS
A. Merger Agreement. Grantee and Issuer have entered into an Agreement and
Plan of Merger, dated as of June 6, 1999 (the "Merger Agreement"); and
B. Option. As a condition to Grantee's entering into the Merger Agreement
and in consideration therefor and in consideration for the option granted to
Issuer by Grantee pursuant to an option agreement dated as of the date hereof,
Issuer has agreed to grant Grantee the Option (as hereinafter defined).
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements set forth herein and in the Merger Agreement, the parties hereto
agree as follows:
1. (a) Issuer hereby grants to Grantee an unconditional, irrevocable option
(the "Option") to purchase, subject to the terms hereof, up to an aggregate of
15,724,539 fully paid and nonassessable shares of the common stock, no par
value, of Issuer ("Common Stock") at a price per share equal to $64.25;
provided, however, that in no event shall the number of shares for which this
Option is exercisable exceed 19.9% of the issued and outstanding shares of
Common Stock. The number of shares of Common Stock that may be received upon the
exercise of the Option and the Option Price are subject to adjustment as herein
set forth.
(b) In the event that any additional shares of Common Stock are issued
or otherwise become outstanding after the date of this Agreement (other
than pursuant to this Agreement and other than pursuant to an event
described in the second sentence of Section 5 hereof), the number of shares
of Common Stock subject to the Option shall be increased so that, after
such issuance, such number together with any shares of Common Stock
previously issued pursuant hereto, equals 19.9% of the number of shares of
Common Stock then issued and outstanding without giving effect to any
shares subject or issued pursuant to the Option. Nothing contained in this
Section l(b) or elsewhere in this Agreement shall be deemed to authorize
Issuer to issue shares in breach of any provision of the Merger Agreement.
2. (a) The Holder (as hereinafter defined) may exercise the Option, in
whole or part, if, but only if, both an Initial Triggering Event (as hereinafter
defined) and a Subsequent Triggering Event (as hereinafter defined) shall have
occurred prior to the occurrence of an Exercise Termination Event (as
hereinafter defined), provided that the Holder shall have sent the written
notice of such exercise (as provided in subsection (e) of this Section 2) within
six (6) months following such Subsequent Triggering Event (or such later period
as provided in Section 10). Each of the following shall be an Exercise
Termination Event: (i) the Effective Time of the Merger; (ii) termination of the
Merger Agreement in accordance with the provisions thereof if such termination
occurs prior to the occurrence of an Initial Triggering Event except a
termination by Grantee pursuant to Section 8.01(b) of the Merger Agreement (a
"Listed Termination"); or (iii) the passage of eighteen (18) months (or such
longer period as provided in Section 10) after termination of the Merger
Agreement if such termination follows the occurrence of an Initial Triggering
Event or is a Listed
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Termination. The term "Holder" shall mean the holder or holders of the Option.
Notwithstanding anything to the contrary contained herein, the Option may not be
exercised at any time when Grantee shall be in material breach of any of its
covenants or agreements contained in the Merger Agreement such that Issuer shall
be entitled to terminate the Merger Agreement pursuant to Section 8.01(b)
thereof. Anything to the contrary notwithstanding, at no point may the Option be
exercised, as a whole or in part, to the extent that such exercise (or the
acquisition of Option Shares thereunder) would, if it occurred on the date
hereof, be inconsistent with any provision of the Merger Agreement.
(b) The term "Initial Triggering Event" shall mean any of the
following events or transactions occurring on or after the date hereof:
(i) Issuer or any of its Significant Subsidiaries (as defined in
Rule 1-02 of Regulation S-X promulgated by the Securities and Exchange
Commission (the "SEC")) (the "Issuer Subsidiaries"), without having
received Grantee's prior written consent, shall have entered into an
agreement to engage in an Acquisition Transaction (as hereinafter
defined) with any person (the term "person" for purposes of this
Agreement having the meaning assigned thereto in Sections 3(a)(9) and
13(d)(3) of the Securities Exchange Act of 1934, as amended (the "1934
Act"), and the rules and regulations thereunder) other than Grantee or
any of its Subsidiaries (each a "Grantee Subsidiary") or the Board of
Directors of Issuer (the "Issuer Board") shall have recommended that the
shareholders of Issuer approve or accept any Acquisition Transaction
other than as contemplated by the Merger Agreement. For purposes of this
Agreement, (a) "Acquisition Transaction" shall mean (x) a merger or
consolidation, or any similar transaction, involving Issuer or any
Issuer Subsidiary (other than mergers, consolidations or similar
transactions involving solely Issuer and/or one or more wholly-owned
Subsidiaries of the Issuer, provided, any such transaction is not
entered into in violation of the terms of the Merger Agreement), (y) a
purchase, lease or other acquisition of all or any substantial part of
the assets or deposits of Issuer or any Issuer Subsidiary, or (z) a
purchase or other acquisition (including by way of merger,
consolidation, share exchange or otherwise) of securities representing
10% or more of the voting power of Issuer or any Issuer Subsidiary and
(b) "Subsidiary" shall have the meaning set forth in Rule 12b-2 under
the 1934 Act;
(ii) Any person other than the Grantee or any Grantee Subsidiary
shall have acquired beneficial ownership or the right to acquire
beneficial ownership of 10% or more of the outstanding shares of Common
Stock (the term "beneficial ownership" for purposes of this Agreement
having the meaning assigned thereto in Section 13(d) of the 1934 Act,
and the rules and regulations thereunder);
(iii) The shareholders of Issuer shall have voted and failed to
approve the Merger Agreement and the Merger at a meeting which has been
held for that purpose or any adjournment or postponement thereof, or
such meeting shall not have been held in violation of the Merger
Agreement or shall have been canceled prior to termination of the Merger
Agreement if, prior to such meeting (or if such meeting shall not have
been held or shall have been canceled, prior to such termination), it
shall have been publicly announced that any person (other than Grantee
or any of its Subsidiaries) shall have made, or disclosed an intention
to make, a proposal to engage in an Acquisition Transaction;
(iv) The Issuer Board shall have withdrawn, modified or qualified
(or publicly announced its intention to withdraw, modify or qualify) in
any manner adverse in any respect to Grantee its recommendation that the
shareholders of Issuer approve the transactions contemplated by the
Merger Agreement, or Issuer or any Issuer Subsidiary
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shall have authorized, recommended, proposed (or publicly announced its
intention to authorize, recommend or propose) an agreement to engage in
an Acquisition Transaction with any person other than Grantee or a
Grantee Subsidiary;
(v) Any person other than Grantee or any Grantee Subsidiary shall
have filed with the SEC a registration statement or tender offer
materials with respect to a potential exchange or tender offer that
would constitute an Acquisition Transaction (or filed a preliminary
proxy statement with the SEC with respect to a potential vote by its
shareholders to approve the issuance of shares to be offered in such an
exchange offer);
(vi) Issuer shall have willfully breached any covenant or
obligation contained in the Merger Agreement in anticipation of an
Acquisition Transaction, and following such breach Grantee would be
entitled to terminate the Merger Agreement (whether immediately or after
the giving of notice or passage of time or both); or
(vii) Any person other than Grantee or any Grantee Subsidiary,
without Grantee's prior written consent, shall have filed an application
or notice with the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board") or other federal or state bank regulatory or
antitrust authority, which application or notice has been accepted for
processing, for approval to engage in an Acquisition Transaction.
(c) The term "Subsequent Triggering Event" shall mean any of the
following events or transactions occurring after the date hereof:
(i) The acquisition by any person (other than Grantee or any
Grantee Subsidiary) of beneficial ownership of 25% or more of the then
outstanding Common Stock; or
(ii) The occurrence of the Initial Triggering Event described in
clause (i) of subsection (b) of this Section 2, except that the
percentage referred to in clause (z) of the second sentence thereof
shall be 25%.
(d) Issuer shall notify Grantee promptly in writing of the occurrence
of any Initial Triggering Event or Subsequent Triggering Event (together, a
"Triggering Event"), it being understood that the giving of such notice by
Issuer shall not be a condition to the right of the Holder to exercise the
Option.
(e) In the event the Holder is entitled to and wishes to exercise the
Option (or any portion thereof), it shall send to Issuer a written notice
(the date of which being herein referred to as the "Notice Date")
specifying (i) the total number of shares it will purchase pursuant to such
exercise and (ii) a place and date not earlier than three business days nor
later than 60 business days from the Notice Date for the closing of such
purchase (the "Closing Date"); provided, that if prior notification to or
approval of the Federal Reserve Board or any other regulatory or antitrust
agency is required in connection with such purchase, the Holder shall
promptly file the required notice or application for approval, shall
promptly notify Issuer of such filing and shall expeditiously process the
same and the period of time that otherwise would run pursuant to this
sentence shall run instead from the date on which any required notification
periods have expired or been terminated or such approvals have been
obtained and any requisite waiting period or periods shall have passed. Any
exercise of the Option shall be deemed to occur on the Notice Date relating
thereto.
(f) At the closing referred to in subsection (e) of this Section 2,
the Holder shall (i) pay to Issuer the aggregate purchase price for the
shares of Common Stock purchased pursuant to the exercise of the Option in
immediately available funds by wire transfer to a bank account designated
by Issuer and (ii) present and surrender this Agreement to Issuer at its
principal
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executive offices, provided that the failure or refusal of the Issuer to
designate such a bank account or accept surrender of this Agreement shall
not preclude the Holder from exercising the Option.
(g) At such closing, simultaneously with the delivery of immediately
available funds as provided in subsection (f) of this Section 2, Issuer
shall deliver to the Holder a certificate or certificates representing the
number of shares of Common Stock purchased by the Holder and, if the Option
should be exercised in part only, a new Option evidencing the rights of the
Holder thereof to purchase the balance of the shares purchasable hereunder.
(h) Certificates for Common Stock delivered at a closing hereunder may
be endorsed with a restrictive legend that shall read substantially as
follows:
"The transfer of the shares represented by this certificate is
subject to certain provisions of an agreement between the registered
holder hereof and Issuer and to resale restrictions arising under the
Securities Act of 1933, as amended. A copy of such agreement is on file
at the principal office of Issuer and will be provided to the holder
hereof without charge upon receipt by Issuer of a written request
therefor."
It is understood and agreed that: (i) the reference to the resale
restrictions of the Securities Act of 1933, as amended (the "1933 Act") in
the above legend shall be removed by delivery of substitute certificate(s)
without such reference if the Holder shall have delivered to Issuer a copy
of a letter from the staff of the SEC, or an opinion of counsel, in form
and substance reasonably satisfactory to Issuer, to the effect that such
legend is not required for purposes of the 1933 Act; (ii) the reference to
the provisions of this Agreement in the above legend shall be removed by
delivery of substitute certificate(s) without such reference if the shares
have been sold or transferred in compliance with the provisions of this
Agreement and under circumstances that do not require the retention of such
reference in the opinion of counsel to the Holder, in form and substance
reasonably satisfactory to the Issuer; and (iii) the legend shall be
removed in its entirety if the conditions in the preceding clauses (i) and
(ii) are both satisfied. In addition, such certificates shall bear any
other legend as may be required by law.
(i) Upon the giving by the Holder to Issuer of the written notice of
exercise of the Option provided for under subsection (e) of this Section 2
and the tender of the applicable purchase price in immediately available
funds, the Holder shall be deemed to be the holder of record of the shares
of Common Stock issuable upon such exercise, notwithstanding that the stock
transfer books of Issuer shall then be closed or that certificates
representing such shares of Common Stock shall not then be actually
delivered to the Holder. Issuer shall pay all expenses, and any and all
United States federal, state and local taxes and other charges that may be
payable in connection with the preparation, issue and delivery of stock
certificates under this Section 2 in the name of the Holder or its
assignee, transferee or designee.
3. Issuer agrees: (i) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued or treasury shares of
Common Stock so that the Option may be exercised without additional
authorization of Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase Common Stock; (ii)
that it will not, by charter amendment or through reorganization, consolidation,
merger, dissolution or sale of assets, or by any other voluntary act, avoid or
seek to avoid the observance or performance of any of the covenants,
stipulations or conditions to be observed or performed hereunder by Issuer;
(iii) promptly to take all action as may from time to time be required
(including (x) complying with all applicable premerger notification, reporting
and waiting period requirements specified in 15 U.S.C. Section 18a and
regulations promulgated thereunder and (y) in the event, under the Bank Holding
Company Act of
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1956, as amended (the "BHCA"), or the Change in Bank Control Act of 1978, as
amended, or any state or other federal banking law, prior approval of or notice
to the Federal Reserve Board or to any state or other federal regulatory
authority is necessary before the Option may be exercised, cooperating fully
with the Holder in preparing such applications or notices and providing such
information to the Federal Reserve Board or such state or other federal
regulatory authority as they may require) in order to permit the Holder to
exercise the Option and Issuer duly and effectively to issue shares of Common
Stock pursuant hereto; and (iv) promptly to take all action provided herein to
protect the rights of the Holder against dilution.
4. This Agreement (and the Option granted hereby) are exchangeable, without
expense, at the option of the Holder, upon presentation and surrender of this
Agreement at the principal office of Issuer, for other Agreements providing for
Options of different denominations entitling the holder thereof to purchase, on
the same terms and subject to the same conditions as are set forth herein, in
the aggregate the same number of shares of Common Stock purchasable hereunder.
The terms "Agreement" and "Option" as used herein include any Agreements and
related Options for which this Agreement (and the Option granted hereby) may be
exchanged. Upon receipt by Issuer of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of this Agreement, and (in the case
of loss, theft or destruction) of reasonably satisfactory indemnification, and
upon surrender and cancellation of this Agreement, if mutilated, Issuer will
execute and deliver a new Agreement of like tenor and date. Any such new
Agreement executed and delivered shall constitute an additional contractual
obligation on the part of Issuer, whether or not the Agreement so lost, stolen,
destroyed or mutilated shall at any time be enforceable by anyone.
5. In addition to the adjustment in the number of shares of Common Stock
that are purchasable upon exercise of the Option pursuant to Section 1 of this
Agreement, the number of shares of Common Stock purchasable upon the exercise of
the Option and the Option Price shall be subject to adjustment from time to time
as provided in this Section 5. In the event of any change in Common Stock by
reason of a stock dividend, stock split, split-up, recapitalization, stock
combination, exchange of shares or similar transaction, the type and number of
shares or securities subject to the Option, and the Option Price therefor, shall
be adjusted appropriately, and proper provision shall be made in the agreements
governing such transaction so that Grantee shall receive, upon exercise of the
Option, the number and class of shares or other securities or property that
Grantee would have received in respect of Common Stock if the Option had been
exercised immediately prior to such event, or the record date therefor, as
applicable. If any additional shares of Common Stock are issued after the date
of this Agreement (other than pursuant to an event described in the second
sentence of this Section 5), the number of shares of Common Stock subject to the
Option shall be adjusted so that, after such issuance, it, together with any
shares of Common Stock previously issued pursuant hereto, equals 19.9% of the
number of shares of Common Stock then issued and outstanding, without giving
effect to any shares subject to or issued pursuant to the Option.
6. Upon the occurrence of a Subsequent Triggering Event that occurs prior
to an Exercise Termination Event, Issuer shall, at the request of Grantee
delivered within twelve (12) months (or such later period as provided in Section
10) of such Subsequent Triggering Event (whether on its own behalf or on behalf
of any subsequent holder of this Option (or part thereof) or any of the shares
of Common Stock issued pursuant hereto), promptly prepare, file and keep current
a registration statement under the 1933 Act covering any shares issued and
issuable pursuant to this Option and shall use its reasonable best efforts to
cause such registration statement to become effective and remain current in
order to permit the sale or other disposition of any shares of Common Stock
issued upon total or partial exercise of this Option ("Option Shares") in
accordance with any plan of disposition requested by Grantee. Issuer will use
its reasonable best efforts to cause such
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registration statement promptly to become effective and then to remain effective
for such period not in excess of 180 days from the day such registration
statement first becomes effective or such shorter time as may be reasonably
necessary to effect such sales or other dispositions. Grantee shall have the
right to demand two such registrations. The Issuer shall bear the costs of such
registrations (including, but not limited to, Issuer's attorneys' fees, printing
costs and filing fees, except for underwriting discounts or commissions,
brokers' fees and the fees and disbursements of Grantee's counsel related
thereto). The foregoing notwithstanding, if, at the time of any request by
Grantee for registration of Option Shares as provided above, Issuer is in
registration with respect to an underwritten public offering by Issuer of shares
of Common Stock, and if in the good faith judgment of the managing underwriter
or managing underwriters, or, if none, the sole underwriter or underwriters, of
such offering the offer and sale of the Option Shares would interfere with the
successful marketing of the shares of Common Stock offered by Issuer, the number
of Option Shares otherwise to be covered in the registration statement
contemplated hereby may be reduced; provided, however, that after any such
required reduction the number of Option Shares to be included in such offering
for the account of the Holder shall constitute at least 33 1/3% of the total
number of shares to be sold by the Holder and Issuer in the aggregate; and
provided further, however, that if such reduction occurs, then Issuer shall file
a registration statement for the balance as promptly as practicable thereafter
as to which no reduction pursuant to this Section 6 shall be permitted or occur
and the Holder shall thereafter be entitled to one additional registration and
the twelve (12) month period referred to in the first sentence of this section
shall be increased to twenty-four (24) months. Each such Holder shall provide
all information reasonably requested by Issuer for inclusion in any registration
statement to be filed hereunder. If requested by any such Holder in connection
with such registration, Issuer shall become a party to any underwriting
agreement relating to the sale of such shares, but only to the extent of
obligating itself in respect of representations, warranties, indemnities and
other agreements customarily included in such underwriting agreements for
Issuer. Upon receiving any request under this Section 6 from any Holder, Issuer
agrees to send a copy thereof to any other person known to Issuer to be entitled
to registration rights under this Section 6, in each case by promptly mailing
the same, postage prepaid, to the address of record of the persons entitled to
receive such copies. Notwithstanding anything to the contrary contained herein,
in no event shall the number of registrations that Issuer is obligated to effect
be increased by reason of the fact that there shall be more than one Holder as a
result of any assignment or division of this Agreement.
7. (a) At any time after the occurrence of a Repurchase Event (as defined
below) (i) at the request of the Holder, delivered prior to an Exercise
Termination Event (or such later period as provided in Section 10), Issuer (or
any successor thereto) shall repurchase the Option from the Holder at a price
(the "Option Repurchase Price") equal to the amount by which (A) the
market/offer price (as defined below) exceeds (B) the Option Price, multiplied
by the number of shares for which this Option may then be exercised and (ii) at
the request of the owner of Option Shares from time to time (the "Owner"),
delivered prior to an Exercise Termination Event (or such later period as
provided in Section 10), Issuer (or any successor thereto) shall repurchase such
number of the Option Shares from the Owner as the Owner shall designate at a
price (the "Option Share Repurchase Price") equal to the market/offer price
multiplied by the number of Option Shares so designated. The term "market/offer
price" shall mean the highest of (i) the price per share of Common Stock at
which a tender or exchange offer therefor has been made, (ii) the price per
share of Common Stock to be paid by any third party pursuant to an agreement
with Issuer, (iii) the highest closing price for shares of Common Stock within
the six-month period immediately preceding the date the Holder gives notice of
the required repurchase of this Option or the Owner gives notice of the required
repurchase of Option Shares, as the case may be, or (iv) in the event of a sale
of all or any substantial part of Issuer's assets or deposits, the sum of the
net price paid in such sale for such assets or deposits and the current market
value of the remaining net assets of Issuer as determined by a nationally
recognized investment banking firm selected by the Holder or the Owner,
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as the case may be, and reasonably acceptable to Issuer, divided by the number
of shares of Common Stock of Issuer outstanding at the time of such sale. In
determining the market/offer price, the value of consideration other than cash
shall be determined by a nationally recognized investment banking firm selected
by the Holder or Owner, as the case may be, and reasonably acceptable to Issuer.
(b) The Holder and the Owner, as the case may be, may exercise its
right to require Issuer to repurchase the Option and any Option Shares
pursuant to this Section 7 by surrendering for such purpose to Issuer, at
its principal office, a copy of this Agreement or certificates for Option
Shares, as applicable, accompanied by a written notice or notices stating
that the Holder or the Owner, as the case may be, elects to require Issuer
to repurchase this Option and/or the Option Shares in accordance with the
provisions of this Section 7. The Holder shall also represent and warrant
that it has sole record and beneficial ownership of such Option Shares and
that such Option Shares are then free and clear of all liens. As promptly
as practicable, and in any event within five (5) business days after the
surrender of the Option and/or certificates representing Option Shares and
the receipt of such notice or notices relating thereto, Issuer shall
deliver or cause to be delivered to the Holder the Option Repurchase Price
and/or to the Owner the Option Share Repurchase Price therefor or the
portion thereof that Issuer is not then prohibited under applicable law and
regulation from so delivering.
(c) To the extent that Issuer is prohibited under applicable law or
regulation, or as a consequence of administrative policy, from repurchasing
the Option and/or the Option Shares in full, Issuer shall immediately so
notify the Holder and/or the Owner and thereafter deliver or cause to be
delivered, from time to time, to the Holder and/or the Owner, as
appropriate, the portion of the Option Repurchase Price and the Option
Share Repurchase Price, respectively, that it is no longer prohibited from
delivering, within five (5) business days after the date on which Issuer is
no longer so prohibited; provided, however, that if Issuer at any time
after delivery of a notice of repurchase pursuant to paragraph (b) of this
Section 7 is prohibited under applicable law or regulation, or as a
consequence of administrative policy, from delivering to the Holder and/or
the Owner, as appropriate, the Option Repurchase Price and the Option Share
Repurchase Price, respectively, in full (and Issuer hereby undertakes to
use its reasonable best efforts to obtain all required regulatory and legal
approvals and to file any required notices as promptly as practicable in
order to accomplish such repurchase), the Holder or Owner may revoke its
notice of repurchase of the Option and/or the Option Shares whether in
whole or to the extent of the prohibition, whereupon, in the latter case,
Issuer shall promptly (i) deliver to the Holder and/or the Owner, as
appropriate, that portion of the Option Repurchase Price and/or the Option
Share Repurchase Price that Issuer is not prohibited from delivering; and
(ii) deliver, as appropriate, either (A) to the Holder, a new Agreement
evidencing the right of the Holder to purchase that number of shares of
Common Stock obtained by multiplying the number of shares of Common Stock
for which the surrendered Agreement was exercisable at the time of delivery
of the notice of repurchase by a fraction, the numerator of which is the
Option Repurchase Price less the portion thereof theretofore delivered to
the Holder and the denominator of which is the Option Repurchase Price,
and/or (B) to the Owner, a certificate for the Option Shares it is then so
prohibited from repurchasing. If an Exercise Termination Event shall have
occurred prior to the date of the notice by Issuer described in the first
sentence of this subsection (c), or shall be scheduled to occur at any time
before the expiration of a period ending on the thirtieth day after such
date, the Holder shall nonetheless have the right to exercise the Option
until the expiration of such 30-day period.
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(d) For purposes of this Agreement, a "Repurchase Event" shall be
deemed to have occurred upon the occurrence of any of the following events
or transactions after the date hereof:
(i) the acquisition by any person (other than Grantee or any
Grantee Subsidiary) of (A) beneficial ownership of 50% or more of the
then outstanding Common Stock or (B) beneficial ownership of 15% more of
the then outstanding Common Stock if Issuer shall have violated Section
6.16 of the Merger Agreement; or
(ii) the consummation of any Acquisition Transaction described in
Section 2(b)(i) hereof, except that the percentage referred to in clause
(z) shall be 25%.
8. (a) In the event that prior to an Exercise Termination Event, Issuer
shall enter into an agreement (i) to consolidate with or merge into any person,
other than Grantee or a Grantee Subsidiary, or engage in a plan of exchange with
any person, other than Grantee or a Grantee Subsidiary and Issuer shall not be
the continuing or surviving corporation of such consolidation or merger or the
acquirer in such plan of exchange, (ii) to permit any person, other than Grantee
or a Grantee Subsidiary, to merge into Issuer or be acquired by Issuer in a plan
of exchange and Issuer shall be the continuing or surviving or acquiring
corporation, but, in connection with such merger or plan of exchange, the then
outstanding shares of Common Stock shall be changed into or exchanged for stock
or other securities of any other person or cash or any other property or the
then outstanding shares of Common Stock shall after such merger or plan of
exchange represent less than 50% of the outstanding shares and share equivalents
of the merged or acquiring company, or (iii) to sell or otherwise transfer all
or a substantial part of its or any Issuer Subsidiary's assets or deposits to
any person, other than Grantee or a Grantee Subsidiary, then, and in each such
case, the agreement governing such transaction shall make proper provision so
that the Option shall, upon the consummation of any such transaction and upon
the terms and conditions set forth herein, be converted into, or exchanged for,
an option (the "Substitute Option"), at the election of the Holder, of either
(x) the Acquiring Corporation (as hereinafter defined) or (y) any person that
controls the Acquiring Corporation.
(b) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean (i) the continuing or
surviving person of a consolidation or merger with Issuer (if other than
Issuer), (ii) the acquiring person in a plan of exchange in which Issuer
is acquired, (iii) the Issuer in a merger or plan of exchange in which
Issuer is the continuing or surviving or acquiring person and (iv) the
transferee of all or a substantial part of Issuer's assets or deposits
(or the assets or deposits of any Issuer Subsidiary).
(ii) "Substitute Common Stock" shall mean the common stock issued
by the issuer of the Substitute Option upon exercise of the Substitute
Option.
(iii) "Assigned Value" shall mean the market/offer price, as
defined in Section 7.
(iv) "Average Price" shall mean the average closing price of a
share of the Substitute Common Stock for one (1) year immediately
preceding the consolidation, merger or sale in question, but in no event
higher than the closing price of the shares of Substitute Common Stock
on the day preceding such consolidation, merger or sale; provided that
if Issuer is the issuer of the Substitute Option, the Average Price
shall be computed with respect to a share of common stock issued by the
person merging into Issuer or by any company which controls or is
controlled by such person, as the Holder may elect.
(c) The Substitute Option shall have the same terms as the Option,
provided that if the terms of the Substitute Option cannot, for legal
reasons, be the same as the Option, such terms
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shall be as similar as possible and in no event less advantageous to the
Holder. The issuer of the Substitute Option shall also enter into an
agreement with the then Holder or Holders of the Substitute Option in
substantially the same form as this Agreement (after giving effect for such
purpose to the provisions of Section 9), which agreement shall be
applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of
shares of Substitute Common Stock as is equal to the Assigned Value
multiplied by the number of shares of Common Stock for which the Option was
exercisable immediately prior to the event described in the first sentence
of Section 8(a), divided by the Average Price. The exercise price of the
Substitute Option per share of Substitute Common Stock shall then be equal
to the Option Price multiplied by a fraction, the numerator of which shall
be the number of shares of Common Stock for which the Option was
exercisable immediately prior to the event described in the first sentence
of Section 8(a) and the denominator of which shall be the number of shares
of Substitute Common Stock for which the Substitute Option is exercisable.
(e) In no event, pursuant to any of the foregoing paragraphs, shall
the Substitute Option be exercisable for more than 19.9% of the shares of
Substitute Common Stock outstanding prior to exercise of the Substitute
Option. In the event that the Substitute Option would be exercisable for
more than 19.9% of the shares of Substitute Common Stock outstanding prior
to exercise but for this clause (e), the issuer of the Substitute Option
(the "Substitute Option Issuer") shall make a cash payment to Holder equal
to the excess of (i) the value of the Substitute Option without giving
effect to the limitation in this clause (e) over (ii) the value of the
Substitute Option after giving effect to the limitation in this clause (e).
This difference in value shall be determined by a nationally recognized
investment banking firm selected by the Holder.
(f) Issuer shall not enter into any transaction described in
subsection (a) of this Section 8 unless the Acquiring Corporation and any
person that controls the Acquiring Corporation assume in writing all the
obligations of Issuer hereunder.
9. (a) At the request of the holder of the Substitute Option (the
"Substitute Option Holder"), the issuer of the Substitute Option (the
"Substitute Option Issuer") shall repurchase the Substitute Option from the
Substitute Option Holder at a price (the "Substitute Option Repurchase Price")
equal to the amount by which (i) the Highest Closing Price (as hereinafter
defined) exceeds (ii) the exercise price of the Substitute Option, multiplied by
the number of shares of Substitute Common Stock for which the Substitute Option
may then be exercised, and at the request of the owner (the "Substitute Share
Owner") of shares of Substitute Common Stock (the "Substitute Shares"), the
Substitute Option Issuer shall repurchase the Substitute Shares at a price (the
"Substitute Share Repurchase Price") equal to the Highest Closing Price
multiplied by the number of Substitute Shares so designated. The term "Highest
Closing Price" shall mean the highest closing price for shares of Substitute
Common Stock within the six-month period immediately preceding the date the
Substitute Option Holder gives notice of the required repurchase of the
Substitute Option or the Substitute Share Owner gives notice of the required
repurchase of the Substitute Shares, as applicable.
(b) The Substitute Option Holder and the Substitute Share Owner, as
the case may be, may exercise its respective rights to require the
Substitute Option Issuer to repurchase the Substitute Option and the
Substitute Shares pursuant to this Section 9 by surrendering for such
purpose to the Substitute Option Issuer, at its principal office, the
agreement for such Substitute Option (or, in the absence of such an
agreement, a copy of this Agreement) and/or certificates for Substitute
Shares accompanied by a written notice or notices stating that the
Substitute Option Holder or the Substitute Share Owner, as the case may be,
elects to require the Substitute Option Issuer to repurchase the Substitute
Option and/or the Substitute Shares in
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accordance with the provisions of this Section 9. As promptly as
practicable and in any event within five (5) business days after the
surrender of the Substitute Option and/or certificates representing
Substitute Shares and the receipt of such notice or notices relating
thereto, the Substitute Option Issuer shall deliver or cause to be
delivered to the Substitute Option Holder the Substitute Option Repurchase
Price and/or to the Substitute Share Owner the Substitute Share Repurchase
Price therefor or the portion thereof which the Substitute Option Issuer is
not then prohibited under applicable law and regulation from so delivering.
(c) To the extent that the Substitute Option Issuer is prohibited
under applicable law or regulation, or as a consequence of administrative
policy, from repurchasing the Substitute Option and/or the Substitute
Shares in part or in full, the Substitute Option Issuer shall immediately
so notify the Substitute Option Holder and/or the Substitute Share Owner
and thereafter deliver or cause to be delivered, from time to time, to the
Substitute Option Holder and/or the Substitute Share Owner, as appropriate,
the portion of the Substitute Option Repurchase Price and/or the Substitute
Share Repurchase Price, respectively, which it is no longer prohibited from
delivering, within five (5) business days after the date on which the
Substitute Option Issuer is no longer so prohibited; provided, however,
that if the Substitute Option Issuer is at any time after delivery of a
notice of repurchase pursuant to subsection (b) of this Section 9
prohibited under applicable law or regulation, or as a consequence of
administrative policy, from delivering to the Substitute Option Holder
and/or the Substitute Share Owner, as appropriate, the Substitute Option
Repurchase Price and the Substitute Share Repurchase Price, respectively,
in full (and the Substitute Option Issuer shall use its reasonable best
efforts to receive all required regulatory and legal approvals as promptly
as practicable in order to accomplish such repurchase), the Substitute
Option Holder and/or Substitute Share Owner may revoke its notice of
repurchase of the Substitute Option or the Substitute Shares either in
whole or to the extent of prohibition, whereupon, in the latter case, the
Substitute Option Issuer shall promptly (i) deliver to the Substitute
Option Holder or Substitute Share Owner, as appropriate, that portion of
the Substitute Option Repurchase Price or the Substitute Share Repurchase
Price that the Substitute Option Issuer is not prohibited from delivering;
and (ii) deliver, as appropriate, either (A) to the Substitute Option
Holder, a new Substitute Option evidencing the right of the Substitute
Option Holder to purchase that number of shares of the Substitute Common
Stock obtained by multiplying the number of shares of the Substitute Common
Stock for which the surrendered Substitute Option was exercisable at the
time of delivery of the notice of repurchase by a fraction, the numerator
of which is the Substitute Option Repurchase Price less the portion thereof
theretofore delivered to the Substitute Option Holder and the denominator
of which is the Substitute Option Repurchase Price, and/or (B) to the
Substitute Share Owner, a certificate for the Substitute Option Shares it
is then so prohibited from repurchasing. If an Exercise Termination Event
shall have occurred prior to the date of the notice by the Substitute
Option Issuer described in the first sentence of this subsection (c), or
shall be scheduled to occur at any time before the expiration of a period
ending on the thirtieth day after such date, the Substitute Option Holder
shall nevertheless have the right to exercise the Substitute Option until
the expiration of such 30-day period.
10. The periods for exercise of certain rights under Sections 2, 6, 7, 9
and 14 shall be extended: (i) to the extent necessary to obtain all regulatory
approvals for the exercise of such rights (for so long as the Holder, Owner,
Substitute Option Holder or Substitute Share Owner, as the case may be, is using
commercially reasonable efforts to obtain such regulatory approvals), and for
the expiration of all statutory waiting periods; (ii) to the extent necessary to
avoid liability under Section 16(b) of the 1934 Act by reason of such exercise;
and (iii) when there exists an injunction, order or judgment that prohibits or
delays exercise of such right.
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11. (a) Issuer hereby represents and warrants to Grantee as follows:
(i) Issuer has the requisite corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby have been duly
and validly authorized by the Issuer Board prior to the date hereof and
no other corporate proceedings on the part of Issuer are necessary to
authorize this Agreement or to consummate the transactions so
contemplated. This Agreement has been duly and validly executed and
delivered by Issuer.
(ii) Issuer has taken all necessary corporate action to authorize
and reserve and to permit it to issue, and at all times from the date
hereof through the termination of this Agreement in accordance with its
terms will have reserved for issuance upon the exercise of the Option,
that number of shares of Common Stock equal to the maximum number of
shares of Common Stock at any time and from time to time issuable
hereunder, and all such shares, upon issuance pursuant thereto, will be
duly authorized, validly issued, fully paid, nonassessable, and will be
delivered free and clear of all claims, liens, encumbrance and security
interests and not subject to any preemptive rights.
(b) Grantee hereby represents and warrants to Issuer as follows:
Grantee has the requisite corporate power and authority to execute and
deliver this Agreement and to perform its obligations hereunder. The
execution and delivery of this Agreement by the Grantee and the performance
of its obligations hereunder by the Grantee have been duly and validly
authorized by the Board of Directors of Grantee and no other corporate
proceedings on the part of the Grantee are necessary to authorize this
Agreement or for Grantee to perform its obligations hereunder. This
Agreement has been duly and validly executed and delivered by Grantee.
(c) This Option is not being, and any Option Shares or other
securities acquired by Grantee upon exercise of the Option will not be,
acquired with a view to the public distribution thereof and will not be
transferred or otherwise disposed or except in a transaction registered or
exempt from registration under the 1933 Act.
12. Neither of the parties hereto may assign any of its rights or
obligations under this Agreement or the Option created hereunder to any other
person, without the express written consent of the other party, except that in
the event an Initial Triggering Event shall have occurred prior to an Exercise
Termination Event, Grantee, subject to the express provisions hereof, may assign
in whole or in part its rights and obligations hereunder; provided, however,
that until the date fifteen (15) days following the date on which the Federal
Reserve Board has approved an application by Grantee to acquire the shares of
Common Stock subject to the Option, Grantee may not assign its rights under the
Option except in (i) a widely dispersed public distribution, (ii) a private
placement in which no one party acquires the right to purchase in excess of 2%
of the voting shares of Issuer, (iii) an assignment to a single party (e.g., a
broker or investment banker) for the purpose of conducting a widely dispersed
public distribution on Grantee's behalf or (iv) any other manner approved by the
Federal Reserve Board.
13. Each of Grantee and Issuer will use its reasonable best efforts to make
all filings with, and to obtain consents of, all third parties and governmental
authorities necessary to the consummation of the transactions contemplated by
this Agreement, including, without limitation, applying to the Federal Reserve
Board under the BHCA for approval to acquire the shares issuable hereunder, but
Grantee shall not be obligated to apply to state banking authorities for
approval to acquire the shares of Common Stock issuable hereunder until such
time, if ever, as it deems appropriate to do so.
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14. (a) Grantee may, at any time following a Repurchase Event and prior to
the occurrence of an Exercise Termination Event (or such later period as
provided in Section 10), relinquish the Option (together with any Option Shares
issued to and then owned by Grantee) to Issuer in exchange for a cash fee equal
to the Surrender Price. The "Surrender Price" shall be equal to $160 million (i)
plus, if applicable, Grantee's purchase price with respect to any Option Shares
and (ii) minus, if applicable, the excess of (A) the net price, if any, received
by Grantee or a Grantee Subsidiary pursuant to the sale of Option Shares (or any
other securities into which such Option Shares were converted or exchanged) to
any unaffiliated party, over (B) Grantee's purchase price of such Option Shares.
(b) Grantee may exercise its right to relinquish the Option and any
Option Shares pursuant to this Section 14 by surrendering to Issuer, at its
principal office, a copy of this Agreement together with certificates for
Option Shares, if any, accompanied by a written notice stating (i) that
Grantee elects to relinquish the Option and Option Shares, if any, in
accordance with the provisions of this Section 14 and (ii) the Surrender
Price. The Surrender Price shall be payable in immediately available funds
on or before the second business day following receipt of such notice by
Issuer.
(c) To the extent that Issuer is prohibited under applicable law or
regulation, or as a consequence of administrative policy, from paying the
Surrender Price to Grantee in full, Issuer shall immediately so notify
Grantee and thereafter deliver or cause to be delivered, from time to time,
to Grantee, the portion of the Surrender Price that it is no longer
prohibited from paying, within five (5) business days after the date on
which Issuer is no longer so prohibited; provided, however, that if Issuer
at any time after delivery of a notice of surrender pursuant to paragraph
(b) of this Section 14 is prohibited under applicable law or regulation, or
as a consequence of administrative policy, from paying to Grantee the
Surrender Price in full, (i) Issuer shall (A) use its reasonable best
efforts to obtain all required regulatory and legal approvals and to file
any required notices as promptly as practicable in order to make such
payments, (B) within five (5) days of the submission or receipt of any
documents relating to any such regulatory and legal approvals, provide
Grantee with copies of the same and (c) keep Grantee advised of both the
status of any such request for regulatory and legal approvals, as well as
any discussions with any relevant regulatory or other third party
reasonably related to the same and (ii) Grantee may revoke such notice of
surrender by delivery of a notice of revocation to Issuer and, upon
delivery of such notice of revocation, the Exercise Termination Date shall
be extended to a date six (6) months from the date on which the Exercise
Termination Date would have occurred if not for the provisions of this
Section 14(c) (during which period Grantee may exercise any of its rights
hereunder, including any and all rights pursuant to this Section 14).
15. The parties hereto acknowledge that damages would be an inadequate
remedy for a breach of this Agreement by either party hereto and that the
obligations of the parties hereto shall be enforceable by either party hereto
through injunctive or other equitable relief. In connection therewith, both
parties waive the posting of any bond or similar requirement.
16. If any term, provision, covenant or restriction contained in this
Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions and covenants and restrictions contained in this Agreement
shall remain in full force and effect, and shall in no way be affected, impaired
or invalidated. If for any reason such court or regulatory agency determines
that the Holder is not permitted to acquire, or Issuer is not permitted to
repurchase pursuant to Section 7, the full number of shares of Common Stock
provided in Section l(a) hereof (as adjusted pursuant to Section l(b) or Section
5 hereof), it is the express intention of Issuer to allow the Holder to acquire
or to require Issuer to repurchase such lesser number of shares as may be
permissible, without any amendment or modification hereof.
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17. All notices, requests, claims, demands and other communications
hereunder shall be deemed to have been duly given when delivered in person, by
fax, telecopy, or by registered or certified mail (postage prepaid, return
receipt requested) at the respective addresses of the parties set forth in the
Merger Agreement.
18. This Agreement shall be governed by and construed in accordance with
the laws of the State of Utah, without regard to the conflict of law principles
thereof (except to the extent that mandatory provisions of Federal law are
applicable).
19. This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original, but all of which shall constitute one
and the same agreement.
20. Except as otherwise expressly provided herein, each of the parties
hereto shall bear and pay all costs and expenses incurred by it or on its behalf
in connection with the transactions contemplated hereunder, including fees and
expenses of its own financial consultants, investment bankers, accountants and
counsel.
21. Except as otherwise expressly provided herein or in the Merger
Agreement, this Agreement contains the entire agreement between the parties with
respect to the transactions contemplated hereunder and supersedes all prior
arrangements or understandings with respect thereof, written or oral. The terms
and conditions of this Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and permitted assignees.
Nothing in this Agreement, expressed or implied, is intended to confer upon any
party, other than the parties hereto, and their respective successors except as
assignees, any rights, remedies, obligations or liabilities under or by reason
of this Agreement, except as expressly provided herein.
22. Capitalized terms used in this Agreement and not defined herein shall
have the meanings assigned thereto in the Merger Agreement.
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, all as of the
date first above written.
ZIONS BANCORPORATION
By /s/ HARRIS H. SIMMONS
------------------------------------
Harris H. Simmons
President and Chief
Executive Officer
FIRST SECURITY CORPORATION
By /s/ SPENCER F. ECCLES
------------------------------------
Spencer F. Eccles
Chairman of the Board and
Chief Executive Officer
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APPENDIX C
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of June 8, 1999, between Zions
Bancorporation, a Utah corporation ("Grantee"), and First Security Corporation,
a Delaware corporation ("Issuer").
RECITALS
A. Merger Agreement. Grantee and Issuer have entered into an Agreement and
Plan of Merger, dated as of June 6, 1999 (the "Merger Agreement"), which
agreement has been executed by the parties hereto immediately prior to this
Stock Option Agreement; and
B. Option. As a condition to Grantee's entering into the Merger Agreement
and in consideration therefor and in consideration for the option granted to
Issuer by Grantee pursuant to an option agreement dated as of the date hereof,
Issuer has agreed to grant Grantee the Option (as hereinafter defined).
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements set forth herein and in the Merger Agreement, the parties hereto
agree as follows:
1. (a) Issuer hereby grants to Grantee an unconditional, irrevocable option
(the "Option") to purchase, subject to the terms hereof, up to an aggregate of
38,798,410 fully paid and nonassessable shares of the common stock, par value
$1.25 per share, of Issuer ("Common Stock") at a price per share equal to the
average of the last reported sale prices per share of Common Stock as reported
on the NASDAQ National Market (as reported in The Wall Street Journal or, if not
reported therein, in another authoritative source) on June 4, 1999 and June 7,
1999; provided, however, that in no event shall the number of shares for which
this Option is exercisable exceed 19.9% of the issued and outstanding shares of
Common Stock. The number of shares of Common Stock that may be received upon the
exercise of the Option and the Option Price are subject to adjustment as herein
set forth.
(b) In the event that any additional shares of Common Stock are issued or
otherwise become outstanding after the date of this Agreement (other than
pursuant to this Agreement and other than pursuant to an event described in the
second sentence of Section 5 hereof), the number of shares of Common Stock
subject to the Option shall be increased so that, after such issuance, such
number together with any shares of Common Stock previously issued pursuant
hereto, equals 19.9% of the number of shares of Common Stock then issued and
outstanding without giving effect to any shares subject or issued pursuant to
the Option. Nothing contained in this Section l(b) or elsewhere in this
Agreement shall be deemed to authorize Issuer to issue shares in breach of any
provision of the Merger Agreement.
2. (a) The Holder (as hereinafter defined) may exercise the Option, in
whole or part, if, but only if, both an Initial Triggering Event (as hereinafter
defined) and a Subsequent Triggering Event (as hereinafter defined) shall have
occurred prior to the occurrence of an Exercise Termination Event (as
hereinafter defined), provided that the Holder shall have sent the written
notice of such exercise (as provided in subsection (e) of this Section 2) within
six (6) months following such Subsequent Triggering Event (or such later period
as provided in Section 10). Each of the following shall be an Exercise
Termination Event: (i) the Effective Time of the Merger; (ii) termination of the
Merger Agreement in accordance with the provisions thereof if such termination
occurs prior to the occurrence of an Initial Triggering Event except a
termination by Grantee pursuant to Section 8.01(b) of the Merger Agreement (a
"Listed Termination"); or (iii) the passage of eighteen
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(18) months (or such longer period as provided in Section 10) after termination
of the Merger Agreement if such termination follows the occurrence of an Initial
Triggering Event or is a Listed Termination. The term "Holder" shall mean the
holder or holders of the Option. Notwithstanding anything to the contrary
contained herein, the Option may not be exercised at any time when Grantee shall
be in material breach of any of its covenants or agreements contained in the
Merger Agreement such that Issuer shall be entitled to terminate the Merger
Agreement pursuant to Section 8.01(b) thereof. Anything to the contrary
notwithstanding, at no point may the Option be exercised, as a whole or in part,
to the extent that such exercise (or the acquisition of Option Shares
thereunder) would, if it occurred on the date hereof, be inconsistent with any
provision of the Merger Agreement.
(b) The term "Initial Triggering Event" shall mean any of the following
events or transactions occurring on or after the date hereof:
(i) Issuer or any of its Significant Subsidiaries (as defined in
Rule 1-02 of Regulation S-X promulgated by the Securities and Exchange
Commission (the "SEC")) (the "Issuer Subsidiaries"), without having
received Grantee's prior written consent, shall have entered into an
agreement to engage in an Acquisition Transaction (as hereinafter
defined) with any person (the term "person" for purposes of this
Agreement having the meaning assigned thereto in Sections 3(a)(9) and
13(d)(3) of the Securities Exchange Act of 1934, as amended (the "1934
Act"), and the rules and regulations thereunder) other than Grantee or
any of its Subsidiaries (each a "Grantee Subsidiary") or the Board of
Directors of Issuer (the "Issuer Board") shall have recommended that the
stockholders of Issuer approve or accept any Acquisition Transaction
other than as contemplated by the Merger Agreement. For purposes of this
Agreement, (a) "Acquisition Transaction" shall mean (x) a merger or
consolidation, or any similar transaction, involving Issuer or any
Issuer Subsidiary (other than mergers, consolidations or similar
transactions involving solely Issuer and/or one or more wholly-owned
Subsidiaries of the Issuer, provided, any such transaction is not
entered into in violation of the terms of the Merger Agreement), (y) a
purchase, lease or other acquisition of all or any substantial part of
the assets or deposits of Issuer or any Issuer Subsidiary, or (z) a
purchase or other acquisition (including by way of merger,
consolidation, share exchange or otherwise) of securities representing
10% or more of the voting power of Issuer or any Issuer Subsidiary and
(b) "Subsidiary" shall have the meaning set forth in Rule 12b-2 under
the 1934 Act;
(ii) Any person other than the Grantee or any Grantee Subsidiary
shall have acquired beneficial ownership or the right to acquire
beneficial ownership of 10% or more of the outstanding shares of Common
Stock (the term "beneficial ownership" for purposes of this Agreement
having the meaning assigned thereto in Section 13(d) of the 1934 Act,
and the rules and regulations thereunder);
(iii) The stockholders of Issuer shall have voted and failed to
approve the Merger Agreement and the Merger at a meeting which has been
held for that purpose or any adjournment or postponement thereof, or
such meeting shall not have been held in violation of the Merger
Agreement or shall have been canceled prior to termination of the Merger
Agreement if, prior to such meeting (or if such meeting shall not have
been held or shall have been canceled, prior to such termination), it
shall have been publicly announced that any person (other than Grantee
or any of its Subsidiaries) shall have made, or disclosed an intention
to make, a proposal to engage in an Acquisition Transaction;
(iv) The Issuer Board shall have withdrawn, modified or qualified
(or publicly announced its intention to withdraw, modify or qualify) in
any manner adverse in any
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respect to Grantee its recommendation that the shareholders of Issuer
approve the transactions contemplated by the Merger Agreement, or Issuer
or any Issuer Subsidiary shall have authorized, recommended, proposed
(or publicly announced its intention to authorize, recommend or propose)
an agreement to engage in an Acquisition Transaction with any person
other than Grantee or a Grantee Subsidiary;
(v) Any person other than Grantee or any Grantee Subsidiary shall
have filed with the SEC a registration statement or tender offer
materials with respect to a potential exchange or tender offer that
would constitute an Acquisition Transaction (or filed a preliminary
proxy statement with the SEC with respect to a potential vote by its
shareholders to approve the issuance of shares to be offered in such an
exchange offer);
(vi) Issuer shall have willfully breached any covenant or
obligation contained in the Merger Agreement in anticipation of an
Acquisition Transaction, and following such breach Grantee would be
entitled to terminate the Merger Agreement (whether immediately or after
the giving of notice or passage of time or both); or
(vii) Any person other than Grantee or any Grantee Subsidiary,
without Grantee's prior written consent, shall have filed an application
or notice with the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board") or other federal or state bank regulatory or
antitrust authority, which application or notice has been accepted for
processing, for approval to engage in an Acquisition Transaction.
(c) The term "Subsequent Triggering Event" shall mean any of the
following events or transactions occurring after the date hereof:
(i) The acquisition by any person (other than Grantee or any
Grantee Subsidiary) of beneficial ownership of 25% or more of the then
outstanding Common Stock; or
(ii) The occurrence of the Initial Triggering Event described in
clause (i) of subsection (b) of this Section 2, except that the
percentage referred to in clause (z) of the second sentence thereof
shall be 25%.
(d) Issuer shall notify Grantee promptly in writing of the occurrence of
any Initial Triggering Event or Subsequent Triggering Event (together, a
"Triggering Event"), it being understood that the giving of such notice by
Issuer shall not be a condition to the right of the Holder to exercise the
Option.
(e) In the event the Holder is entitled to and wishes to exercise the
Option (or any portion thereof), it shall send to Issuer a written notice (the
date of which being herein referred to as the "Notice Date") specifying (i) the
total number of shares it will purchase pursuant to such exercise and (ii) a
place and date not earlier than three business days nor later than 60 business
days from the Notice Date for the closing of such purchase (the "Closing Date");
provided, that if prior notification to or approval of the Federal Reserve Board
or any other regulatory or antitrust agency is required in connection with such
purchase, the Holder shall promptly file the required notice or application for
approval, shall promptly notify Issuer of such filing and shall expeditiously
process the same and the period of time that otherwise would run pursuant to
this sentence shall run instead from the date on which any required notification
periods have expired or been terminated or such approvals have been obtained and
any requisite waiting period or periods shall have passed. Any exercise of the
Option shall be deemed to occur on the Notice Date relating thereto.
(f) At the closing referred to in subsection (e) of this Section 2, the
Holder shall (i) pay to Issuer the aggregate purchase price for the shares of
Common Stock purchased pursuant to the exercise of the Option in immediately
available funds by wire transfer to a bank account designated
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by Issuer and (ii) present and surrender this Agreement to Issuer at its
principal executive offices, provided that the failure or refusal of the Issuer
to designate such a bank account or accept surrender of this Agreement shall not
preclude the Holder from exercising the Option.
(g) At such closing, simultaneously with the delivery of immediately
available funds as provided in subsection (f) of this Section 2, Issuer shall
deliver to the Holder a certificate or certificates representing the number of
shares of Common Stock purchased by the Holder and, if the Option should be
exercised in part only, a new Option evidencing the rights of the Holder thereof
to purchase the balance of the shares purchasable hereunder.
(h) Certificates for Common Stock delivered at a closing hereunder may
be endorsed with a restrictive legend that shall read substantially as follows:
"The transfer of the shares represented by this certificate is
subject to certain provisions of an agreement between the registered
holder hereof and Issuer and to resale restrictions arising under the
Securities Act of 1933, as amended. A copy of such agreement is on file
at the principal office of Issuer and will be provided to the holder
hereof without charge upon receipt by Issuer of a written request
therefor."
It is understood and agreed that: (i) the reference to the resale
restrictions of the Securities Act of 1933, as amended (the "1933 Act")
in the above legend shall be removed by delivery of substitute
certificate(s) without such reference if the Holder shall have delivered
to Issuer a copy of a letter from the staff of the SEC, or an opinion of
counsel, in form and substance reasonably satisfactory to Issuer, to the
effect that such legend is not required for purposes of the 1933 Act;
(ii) the reference to the provisions of this Agreement in the above
legend shall be removed by delivery of substitute certificate(s) without
such reference if the shares have been sold or transferred in compliance
with the provisions of this Agreement and under circumstances that do
not require the retention of such reference in the opinion of counsel to
the Holder, in form and substance reasonably satisfactory to the Issuer;
and (iii) the legend shall be removed in its entirety if the conditions
in the preceding clauses (i) and (ii) are both satisfied. In addition,
such certificates shall bear any other legend as may be required by law.
(i) Upon the giving by the Holder to Issuer of the written notice of
exercise of the Option provided for under subsection (e) of this Section 2 and
the tender of the applicable purchase price in immediately available funds, the
Holder shall be deemed to be the holder of record of the shares of Common Stock
issuable upon such exercise, notwithstanding that the stock transfer books of
Issuer shall then be closed or that certificates representing such shares of
Common Stock shall not then be actually delivered to the Holder. Issuer shall
pay all expenses, and any and all United States federal, state and local taxes
and other charges that may be payable in connection with the preparation, issue
and delivery of stock certificates under this Section 2 in the name of the
Holder or its assignee, transferee or designee.
3. Issuer agrees: (i) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued or treasury shares of
Common Stock so that the Option may be exercised without additional
authorization of Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase Common Stock; (ii)
that it will not, by charter amendment or through reorganization, consolidation,
merger, dissolution or sale of assets, or by any other voluntary act, avoid or
seek to avoid the observance or performance of any of the covenants,
stipulations or conditions to be observed or performed hereunder by Issuer;
(iii) promptly to take all action as may from time to time be required
(including (x) complying with all applicable premerger notification, reporting
and waiting period requirements specified in 15 U.S.C. Section 18a and
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regulations promulgated thereunder and (y) in the event, under the Bank Holding
Company Act of 1956, as amended (the "BHCA"), or the Change in Bank Control Act
of 1978, as amended, or any state or other federal banking law, prior approval
of or notice to the Federal Reserve Board or to any state or other federal
regulatory authority is necessary before the Option may be exercised,
cooperating fully with the Holder in preparing such applications or notices and
providing such information to the Federal Reserve Board or such state or other
federal regulatory authority as they may require) in order to permit the Holder
to exercise the Option and Issuer duly and effectively to issue shares of Common
Stock pursuant hereto; and (iv) promptly to take all action provided herein to
protect the rights of the Holder against dilution.
4. This Agreement (and the Option granted hereby) are exchangeable, without
expense, at the option of the Holder, upon presentation and surrender of this
Agreement at the principal office of Issuer, for other Agreements providing for
Options of different denominations entitling the holder thereof to purchase, on
the same terms and subject to the same conditions as are set forth herein, in
the aggregate the same number of shares of Common Stock purchasable hereunder.
The terms "Agreement" and "Option" as used herein include any Agreements and
related Options for which this Agreement (and the Option granted hereby) may be
exchanged. Upon receipt by Issuer of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of this Agreement, and (in the case
of loss, theft or destruction) of reasonably satisfactory indemnification, and
upon surrender and cancellation of this Agreement, if mutilated, Issuer will
execute and deliver a new Agreement of like tenor and date. Any such new
Agreement executed and delivered shall constitute an additional contractual
obligation on the part of Issuer, whether or not the Agreement so lost, stolen,
destroyed or mutilated shall at any time be enforceable by anyone.
5. In addition to the adjustment in the number of shares of Common Stock
that are purchasable upon exercise of the Option pursuant to Section 1 of this
Agreement, the number of shares of Common Stock purchasable upon the exercise of
the Option and the Option Price shall be subject to adjustment from time to time
as provided in this Section 5. In the event of any change in Common Stock by
reason of a stock dividend, stock split, split-up, recapitalization, stock
combination, exchange of shares or similar transaction, the type and number of
shares or securities subject to the Option, and the Option Price therefor, shall
be adjusted appropriately, and proper provision shall be made in the agreements
governing such transaction so that Grantee shall receive, upon exercise of the
Option, the number and class of shares or other securities or property that
Grantee would have received in respect of Common Stock if the Option had been
exercised immediately prior to such event, or the record date therefor, as
applicable. If any additional shares of Common Stock are issued after the date
of this Agreement (other than pursuant to an event described in the second
sentence of this Section 5), the number of shares of Common Stock subject to the
Option shall be adjusted so that, after such issuance, it, together with any
shares of Common Stock previously issued pursuant hereto, equals 19.9% of the
number of shares of Common Stock then issued and outstanding, without giving
effect to any shares subject to or issued pursuant to the Option.
6. Upon the occurrence of a Subsequent Triggering Event that occurs prior
to an Exercise Termination Event, Issuer shall, at the request of Grantee
delivered within twelve (12) months (or such later period as provided in Section
10) of such Subsequent Triggering Event (whether on its own behalf or on behalf
of any subsequent holder of this Option (or part thereof) or any of the shares
of Common Stock issued pursuant hereto), promptly prepare, file and keep current
a registration statement under the 1933 Act covering any shares issued and
issuable pursuant to this Option and shall use its reasonable best efforts to
cause such registration statement to become effective and remain current in
order to permit the sale or other disposition of any shares of Common Stock
issued upon total or partial exercise of this Option ("Option Shares") in
accordance with any
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plan of disposition requested by Grantee. Issuer will use its reasonable best
efforts to cause such registration statement promptly to become effective and
then to remain effective for such period not in excess of 180 days from the day
such registration statement first becomes effective or such shorter time as may
be reasonably necessary to effect such sales or other dispositions. Grantee
shall have the right to demand two such registrations. The Issuer shall bear the
costs of such registrations (including, but not limited to, Issuer's attorneys'
fees, printing costs and filing fees, except for underwriting discounts or
commissions, brokers' fees and the fees and disbursements of Grantee's counsel
related thereto). The foregoing notwithstanding, if, at the time of any request
by Grantee for registration of Option Shares as provided above, Issuer is in
registration with respect to an underwritten public offering by Issuer of shares
of Common Stock, and if in the good faith judgment of the managing underwriter
or managing underwriters, or, if none, the sole underwriter or underwriters, of
such offering the offer and sale of the Option Shares would interfere with the
successful marketing of the shares of Common Stock offered by Issuer, the number
of Option Shares otherwise to be covered in the registration statement
contemplated hereby may be reduced; provided, however, that after any such
required reduction the number of Option Shares to be included in such offering
for the account of the Holder shall constitute at least 33 1/3% of the total
number of shares to be sold by the Holder and Issuer in the aggregate; and
provided further, however, that if such reduction occurs, then Issuer shall file
a registration statement for the balance as promptly as practicable thereafter
as to which no reduction pursuant to this Section 6 shall be permitted or occur
and the Holder shall thereafter be entitled to one additional registration and
the twelve (12) month period referred to in the first sentence of this section
shall be increased to twenty-four (24) months. Each such Holder shall provide
all information reasonably requested by Issuer for inclusion in any registration
statement to be filed hereunder. If requested by any such Holder in connection
with such registration, Issuer shall become a party to any underwriting
agreement relating to the sale of such shares, but only to the extent of
obligating itself in respect of representations, warranties, indemnities and
other agreements customarily included in such underwriting agreements for
Issuer. Upon receiving any request under this Section 6 from any Holder, Issuer
agrees to send a copy thereof to any other person known to Issuer to be entitled
to registration rights under this Section 6, in each case by promptly mailing
the same, postage prepaid, to the address of record of the persons entitled to
receive such copies. Notwithstanding anything to the contrary contained herein,
in no event shall the number of registrations that Issuer is obligated to effect
be increased by reason of the fact that there shall be more than one Holder as a
result of any assignment or division of this Agreement.
7. (a) At any time after the occurrence of a Repurchase Event (as defined
below) (i) at the request of the Holder, delivered prior to an Exercise
Termination Event (or such later period as provided in Section 10), Issuer (or
any successor thereto) shall repurchase the Option from the Holder at a price
(the "Option Repurchase Price") equal to the amount by which (A) the
market/offer price (as defined below) exceeds (B) the Option Price, multiplied
by the number of shares for which this Option may then be exercised and (ii) at
the request of the owner of Option Shares from time to time (the "Owner"),
delivered prior to an Exercise Termination Event (or such later period as
provided in Section 10), Issuer (or any successor thereto) shall repurchase such
number of the Option Shares from the Owner as the Owner shall designate at a
price (the "Option Share Repurchase Price") equal to the market/offer price
multiplied by the number of Option Shares so designated. The term "market/offer
price" shall mean the highest of (i) the price per share of Common Stock at
which a tender or exchange offer therefor has been made, (ii) the price per
share of Common Stock to be paid by any third party pursuant to an agreement
with Issuer, (iii) the highest closing price for shares of Common Stock within
the six-month period immediately preceding the date the Holder gives notice of
the required repurchase of this Option or the Owner gives notice of the required
repurchase of Option Shares, as the case may be, or (iv) in the event of a sale
of all or any substantial part of Issuer's assets or deposits, the sum of the
net price paid in such sale for such assets or deposits and the current market
value of the remaining net assets of Issuer as
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determined by a nationally recognized investment banking firm selected by the
Holder or the Owner, as the case may be, and reasonably acceptable to Issuer,
divided by the number of shares of Common Stock of Issuer outstanding at the
time of such sale. In determining the market/offer price, the value of
consideration other than cash shall be determined by a nationally recognized
investment banking firm selected by the Holder or Owner, as the case may be, and
reasonably acceptable to Issuer.
(b) The Holder and the Owner, as the case may be, may exercise its right
to require Issuer to repurchase the Option and any Option Shares pursuant to
this Section 7 by surrendering for such purpose to Issuer, at its principal
office, a copy of this Agreement or certificates for Option Shares, as
applicable, accompanied by a written notice or notices stating that the Holder
or the Owner, as the case may be, elects to require Issuer to repurchase this
Option and/or the Option Shares in accordance with the provisions of this
Section 7. The Holder shall also represent and warrant that it has sole record
and beneficial ownership of such Option Shares and that such Option Shares are
then free and clear of all liens. As promptly as practicable, and in any event
within five (5) business days after the surrender of the Option and/or
certificates representing Option Shares and the receipt of such notice or
notices relating thereto, Issuer shall deliver or cause to be delivered to the
Holder the Option Repurchase Price and/or to the Owner the Option Share
Repurchase Price therefor or the portion thereof that Issuer is not then
prohibited under applicable law and regulation from so delivering.
(c) To the extent that Issuer is prohibited under applicable law or
regulation, or as a consequence of administrative policy, from repurchasing the
Option and/or the Option Shares in full, Issuer shall immediately so notify the
Holder and/or the Owner and thereafter deliver or cause to be delivered, from
time to time, to the Holder and/or the Owner, as appropriate, the portion of the
Option Repurchase Price and the Option Share Repurchase Price, respectively,
that it is no longer prohibited from delivering, within five (5) business days
after the date on which Issuer is no longer so prohibited; provided, however,
that if Issuer at any time after delivery of a notice of repurchase pursuant to
paragraph (b) of this Section 7 is prohibited under applicable law or
regulation, or as a consequence of administrative policy, from delivering to the
Holder and/or the Owner, as appropriate, the Option Repurchase Price and the
Option Share Repurchase Price, respectively, in full (and Issuer hereby
undertakes to use its reasonable best efforts to obtain all required regulatory
and legal approvals and to file any required notices as promptly as practicable
in order to accomplish such repurchase), the Holder or Owner may revoke its
notice of repurchase of the Option and/or the Option Shares whether in whole or
to the extent of the prohibition, whereupon, in the latter case, Issuer shall
promptly (i) deliver to the Holder and/or the Owner, as appropriate, that
portion of the Option Repurchase Price and/or the Option Share Repurchase Price
that Issuer is not prohibited from delivering; and (ii) deliver, as appropriate,
either (A) to the Holder, a new Agreement evidencing the right of the Holder to
purchase that number of shares of Common Stock obtained by multiplying the
number of shares of Common Stock for which the surrendered Agreement was
exercisable at the time of delivery of the notice of repurchase by a fraction,
the numerator of which is the Option Repurchase Price less the portion thereof
theretofore delivered to the Holder and the denominator of which is the Option
Repurchase Price, and/or (B) to the Owner, a certificate for the Option Shares
it is then so prohibited from repurchasing. If an Exercise Termination Event
shall have occurred prior to the date of the notice by Issuer described in the
first sentence of this subsection (c), or shall be scheduled to occur at any
time before the expiration of a period ending on the thirtieth day after such
date, the Holder shall nonetheless have the right to exercise the Option until
the expiration of such 30-day period.
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(d) For purposes of this Agreement, a "Repurchase Event" shall be deemed
to have occurred upon the occurrence of any of the following events or
transactions after the date hereof:
(i) the acquisition by any person (other than Grantee or any
Grantee Subsidiary) of (A) beneficial ownership of 50% or more of the
then outstanding Common Stock or (B) beneficial ownership of 15% more of
the then outstanding Common Stock if Issuer shall have violated Section
6.16 of the Merger Agreement; or
(ii) the consummation of any Acquisition Transaction described in
Section 2(b)(i) hereof, except that the percentage referred to in clause
(z) shall be 25%.
8. (a) In the event that prior to an Exercise Termination Event, Issuer
shall enter into an agreement (i) to consolidate with or merge into any person,
other than Grantee or a Grantee Subsidiary, or engage in a plan of exchange with
any person, other than Grantee or a Grantee Subsidiary and Issuer shall not be
the continuing or surviving corporation of such consolidation or merger or the
acquirer in such plan of exchange, (ii) to permit any person, other than Grantee
or a Grantee Subsidiary, to merge into Issuer or be acquired by Issuer in a plan
of exchange and Issuer shall be the continuing or surviving or acquiring
corporation, but, in connection with such merger or plan of exchange, the then
outstanding shares of Common Stock shall be changed into or exchanged for stock
or other securities of any other person or cash or any other property or the
then outstanding shares of Common Stock shall after such merger or plan of
exchange represent less than 50% of the outstanding shares and share equivalents
of the merged or acquiring company, or (iii) to sell or otherwise transfer all
or a substantial part of its or any Issuer Subsidiary's assets or deposits to
any person, other than Grantee or a Grantee Subsidiary, then, and in each such
case, the agreement governing such transaction shall make proper provision so
that the Option shall, upon the consummation of any such transaction and upon
the terms and conditions set forth herein, be converted into, or exchanged for,
an option (the "Substitute Option"), at the election of the Holder, of either
(x) the Acquiring Corporation (as hereinafter defined) or (y) any person that
controls the Acquiring Corporation.
(b) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean (i) the continuing or
surviving person of a consolidation or merger with Issuer (if other than
Issuer), (ii) the acquiring person in a plan of exchange in which Issuer
is acquired, (iii) the Issuer in a merger or plan of exchange in which
Issuer is the continuing or surviving or acquiring person and (iv) the
transferee of all or a substantial part of Issuer's assets or deposits
(or the assets or deposits of any Issuer Subsidiary).
(ii) "Substitute Common Stock" shall mean the common stock issued
by the issuer of the Substitute Option upon exercise of the Substitute
Option.
(iii) "Assigned Value" shall mean the market/offer price, as
defined in Section 7.
(iv) "Average Price" shall mean the average closing price of a
share of the Substitute Common Stock for one (1) year immediately
preceding the consolidation, merger or sale in question, but in no event
higher than the closing price of the shares of Substitute Common Stock
on the day preceding such consolidation, merger or sale; provided that
if Issuer is the issuer of the Substitute Option, the Average Price
shall be computed with respect to a share of common stock issued by the
person merging into Issuer or by any company which controls or is
controlled by such person, as the Holder may elect.
(c) The Substitute Option shall have the same terms as the Option,
provided that if the terms of the Substitute Option cannot, for legal reasons,
be the same as the Option, such terms shall
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be as similar as possible and in no event less advantageous to the Holder. The
issuer of the Substitute Option shall also enter into an agreement with the then
Holder or Holders of the Substitute Option in substantially the same form as
this Agreement (after giving effect for such purpose to the provisions of
Section 9), which agreement shall be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of shares
of Substitute Common Stock as is equal to the Assigned Value multiplied by the
number of shares of Common Stock for which the Option was exercisable
immediately prior to the event described in the first sentence of Section 8(a),
divided by the Average Price. The exercise price of the Substitute Option per
share of Substitute Common Stock shall then be equal to the Option Price
multiplied by a fraction, the numerator of which shall be the number of shares
of Common Stock for which the Option was exercisable immediately prior to the
event described in the first sentence of Section 8(a) and the denominator of
which shall be the number of shares of Substitute Common Stock for which the
Substitute Option is exercisable.
(e) In no event, pursuant to any of the foregoing paragraphs, shall the
Substitute Option be exercisable for more than 19.9% of the shares of Substitute
Common Stock outstanding prior to exercise of the Substitute Option. In the
event that the Substitute Option would be exercisable for more than 19.9% of the
shares of Substitute Common Stock outstanding prior to exercise but for this
clause (e), the issuer of the Substitute Option (the "Substitute Option Issuer")
shall make a cash payment to Holder equal to the excess of (i) the value of the
Substitute Option without giving effect to the limitation in this clause (e)
over (ii) the value of the Substitute Option after giving effect to the
limitation in this clause (e). This difference in value shall be determined by a
nationally recognized investment banking firm selected by the Holder.
(f) Issuer shall not enter into any transaction described in subsection
(a) of this Section 8 unless the Acquiring Corporation and any person that
controls the Acquiring Corporation assume in writing all the obligations of
Issuer hereunder.
9. (a) At the request of the holder of the Substitute Option (the
"Substitute Option Holder"), the issuer of the Substitute Option (the
"Substitute Option Issuer") shall repurchase the Substitute Option from the
Substitute Option Holder at a price (the "Substitute Option Repurchase Price")
equal to the amount by which (i) the Highest Closing Price (as hereinafter
defined) exceeds (ii) the exercise price of the Substitute Option, multiplied by
the number of shares of Substitute Common Stock for which the Substitute Option
may then be exercised, and at the request of the owner (the "Substitute Share
Owner") of shares of Substitute Common Stock (the "Substitute Shares"), the
Substitute Option Issuer shall repurchase the Substitute Shares at a price (the
"Substitute Share Repurchase Price") equal to the Highest Closing Price
multiplied by the number of Substitute Shares so designated. The term "Highest
Closing Price" shall mean the highest closing price for shares of Substitute
Common Stock within the six-month period immediately preceding the date the
Substitute Option Holder gives notice of the required repurchase of the
Substitute Option or the Substitute Share Owner gives notice of the required
repurchase of the Substitute Shares, as applicable.
(b) The Substitute Option Holder and the Substitute Share Owner, as the
case may be, may exercise its respective rights to require the Substitute Option
Issuer to repurchase the Substitute Option and the Substitute Shares pursuant to
this Section 9 by surrendering for such purpose to the Substitute Option Issuer,
at its principal office, the agreement for such Substitute Option (or, in the
absence of such an agreement, a copy of this Agreement) and/or certificates for
Substitute Shares accompanied by a written notice or notices stating that the
Substitute Option Holder or the Substitute Share Owner, as the case may be,
elects to require the Substitute Option Issuer to repurchase the Substitute
Option and/or the Substitute Shares in accordance with the provisions of this
Section 9. As promptly as practicable and in any event within five (5) business
days after the
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surrender of the Substitute Option and/or certificates representing Substitute
Shares and the receipt of such notice or notices relating thereto, the
Substitute Option Issuer shall deliver or cause to be delivered to the
Substitute Option Holder the Substitute Option Repurchase Price and/or to the
Substitute Share Owner the Substitute Share Repurchase Price therefor or the
portion thereof which the Substitute Option Issuer is not then prohibited under
applicable law and regulation from so delivering.
(c) To the extent that the Substitute Option Issuer is prohibited under
applicable law or regulation, or as a consequence of administrative policy, from
repurchasing the Substitute Option and/or the Substitute Shares in part or in
full, the Substitute Option Issuer shall immediately so notify the Substitute
Option Holder and/or the Substitute Share Owner and thereafter deliver or cause
to be delivered, from time to time, to the Substitute Option Holder and/or the
Substitute Share Owner, as appropriate, the portion of the Substitute Option
Repurchase Price and/or the Substitute Share Repurchase Price, respectively,
which it is no longer prohibited from delivering, within five (5) business days
after the date on which the Substitute Option Issuer is no longer so prohibited;
provided, however, that if the Substitute Option Issuer is at any time after
delivery of a notice of repurchase pursuant to subsection (b) of this Section 9
prohibited under applicable law or regulation, or as a consequence of
administrative policy, from delivering to the Substitute Option Holder and/or
the Substitute Share Owner, as appropriate, the Substitute Option Repurchase
Price and the Substitute Share Repurchase Price, respectively, in full (and the
Substitute Option Issuer shall use its reasonable best efforts to receive all
required regulatory and legal approvals as promptly as practicable in order to
accomplish such repurchase), the Substitute Option Holder and/or Substitute
Share Owner may revoke its notice of repurchase of the Substitute Option or the
Substitute Shares either in whole or to the extent of prohibition, whereupon, in
the latter case, the Substitute Option Issuer shall promptly (i) deliver to the
Substitute Option Holder or Substitute Share Owner, as appropriate, that portion
of the Substitute Option Repurchase Price or the Substitute Share Repurchase
Price that the Substitute Option Issuer is not prohibited from delivering; and
(ii) deliver, as appropriate, either (A) to the Substitute Option Holder, a new
Substitute Option evidencing the right of the Substitute Option Holder to
purchase that number of shares of the Substitute Common Stock obtained by
multiplying the number of shares of the Substitute Common Stock for which the
surrendered Substitute Option was exercisable at the time of delivery of the
notice of repurchase by a fraction, the numerator of which is the Substitute
Option Repurchase Price less the portion thereof theretofore delivered to the
Substitute Option Holder and the denominator of which is the Substitute Option
Repurchase Price, and/or (B) to the Substitute Share Owner, a certificate for
the Substitute Option Shares it is then so prohibited from repurchasing. If an
Exercise Termination Event shall have occurred prior to the date of the notice
by the Substitute Option Issuer described in the first sentence of this
subsection (c), or shall be scheduled to occur at any time before the expiration
of a period ending on the thirtieth day after such date, the Substitute Option
Holder shall nevertheless have the right to exercise the Substitute Option until
the expiration of such 30-day period.
10. The periods for exercise of certain rights under Sections 2, 6, 7, 9
and 14 shall be extended: (i) to the extent necessary to obtain all regulatory
approvals for the exercise of such rights (for so long as the Holder, Owner,
Substitute Option Holder or Substitute Share Owner, as the case may be, is using
commercially reasonable efforts to obtain such regulatory approvals), and for
the expiration of all statutory waiting periods; (ii) to the extent necessary to
avoid liability under Section 16(b) of the 1934 Act by reason of such exercise;
and (iii) when there exists an injunction, order or judgment that prohibits or
delays exercise of such right.
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11. (a) Issuer hereby represents and warrants to Grantee as follows:
(i) Issuer has the requisite corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby have been duly
and validly authorized by the Issuer Board prior to the date hereof and
no other corporate proceedings on the part of Issuer are necessary to
authorize this Agreement or to consummate the transactions so
contemplated. This Agreement has been duly and validly executed and
delivered by Issuer.
(ii) Issuer has taken all necessary corporate action to authorize
and reserve and to permit it to issue, and at all times from the date
hereof through the termination of this Agreement in accordance with its
terms will have reserved for issuance upon the exercise of the Option,
that number of shares of Common Stock equal to the maximum number of
shares of Common Stock at any time and from time to time issuable
hereunder, and all such shares, upon issuance pursuant thereto, will be
duly authorized, validly issued, fully paid, nonassessable, and will be
delivered free and clear of all claims, liens, encumbrance and security
interests and not subject to any preemptive rights.
(b) Grantee hereby represents and warrants to Issuer as follows: Grantee
has the requisite corporate power and authority to execute and deliver this
Agreement and to perform its obligations hereunder. The execution and delivery
of this Agreement by the Grantee and the performance of its obligations
hereunder by the Grantee have been duly and validly authorized by the Board of
Directors of Grantee and no other corporate proceedings on the part of the
Grantee are necessary to authorize this Agreement or for Grantee to perform its
obligations hereunder. This Agreement has been duly and validly executed and
delivered by Grantee.
(c) This Option is not being, and any Option Shares or other securities
acquired by Grantee upon exercise of the Option will not be, acquired with a
view to the public distribution thereof and will not be transferred or otherwise
disposed or except in a transaction registered or exempt from registration under
the 1933 Act.
12. Neither of the parties hereto may assign any of its rights or
obligations under this Agreement or the Option created hereunder to any other
person, without the express written consent of the other party, except that in
the event an Initial Triggering Event shall have occurred prior to an Exercise
Termination Event, Grantee, subject to the express provisions hereof, may assign
in whole or in part its rights and obligations hereunder; provided, however,
that until the date fifteen (15) days following the date on which the Federal
Reserve Board has approved an application by Grantee to acquire the shares of
Common Stock subject to the Option, Grantee may not assign its rights under the
Option except in (i) a widely dispersed public distribution, (ii) a private
placement in which no one party acquires the right to purchase in excess of 2%
of the voting shares of Issuer, (iii) an assignment to a single party (e.g., a
broker or investment banker) for the purpose of conducting a widely dispersed
public distribution on Grantee's behalf or (iv) any other manner approved by the
Federal Reserve Board.
13. Each of Grantee and Issuer will use its reasonable best efforts to make
all filings with, and to obtain consents of, all third parties and governmental
authorities necessary to the consummation of the transactions contemplated by
this Agreement, including, without limitation, applying to the Federal Reserve
Board under the BHCA for approval to acquire the shares issuable hereunder, but
Grantee shall not be obligated to apply to state banking authorities for
approval to acquire the shares of Common Stock issuable hereunder until such
time, if ever, as it deems appropriate to do so.
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14. (a) Grantee may, at any time following a Repurchase Event and prior to
the occurrence of an Exercise Termination Event (or such later period as
provided in Section 10), relinquish the Option (together with any Option Shares
issued to and then owned by Grantee) to Issuer in exchange for a cash fee equal
to the Surrender Price. The "Surrender Price" shall be equal to $160 million (i)
plus, if applicable, Grantee's purchase price with respect to any Option Shares
and (ii) minus, if applicable, the excess of (A) the net price, if any, received
by Grantee or a Grantee Subsidiary pursuant to the sale of Option Shares (or any
other securities into which such Option Shares were converted or exchanged) to
any unaffiliated party, over (B) Grantee's purchase price of such Option Shares.
(b) Grantee may exercise its right to relinquish the Option and any
Option Shares pursuant to this Section 14 by surrendering to Issuer, at its
principal office, a copy of this Agreement together with certificates for Option
Shares, if any, accompanied by a written notice stating (i) that Grantee elects
to relinquish the Option and Option Shares, if any, in accordance with the
provisions of this Section 14 and (ii) the Surrender Price. The Surrender Price
shall be payable in immediately available funds on or before the second business
day following receipt of such notice by Issuer.
(c) To the extent that Issuer is prohibited under applicable law or
regulation, or as a consequence of administrative policy, from paying the
Surrender Price to Grantee in full, Issuer shall immediately so notify Grantee
and thereafter deliver or cause to be delivered, from time to time, to Grantee,
the portion of the Surrender Price that it is no longer prohibited from paying,
within five (5) business days after the date on which Issuer is no longer so
prohibited; provided, however, that if Issuer at any time after delivery of a
notice of surrender pursuant to paragraph (b) of this Section 14 is prohibited
under applicable law or regulation, or as a consequence of administrative
policy, from paying to Grantee the Surrender Price in full, (i) Issuer shall (A)
use its reasonable best efforts to obtain all required regulatory and legal
approvals and to file any required notices as promptly as practicable in order
to make such payments, (B) within five (5) days of the submission or receipt of
any documents relating to any such regulatory and legal approvals, provide
Grantee with copies of the same and (c) keep Grantee advised of both the status
of any such request for regulatory and legal approvals, as well as any
discussions with any relevant regulatory or other third party reasonably related
to the same and (ii) Grantee may revoke such notice of surrender by delivery of
a notice of revocation to Issuer and, upon delivery of such notice of
revocation, the Exercise Termination Date shall be extended to a date six (6)
months from the date on which the Exercise Termination Date would have occurred
if not for the provisions of this Section 14(c) (during which period Grantee may
exercise any of its rights hereunder, including any and all rights pursuant to
this Section 14).
15. The parties hereto acknowledge that damages would be an inadequate
remedy for a breach of this Agreement by either party hereto and that the
obligations of the parties hereto shall be enforceable by either party hereto
through injunctive or other equitable relief. In connection therewith, both
parties waive the posting of any bond or similar requirement.
16. If any term, provision, covenant or restriction contained in this
Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions and covenants and restrictions contained in this Agreement
shall remain in full force and effect, and shall in no way be affected, impaired
or invalidated. If for any reason such court or regulatory agency determines
that the Holder is not permitted to acquire, or Issuer is not permitted to
repurchase pursuant to Section 7, the full number of shares of Common Stock
provided in Section l(a) hereof (as adjusted pursuant to Section l(b) or Section
5 hereof), it is the express intention of Issuer to allow the Holder to acquire
or to require Issuer to repurchase such lesser number of shares as may be
permissible, without any amendment or modification hereof.
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17. All notices, requests, claims, demands and other communications
hereunder shall be deemed to have been duly given when delivered in person, by
fax, telecopy, or by registered or certified mail (postage prepaid, return
receipt requested) at the respective addresses of the parties set forth in the
Merger Agreement.
18. This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware, without regard to the conflict of law
principles thereof (except to the extent that mandatory provisions of federal
law are applicable).
19. This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original, but all of which shall constitute one
and the same agreement.
20. Except as otherwise expressly provided herein, each of the parties
hereto shall bear and pay all costs and expenses incurred by it or on its behalf
in connection with the transactions contemplated hereunder, including fees and
expenses of its own financial consultants, investment bankers, accountants and
counsel.
21. Except as otherwise expressly provided herein or in the Merger
Agreement, this Agreement contains the entire agreement between the parties with
respect to the transactions contemplated hereunder and supersedes all prior
arrangements or understandings with respect thereof, written or oral. The terms
and conditions of this Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and permitted assignees.
Nothing in this Agreement, expressed or implied, is intended to confer upon any
party, other than the parties hereto, and their respective successors except as
assignees, any rights, remedies, obligations or liabilities under or by reason
of this Agreement, except as expressly provided herein.
22. Capitalized terms used in this Agreement and not defined herein shall
have the meanings assigned thereto in the Merger Agreement.
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, all as of the
date first above written.
ZIONS BANCORPORATION
By /s/ HARRIS H. SIMMONS
------------------------------------
Harris H. Simmons
President and Chief Executive
Officer
FIRST SECURITY CORPORATION
By /s/ SPENCER F. ECCLES
------------------------------------
Spencer F. Eccles
Chairman of the Board and
Chief Executive Officer
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APPENDIX D
PERSONAL AND CONFIDENTIAL
,1999
Board of Directors
Zions Bancorporation
One South Main Street
Salt Lake City, Utah 84111
Gentlemen and Madame:
You have requested our opinion as to the fairness from a financial point of
view to the holders of the outstanding shares of Common Stock without par value
(the "Shares"), of Zions Bancorporation ("Zions") of the exchange ratio of one
share of Common Stock, par value $1.25 per share (the "Surviving Corporation
Common Stock"), of the Surviving Corporation (as defined below) to be exchanged
(the "Exchange Ratio") for each Share, following a reverse stock split in which
each outstanding share of Common Stock, par value $1.25 per share (the "First
Security Common Stock"), of First Security Corporation ("First Security") will
be reclassified and converted into 0.442 shares of Surviving Corporation Common
Stock, all pursuant to the Agreement and Plan of Merger, dated as of June 6,
1999, by and between Zions and First Security (the "Agreement"). Pursuant to the
Agreement, Zions will be merged with and into First Security (the "Surviving
Corporation").
Goldman, Sachs & Co., as part of its investment banking business, is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for estate, corporate and other purposes. We are
familiar with Zions, having provided certain investment banking services to
Zions from time to time, including having acted as managing underwriter of a
public offering of 2,400,000 Shares in June 1998, and having acted as its
financial advisor in connection with, and having participated in certain of the
negotiations leading to, the Agreement. We have also provided certain investment
banking services to First Security from time to time, including having acted as
agent in the sale of approximately $170 million of mortgage loans in September
1998. Goldman, Sachs & Co. provides a full range of financial advisory and
securities services and, in the course of its normal trading activities, may
from time to time effect transactions and hold securities, including derivative
securities, of Zions or First Security for its own account and for the accounts
of customers.
In connection with this opinion, we have reviewed, among other things, the
Agreement; Annual Reports to Shareholders and Annual Reports on Form 10-K of
Zions and First Security for the five years ended December 31, 1998; certain
interim reports to shareholders and Quarterly Reports on Form 10-Q of Zions and
First Security; certain other communications from Zions and First Security to
their respective shareholders; and certain internal financial analyses and
forecasts for Zions and First Security prepared by their respective managements,
including certain cost savings, operating synergies and the impact of certain
divestitures (the "Divestitures") projected by the managements of Zions and
First Security to result from the transaction contemplated by the Agreement (the
"Synergies"). We also have held discussions with members of the senior
management of Zions and First Security regarding the strategic rationale for,
and the potential benefits of, the transaction contemplated by the Agreement and
the past and current business operations, financial condition and future
prospects of their respective companies. In addition, we have reviewed the
reported price and
D-1
<PAGE> 191
trading activity for the Shares and the First Security Common Stock, compared
certain financial and stock market information for Zions and First Security with
similar information for certain other companies the securities of which are
publicly traded, reviewed the financial terms of certain recent business
combinations in the commercial banking industry specifically and in other
industries generally and performed such other studies and analyses as we
considered appropriate.
We have relied upon the accuracy and completeness of all of the financial
and other information reviewed by us and have assumed such accuracy and
completeness for purposes of rendering this opinion. In that regard, we have
assumed with your consent that the internal financial forecasts of Zions and
First Security prepared by their respective managements as well as the Synergies
projected by the managements of Zions and First Security have been reasonably
prepared on a basis reflecting the best currently available estimates and
judgments of Zions and First Security, and that such forecasts and synergies
will be realized in the amounts and time periods contemplated thereby. We are
not experts in the evaluation of loan and lease portfolios for purposes of
assessing the adequacy of the allowance for losses with respect thereto and have
assumed, with your consent, that such allowances for each of Zions and First
Security are in the aggregate adequate to cover all such losses. In addition, we
have not reviewed individual credit files nor have we made an independent
evaluation or appraisal of the assets and liabilities (including any hedge or
derivative positions) of Zions or First Security or any of their subsidiaries
and we have not been furnished with any such evaluation or appraisal. We also
have assumed with your consent that the transaction contemplated by the
Agreement will be accounted for as a pooling-of-interests under generally
accepted accounting principles. We also have assumed all material governmental,
regulatory or other consents and approvals necessary for the consummation of the
transaction contemplated by the Agreement will be obtained without any adverse
effect, other than the impact of the Divestitures as reflected in the forecasts,
on Zions or First Security or on the expected benefits of the transaction
contemplated by the Agreement.
Our advisory services and the opinion expressed herein are provided for the
information and assistance of the Board of Directors of Zions in connection with
its consideration of the transaction contemplated by the Agreement and such
opinion does not constitute a recommendation as to how any holder of Shares
should vote with respect to such transaction.
Based upon and subject to the foregoing and based upon such other matters
as we consider relevant, it is our opinion that as of the date hereof the
Exchange Ratio pursuant to the Agreement is fair from a financial point of view
to the holders of the Shares.
Very truly yours,
- ---------------------------------------------------------
(GOLDMAN, SACHS & CO.)
D-2
<PAGE> 192
APPENDIX E
, 1999
Board of Directors
First Security Corporation
79 S. Main Street
Salt Lake City, Utah 84111
Ladies and Gentlemen:
You have requested our opinion as to the fairness, from a financial point
of view, to the stockholders of First Security Corporation (the "Company") of
the Exchange Ratio (as defined below) in connection with the proposed merger
(the "Merger") of the Company with Zions Bancorporation ("Zions"). Pursuant to
the Agreement and Plan of Merger, dated as of June 6, 1999 (the "Agreement"), by
and between the Company and Zions, Zions will merge with and into the Company
with the Company as the surviving corporation (the "Surviving Corporation").
Immediately prior to the effective time of the Merger, each outstanding share of
common stock, par value $1.25 per share, of the Company (the "Company Common
Stock") will be reclassified and converted (the "Reverse Stock Split") into
0.442 of a share of common stock (the "Exchange Ratio"), par value $1.25 per
share, of the Surviving Corporation (the "Surviving Corporation Common Stock").
Except for certain shares which are to be canceled pursuant to the Agreement and
subject to the prior effectiveness of the Reverse Stock Split, by virtue of the
Merger (i) each share of Company Common Stock issued and outstanding immediately
prior to the effective time of the Merger will remain an issued and outstanding
share of Surviving Corporation Common Stock, and (ii) each share of common
stock, no par value, of Zions (the "Zions Common Stock") issued and outstanding
immediately prior to the effective time of the Merger will be converted into one
share of Surviving Corporation Common Stock.
In arriving at our opinion, we have reviewed (i) the Agreement; (ii) the
Proxy Statement/Prospectus of the Company and Zions relating to the Merger;
(iii) certain publicly available information concerning the business of the
Company and Zions and of certain other companies engaged in businesses
comparable to those of the Company and Zions, and the reported market prices for
certain other companies' securities deemed comparable; (iv) publicly available
terms of certain transactions involving companies comparable to the Company and
Zions and the consideration received for such companies; (v) current and
historical market prices of the Company Common Stock and the Zions Common Stock;
(vi) the audited financial statements of the Company and Zions for the fiscal
years ended December 31, 1994, 1995, 1996, 1997 and 1998, and the unaudited
financial statements of the Company and Zions for the period ended September 30,
1999; (vii) certain internal financial analyses and forecasts prepared by the
Company and Zions and their respective managements; and (viii) the terms of
other business combinations that we deemed relevant.
In addition, we have held discussions with certain members of the
management of the Company and Zions with respect to certain aspects of the
Merger, the past and current business operations of the Company and Zions, the
financial condition and future prospects and operations of the Company and
Zions, the effects of the Merger on the financial condition and future prospects
of the Company and Zions, and certain other matters we believed necessary or
appropriate to our inquiry. We have reviewed such other financial studies and
analyses and considered such other information as we deemed appropriate for the
purposes of this opinion.
In giving our opinion, we have relied upon and assumed, without independent
verification, the accuracy and completeness of all information that was publicly
available or was furnished to us by the
E-1
<PAGE> 193
Company and Zions or otherwise reviewed by us, and we have not assumed any
responsibility or liability therefor. We have not conducted any valuation or
appraisal of any assets or liabilities, nor have any such valuations or
appraisals been provided to us. We have not been requested to review individual
credit files or make any independent assessment as to the future performance or
non-performance of the Company's or Zions' assets. We have assumed that current
allowances and reserves for loan losses for both the Company and Zions are
sufficient to cover all such losses. In relying on financial analyses and
forecasts provided to us, we have assumed that they have been reasonably
prepared based on assumptions reflecting the best currently available estimates
and judgments by management as to the expected future results of operations and
financial condition of the Company and Zions to which such analyses or forecasts
relate. We have also assumed that, in the course of obtaining regulatory and
third party consents for the Merger and the other transactions contemplated by
the Agreement and the Proxy Statement/Prospectus, no restriction will be imposed
that will have a material adverse effect on the future results of operations or
financial condition of the Company or Zions. We have further assumed that the
Merger will be accounted for as a pooling-of-interests under generally accepted
accounting principles and that it will qualify as a tax-free reorganization for
U.S. federal income tax purposes. We have relied as to all legal matters
relevant to rendering our opinion upon the advice of counsel.
Our opinion is necessarily based on economic, market and other conditions
as in effect on, and the information made available to us as of, the date
hereof. It should be understood that subsequent developments may affect this
opinion and that we do not have any obligation to update, revise, or reaffirm
this opinion. We are expressing no opinion herein as to the price at which the
Surviving Corporation Common Stock will trade at any future time. In connection
with our engagement, we were not requested to, and did not, solicit third party
indications of interest in acquiring all or any portion of the Company.
We have acted as financial advisor to the Company with respect to the
proposed Merger and will receive a fee from the Company for our services, a
significant portion of which is contingent upon the consummation of the Merger.
As you are aware, in the past we and our affiliates have provided financial
advisory, capital markets and commercial banking services to the Company, for
which we and our affiliates have received customary fees. In the ordinary course
of their businesses, J.P. Morgan Securities Inc. and its affiliates may actively
trade the debt and equity securities of the Company or Zions for their own
account or for the accounts of customers and, accordingly, they may at any time
hold long or short positions in such securities.
On the basis of and subject to the foregoing, it is our opinion as of the
date hereof that the Exchange Ratio in the proposed Merger is fair, from a
financial point of view, to the Company's stockholders.
This letter is provided to the Board of Directors of the Company in
connection with and for the purposes of its evaluation of the Merger. This
opinion does not constitute a recommendation to any stockholder of the Company
as to how such stockholder should vote with respect to the Merger.
Very truly yours,
J.P. MORGAN SECURITIES INC.
By:
- ----------------------------------------------------
Gail M. Rogers
Managing Director
E-2
<PAGE> 194
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Section 145 of the General Corporation Law of Delaware contains detailed
provisions on indemnification of directors and officers of a Delaware
corporation against expenses, judgments, fines and amounts paid in settlement,
actually and reasonably incurred in connection with litigation.
The Certificate of Incorporation of First Security Corporation provides for
indemnification of directors and officers to the full extent permitted or
allowed by the laws of the State of Delaware, as such laws exist or may
hereafter be amended (but, in the case of any such amendment, only to the extent
that such amendment permits the registrant to provide broader indemnification
rights than permitted or allowed by Section 145). The registrant also insures
its officers and directors to the full extent permitted by Section 145.
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-6.
(b) FINANCIAL STATEMENT SCHEDULES. Not applicable.
(c) REPORT, OPINION OR APPRAISAL. Not applicable.
ITEM 22. UNDERTAKINGS.
The undersigned registrant hereby undertakes as follows:
(1) 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 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.
(2) 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), 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.
(3) that every prospectus (i) that is filed pursuant to paragraph (2)
immediately preceding, or (ii) that purports to meet the requirements of
Section 10(a)(3) of the Securities Act of 1933, as amended, 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.
(4) that 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 provisions described
under Item 20 above, or otherwise, the registrant has been advised that in
II-1
<PAGE> 195
the opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by 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 Act and
will be governed by the final adjudication of such issue.
(5) to respond to requests for information that is incorporated by
reference into the Proxy Statement-Prospectus pursuant to Items 4, 10(b),
11 or 13 of Form S-4, 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.
(6) 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> 196
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Salt Lake City, Utah, on the 18th day
of November, 1999.
FIRST SECURITY CORPORATION
By: /s/ MORGAN J. EVANS
--------------------------------------
Morgan J. Evans
President and Chief Operating Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Morgan J. Evans and Brad D. Hardy, 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/ SPENCER F. ECCLES Chairman and Chief November 18, 1999
- ----------------------------------------------------- Executive Officer,
Spencer F. Eccles Director
/s/ MORGAN J. EVANS President and Chief November 18, 1999
- ----------------------------------------------------- Operating Officer,
Morgan J. Evans Director
/s/ BRAD D. HARDY Executive Vice President, November 18, 1999
- ----------------------------------------------------- General Counsel and Chief
Brad D. Hardy Financial Officer
(Principal Financial and
Accounting Officer)
Director , 1999
- -----------------------------------------------------
James C. Beardall
</TABLE>
II-3
<PAGE> 197
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
--------- -------- ----
<S> <C> <C>
/s/ RODNEY H. BRADY Director November 18, 1999
- -----------------------------------------------------
Rodney H. Brady
/s/ JAMES E. BRUCE Director November 18, 1999
- -----------------------------------------------------
James E. Bruce
/s/ THOMAS D. DEE II Director November 18, 1999
- -----------------------------------------------------
Thomas D. Dee II
/s/ DR. DAVID P. GARDNER Director November 18, 1999
- -----------------------------------------------------
Dr. David P. Gardner
/s/ ROBERT H. GARFF Director November 18, 1999
- -----------------------------------------------------
Robert H. Garff
/s/ JAY DEE HARRIS Director November 18, 1999
- -----------------------------------------------------
Jay Dee Harris
/s/ ROBERT T. HEINER Director November 18, 1999
- -----------------------------------------------------
Robert T. Heiner
/s/ KAREN H. HUNTSMAN Director November 18, 1999
- -----------------------------------------------------
Karen H. Huntsman
/s/ G. FRANK JOKLIK Director November 18, 1999
- -----------------------------------------------------
G. Frank Joklik
/s/ B.Z. KASTLER Director November 18, 1999
- -----------------------------------------------------
B. Z. Kastler
/s/ DR. J. BERNARD MACHEN Director November 18, 1999
- -----------------------------------------------------
Dr. J. Bernard Machen
Director , 1999
- -----------------------------------------------------
Joseph G. Maloof
/s/ MICHELE PAPEN-DANIEL, PH.D. Director November 18, 1999
- -----------------------------------------------------
Michele Papen-Daniel, Ph.D.
/s/ SCOTT S. PARKER Director November 18, 1999
- -----------------------------------------------------
Scott S. Parker
/s/ JAMES L. SORENSON Director November 18, 1999
- -----------------------------------------------------
James L. Sorenson
</TABLE>
II-4
<PAGE> 198
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
--------- -------- ----
<S> <C> <C>
/s/ HAROLD J. STEELE Director November 18, 1999
- -----------------------------------------------------
Harold J. Steele
/s/ JAMES R. WILSON Director November 18, 1999
- -----------------------------------------------------
James R. Wilson
</TABLE>
II-5
<PAGE> 199
EXHIBIT INDEX
(PURSUANT TO ITEM 601 OF REGULATION S-K)
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION AND METHOD OF FILING
- ------- --------------------------------
<C> <S>
2.1 Agreement and Plan of Merger, dated as of June 6, 1999, by
and between Zions Bancorporation and First Security
Corporation (included as Appendix A to the Proxy
Statement-Prospectus and incorporated by reference herein)
3.1 Certificate of Incorporation, as amended (Exhibit 3.1 to
First Security's Registration Statement on Form S-4, Reg
#333-30045, filed July 24, 1990, incorporated by reference
herein)
3.2 Bylaws of First Security, as amended January 26, 1998
(Exhibit 3.2 to First Security's Annual Report on Form 10-K
for the year ended December 31, 1997, incorporated by
reference herein)
4.1 Rights Agreement between First Security and First Security
Bank, N.A., dated October 27, 1998, which includes: Exhibit
A, the form of Rights Certificate and the form of Election
of Exercise; Exhibit B, the form of Certificate of
Designation of First Security's Junior Series B Preferred
Stock, no par value per share; and Exhibit C, the Summary of
Rights (Exhibit 4 to First Security's Current Report on Form
8-K, dated November 2, 1998, incorporated by reference
herein)
5.1 Opinion of Wachtell, Lipton, Rosen & Katz regarding the
validity of the shares of Common Stock being registered
(filed herewith)
8.1 Opinion of Sullivan & Cromwell regarding tax matters (filed
herewith)
8.2 Opinion of Wachtell, Lipton, Rosen & Katz regarding tax
matters (filed herewith)
23.1 Consent of KPMG LLP, independent certified public
accountants for Zions Bancorporation (filed herewith)
23.2 Consent of Deloitte & Touche LLP, independent auditors for
First Security Corporation (filed herewith)
23.3 Consent of Sullivan & Cromwell (contained in their opinion
filed as Exhibit 8.1)
23.4 Consent of Wachtell, Lipton, Rosen & Katz (contained in
their opinions, filed as Exhibits 5.1 and 8.2)
23.5 Consent of Goldman, Sachs & Co. (filed herewith)
23.6 Consent of J. P. Morgan Securities Inc. (filed herewith)
24.1 Power of Attorney (set forth on Page II-3 of the
Registration Statement)
99.1 Stock Option Agreement, dated as of June 8, 1999, between
Zions Bancorporation and First Security Corporation
(included as Appendix B to the Proxy Statement-Prospectus
and incorporated by reference herein)
99.2 Stock Option Agreement, dated as of June 8, 1999, between
First Security Corporation and Zions Bancorporation
(included as Appendix C to the Proxy Statement-Prospectus
and incorporated by reference herein)
99.3 Form of Proxy of Zions Bancorporation (filed herewith)
99.4 Form of Proxy of First Security Corporation (filed herewith)
</TABLE>
II-6
<PAGE> 1
EXHIBIT 5.1
[Wachtell, Lipton, Rosen & Katz Letterhead]
November 19, 1999
Board of Directors
First Security Corporation
79 South Main
Salt Lake City, Utah 84111
Ladies and Gentlemen:
We have acted as special counsel to First Security Corporation, a
Delaware corporation (the "Corporation"), in connection with the preparation and
filing of a Registration Statement on Form S-4 (the "Registration Statement")
relating to the issuance of up to 88,490,503 shares of the Corporation's common
stock, par value $1.25 (the "Shares"), to be issued by the Corporation in
connection with its merger with Zions Bancorporation, a Utah corporation.
In rendering this opinion, we have examined such corporate
records and other documents, and we have reviewed such matters of law, as we
have deemed necessary or appropriate. Based on the foregoing, we are of the
opinion that the Shares are legally authorized and, when the Registration
Statement has been declared effective by order of the Securities and Exchange
Commission and the Shares have been issued and paid for upon the terms and
conditions set forth in the Registration Statement, the Shares will be validly
issued, fully paid and nonassessable.
We hereby consent to be named in the Registration Statement and
in the related joint proxy statement/prospectus contained therein as the
attorneys who passed upon the legality of the Shares and to the filing of a copy
of this opinion as Exhibit 5.1 to the Registration Statement.
Very truly yours,
/s/ Wachtell, Lipton, Rosen & Katz
<PAGE> 1
EXHIBIT 8.1
[Sullivan & Cromwell Letterhead]
November 19, 1999
Zions Bancorporation,
One South Main, Suite 1380,
Salt Lake City, Utah 84111.
Ladies and Gentlemen:
We have acted as counsel to Zions Bancorporation, a Utah
corporation ("Zions"), in connection with the planned merger of Zions with and
into First Security Corporation, a Delaware corporation ("First Security"),
pursuant to the Agreement and Plan of Merger, dated as of June 6, 1999, by and
among Zions and First Security (the "Agreement"). We render this opinion to you,
in part, in connection with the registration of the Surviving Corporation Common
Stock to be issued in connection with the Merger. All capitalized terms used and
not otherwise defined herein shall have the meanings provided in the Agreement.
For purposes of this opinion, we have reviewed the Agreement
and such other documents and matters of law and fact as we have considered
necessary or appropriate, and we have assumed, with your consent, the following:
(i) The Merger will be completed in the manner set forth in
the Agreement and the Proxy Statement/Prospectus of Zions and First
Security (the "Proxy/Prospectus").
(ii) The representations contained in the letters of
representation from Zions and First Security to us and Wachtell,
Lipton, Rosen & Katz, special counsel to First Security, both dated
November 19, 1999, will be true and complete at the Effective Time.
<PAGE> 2
Zions Bancorporation -2-
On the basis of the foregoing, and our consideration of such
other matters of fact and law as we have deemed necessary or appropriate, it is
our opinion, under presently applicable federal income tax law, that:
(1) The Merger will be treated as a "reorganization" within
the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code");
(2) Zions and First Security will each be a party to that
reorganization within the meaning of Section 368(b) of the Code; and
(3) No gain or loss will be recognized by shareholders of
Zions who receive shares of Surviving Company Common Stock in exchange
for shares of Zions Common Stock.
The tax consequences described in (3) above may not be applicable to financial
institutions, dealers in securities, traders in securities that elect to use a
mark to market method of accounting, persons who hold Zions Common Stock as part
of a "straddle", "hedge" or "conversion" transaction or persons who acquired or
acquire shares of Zions Common Stock pursuant to the exercise of employee stock
options or otherwise as compensation.
This opinion is limited to the federal income tax laws of the
United States and does not purport to discuss the consequences or effectiveness
of the Merger under any other laws.
<PAGE> 3
Zions Bancorporation -3-
We also hereby confirm to you that the discussions set forth
under the heading "THE MERGER Federal Income Tax Considerations of the Merger
and Related Transactions" in the Proxy/Prospectus which form a part of the
Registration Statement of the Company to which this opinion is filed as an
exhibit is our opinion, subject to the limitations set forth therein.
We hereby consent to the filing of this opinion as an exhibit
to the Registration Statement and to the reference to us under the heading "THE
MERGER - Federal Income Tax Considerations of the Merger and Related
Transactions" in the Proxy/Prospectus. In giving such consent, we do not thereby
admit that we are in the category of persons whose consent is required under
Section 7 of the Securities Act.
Very truly yours,
/s/ Sullivan & Cromwell
<PAGE> 1
EXHIBIT 8.2
[Wachtell, Lipton, Rosen & Katz Letterhead]
November 19, 1999
First Security Corporation
79 South Main Street, Second Floor
Salt Lake City, Utah 84111
Ladies/Gentlemen:
We have acted as special counsel to First Security Corporation, a
Delaware corporation ("First Security"), in connection with the proposed merger
of Zions Bancorporation, a Utah corporation ("Zions"), with and into First
Security (the "Merger"), pursuant to the Agreement and Plan of Merger (the
"Agreement"), dated as of June 6, 1999, by and between Zions and First Security.
At your request and in connection with the filing of the registration statement
on Form S-4 filed with the Securities and Exchange Commission in connection with
the Merger (the "Registration Statement"), we are rendering our opinion
concerning certain United States federal income tax consequences of the Merger
and related transactions pursuant to the Agreement. Any capitalized term used
and not defined herein has the meaning given to it in the joint proxy
statement-prospectus of Zions and First Security (the "Joint Proxy
Statement-Prospectus") included in the Registration Statement, or the appendices
thereto (including the Agreement).
For purposes of the opinion set forth below, we have relied, with the
consent of Zions and the consent of First Security, upon the accuracy and
completeness of the statements and representations (which statements and
representations we have neither investigated nor verified) contained,
respectively, in the representation letters of Zions and First Security dated
the date hereof, and have assumed that such statements and representations will
be complete and accurate as of the Effective Time and that all representations
made to the knowledge of any person or entity or with similar qualification are
and will be true and correct as if made without such qualification. We have also
relied upon the accuracy of the Registration Statement and the Joint Proxy
Statement-Prospectus.
We have also assumed that the transactions contemplated by the Agreement
will be consummated in accordance therewith and as described in the Joint Proxy
Statement-Prospectus and that the Merger will qualify as a statutory merger
under the applicable laws of the States of Utah and Delaware.
Based upon and subject to the foregoing, it is our opinion, under
currently applicable United States federal income tax law, that:
<PAGE> 2
First Security Corporation
November 19, 1999
Page 2
1. The Merger will be treated for federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Internal Revenue Code
of 1986, as amended (the "Code");
2. Each of Zions and First Security will be a party to that
reorganization within the meaning of Section 368(b) of the Code;
3. No gain or loss will be recognized by shareholders of Zions who
receive shares of Surviving Corporation Common Stock in exchange for shares of
Zions Common Stock pursuant to the Merger;
4. The holding period of the Surviving Corporation Common Stock
exchanged for shares of Zions Common Stock pursuant to the Merger will include
the holding period of the Zions Common Stock for which it is exchanged, assuming
the shares of Zions Common Stock are held as capital assets at the Effective
Time;
5. The basis of the Surviving Corporation Common Stock received in the
Merger will be the same as the basis of the Zions Common Stock for which it is
exchanged;
6. No gain or loss will be recognized by stockholders of First Security
who receive shares of Surviving Corporation Common Stock in the Reverse Stock
Split, except with respect to cash received in lieu of fractional share
interests;
7. The holding period of the Surviving Corporation Common Stock
exchanged for shares of First Security Common Stock in the Reverse Stock Split
will include the holding period of the First Security Common Stock for which it
is exchanged, assuming the shares of First Security Common Stock are held as
capital assets at the Effective Time; and
8. The basis of the Surviving Corporation Common Stock received in the
Reverse Stock Split (including fractional shares deemed received and redeemed)
will be the same as the basis of the First Security Common Stock for which it is
exchanged.
We express no opinion as to the United States federal income tax
consequences of the Merger or the Reverse Stock Split to stockholders subject to
special treatment under United States federal income tax law (including, for
example, financial institutions, insurance companies, tax-exempt organizations,
dealers in securities or currencies, traders in securities that elect to use a
mark-to-market method of accounting, persons that hold common stock as part of a
hedge, straddle or conversion transactions, persons who are not citizens or
residents of the United States, and shareholders who acquired their shares of
common stock through the exercise of an employee stock option or otherwise as
compensation. In addition, no opinion is expressed with respect to the tax
consequences of the Merger or the Reverse Stock Split under applicable foreign,
state or local laws or under any federal tax laws other than those pertaining to
the income tax.
We hereby consent to the filing of this opinion with the Securities and
Exchange Commission as an exhibit to the Registration Statement, and to the
references to us under the caption "THE MERGER - Federal Income Tax Consequences
of the Merger and Related Transactions" and elsewhere in the Joint Proxy
Statement-Prospectus. In giving such consent, we do not thereby admit that we
are in the category of persons whose consent is required under Section 7 of the
Securities Act of 1933, as amended.
<PAGE> 3
First Security Corporation
November 19, 1999
Page 3
We are furnishing this opinion to you solely in connection with the
filing of the Registration Statement and this opinion is not to be relied upon,
circulated, quoted or otherwise referred to for any other purpose.
Very truly yours,
/s/ Wachtell, Lipton, Rosen & Katz
<PAGE> 1
EXHIBIT 23.1
Consent of Independent Certified Public Accountant
The Board of Directors
Zions Bancorporation:
We consent to the use of our report dated January 26, 1999, with respect to the
consolidated financial statements of Zions Bancorporation as of December 31,
1998 and 1997, and for each of the years in the three-year period ended December
31, 1998 incorporated herein by reference, and to the reference to our firm
under the heading "Experts" in the proxy statement/prospectus.
/s/ KPMG LLP
November 19, 1999
Salt Lake City, Utah
<PAGE> 1
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Proxy Statement/Prospectus
of First Security Corporation on Form S-4 of our report dated February 24, 1999,
appearing in and incorporated by reference in the Annual Report on Form 10-K of
First Security Corporation for the year ended December 31, 1998 and to the
reference to us under the heading "Experts" in the Proxy Statement/Prospectus,
which is part of this Registration Statement.
/s/ DELOITTE & TOUCHE LLP
Salt Lake City, Utah
November 19, 1999
<PAGE> 1
EXHIBIT 23.5
PERSONAL AND CONFIDENTIAL
November 19, 1999
Board of Directors
Zions Bancorporation
One South Main Street
Salt Lake City, Utah 84111
Re: Registration Statement (File No. 333-___) of Zions Bancorporation
Ladies and Gentlemen:
Reference is made to our opinion letter (the "Opinion Letter") dated on or about
the date of this Registration Statement with respect to the fairness from a
financial point of view to the holders of the outstanding shares of Common
Stock, without par value (the "Shares"), of Zions Bancorporation ("Zions"), of
the exchange ratio of one share of Common Stock, par value $1.25 per share (the
"Surviving Corporation Common Stock"), of the Surviving Corporation (as defined
in the Opinion Letter), to be exchanged for each Share, following a reverse
stock split in which each outstanding share of Common Stock, par value $1.25 per
share, of First Security Corporation ("First Security") will be reclassified and
converted into 0.442 shares of Surviving Corporation Common Stock, all pursuant
to the Agreement and Plan of Merger, dated as of June 6, 1999, by and between
Zions and First Security.
The Opinion Letter is provided for the information and assistance of the Board
of Directors of Zions in connection with its consideration of the transaction
contemplated therein 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 accordance with our prior written consent. We
understand that Zions has determined to include the Opinion Letter in a
registration statement to be filed with the Securities and Exchange Commission
(the "Registration Statement") in connection with the above-referenced
transaction.
In that regard, we hereby consent to the reference to the Opinion Letter under
the captions "Summary", "The Merger - Background of the Merger", "The Merger -
Reasons of Zions for the Merger and Recommendation of the Zions Board", "Opinion
of Zions' Financial Advisor" and "Appendix D" and to the inclusion of the
Opinion Letter in the Joint Proxy Statement/Prospectus included in the
Registration Statement. In giving such consent, we do
<PAGE> 2
Board of Directors
Zions Bancorporation
November 19, 1999
Page Two
not thereby admit that we come within the category of persons whose consent is
required under Section 7 of the Securities Act of 1933 or the rules and
regulations of the Securities and Exchange Commission thereunder.
Very truly yours,
/s/ Goldman, Sachs & Co.
- ---------------------------------------
(Goldman, Sachs & Co.)
<PAGE> 1
EXHIBIT 23.6
CONSENT OF J.P. MORGAN SECURITIES INC.
We hereby consent to (i) the use of our opinion letter to the Board of
Directors of First Security Corporation (the "Company") included as Appendix E
to the Proxy Statement/Prospectus which forms a part of the Registration
Statement on Form S-4 relating to the proposed merger of the Company and Zions
Bancorporation, and (ii) the references to such opinion in such Proxy
Statement/Prospectus. In giving such consent, we do not admit that we come
within the category of persons whose consent is required under Section 7 of the
Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission thereunder, nor do we hereby admit that we
are experts with respect to any part of such Registration Statement within the
meaning of the term "experts" as used in the Securities Act of 1933, as amended,
or the rules and regulations of the Securities and Exchange Commission
thereunder.
J.P. MORGAN SECURITIES INC.
By: /s/ Gail M. Rogers
------------------------------------
Name: Gail M. Rogers
Title: Managing Director
November 19, 1999
<PAGE> 1
EXHIBIT 99.3
[X] Please mark
your vote as
this ZIONS BANCORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR SPECIAL MEETING OF SHAREHOLDERS--DECEMBER 28, 1999
The undersigned shareholder of Zions Bancorporation, a Utah
corporation (the "Company"), acknowledges receipt of the Notice of Special
Meeting of Shareholders and proxy statement/prospectus, dated November 23, 1999,
and the undersigned revokes all other proxies and appoints Harris H. Simmons and
Dale M. Gibbons, and each of them, the attorneys and proxies for the
undersigned, each with full power of substitution, to attend and act for the
undersigned at the Company's Special Meeting of Shareholders at 9:00 a..m.,
local time, December 28, 1999 and at any adjournments or postponements thereof
and in connection therewith to vote and represent all of the shares of the
Company's Common Stock covered by this proxy which the undersigned would be
entitled to vote.
1. Proposal 1. To adopt the Agreement and Plan of Merger, dated as of June
6, 1999, by and between the Company and First Security Corporation.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting. Each of the
above-named proxies present at said meeting, either in person or by
substitute, shall have and exercise all the powers of said proxies
hereunder.
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE CHOICES SPECIFIED BY THE
UNDERSIGNED. IF NO SPECIFICATIONS TO THE CONTRARY ARE INDICATED HEREON, THIS
PROXY WILL BE TREATED AS A GRANT OF AUTHORITY TO VOTE FOR PROPOSAL 1 AND IN THE
DISCRETION OF THE PROXIES ON ANY OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE
MEETING. PLEASE SIGN, DATE AND RETURN YOUR PROXY PROMPTLY IN THE POSTAGE PREPAID
ENVELOPE PROVIDED.
Dated:
-------------------------------
Signature(s)
-------------------------------
NOTE: Please sign exactly as your
name appears hereon. When signing
as attorney, executor,
administrator, trustee or
guardian, please give full title
as such. If shares are held
jointly, each holder should sign.
<PAGE> 1
EXHIBIT 99.4
[X] Please mark
your vote as
this FIRST SECURITY CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR SPECIAL MEETING OF STOCKHOLDERS--DECEMBER 28, 1999
The undersigned stockholder of First Security Corporation, a
Delaware corporation (the "Company"), acknowledges receipt of the Notice of
Special Meeting of Stockholders and proxy statement/prospectus, dated November
23, 1999, and the undersigned revokes all other proxies and appoints Spencer F.
Eccles and Morgan J. Evans, and each of them, the attorneys and proxies for the
undersigned, each with full power of substitution, to attend and act for the
undersigned at the Company's Special Meeting of Stockholders at 1:00 p.m., local
time, December 28, 1999 and at any adjournments or postponements thereof and in
connection therewith to vote and represent all of the shares of the Company's
Common Stock and Preferred Stock covered by this proxy which the undersigned
would be entitled to vote:
1. Proposal 1. To adopt the Agreement and Plan of Merger, dated as of June 6,
1999, by and between the Company and Zions Bancorporation.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. Proposal 2. To approve the amendment and restatement of the Company's
certificate of incorporation.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting. Each of the above-named
proxies present at said meeting, either in person or by substitute, shall
have and exercise all the powers of said proxies hereunder.
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE CHOICES SPECIFIED BY THE
UNDERSIGNED. IF NO SPECIFICATIONS TO THE CONTRARY ARE INDICATED HEREON, THIS
PROXY WILL BE TREATED AS A GRANT OF AUTHORITY TO VOTE FOR PROPOSALS 1 AND 2 AND
IN THE DISCRETION OF THE PROXIES ON ANY OTHER BUSINESS AS MAY PROPERLY COME
BEFORE THE MEETING. PLEASE SIGN, DATE AND RETURN YOUR PROXY PROMPTLY IN THE
POSTAGE PREPAID ENVELOPE PROVIDED.
Dated:
-------------------------------
Signature(s)
-------------------------------
NOTE: Please sign exactly as
your name appears hereon. When
signing as attorney, executor,
administrator, trustee or
guardian, please give full
title as such. If shares are
held jointly, each holder
should sign.
