As filed with the Securities and Exchange Commission on March 3, 2000
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)
- --------------------------------------------------------------------------------
Delaware 6711 87-6118148
- --------------------------------------------------------------------------------
(State or other juris- (Primary Standard Industrial (I.R.S. Employer
diction of incorporation Classification Code Number) Identification No.)
or organization)
- --------------------------------------------------------------------------------
79 South Main Street
Salt Lake City, Utah 84111
(801) 246-5976
-------------------------------------------
(Address, including zip code, and telephone
number, including area code, of registrant's
principal executive offices)
BRAD D. HARDY
Executive Vice President and Chief Financial Officer
First Security Corporation
79 South Main Street
Salt Lake City, Utah 84111
(801) 246-5976
-------------------------------------
(Name, address, including zip code, and
telephone number, including area code, of agent for service)
Copies To:
A. ROBERT THORUP, ESQ. BENJAMIN G. WOLFF, ESQ.
RAY, QUINNEY & NEBEKER P.C. MICHAEL McARTHUR-PHILLIPS, ESQ.
79 South Main Street, Suite 400 DAVIS WRIGHT TREMAINE LLP
Salt Lake City, Utah 84111 1300 SW Fifth Avenue, Suite 2300
(801) 323-3359 Portland, Oregon 97201-5682
(fax) (801) 532-7543 (503) 241-2300
(fax) (503) 778-5299
Approximate date of commencement of proposed sale of the securities to
the public: As soon as practicable after the effective time of this Registration
Statement.
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. [ ]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
- --------------------------------- --------------------- --------------------- ----------------------- ------------------------
Title of each class of Amount to be Proposed Maximum Proposed Maximum Amount of registration
securities to be registered registered offering price per aggregate offering fee
share price
- --------------------------------- --------------------- --------------------- ----------------------- ------------------------
<S> <C> <C> <C> <C>
Common Stock ($1.25 par value) 568,182 shares(1), (3) $22.6875 $12,890,629 $3,583.60
- --------------------------------- --------------------- --------------------- ----------------------- ------------------------
</TABLE>
(1) The maximum possible number of shares of Common Stock to be issued in
connection with the merger described herein.
(2) Calculated pursuant to Rule 457(f)(1) solely for the purpose of the
registration fee based on market value as of February 28, 2000.
(3) One Right to purchase Junior Series B Preferred Stock of First Security
is associated with each share of Common Stock. The Rights are not
transferable separately from the Common Stock except in limited
circumstances.
This Registration Statement is hereby amended on such date or dates as
may be necessary to delay its effective time until the Registrant will file a
further amendment which specifically states that this Registration Statement
will thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement will become effective
on such date as the Commission, acting pursuant to said Section 8(a), may
determine.
<PAGE>
FIRST SECURITY CORPORATION BLACK & COMPANY, INC.
Prospectus Proxy Statement
TO THE SHAREHOLDERS OF BLACK & COMPANY, INC.:
The boards of directors of Black & Company, Inc. and First Security
Corporation have agreed to merge Black & Company, Inc. with and into First
Security Van Kasper, Inc., a wholly owned subsidiary of First Security. Black &
Company and First Security are sending you this Prospectus/Proxy Statement to
provide you with important information about this merger. Black & Company is
asking you to sign and return a Black & Company proxy card that has the effect
of voting your Black & Company common stock in favor of the merger.
Upon completion of the merger, in exchange for your shares of Black &
Company capital stock, you will receive shares of First Security common stock.
First Security shares to be issued in the merger will be listed on the Nasdaq
National Market under the symbol "FSCO." The exact number of shares that you
will receive will be calculated according to a formula described in this
Prospectus/Proxy Statement. This formula takes into account a number of factors
including:
* the number of shares of Black & Company capital stock that will be
outstanding when the merger closes;
* the resolution of certain contingencies associated with Black &
Company's business;
* and the market price of First Security common stock during certain
periods before the merger closes.
The exchange of Black & Company shares will be tax-free to you for
federal income tax purposes. If you choose to vote against the merger and also
perfect your dissenters' rights under Oregon law, you will receive the fair
value of your Black & Company shares in cash, which would be a taxable
transaction for you.
The merger cannot be completed unless the Black & Company shareholders
approve the merger and the transactions associated with it. A special meeting of
Black & Company shareholders has been called for April 7, 2000 at 2:00 p.m.
Pacific Time at the offices of Black & Company at One Southwest Columbia, Suite
1200, Portland, Oregon 97258, for the purpose of voting on the merger. The Black
& Company board of directors has determined that the merger and the transactions
associated with it are in your best interests and recommends that you vote to
approve the merger and the transactions associated with it by completing the
enclosed proxy card regardless of whether you intend to attend the special
shareholders meeting.
YOUR VOTE IS VERY IMPORTANT.
Only Black & Company shareholders who held their shares at the close of
business on March 1, 2000 will be entitled to vote on the merger and receive
this Prospectus/Proxy Statement. You can get more information about Black &
Company or First Security, and about the merger, by writing or calling as
follows:
First Security Corporation Black & Company, Inc.
79 South Main Street, Second Floor One Southwest Columbia, Suite 1200
Salt Lake City, Utah 84111 Portland, Oregon 97258
Attention: Brad D. Hardy Attention: Frank J. Niezgoda
(801) 246-5976. (503) 248-7551
This Prospectus/Proxy Statement provides you with detailed information
about the merger and the transactions associated with it. Please see "WHERE YOU
CAN FIND MORE INFORMATION" on page 67 for additional information about First
Security filed with the Securities and Exchange Commission.
We encourage you to read this entire document carefully. Information
about First Security and Black & Company may change from that contained in this
Prospectus/Proxy Statement. First Security and Black & Company will send you
additional information about themselves before the date of the special
shareholders meeting if the new information would be material to your decision
on the merger.
FIRST SECURITY SHARES ARE NOT INSURED BANK DEPOSITS. THERE ARE RISKS
INHERENT IN THE OWNERSHIP OF FIRST SECURITY SHARES. SEE "RISK FACTORS" ON PAGE
13 FOR A DISCUSSION OF CERTAIN FACTORS THAT YOU SHOULD CONSIDER IN DETERMINING
HOW TO VOTE ON THE MERGER AND THE TRANSACTIONS ASSOCIATED WITH IT.
NEITHER THE COMMISSION NOR ANY STATE SECURITIES AGENCY HAS APPROVED THE
FIRST SECURITY SHARES OR DETERMINED THAT THIS PROSPECTUS / PROXY STATEMENT IS
ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
This Prospectus/Proxy Statement is dated March 10, 2000, and was first
mailed on or about March 10, 2000.
<PAGE>
You should rely on the information contained or incorporated by
reference in this Prospectus/Proxy Statement to vote on the merger and the
transactions associated with it. We have not authorized anyone to provide you
with information that is different from what is contained in this
Prospectus/Proxy Statement. This Prospectus/Proxy Statement is dated March 10,
2000. You should not assume that the information contained in this
Prospectus/Proxy Statement is accurate as of any date other than such date, and
neither the mailing of this Prospectus/Proxy Statement to Black & Company
shareholders nor the issuance of First Security common stock in the merger will
create any implication to the contrary.
TABLE OF CONTENTS
FORWARD-LOOKING STATEMENTS.................................................1
QUESTIONS AND ANSWERS ABOUT THE MERGER.....................................1
SUMMARY....................................................................5
RISK FACTORS..............................................................13
CAPITALIZATION OF FIRST SECURITY..........................................16
SELECTED HISTORICAL FINANCIAL DATA FOR FIRST SECURITY.....................16
FIRST SECURITY MARKET PRICE AND DIVIDENDS INFORMATION.....................18
THE BLACK & COMPANY SPECIAL SHAREHOLDERS MEETING..........................19
DATE, TIME AND PLACE...................................................19
PURPOSE................................................................19
RECORD DATE, SHARES OUTSTANDING, SHARES ENTITLED TO VOTE...............19
VOTE REQUIRED..........................................................20
VOTING AND REVOCATION OF PROXIES.......................................20
QUORUM.................................................................21
SIGNIFICANT SHAREHOLDERS OF BLACK & COMPANY............................21
THE MERGER................................................................23
GENERAL................................................................23
THE EFFECTIVE TIME OF THE MERGER.......................................23
MANAGEMENT OF BLACK & COMPANY FOLLOWING WITH MERGER....................23
BACKGROUND OF AND REASONS FOR THE MERGER; RECOMMENDATION OF
BLACK & COMPANY'S BOARD OF DIRECTORS.................................23
INTERESTS OF CERTAIN PERSONS IN THE MERGER.............................25
CONVERSION OF SHARES; EXCHANGE RATIO...................................25
BLACK & COMPANY OPTIONS................................................27
DISSENTING SHARES......................................................27
EXCHANGE OF SHARES AND CERTIFICATES....................................27
FRACTIONAL SHARES......................................................28
REPRESENTATIONS AND WARRANTIES.........................................28
CERTAIN COVENANTS......................................................29
CONDITIONS TO THE CLOSING OF THE MERGER................................29
TERMINATION............................................................30
INDEMNIFICATION........................................................30
ACCOUNTING TREATMENT OF THE MERGER.....................................31
THE EFFECT OF THE MERGER ON BLACK & COMPANY EMPLOYEE BENEFIT PLANS.....31
REGULATORY NOTIFICATION AND APPROVAL...................................31
MISCELLANEOUS..........................................................32
FEDERAL INCOME TAX ASPECTS................................................32
THE MERGER.............................................................32
RIGHTS OF DISSENTING BLACK & COMPANY SHAREHOLDERS.........................34
RESALE OF FIRST SECURITY SHARES RECEIVED IN THE MERGER....................35
INFORMATION ABOUT FIRST SECURITY..........................................35
GENERAL................................................................35
THE ZIONS BANCORPORATION MERGER AGREEMENT..............................36
COMPETITION............................................................39
DESCRIPTION OF FIRST SECURITY CAPITAL STOCK............................40
REGULATION.............................................................42
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INFORMATION ABOUT BLACK & COMPANY.........................................47
COMPARATIVE RIGHTS OF SHAREHOLDERS........................................57
LEGAL MATTERS.............................................................66
EXPERTS...................................................................66
WHERE YOU CAN FIND MORE INFORMATION.......................................66
AVAILABLE ADDITIONAL INFORMATION.......................................66
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE........................67
APPENDIX A -- AGREEMENT AND PLAN OF REORGANIZATION, AS AMENDED
APPENDIX B -- FORM OF BLACK & COMPANY PROXY CARD
APPENDIX C - EXTRACTS FROM OREGON LAW CONCERNING DISSENTERS' RIGHTS
OF BLACK & COMPANY SHAREHOLDERS
ii
<PAGE>
FORWARD-LOOKING STATEMENTS MAY PROVE INACCURATE
This document, the disclosure documents of First Security incorporated
by reference in this document and other communications to Black & Company
shareholders, respectively, may contain "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. These
statements relate to expectations concerning matters that are not historical
facts. Also, when we use words such as "believes," "expects," "anticipates," or
similar expressions, we are making forward-looking statements. Although each of
First Security and Black & Company believes that the expectations reflected in
such forward-looking statements are reasonable, neither can give any assurance
that such expectations will prove to have been correct. Important factors that
could cause actual results to differ materially from such expectations are
disclosed in this document, the documents of First Security incorporated by
reference in this document and other communications to Black & Company
shareholders, including, without limitation, in conjunction with the
forward-looking statements included under "RISK FACTORS." All forward-looking
statements attributable to First Security are expressly qualified in their
entirety by the factors which may cause actual results to differ materially from
expectations described in this document and in First Security's reports filed
with the Securities and Exchange Commission, including the Annual Report on Form
10-K for the year ended December 31, 1998 and the Amendment No. 2 to the Form
S-4 Registration Statement filed on February 17, 2000 relating to the announced
merger with Zions Bancorporation. All forward-looking statements attributable to
Black & Company are expressly qualified in their entirety by the factors which
may cause actual results to differ materially from expectations described in
this document.
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: Why is First Security proposing to acquire Black & Company? How will I
benefit?
A: First Security and First Security Van Kasper desire to expand First
Security Van Kasper's presence in the Pacific Northwest securities
brokerage and investment banking market. Black & Company is a
successful, small brokerage and investment banking firm in the
Portland, Oregon market area, and it provides First Security and First
Security Van Kasper with opportunities for growth in that important
Oregon market.
Under the terms of the merger agreement, you will become a shareholder
in First Security, an institution whose common stock is traded on the
Nasdaq National Market under the symbol FSCO. The Black & Company board
of directors believes that the consideration you will receive in the
merger may deliver value to you that exceeds the value that could be
expected if Black & Company continues as an independent entity. To
review the reasons for the merger in greater detail, and related
uncertainties, see pages 23 through 32.
Q: What will I receive in the merger?
A: In exchange for your Black & Company shares, you will receive shares of
First Security common stock. The exact number of shares you receive
will be calculated according to an exchange ratio described in greater
detail in this Prospectus/Proxy Statement. The exchange ratio is
subject to a number of contingencies associated with the business of
Black & Company.
Q: How is the Exchange Ratio calculated?
A: The exchange ratio is calculated according to a relatively complex
formula that takes into account several factors, including:
* the number of shares of Black & Company common stock that are
outstanding at Closing;
1
<PAGE>
* the resolution of certain ongoing contingencies inherent in the
business of Black & Company;
* and the market price of First Security common stock.
Q: How many shares of First Security common stock will I receive in
exchange for my Black & Company common stock?
A: After closing of the merger, First Security will cause shares
aggregately valued at approximately $6.125 million to be
proportionately issued to Black & Company shareholders. The exact
number of shares will depend on the market price of First Security
common stock at the measurement time. Not less than one year after
closing of the merger, First Security will cause shares valued (at the
close of the merger) at approximately $1.375 million to be
proportionately issued (less any allowed offsets against such shares as
set forth in the merger agreement) if certain loss contingencies
described in the merger agreement, primarily litigation items, have
been resolved and there have been no threats in connection with such
loss contingencies. If any such loss contingencies arise, First
Security may offset the costs of such contingencies against the shares
otherwise payable to Black & Company's shareholders. In addition, First
Security will issue shares valued (at the close of the merger) at up to
$4.75 million on the third-year and three-month anniversary of the
closing of the merger if Black & Company reaches certain earnings
goals.
Q: How many shares will be held back and when might I receive them?
A: The number of shares which will be held back at the close of the merger
represent approximately 18.33% of the total number of First Security
shares that you would otherwise receive at the close of the merger
according to the exchange ratio, or $1.375 million worth of shares
valued at the closing of the merger. If Black & Company experiences no
loss contingencies as described in the merger agreement, then the
shares which are held back will be distributed to the Black & Company
shareholders one year following closing of the merger so long as there
have been no threats in connection with such loss contingencies. If any
such loss contingencies arise or if there are new threats in connection
therewith, First Security may permanently withhold some or all of the
shares heldback at closing as needed to compensate for the costs of
such contingencies. It is possible that failure to satisfactorily
resolve one or more of the potential loss contingencies will result in
you receiving none of the shares held back.
Q: How many additional shares can be earned and when might I receive them?
A: In addition to the shares paid at closing and the shares held back, the
merger agreement provides for an "earn-out" payment in the event that
the Black & Company business assets acquired in the merger produce
earnings for First Security Van Kasper at required levels and according
to formulas set out in the merger agreement. The calculations to
determine if shares have been earned shall be made three years and
three months following the effective time of the merger. If the Black &
Company division produces $5 million of earnings as calculated pursuant
to the merger agreement, the aggregate value of the earn-out shares
issued will be $3.75 million and will be paid in First Security shares,
valued at the time of the closing of the merger. If $8 million of
earnings is produced, the aggregate value of the earn-out shares issued
will be $4.75 million and will be paid in First Security shares, valued
at the time of closing of the merger. If earnings from the Black &
Company division as calculated pursuant to the merger agreement do not
exceed $5 million, no earn-out shares will be paid.
2
<PAGE>
Q: What will happen to my Black & Company Options?
A: First Security will not assume any of your options to purchase Black &
Company stock. All options to purchase Black & Company stock must be
exercised prior to the closing, otherwise they will be terminated.
Q: Do I need to pay the exercise price of my options in cash?
A: Yes. Options to purchase Black & Company stock must be exercised in
accordance with the stock option agreement(s) between you and Black &
Company. Black & Company's stock option agreements generally require
the payment of the exercise price in cash at the time of exercise of
your options.
Q: What risks should I consider?
A: You should carefully review and understand the "RISK FACTORS" on pages
13 through 15.
Q: What are the tax consequences of the merger to me?
A: The exchange of your shares for First Security shares of common stock
will be tax-free to you for federal income tax purposes. However, you
may have to pay taxes on cash received for fractional shares. In
addition, if you choose to vote against the merger by not returning
your signed proxy card and also perfect your dissenters' rights under
Oregon law, you will receive the fair value of your Black & Company
shares in cash, which would be a taxable transaction to you. To review
the tax consequences of the merger to Black & Company shareholders in
greater detail, see page 33.
The tax consequences of the merger to you will depend on your own
situation. You should consult your tax advisors for a full
understanding of these tax consequences.
Q: When do you expect the merger to be completed?
A: We are working towards completing the merger as quickly as possible. In
addition to the approval of Black & Company shareholders, we must file
certain regulatory notices and satisfy other conditions described in
the merger agreement. We hope to complete the merger by April 30, 2000.
Q: When is the Special Shareholders Meeting?
A: Black & Company has called a special shareholders meeting on April 7,
2000 to allow its shareholders to vote on the merger. The meeting will
be held at the offices of Black & Company located at One Southwest
Columbia, Suite 1200, Portland, Oregon 97258, at 2:00 p.m. Pacific
Time. There is no other business scheduled for the special shareholders
meeting.
Q: What do I need to do now?
A: After carefully reading and considering the information contained in
this document, please fill out and sign your proxy card. Then mail your
signed proxy card in the enclosed return envelope as soon as possible
so that your shares may be voted at the special shareholders meeting.
You may also attend the special shareholders meeting and vote your
shares there at the appropriate time.
3
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Q: What am I being asked to vote upon?
A: You are being asked to approve the merger agreement and the
transactions associated with it. In the merger, Black & Company would
become part of First Security Van Kasper, a wholly-owned subsidiary of
First Security.
Black & Company's board of directors has approved the merger agreement
and recommends that you vote FOR the merger agreement and the
transactions associated with it by returning the signed proxy card.
Q: May I change my vote after I have mailed my signed proxy card?
A: Yes. You may revoke your proxy by signing and mailing in a new proxy
card with a later date, or by attending the special shareholders
meeting and notifying Black & Company of your desire to change your
vote at the time voting is commenced at the meeting, and then voting at
the special shareholders meeting contrary to your proxy card. There is
no need to attend and vote at the special shareholders meeting if you
have signed and submitted a proxy card and desire to vote your shares
exactly as specified on the proxy card.
Q: Should I send in my stock certificates now?
A: No. After the merger is completed, First Security will send written
instructions to Black & Company shareholders for exchanging their stock
certificates.
Q: Who can help answer further questions?
A: If you would like additional copies of this Prospectus/Proxy Statement,
or if you have more questions about the merger, you should contact:
Black & Company, Inc.
One Southwest Columbia, Suite 1200, Portland, Oregon 97258
Attention: Frank J. Niezgoda, (503) 243-7551
4
<PAGE>
SUMMARY
This summary highlights selected information from this document and may
not contain all of the information that is important to you. For a more complete
understanding of the merger and for a more complete description of the legal
terms of the proposed merger, you should read carefully this entire document as
well as the additional documents we refer you to. See "'WHERE YOU CAN FIND MORE
INFORMATION," page 67.
First Security Corporation
79 South Main
Salt Lake City, Utah 84111
(801) 246-6000
First Security is a regional bank holding company headquartered in Salt
Lake City, Utah. First Security has filed an application with the Federal
Reserve Board to become a Financial Holding Company under the Gramm-Leach-Bliley
Act of 1999. First Security owns and operates four banks, with offices in the
seven western states of California, Idaho, New Mexico, Nevada, Oregon, Utah and
Wyoming, and several other financial services companies, some having a national
presence. Through its subsidiaries, First Security provides commercial and
agricultural loans, consumer banking, trust services, capital markets advice and
municipal underwriting services, treasury management, investment management,
data processing, leasing and securities underwriting and brokerage services. At
September 30, 1999, First Security and its subsidiaries had consolidated assets
of $23.3 billion, consolidated deposits of $13.2 billion and shareholders'
equity of $1.8 billion. First Security has paid a regular dividend on its common
stock since 1928. (See "INFORMATION ABOUT FIRST SECURITY," page 36).
First Security's executive offices are located at 79 South Main Street,
Salt Lake City, Utah 84111, and its telephone number is (801) 246-6000.
First Security Van Kasper
41 East 100 South
Salt Lake City, Utah 84111
(801) 246-6000
First Security Van Kasper is a wholly owned subsidiary of First
Security engaged in a variety of investment management, securities underwriting
and brokerage, and municipal financial advisory activities pursuant to authority
granted by the Federal Reserve Board. First Security Van Kasper is registered as
a broker dealer with the National Association of Securities Dealers, Inc. Its
executive offices are located at 41 East 1st South in Salt Lake City, Utah.
First Security Van Kasper also maintains other offices throughout the First
Security market area. It is the intent of the parties to the merger that Black &
Company be combined with and into First Security Van Kasper as a result of the
merger.
Black & Company
One Southwest Columbia, Suite 1200
Portland, Oregon 97258
(503) 248-7551
Black & Company is a closely held Oregon-based investment-banking firm
established in 1959. Black & Company provides private brokerage services to
individual and institutional clients; publishes proprietary equity research;
makes markets in Nasdaq securities; and provides investment management services.
Black & Company had total assets of $2.3 million and shareholders' equity of
$916,000 at
5
<PAGE>
December 31, 1999. Black & Company's executive offices are located at One
Southwest Columbia, Suite 1200, Portland, Oregon 97258. Its telephone number at
that address is (503) 248-7551.
First Security to merge with Zions Bancorporation
Prior to the date of the First Security/Black & Company merger
agreement, First Security and Zions Bancorporation entered into a merger
agreement, the result of which Zions Bancorporation will merge with and into
First Security. In the First Security/Zions merger and related transactions,
each share of First Security common stock will be reclassified and converted
into 0.442 of a share of First Security common stock and each share of Zions
common stock will be converted into one share of First Security common stock.
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 Bancorporation 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 Bancorporation had
consolidated assets of $19.0 billion, deposits of $13.0 billion and
shareholders' equity of $1.5 billion. If the First Security/Zions merger is
completed prior to closing of the Black & Company merger, holders of Black &
Company stock will receive the reclassified shares as discussed below of First
Security common stock. The reclassification will not change the exchange ratio
in the First Security/Black & Company merger. If the First Security/Black &
Company merger is completed prior to the merger of First Security and Zions
Bancorporation, the shares issued to the Black & Company shareholders at closing
as well as the shares held back and to be earned, if any, will be reclassified
as described below.
First Security currently expects the First Security/Zions merger will
close before the First Security/Black & Company merger. If all conditions to the
completion of the First Security/Zions merger are met and the First
Security/Zions merger is consummated, Black & Company shareholders would become
stockholders of the new First Security. Therefore, when voting on the principal
terms of the First Security/Black & Company merger agreement and deciding
whether to exercise dissenters' rights with respect to the First Security/Black
& Company merger, you must consider the possibility that you will become a
stockholder of the combined First Security and Zions entity.
Conditions that must be satisfied for First Security/Zions merger to occur
The First Security/Zions merger is subject to various conditions,
including:
* Approval of the First Security/Zions merger agreement by First
Security stockholders and Zions' shareholders;
* Receipt of all governmental and other consents and approvals
that are necessary to permit completion of the First
Security/Zions merger; and
* Other usual conditions.
The Board of Governors of the Federal Reserve System approved the First
Security/Zions merger on December 13, 1999. However, First Security cannot
guarantee when or if the merger with Zions Bancorporation will be completed.
(See "INFORMATION ABOUT FIRST SECURITY - THE ZIONS BANCORPORATION MERGER
AGREEMENT," page 37.)
6
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First Security common stock is likely to be reclassified prior to the merger
In the First Security/Zions merger agreement, First Security has agreed
that immediately prior to the completion of the merger of First Security and
Zions, 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 pre-merger First Security stockholders. In the
reclassification, pre-merger 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 First Security/Zions
merger, the shares of First Security common stock will not be further affected,
but will thereafter be common shares of the combined company.
The reclassification associated with the First Security/Zions merger 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. (See "COMPARATIVE RIGHTS OF
SHAREHOLDERS," page 58.) 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 First Security/Zions merger are
satisfied or waived.
Neither the First Security/Zions merger nor the proposed
reclassification will reduce the number of First Security shares you will
receive in the merger.
Our reasons for the merger
The Black & Company board of directors has determined that the merger
agreement and the transactions associated with it are in the best interests of
the Black & Company shareholders. In reaching its decision, the board of
directors considered the following factors, among other things:
* The merger will create an organization that will be able to
offer a wider array of services to each company's existing
clients by combining First Security Van Kasper's traditional
investment banking, equity underwriting, retail sale,
investment advisory and investment management services
business with Black & Company's research report and brokerage
services and strong regional presence in the Pacific
Northwest.
* The consideration that Black & Company shareholders will
receive in the merger may deliver value to them that exceeds
the value that could be expected if Black & Company had
continued as an independent entity, including the
consideration of the liquidity provided through First Security
common stock which is traded on the Nasdaq National Market.
* The combination may strengthen Black & Company's competitive
position in an environment of increasing consolidation in the
securities industry.
To review the reasons for the merger in greater detail, as well as
related uncertainties, see pages 23 through 32.
Recommendation to Black & Company shareholders
The Black & Company board of directors believes that the merger is in
your best interests and unanimously recommends that you vote FOR the proposal to
approve the merger agreement and the transactions associated with it by
returning the signed proxy card.
7
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Shareholder votes required to approve the merger
The affirmative vote of the holders of a majority of the outstanding
shares of Black & Company common stock is required to approve the merger
agreement and the transactions associated with it. As of the record date for the
special meeting, directors of Black & Company held approximately 45% of the
outstanding shares of Black & Company voting common stock (including 5,588.25
shares that may be acquired upon exercise of options that are exercisable prior
to the Black & Company shareholders meeting). Each of the directors has agreed
to vote their respective shares of Black & Company voting common stock in favor
of the merger. Your failure to return a signed proxy card will have the effect
of a vote against the merger and the transactions associated with it.
Under applicable law, the shareholders of First Security and First
Security Van Kasper are not entitled or required to vote on the merger.
To review information relating to the Black & Company shareholder votes
in greater detail, see "THE BLACK & COMPANY SPECIAL SHAREHOLDERS MEETING" on
pages 19 through 22.
The merger (page 23)
First Security and Black & Company have agreed to merge Black & Company
with and into First Security Van Kasper. The merger agreement is attached as
Appendix A at the back of this Prospectus/Proxy Statement. We encourage you to
read the merger agreement. It is the legal document that governs the proposed
merger.
What Black & Company shareholders will receive in the merger
As a result of the merger, you will receive shares of First Security
common stock. The exact number of shares you receive will be calculated
according to a formula described in greater detail in this Prospectus/Proxy
Statement. Some shares will be delivered at closing of the merger, some shares
may be delivered based on the future resolution of certain contingencies
(including pending litigation matters against Black & Company), and other shares
may possibly be distributed in the future based on the Black & Company division
meeting certain earnings goals as part of First Security Van Kasper. (See "The
Merger, Conversion or Shares; Exchange Ratio" at page 25.)
You will not receive fractional shares. Instead, you will receive a
check in payment for any fractional shares based on the average market value of
First Security common stock during a specified period prior to the merger.
Do not send in your stock certificates now. When the merger is
completed, you will receive written instructions for exchanging your Black &
Company stock certificates.
Status of Black & Company following the merger
If the merger is approved, Black & Company will merge with and into
First Security Van Kasper, a wholly-owned subsidiary of First Security.
Shareholders of Black & Company will become shareholders of First Security upon
completion of the merger. Black & Company will no longer exist as a separate
entity. Nevertheless, the business assets of Black & Company will be operated as
a division of First Security Van Kasper for at least three years and three
months.
8
<PAGE>
Ownership of First Security following the merger
The shares of First Security common stock issued to you in the merger
will constitute less than 1% of the outstanding stock of First Security after
the merger regardless of whether the First Security/Zions merger is completed
and under any combination of factors governing the number of First Security
shares to be distributed under the merger agreement.
Conditions to the merger (page 30)
The merger will not be completed unless certain conditions are met,
including the approval of the merger agreement and the transactions associated
with it by Black & Company shareholders. Certain conditions other than Black &
Company shareholder approval may be waived by the party entitled to assert the
conditions.
No solicitation of other deals
Black & Company has agreed that during the pendency of the merger
agreement, neither it nor its affiliates will solicit or attempt to procure an
offer relating to a merger or similar transaction with any other person.
Termination (page 31)
First Security and Black & Company together may agree to terminate the
merger agreement without completing the merger whether or not the Black &
Company shareholders have approved the merger agreement.
The merger agreement may also be terminated by the board of directors
of either party in certain other circumstances including:
(1) if the merger is not completed on or before July 24, 2000,
except that neither First Security or Black & Company may
terminate the merger agreement if its breach of the merger
agreement is the reason the merger has not been completed by
that date;
(2) if the approval of the shareholders of Black & Company is not
obtained; or
(3) if any representations or warranties made by the other party
in the merger agreement are materially incorrect or the other
party has failed to perform certain of its obligations under
the merger agreement.
Amendment (page 32)
After the Black & Company shareholders have approved the merger
agreement, the boards of directors of First Security and Black & Company may
only amend the merger agreement in certain ways. The boards may not change the
exchange ratio, tax consequences, or methods of accounting for the merger.
Voting Agreements (page 22)
Certain shareholders of Black & Company have agreed to vote their
shares in favor of the merger agreement and the transactions associated with it.
These shareholders hold approximately 45% of the outstanding shares of Black &
Company voting common stock (including 5,588.25 shares that may be
9
<PAGE>
acquired upon exercise of options that are exercisable prior to the Black &
Company shareholders meeting). Their obligation to vote their shares in favor of
the merger terminates upon the completion of the merger or upon termination of
the merger agreement.
Regulatory filings (page 32)
First Security is required to make certain filings with certain
regulatory authorities in connection with the merger. These filings include the
application filed with the Federal Reserve Board for First Security to become a
Financial Holding Company pursuant to the recently adopted Gramm-Leach-Bliley
Act of 1999, as well as notice of the merger by First Security and First
Security Van Kasper to the Federal Reserve Board and the NASD. All other
necessary applications and notices have been filed or are in the process of
being filed. First Security cannot predict whether it will obtain all required
regulatory approvals, the timing of such approvals, whether any approvals will
include conditions that would be detrimental to First Security or whether there
will be litigation challenging the approvals.
Important federal income tax consequences of the merger
The exchange of Black & Company common stock for First Security common
stock (other than cash paid for fractional shares) should be tax free to you for
federal income tax purposes. To review the tax consequences to a shareholder in
greater detail, see page 33.
Tax matters are very complicated and the tax consequences of the merger
to you will depend in part on your own circumstances. You should consult your
tax advisors for a full understanding of all of the tax consequences of the
merger to you.
Comparative rights of Black & Company's shareholders (page 58)
Black & Company is an Oregon corporation, and, as a Black & Company
shareholder, you have certain rights under Oregon law. After the merger you will
be a First Security shareholder and will have rights under Delaware law. If the
merger is completed, the rights of former Black & Company shareholders who
become First Security shareholders will be determined by First Security's
certificate of incorporation and by-laws which now differ in certain respects
from Black & Company's articles of incorporation and by-laws. As a condition to
Zions Bancorporation merging with and into First Security, First Security will
be required to amend and restate its certificate of incorporation and by-laws.
If the merger of First Security and Zions is completed, the rights of former
Black & Company shareholders who become First Security shareholders will be
determined by an amended and restated certificate of incorporation and amended
and restated by-laws.
Risk Factors
The success of the merger is subject to certain risks. A description of
these risks is found at "RISK FACTORS" starting on page 13 of this
Prospectus/Proxy Statement.
Black & Company's Special Shareholders Meeting
Black & Company has called a special shareholders meeting to be held on
April 7, 2000 at the offices of Black & Company at One Southwest Columbia, Suite
1200, Portland, Oregon 97258, at 2:00 p.m. Pacific Time for the purpose of
allowing all Black & Company shareholders to vote on the merger. The board of
directors of Black & Company is asking you to vote FOR the merger by signing and
delivering a proxy card, or by attending the special shareholders meeting and
voting FOR the merger. As a Black &
10
<PAGE>
Company shareholder as of the record date of the special shareholders meeting,
you are entitled to vote for or against the merger by using the proxy card or by
attending the special shareholders meeting.
Purpose
The purpose of the special shareholders meeting is to consider and vote
on the merger. In accordance with Black & Company's articles of incorporation
and Oregon law, the merger will be approved and adopted if the holders of a
majority of the outstanding shares of Black & Company voting common stock vote
in favor of the merger.
You may revoke a proxy card by written notice to the Secretary of Black
& Company, at any time prior to the time votes are called for at the special
shareholders meeting or by attending the special shareholders meeting and voting
in person contrary to the previously submitted proxy card.
Votes required; Record date
The "record date" for determining shareholders entitled to vote on the
merger was set by Black & Company as March 1, 2000. Only Black & Company
shareholders as of the record date will be provided notice of the special
shareholders meeting and allowed to vote on the merger. A majority of the
outstanding shares of Black & Company common stock is required to approve the
merger.
As of the record date of the special shareholders meeting, directors
and executive officers of Black & Company and their affiliates were beneficial
owners of an aggregate of 160,156.64 shares of Black & Company voting common
stock (including 6,088.25 shares that may be acquired upon exercise of options
that are exercisable prior to the Black & Company shareholders meeting but
excluding an additional 73,866.75 shares that may be acquired upon exercise of
options that will become exercisable only if all conditions to the merger are
satisfied), or approximately 48% of the 332,184.75 shares of Black & Company
voting common stock that were deemed to be issued and outstanding as of such
date. (See "THE BLACK & COMPANY SPECIAL SHAREHOLDERS MEETING," page 19)
Interests of certain persons in the merger (page 25)
In considering the recommendation of the Black & Company board of
directors with respect to the merger, you should be aware that certain members
of the management of Black & Company have interests in the merger that are in
addition to the interests of Black & Company shareholders generally. These
interests arise from, among other things, payments that Black & Company may make
in connection with the execution of noncompetition agreements as well as
payments that First Security will make after the merger to certain members of
management pursuant to employment agreements and bonus plans, and
indemnification and insurance arrangements.
Management of Black & Company following the merger (page 23)
Following the merger, Black & Company will cease to exist as a separate
legal entity, and will be an operating division of First Security Van Kasper,
which is a wholly owned subsidiary of First Security, reporting to an Executive
Vice President of First Security. First Security anticipates that substantially
all of the current management of Black & Company will continue initially to
manage the day to day business of the Black & Company division of First Security
Van Kasper in an attempt to maintain continuity of Black & Company management
and culture.
11
<PAGE>
Dissenters' rights
Black & Company shareholders who vote against the merger are entitled
to dissenters' rights under Oregon law if they follow the required steps.
Dissenters' rights generally entitle the dissenting shareholders to the fair
value of their Black & Company common stock in cash in a taxable transaction.
For more information about dissenter's rights, see pages 34 through 36.
[This space left blank intentionally]
12
<PAGE>
RISK FACTORS
Certain risks are inherent in the merger and the business of First
Security. The material risks are highlighted below for the benefit of Black &
Company shareholders:
RISKS RELATED TO THE MERGER
Black & Company shareholders may not receive all the First Security shares
provided for in the merger agreement
First Security will withhold some of the shares (which comprise a
portion of the merger consideration) pending resolution of certain contingencies
of Black & Company, which include litigation matters pending against Black &
Company. Depending on the financial impact of the resolution of these
contingencies, some or all of the shares being withheld may be forfeited. In
addition, the earn-out component of the merger consideration will be paid to
Black & Company shareholders only if the Black & Company division of First
Security Van Kasper meets certain earnings goals. (See, "THE MERGER-Conversion
of Shares; Exchange Ratio," page 25.) If the Black & Company division of First
Security Van Kasper does not achieve these revenue targets, you may not receive
these additional shares. Many factors may limit the ability of the Black &
Company division to achieve these revenue targets.
Such factors include:
* The ability of Black & Company and First Security Van
Kasper to achieve expected business synergies;
* The ability of Black & Company and First Security Van
Kasper to integrate their operations, products and
technologies;
* The ability of Black & Company to retain its current
customers and to attract new customers following the
merger;
* The ability of Black & Company to retain key
employees following the merger; and
* Competition in the financial services industry.
Lack of control over Black & Company operations by current management
Following the merger, current shareholders of Black & Company will own
less than 1% of the outstanding voting securities of First Security. In
addition, the current directors of Black & Company will not be directors of
First Security or First Security Van Kasper. Finally, while First Security
expects to retain current management of Black & Company for the foreseeable
future, First Security may replace such management and such management will
report to senior management at First Security and First Security Van Kasper.
Accordingly, the current shareholders of Black & Company will not have control
over the operations of the Black & Company division of First Security Van
Kasper. This lack of control may adversely impact Black & Company's ability to
meet the earnings targets required for payment of all or a portion of the shares
held back.
13
<PAGE>
Tax risks
There are certain Federal income tax risks associated with any merger
that is intended to be tax-free. These are discussed more fully under Federal
Income Tax Aspects, below at page 33. In general, there is a risk arising out of
changing interpretations of applicable tax law based on court cases and IRS
positions as published in revenue rulings and regulations. However, based on
currently applicable tax law, the merger should be tax-free to First Security
and Black & Company, and the shareholders of Black & Company who receive shares
of First Security common stock pursuant to the merger agreement should receive
such shares without the recognition of any gain (except gain attributable to the
redemption of fractional shares). This conclusion assumes that the merger will
take place pursuant to the merger agreement and the representations set forth in
this Registration Statement.
A potentially large percentage of the total merger consideration will
be held back at the closing or will be subject to the terms of an earnout. If
such contingent consideration were too great a proportion of the total
consideration, there is a risk that such contingent consideration might be
immediately taxable, or even that the entire merger might no longer be tax-free.
However, it appears that the total contingent consideration will in no event
exceed 50% of the total merger consideration, and under IRS guidelines this
should not cause the contingent consideration to be immediately taxable and
should not jeopardize the tax-free nature of the merger.
The circumstances of individual shareholders may vary. It is important
that each shareholder consult his or her own tax advisor regarding the tax
consequences of the merger to such shareholder in light of his or her particular
tax status or circumstances. Moreover, the discussion and analysis set forth
herein does not address state or local tax consequences.
RISKS RELATED TO THE BUSINESS OF FIRST SECURITY
The Zions Bancorporation merger
The announced merger between First Security and Zions Bancorporation is
structured as a merger of equals with First Security as the surviving company.
Significant risks and uncertainties are inherent in any such merger considering
the integration of different management systems, financial and accounting
systems, business processes and models, and corporate cultures. Moreover, as a
condition of the First Security/Zions merger, the U.S. Department of Justice has
required both Zions Bancorporation and First Security to sell a total of 63
branches located in Utah and Idaho. Each of First Security and Zions has entered
into an agreement with Bank of the West pursuant to which Bank of the West has
agreed to purchase these branches and their attendant loans and deposits. Upon
completion of the acquisition of these branches, Bank of the West will become
the second largest bank in Utah.
First Security's stock prices can change in response to market conditions
The market for First Security common stock is potentially volatile. The
trading price of First Security common stock could be subject to wide
fluctuations in response to quarterly variations in operating results,
announcements following acquisitions by First Security or its competitors,
changes in interest rates or prices of First Security's or its competitors'
financial products and services, changes in product mix, changes in revenue and
revenue growth rates for First Security as a whole or for geographic areas or
business units, and other events or factors. Statements or changes in opinions,
ratings or earnings estimates made by brokerage firms or industry analysts
relating to the markets in which First Security does business or relating to
First Security specifically have resulted, and could in the future result, in an
14
<PAGE>
immediate and adverse effect on the market price of First Security common stock.
Statements by financial or industry analysts regarding the impact on First
Security's net income per share resulting from the First Security/Zions merger
and the extent to which such analysts expect potential business synergies to
affect reported results in future periods can be expected to contribute to
volatility in the market price of First Security common stock.
In addition, the stock market has from time to time experienced extreme
price and volume fluctuations which have particularly affected the market price
for the securities of many financial services companies and which often have
been unrelated to the operating performance of these companies.
First Security needs to obtain and retain good employees
The continued growth and success of First Security depends
significantly on the continued service of highly skilled employees and managers.
In particular, First Security's success to date has depended to a significant
extent upon a number of key management employees, the loss of any of whom could
have a material adverse effect on First Security's business and results of
operations. Competition for these employees in today's marketplace, especially
in the financial services industries, is intense. First Security's ability to
attract and retain employees is dependent on a number of factors including its
continued ability to grant stock incentive awards. There can be no assurance
that First Security will be successful in continuing to recruit new personnel
and to retain existing personnel. The loss of one or more key employees or First
Security's inability to maintain existing employees, or to recruit new
employees, could have a material adverse impact on First Security. In addition,
First Security may experience increased compensation costs to attract and retain
skilled personnel.
Anti-Takeover effect of certain provisions of First Security's certificate of
incorporation and bylaws
Certain provisions of First Security's certificate of incorporation and
bylaws, or its amended and restated certificate of incorporation and amended and
restated bylaws, as the case may be, could delay or frustrate the removal of
incumbent directors and could make more difficult a merger, tender offer or
proxy contest involving First Security, even if such events could be beneficial
to its shareholders. For example, each share of First Security common stock has
a right attached that entitles the shareholder to acquire a series of preferred
stock under certain circumstances associated with a potential change in control
of First Security. Also, both the bylaws and the amended and restated bylaws
restrict the ability of a shareholder to nominate directors or to present
matters before a shareholders meeting. Furthermore, both the First Security
certificate of incorporation and the amended and restated certificate of
incorporation contain a supermajority voting provision commonly known as a "fair
price" provision that will make certain staged take-overs difficult. (See
"INFORMATION ABOUT FIRST SECURITY-Description of First Security's Capital
Stock," page 41.)
15
<PAGE>
CAPITALIZATION OF FIRST SECURITY
The following table sets forth the unaudited historical capitalization
of First Security as of September 30, 1999.
<TABLE>
<CAPTION>
(in thousands)
DEBT:
<S> <C>
Deposits (1) $13,212,965
Federal funds purchased and securities sold under agreements to repurchase 4,508,377
Other short-term borrowings 641,355
Long-term debt (2) 2,536,949
-----------
Total Debt 20,899,646
STOCKHOLDERS' EQUITY:
Series "A", $3.15 Cumulative Convertible Preferred Stock, (8,691 shares issued) 456
Common Stock (par value $1.25, authorized 600,000,000 shares, 197,380,875 shares issued) (3) 246,726
Paid-in surplus 286,663
Retained earnings 1,359,742
Accumulated other comprehensive income (4) (93,641)
Common treasury stock, at cost (1,635,717 shares) (40,367)
-----------
Total shareholders' equity 1,759,579
-----------
Total capitalization $22,659,225
===========
</TABLE>
NOTES:
(1) Including demand deposits of $2.6 billion and interest-bearing deposits
of $10.6 billion (including $1.7 billion of certificates of deposit
over $100,000).
(2) Being, with respect to First Security, (in thousands), $23,750 of
Medium Term Notes due 1998-2003, $325,000 of 5.875% Senior notes due
2003, $150,000 of 6.875% Senior Notes due 2006, $75,000 of 7.5%
Subordinated Notes due 2002, $125,000 of 7.0% Subordinated Notes due
2005, and $150,000 of 8.41% Subordinated Capital Income Securities due
2026; and with respect to First Security's subsidiaries, $1,688 of bank
notes and Federal Home Loan Bank borrowings and $287 of nonbank debt.
First Security's subsidiaries' obligations are direct obligations of
such subsidiaries, and as such constitute claims against such
subsidiaries ranking prior to First Security's equity therein.
(3) Shares issued and outstanding excluded 10,366,892 shares reserved for
issuance upon exercise of outstanding stock options, 356,385 shares
reserved for issuance upon exercise of conversion rights of preferred
stock, 671,569 shares reserved for issuance under the dividend
reinvestment and stock purchase plan, 7,082,431 shares reserved for
issuance under First Security's Comprehensive Management Incentive
Plan, and 1,449,000 shares reserved for issuance under First Security's
Nonemployee Director Stock Option Plan.
(4) Accumulated other comprehensive income consists entirely of net
unrealized loss on securities available for sale.
SELECTED HISTORICAL FINANCIAL DATA FOR FIRST SECURITY
The following tables present unaudited selected financial data of First
Security for the periods indicated. The historical First Security financial data
as of September 30, 1999 are unaudited, and the four fiscal years ended December
31, 1998 were derived from audited financial statements. The data presented
below should be read in conjunction with the financial statements and related
notes of First Security which are incorporated by reference. Historical
financial data for Black & Company is not being provided pursuant to the
Securities and Exchange Commission's recently adopted rule entitled Regulation
of Takeovers and Security Holder Communications, which became effective January
24, 2000. Pursuant to that rule, Black & Company's financial information is not
required since Black & Company's income and assets are less than 20% of First
Security's income and assets and First Security's shareholders are not required
to vote on the transaction.
16
<PAGE>
<TABLE>
<CAPTION>
First Security Corporation
Selected Historical Financial Data
(Dollars in Thousands, except per share amounts)
Nine Months Ended YEAR ENDED DECEMBER 31
----------------- ----------------------
Sept. 30, 1999 Sept. 30, 1998 1998 1997 1996 1995
(unaudited) (unaudited)
----------- ----------- ---------- ---------- --------- ---------
SUMMARY OF OPERATIONS:
<S> <C> <C> <C> <C> <C> <C>
Interest Income $1,153,213 $1,051,467 $1,420,660 $ 1,213,378 $ 1,039,391 $ 974,015
Interest Expense 583,358 534,483 716,961 587,439 485,328 469,812
Net Interest Income 569,855 516,984 703,699 625,939 554,063 504,203
Provision for Possible Loan Losses 40,251 49,062 71,923 63,386 41,300 22,682
Noninterest Income 403,770 341,946 474,390 357,157 306,444 270,638
Noninterest Expenses 620,013 529,599 723,088 588,904 531,219 555,192
Income Before Taxes 313,361 280,269 383,078 330,806 287,988 196,967
Applicable Income Taxes 106,325 99,902 135,398 115,532 103,516 72,336
Net Income 207,036 180,367 247,680 215,274 184,472 124,631
PER COMMON SHARE DATA:
Earnings Per Share - Basic $ 1.08 $ 0.96 $ 1.32 $ 1.18 $ 1.03 $ 0.71
Earnings Per Share - Diluted 1.05 0.93 1.28 1.14 1.00 0.69
Cash Dividends Declared 0.42 0.39 0.52 0.44 0.38 0.33
Book Value per Common Share 8.99 8.54 8.54 7.59 6.72 6.13
BALANCE SHEET ITEM - PERIOD END:
Loans, Net of Unearned Income $13,817,241 $12,926,926 $14,013,417 $11,230,766 $ 9,697,351 $ 8,616,763
Reserve for Possible Loan Losses 174,443 169,058 173,350 157,525 142,693 135,011
Total Assets 23,346,617 19,859,300 21,689,088 18,151,783 15,456,649 13,529,699
Deposits 13,212,965 11,943,616 12,658,574 11,417,634 10,103,007 9,202,844
Long-Term Debt 2,536,949 1,749,478 2,609,558 1,304,463 944,055 720,521
Shareholders' Equity 1,759,579 1,610,006 1,595,495 1,400,846 1,217,840 1,082,995
PROFITABILITY RATIOS:
Return on Average Assets 1.25% 1.27% 1.28% 1.35% 1.35% 0.98%
Return on Average Shareholders' Equity 16.65 16.11 16.21 16.60 16.23 12.02
Net Interest Margin, FTE (1) 3.94 4.15 4.15 4.47 4.59 4.48
Net Interest Spread, FTE (2) 3.43 3.52 3.53 3.75 3.85 3.73
Operating Expense Ratio (3) 63.20 61.11 60.84 59.27 61.18 70.89
Productivity Ratio (4) 3.74 3.74 3.75 3.68 3.87 4.37
CAPITAL RATIOS:
Shareholders' Equity to Assets 7.54% 8.11% 7.36% 7.72% 7.88% 8.00%
Tangible Common Equity Ratio 5.23 6.42 5.57 6.24 6.74 6.95
ASSET QUALITY RATIOS:
Reserve for Loan Losses at End of
Period to:
Total Loans 1.26% 1.31% 1.24% 1.40% 1.47% 1.57%
Nonaccruing and Renegotiated Loans 354.57 410.48 378.39 427.17 399.14 547.49
Nonperforming Assets at End of Period to:
Total Loans and Other Real Estate 0.41 0.34 0.35 0.40 0.48 0.43
Total Assets 0.25 0.22 0.23 0.25 0.30 0.27
Total Equity 3.25 2.73 3.10 3.20 3.81 3.40
Total Equity + Loan Loss Reserve 2.96 2.47 2.79 2.88 3.41 3.03
Net Loans Charged Off to Average Loans 0.47 0.44 0.49 0.51 0.41 0.30
RATIO OF EARNINGS TO FIXED CHARGES:(5)
Excluding Interest on Deposits 2.11x 2.23x 2.22x 2.41x 2.82x 2.23x
Including Interest on Deposits 1.54x 1.52x 1.53x 1.56x 1.59x 1.42x
</TABLE>
NOTES:
(1) Historical data has been restated where appropriate to reflect two
separate 3-for-2 common stock splits in the form of 50% stock dividends
paid in May 1997 and February 1998 and also for the May 1998
pooling-of-interests acquisition of California State Bank.
(2) Fully Taxable Equivalent: an adjustment made to interest income to
facilitate comparison of interest income earned on tax-exempt or
tax-favored loans, leases and securities with interest earned subject
to full taxation.
(3) Noninterest expenses/FTE net interest income plus noninterest income.
(4) Noninterest expenses/average assets.
(5) For purposes of computing the consolidated ratio of earnings to
combined fixed charges and preferred stock dividends, earnings
represent net income plus income taxes and fixed charges. Fixed
charges, including interest on deposits, include interest expense,
capitalized interest, an amount equal to the pretax earnings required
to meet applicable preferred stock dividend requirements and the
interest factor included in rents.
17
<PAGE>
Proforma Financial Information about the First Security/Zions Merger.
Proforma balance sheet and income statement information concerning the
First Security/Zions merger has been filed with the Securities and Exchange
Commission as part of First Security's registration statement on Amendment No. 2
to Form S-4 filed on February 17, 2000. File No. 333-91401. This information is
hereby incorporated by reference. It can be viewed by means of the Commission's
web site, www.sec.com/cgi-bin/formlynx.pl.b. A paper copy of the
Prospectus/Proxy Statement for the First Security/Zions merger may be obtained
by calling 801-246-5044.
FIRST SECURITY MARKET PRICE AND DIVIDENDS INFORMATION
First Security common stock is quoted through the Nasdaq National
Market under the symbol "FSCO". The following table sets forth the high and low
sales price of First Security common stock. The cash dividends declared per
share for the calendar periods are also indicated. The information presented
below for First Security was obtained from the National Association of
Securities Dealers, Inc. and reflects interdealer prices, without retail markup,
markdown or commissions, and may not represent actual transactions. ALL FIRST
SECURITY NUMBERS OF SHARES AND PER SHARE INFORMATION ARE ADJUSTED FOR A FIRST
SECURITY STOCK SPLIT ON FEBRUARY 24, 1998. THIS INFORMATION HAS ALSO BEEN
ADJUSTED FOR THE POOLING OF INTERESTS MERGER INVOLVING FIRST SECURITY'S
ACQUISITION OF CALIFORNIA STATE BANK ON MAY 30, 1998. FIRST SECURITY BELIEVES
THAT THE HISTORICAL PRICES SHOULD REFLECT THE MARKET REACTION TO THE ANNOUNCED
FIRST SECURITY/ZIONS MERGER.
Dividends
Declared
Per First
Security Common
Price of First Security common stock Share
------------------------------------ ------------
High Low
---- ---
1998
First Quarter $27.92 $21.83 $0.13
Second Quarter 25.13 20.81 0.13
Third Quarter 24.13 15.50 0.13
Fourth Quarter 23.44 15.63 0.13
1999
First Quarter $23.94 $17.50 $0.14
Second Quarter 27.31 17.81 0.14
Third Quarter 27.56 18.38 0.14
Fourth Quarter 31.00 22.75 0.14
2000
First Quarter (through $26.25 $21.31 $0.14
February 29)
The closing bid price of First Security common stock as reported on the
Nasdaq National Market on January 21, 2000, the last trading day prior to the
public announcement of the merger agreement, was $23.125 per share. On February
29, 2000, the closing bid price for First Security common stock was $23.19 per
share.
18
<PAGE>
First Security has paid cash dividends on its common and preferred
stock without reduction in amount for over 70 consecutive years. Since 1983,
these dividends have been paid quarterly.
Future dividends on First Security common stock will be determined by
First Security's board of directors in light of circumstances existing at the
time, including the earnings and financial condition of First Security, and
there is no assurance that dividends will continue to be paid at current levels.
No material restrictions have been imposed on First Security's ability to pay
dividends from its earned surplus by bank regulations or applicable law.
Payment of dividends on the First Security common stock is also subject
to the prior rights of First Security's outstanding preferred stock. (See
"Information About First Security, Description of Preferred Stock," page 41.)
Black & Company shareholders are advised to obtain current market
quotations for First Security common stock. No assurances can be given
concerning the market price of the First Security common stock before or after
the date on which the merger is consummated. The market price of First Security
common stock will fluctuate between the date of this Prospectus/Proxy Statement
and the date of closing of the merger and thereafter. Because the ratio pursuant
to which your shares of Black & Company stock will be exchanged for First
Security common stock is subject to the adjustment as described below in this
Prospectus/Proxy Statement, and because the market price of First Security
common stock is subject to fluctuation, the value of the shares of First
Security common stock that Black & Company shareholders will receive under the
merger agreement may increase or decrease prior to and following the closing of
the merger.
ALL INFORMATION CONTAINED IN THIS PROSPECTUS/PROXY STATEMENT RELATING TO FIRST
SECURITY CORPORATION HAS BEEN FURNISHED BY FIRST SECURITY, AND ALL INFORMATION
CONTAINED IN THIS PROSPECTUS/PROXY STATEMENT RELATING TO BLACK & COMPANY HAS
BEEN FURNISHED BY BLACK & COMPANY. THE PARTY FURNISHING INFORMATION IS
RESPONSIBLE FOR ITS ACCURACY.
THE BLACK & COMPANY SPECIAL SHAREHOLDERS MEETING
Date, Time and Place
This Prospectus/Proxy Statement is being furnished in connection with
the solicitation of proxies by the board of directors of Black & Company for use
at the special shareholders meeting. The special shareholders meeting will be
held at the offices of Black & Company located at One Southwest Columbia, Suite
1200, Portland, Oregon 97258 on April 7, 2000, at 2:00 p.m. Pacific Time.
Purpose
At the special shareholders meeting, holders of Black & Company common
stock will be asked to vote upon a proposal to approve the merger. The merger
agreement provides that Black & Company will merge with and into First Security
Van Kasper.
Record Date, Shares Outstanding, Shares Entitled to Vote
The record date for the determination of Black & Company shareholders
entitled to notice of and to vote at the special shareholders meeting has been
fixed by the board of directors of Black & Company as the close of business on
March 1, 2000. As of the record date, there were 332,184.75 shares of Black
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& Company voting common stock deemed to be issued and outstanding (including
6,088.15 shares of voting common stock that may be acquired upon exercise of
options that are exercisable prior to the Black & Company shareholders meeting).
The Black & Company common stock was held of record on that date by 27
shareholders. Holders of Black & Company common stock on the record date are
entitled to one vote per share on each matter to be acted upon at the special
shareholders meeting. Black & Company shareholders are not entitled to vote
cumulatively in the election or removal of directors or otherwise. Holders of
Black & Company common stock on the record date are entitled to exercise
dissenters' rights on the proposal to approve the merger. (See "Rights of
Dissenting Shareholders," page 34.)
Vote Required
The affirmative vote of the holders of a majority of the shares of
Black & Company common stock, approximately 163,048 shares (assuming no exercise
of options that are exercisable prior to the Black & Company shareholders
meeting), is required to adopt the merger agreement. Failure to vote is
equivalent to voting against the merger agreement. Of the 326,096 shares of
Black & Company voting common stock issued and outstanding on the record date of
the special shareholders meeting (assuming no exercise of options that are
exercisable prior to the Black & Company shareholders meeting), directors of
Black & Company entitled to vote 145,068.39 shares (assuming no exercise of
options that are exercisable prior to the Black & Company shareholders meeting),
or approximately 45% of the Black & Company voting common stock (assuming no
exercise of options that are exercisable prior to the Black & Company
shareholders meeting), have agreed to vote their shares in favor of the merger.
(See "Significant Shareholders of Black & Company," page 21.)
The Black & Company board of directors has unanimously approved the
merger agreement, believes that the terms of the merger agreement are fair to,
and in the best interests of, Black & Company and its shareholders, and
unanimously recommends that the Black & Company shareholders vote FOR the
merger.
Solicitation, Voting and Revocation of Proxies
You are requested to complete, date and sign the accompanying proxy
card and return it promptly in the accompanying postage-prepaid envelope.
Management of Black & Company may solicit proxies without additional
compensation. Black & Company will bear the expense of such solicitation.
Shares represented by valid proxies will be voted at the special
shareholders meeting in accordance with the instructions noted thereon. If no
instructions are given, proxies will be voted FOR adoption of the merger.
Proxies solicited by this Proxy/Prospectus may be used at the special
shareholders meeting and any adjournment thereof only and will not be used for
any other meeting.
Unless revoked, your shares represented by proxies will be voted at the
special shareholders meeting. If you execute a proxy, you may revoke it at any
time before completion of the meeting, but revocation will not affect a vote
previously taken. Your presence at the meeting will not automatically revoke
your proxy. You may revoke a proxy at any time prior to its exercise by
delivering to the Secretary of Black & Company a written notice of revocation
prior to the meeting; delivering to the Secretary prior to the meeting a duly
executed proxy bearing a later date; or attending the meeting and filing a
written notice of revocation with the Secretary.
Any written notice revoking a proxy should be delivered to Frank J.
Niezgoda, Chief Operating Officer of Black & Company, One Southwest Columbia,
Suite 1200, Portland, Oregon 97258.
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Quorum
A majority of the shares of Black & Company common stock issued and
outstanding on the record date must be present in person or by proxy for there
to be a quorum to conduct business at the special shareholders meeting. If a
quorum is not obtained, or if fewer shares of Black & Company common stock than
the number required are voted in favor of the merger agreement, the special
shareholders meeting may be postponed or adjourned to permit additional time for
soliciting and obtaining additional proxies or votes. At any subsequent
reconvening of the meeting, all proxies will be voted in the same manner as such
proxies would have been voted at the original convening of the special
shareholders meeting, except for any proxies that have been effectively revoked
or withdrawn.
Abstentions will be counted as present for purposes of determining
whether there is a quorum at the special shareholders meeting, but will not be
voted. Because adoption of the merger agreement requires the affirmative vote of
the holders of a majority of the outstanding shares of Black & Company common
stock, abstentions will have the same effect as votes against adoption of the
merger agreement.
Significant Shareholders of Black & Company
The following table indicates the beneficial ownership of Black &
Company common stock as of the record date (i) by directors and executive
officers of Black & Company, (ii) by each person who is known by Black & Company
to own beneficially more than 5% of the outstanding shares of Black & Company
common stock, and (iii) by all directors and executive officers of Black &
Company as a group. Unless otherwise indicated, voting power and investment
power are exercised solely by the person named or are shared with members of his
or her household. For purposes of the table, a person is considered to own
beneficially any shares with respect to which he or she exercises sole or shared
voting or investment power, plus the number of shares the individual has the
right to acquire within 60 days of the date of this Proxy Statement/Prospectus
(but excluding shares the individual has the right to acquire upon exercise of
options that become exercisable only if the merger is approved and the other
conditions of closing the merger are satisfied). The percentage of common stock
outstanding is calculated on the basis of 326,096 outstanding shares plus
6,088.25 shares covered by options exercisable within 60 days of the date of
this Proxy Statement/Prospectus (but excluding shares the individual has the
right to acquire upon exercise of options that become exercised only if the
merger is approved and the other conditions of closing the merger are
satisfied).
NUMBER OF
COMMON
SHARES PERCENT OF
BENEFICIALLY COMMON
NAME OF BENEFICIAL OWNER OWNED STOCK
- ------------------------ ------------- -----
Herbert D. Black 16,370.00 5.0%
Jennifer E. Black* 16,221.00 4.9%
Lawrence S. Black* 92,641.64 28.4%
David A. Duley* 17,023.75 5.2%
Robert M. Johnson 25,375.00 7.7%
Laurie R. Miller 37,584.64 11.5%
Todd M. Niedermeyer* 21,090.00 6.5%
Frank J. Niezgoda* 3,681.00 1.1%
Dennis Reiter* 9,500.00 3.0%
Ronald A. Sauer(1) 27,671.58 8.5%
(1)Non-voting shares
*All directors and executive
officers as a group (6 persons). 160,156.64 48.2%
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On the date the merger agreement was executed, certain shareholders of
Black & Company entered into a Stockholder Voting Agreement with First Security
as an inducement for First Security to enter into the merger agreement. The
Stockholder Voting Agreement requires the shareholders who have executed the
Stockholder Voting Agreement to vote their Black & Company common stock in favor
of the merger; vote against any other acquisition proposal involving a change in
control of Black & Company or similar transaction (other than the merger with
and into First Security Van Kasper); and vote against any other transaction that
is inconsistent with the obligation of Black & Company to consummate the merger.
The shareholders who executed the Stockholder Voting Agreement are
Lawrence W. Black, Director, Chairman of the Board and Chief Executive Officer,
Jennifer E. Black, Director and President, David A. Duley, Director and Research
Director, Todd M. Niedermeyer, Director and Executive Vice President, and Frank
J. Niezgoda, Director and Executive Vice President, Chief Operating Officer.
Together, these shareholders own or exercise voting power over approximately
145,068.39 of the currently issued and outstanding shares of Black & Company
voting common stock, or 45% of the voting power and options to purchase an
additional 5,588 shares that are exercisable prior to the Black & Company
shareholders meeting, which if exercised would give such persons 48% of the
voting power of Black & Company.
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THE MERGER
The following is a summary of certain provisions of the merger
agreement, a copy of which is attached to this Prospectus/Proxy Statement as
Appendix A and incorporated herein by reference. Such summary is qualified in
its entirety by reference to the full text of the merger agreement.
General
Subject to the terms and conditions of the merger agreement, at the
effective time of the merger, Black & Company will merge with and into First
Security Van Kasper, which is a wholly owned subsidiary of First Security. Black
& Company shareholders will become shareholders of First Security.
The Effective Time of the Merger
Promptly after all conditions to the merger agreement have been
satisfied or waived, the articles of merger pertaining to the merger or such
other documents as may be appropriate or necessary to effect the merger, will be
executed and filed in accordance with Utah and Oregon law, as the case may be,
and the merger will become effective at the last time and date of the filing of
the articles of merger in the States of Utah and Oregon.
Management of Black & Company Following the Merger
Black & Company will operate as a division of First Security Van
Kasper, and will have divisional leadership following the merger substantially
the same as preceding the merger. The management of the Black & Company division
of First Security Van Kasper will report to designated executive officers of
First Security Van Kasper.
Background of and Reasons for the Merger; Recommendation of Black & Company's
Board of Directors
The board of directors of Black & Company has unanimously approved the
merger agreement, believes that the terms of the merger agreement are fair to,
and in the best interests of, Black & Company and its shareholders, and
unanimously recommends that holders of Black & Company shares vote FOR approval
of the merger.
The board of directors of Black & Company believes that the merger of
Black & Company into First Security Van Kasper will create an organization
better positioned to serve Black & Company's clients. The merger will combine
Black & Company's traditional strong research report capabilities with First
Security Van Kasper's investment banking, equity underwriting, retail sales,
investment advisory and investment management services, and First Security's
financial services strengths and strong national corporate capital capabilities,
thereby enabling the post-merger First Security Van Kasper to expand its
customer base in the Pacific Northwest market.
In reaching its determination to merge with First Security Van Kasper,
the Black & Company board considered a number of factors. A potential merger
with First Security Van Kasper was considered to be complementary with Black &
Company's long-term objectives and to provide an opportunity to attain the
following potential strategic benefits:
* The board's belief that the terms of the merger
agreement are attractive in that the merger agreement
allows the Black & Company shareholders to become
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shareholders in First Security, an institution whose
stock is traded on the Nasdaq National Market.
* The board's view of the likelihood that the merger
would deliver value to the Black & Company
shareholders exceeding the value that could be
expected in connection with continued independence.
* The increasing consolidation in the securities
industry and the possibility that such consolidation
might affect the competitive position of Black &
Company in the future.
In the course of its deliberations, the Black & Company board reviewed
with Black & Company's management a number of other factors relevant to the
merger. In particular, the Black & Company board considered, among other things:
* The board's familiarity with and review of First
Security Van Kasper's business, operations, earnings
and financial condition and future capital
requirements.
* The board's review of the proposed terms of the
merger, including comparing the merger consideration
to premiums paid in certain recent retail brokerage
transactions and the price performance of recent
acquirers of securities firms, all as known to them,
and the resulting opinion of the board that the
exchange ratio is fair from a financial point of view
to the Black & Company shareholders.
* An analysis of the risks of the exchange ratio and
other terms of the merger.
* The historical performance of First Security and
First Security's financial performance relative to
Black & Company's financial performance.
* The terms and conditions of the merger agreement,
including the amount and form of the consideration,
the parties' representations, warranties, covenants
and agreements, and the conditions to the respective
obligations set forth in the merger agreement.
The Black & Company board also considered certain risks potentially
arising in connection with the merger, including:
* The risk that the merger will not be consummated in
accordance with the terms and the conditions of the
merger agreement.
* The risks and likelihood of the First Security/Zions
merger transaction.
* The loss of Black & Company's independence.
* The risk that benefits sought to be achieved by the
merger would not be achieved.
The foregoing discussion of information and factors considered and
given weight by the Black & Company board is not intended to be exhaustive,
although it is intended to include all material factors considered. In view of
the wide variety of factors considered in connection with its evaluation of the
terms of the merger, the Black & Company board did not find it practicable to,
and did not, quantify or otherwise attempt to assign relative weight to the
specific factors considered in reaching its determination.
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In addition, the individual members of the Black & Company board may have given
different weight to different factors.
Interests of certain persons in the merger
In considering the recommendations of the Black & Company board with
respect to the merger, the Black & Company shareholders should be aware that
certain members of Black & Company management have interests in the merger that
are in addition to the interests of Black & Company shareholders generally.
These interests include the following:
Lawrence S. Black, Jennifer E. Black, Frank J. Niezgoda, and David A.
Duley have entered into employment agreements with First Security Van Kasper
which will become effective upon consummation of the merger. These employment
agreements each provide for a base salary, a minimum annual bonus, additional
incentive compensation opportunities, participation in a $1.75 million retention
bonus pool, and certain non-competition provisions.
Outstanding options granted by Black & Company that have not previously
vested will accelerate and become exercisable effective immediately prior to the
closing of the merger. Of the currently outstanding options to purchase 197,079
shares of Black & Company common stock, officers and directors of Black &
Company currently hold options to purchase 79,855 of such shares.
Pursuant to the merger agreement, First Security will use its
reasonable best efforts to procure directors and officers liability insurance
that serves to reimburse the present and former officers and directors of Black
& Company with respect to claims against such directors and officers arising
from facts or events occurring at or prior to the effective time of the merger,
which insurance must contain terms and conditions no less advantageous as the
coverage currently in force at Black & Company. First Security is only required
to acquire this insurance coverage if the premium is no more than 150% of Black
& Company's current annual policy premium.
Conversion of shares; Exchange ratio
In accordance with the merger agreement, as of the effective time of
the merger, each issued and outstanding share of the Black & Company common
stock will be converted into the right to receive shares of First Security
common stock as set forth in the merger agreement and as summarized below. Each
holder of a certificate representing Black & Company common stock will cease to
have any rights with respect thereto, except the right to receive, upon the
surrender of any such certificates, the shares of First Security common stock
upon the terms and subject to the conditions set forth in the merger agreement.
Certain definitions. The merger agreement provides for the conversion
of the Black & Company common stock into shares of First Security common stock
under an exchange ratio that is somewhat complex. To understand the details of
the exchange ratio, the following definitions are provided:
"First Security Share Price" means the average of the last
sales price per share of First Security common stock on the Nasdaq
National Market for the ten (10) consecutive trading days ending on the
trading day which is five (5) trading days prior to the effective time
of the merger.
"Company Share Price" means $7,500,000 divided by the total
number of issued and outstanding shares of Black & Company common stock
immediately prior to the effective time of the merger.
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"Exchange Ratio" means (in each case, rounded to the nearest
one thousandth of a share) that number of shares of First Security
common stock (rounded to the nearest one thousandth) determined as
follows:
Black & Company Share Price
---------------------------
First Security Share Price
"Base Consideration" for each share of Black & Company common
stock issued and outstanding immediately prior to the effective time of
the merger means the number of shares of First Security common stock
equal to the Exchange Ratio.
Holdback amount. Approximately 18.33% of the shares of First Security
common stock otherwise issuable at the closing of the merger (or approximately
$1.375 million worth of First Security common stock, valued at the time of
closing of the merger) will be withheld by First Security and issued to Black &
Company shareholders as soon as reasonably practical after the first anniversary
of the closing of the merger if there are no actions, proceedings or
investigations pending, contemplated by governmental authorities or threatened
against or relating to Black & Company or its current or former officers,
directors, employees or representatives relating, directly or indirectly, to
certain matters previously disclosed to First Security, namely (1) matters
relating to a cease and desist order issued against Black & Company in May of
1992; (2) the issues related to Sirena Apparel Group, Inc.; and (3) all claims,
causes of action and proceedings against Black & Company in the matter of
American Industries, Inc. et al. v. Imaging Technologies Corp., et al., have
been dismissed, released or fully discharged and there are no additional
actions, proceedings, claims or investigations pending, contemplated by
governmental authorities or threatened against or relating to Black & Company or
its officers, directors, employees or representatives in connection with such
matters.
If any such actions, proceedings or investigations are commenced,
contemplated by governmental authorities, pending or threatened on or before the
first anniversary of the closing of the merger, First Security will be entitled
to retain the shares held back at closing, or some portion thereof, to cover any
and all liability and costs reasonably expected to be incurred in connection
with such matters, including litigation costs and attorneys' fees, until such
action, proceeding or investigation has been settled or dismissed, the liability
arising therefrom discharged, or, in the case of a threatened action, proceeding
or investigation, or an action, proceeding or investigation contemplated by the
government, more than one year has elapsed without such action, proceeding or
investigation being commenced or again threatened.
Notwithstanding the foregoing, the shares held back at closing will be
subject to offset (and will be appropriately adjusted at the time of any such
offset) by any amounts owed by Black & Company to First Security or First
Security Van Kasper under the merger agreement. Amounts to be offset against the
shares held back at closing will be determined by (i) dividing the amount or
amounts to be offset by the market price of First Security common stock at the
time of offset calculated in the same manner that the market price of First
Security common stock was calculated prior to the closing of the merger and (ii)
subtracting the resulting number of shares of First Security common stock from
the number of shares of First Security common stock that would be obtained by
dividing the shares held back at closing by the market price of First Security
calculated prior to the closing of the merger. The full amount of the shares
held back at closing, including any increase in value resulting from an increase
in the market value of First Security common stock, will be subject to offset.
The Exchange Ratio will be appropriately adjusted with respect to the
shares held back at closing to take into account (i) a split or combination of
the First Security common stock, or payment of a stock dividend or other stock
distribution in First Security common stock; (ii) an issuance to all holders of
First Security common stock of rights or warrants to purchase First Security
common stock; (iii) a distribution to all holders of First Security common stock
or capital stock (other than First Security common stock) or
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evidences of indebtedness of First Security or of assets (including securities,
but excluding those rights, warrants, dividends and distributions referred to
above); and (iv) distributions of cash on the First Security common stock;
provided, however, that if a cash distribution to be paid by First Security in
an amount that would reasonably be expected to impair the ability of the merger
to qualify as a reorganization under Section 368(a) of the Code, such
distribution amount will be paid instead in shares of First Security stock.
Earn out. Pursuant to the merger agreement, each Black & Company
shareholder shall have the right to receive additional shares of First Security
common stock approximately three years and three months after the closing of the
merger if certain conditions are satisfied as provided in the merger agreement.
These shares of First Security common stock to be issued if certain conditions
are satisfied will be registered under the Securities Act of 1933 and approved
for quotation on the Nasdaq National Market. The additional shares of First
Security common stock may be issued as follows:
(i) If the Black & Company division's aggregate, accumulated
earnings before taxes, calculated as set forth in the merger agreement,
for the period commencing at the closing of the merger and ending on
the last day of the month nearest to the three-year and three-month
anniversary of the closing of the merger, equals or exceeds $8,000,000,
Black & Company's shareholders shall be entitled to receive
approximately $4,750,000 in shares of First Security common stock
(valued at the time of the closing of the merger).
(ii) If such earnings are less than $8,000,000, but equal or
exceed $5,000,000, for the same period of time, Black & Company's
shareholders shall be entitled to receive approximately $3,750,000 in
shares of First Security common stock (valued at the time of the
closing of the merger).
(iii) If such earnings are less than $5,000,000 for the same
period of time, Black & Company's shareholders shall not be entitled to
receive any portion of additional shares to be earned.
Black & Company options
Prior to the effective time of the merger, any and all outstanding
options to purchase Black & Company common stock must be exercised or forfeited.
There are 197,079 options outstanding and all are expected to be exercised prior
to the effective time of the merger.
Dissenting shares
Dissenting Shares will not be converted into or represent a right to
receive the merger consideration. A dissenting Black & Company shareholder will
be entitled to only such rights as are granted by Oregon law. (See "RIGHTS OF
DISSENTING BLACK & COMPANY SHAREHOLDERS," page 34.)
Exchange of shares and certificates
As of the effective time of the merger, First Security will deposit
with an exchange agent, which exchange agent may be an affiliate of First
Security, for the benefit of each Black & Company shareholder who does not
exercise their dissenter's rights, (i) cash in an amount sufficient for cash
paid in lieu of fractional shares, and (ii) certificates representing the shares
of First Security common stock issuable at the closing of the merger in exchange
for outstanding Black & Company common stock.
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These shares will not include shares of First Security common stock that will be
held back or which may be earned pursuant to the merger agreement.
As soon as reasonably practicable after the effective time of the
merger, First Security's exchange agent will mail to all Black & Company
shareholders as of the record date (i) a letter of transmittal, and (ii)
instructions for use in effecting the surrender of Black & Company stock
certificates in exchange for certificates representing shares of First Security
common stock and cash in lieu of fractional shares of First Security common
stock. Upon surrender of a Black & Company stock certificate for cancellation to
First Security's exchange agent, together with all required documents, each
Black & Company shareholder will be entitled to receive (i) a certificate
representing that whole number of shares which such holder has the right to
receive initially and (ii) cash in lieu of any fractional number of such shares.
In addition, if the conditions previously discussed for payment of shares held
back at closing or that may be earned after closing are satisfied, Black &
Company shareholders will also be entitled to receive (i) a certificate
representing that whole number of shares representing the appropriate proportion
of shares held back or earned, (ii) cash in lieu of any fractional number of
such shares and (iii) cash equal to the dividends payable with respect to such
shares during the period of time following the closing of the merger and prior
to issuance of such shares. Until surrendered, each Black & Company stock
certificate will be deemed to represent only the right to receive the merger
consideration. No interest will be paid or accrue on any cash payable in lieu of
any fractional shares of First Security common stock.
Black & Company shareholders should not send in their certificates until they
have received transmittal letters. Black & Company shareholders should not
return share certificates with their Black & Company proxy cards.
Fractional shares
No certificates representing fractional shares of First Security common
stock will be issued upon the surrender for exchange of Black & Company stock
certificates. Each Black & Company shareholder who would otherwise have been
entitled to receive a fraction of a share of First Security common stock in
connection with the merger will receive, in lieu thereof, cash (without
interest) in an amount equal to (A) such fraction multiplied by (B) the First
Security Share Price.
Representations and warranties
The merger agreement contains various customary representations and
warranties of Black & Company relating to, among other things: (a) the
organization of Black & Company and similar corporate matters; (b) Black &
Company's capital structure; (c) authorization, execution, delivery, performance
and enforceability of the merger agreement and related agreements; (d) the
absence of material violations; (e) shareholder approvals; (f) the absence of
material defaults; (g) the absence of material litigation; (h) compliance with
law; (i) the accuracy of Black & Company's financial statements and the absence
of undisclosed liabilities; (j) the absence of certain changes; (k) matters
related to employee benefit plans and ERISA; (l) matters related to taxes; (m)
third-party consents; (n) contracts; (o) environmental matters; (p) labor laws;
(q) Black & Company's investment contracts, funds and clients; (r) brokers and
finders; (s) insurance matters; (t) the absence of regulatory agreements; (u)
investment securities; and (v) interest rate risk management instruments.
The merger agreement also contains various customary representations
and warranties of First Security and First Security Van Kasper relating to,
among other things, (a) corporate organization; (b) capitalization; (c)
authority of First Security and First Security Van Kasper to enter into, and the
execution, delivery, validity and enforceability of, the merger agreement; (d)
the absence of certain violations; (e) the necessity of obtaining governmental
approval; (f) the absence of certain defaults; (g) the absence of material
litigation; (h) the filing of reports, registrations and statements with
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governmental authorities; (i) the absence of material changes; and (j)
satisfaction of conditions in Section 15(f) of the Investment Company Act of
1940.
Certain covenants
Pursuant to the merger agreement, Black & Company has made various
customary covenants, including that, until the effective time of the merger, it
will: (a) conduct its operations and business in the usual and ordinary course
of business; (b) permit First Security to make such additional investigation of
the business and properties of Black & Company as First Security deems
reasonably necessary or advisable; (c) refrain from soliciting or attempting to
procure offers related to the acquisition of Black & Company by a party other
than First Security or First Security Van Kasper; (d) obtain the consents of its
clients with respect to investment contracts with such clients; and (e) not
change its authorized capital stock or issue, agree to issue or permit the
Company to become obligated to issue any shares of capital stock.
First Security and First Security Van Kasper will: (a) prior to the
effective time of the merger, file with the Nasdaq National Market a
notification for listing covering shares issuable in the merger; and (b) deliver
the shares to be issued at closing of the merger, as well as the shares held
back or earned, if any, pursuant to the merger agreement pursuant to an
effective registration statement under the Securities Act of 1933.
Prior to the closing of the merger, First Security, First Security Van
Kasper and Black & Company have agreed to (a) use their respective reasonable
best efforts to take, or cause to be taken, all actions, and to do, or cause to
be done, all things necessary, proper or advisable (subject to any applicable
laws) to consummate and make effective the merger and related transactions; (b)
consult with each other with respect to, provide any necessary information with
respect to, and provide each other (or their respective counsel) with copies of,
all filings made by them with any governmental entity or any other information
supplied by them to a governmental entity; (c) refrain from making any public
announcement concerning the transactions contemplated by the merger agreement
without the prior approval of the other party or parties; and (d) pay their own
expenses related to the merger.
Conditions to the closing of the merger
Conditions to the obligations of Each Party
The respective obligation of each party to effect the closing of the
merger is subject to the satisfaction or waiver at or prior to the closing of
the merger of certain conditions including: (a) the absence of any governmental
prohibition or restriction on the closing of the merger; (b) the absence of any
suit, action, investigation, inquiry or other proceeding seeking to prevent
consummation of the merger, if such suit may reasonably succeed; (c) the
effectiveness of a registration statement to register the shares of First
Security common stock to be issued at closing of the merger; and (d) the receipt
by Black & Company and First Security of an opinion of First Security's legal
counsel, substantially to the effect that the merger will constitute a
"reorganization" within the meaning of Section 368(a) of the Code.
Additional conditions to the obligations of Black & Company
The obligation of Black & Company to effect the closing of the merger
is further subject to the satisfaction (or waiver by Black & Company) at or
prior to the closing of the merger of certain conditions including: (a) the
correctness of the representations and warranties of each of First Security and
First Security Van Kasper contained in the merger agreement; (b) the performance
by First Security of each covenant, agreement and condition required by the
merger agreement; (c) Black & Company's receipt of a certificate of a senior
officer of First Security and First Security Van Kasper certifying the accuracy
of
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certain statements set forth in the merger agreement; (d) Black & Company's
receipt of an opinion of Ray, Quinney & Nebeker, counsel to First Security; and
(e) Black & Company's receipt of such other documents, instruments and
certificates as Black & Company will reasonably request from First Security.
Conditions to the obligations of First Security
The obligation of First Security and First Security Van Kasper to
effect the closing is further subject to the satisfaction (or waiver by First
Security) at or prior to the closing date of the certain conditions including:
(a) the correctness of the representations and warranties of Black & Company
contained in the merger agreement; (b) the performance by Black & Company of
each covenant, agreement and condition required by the merger agreement; (c) the
receipt by First Security of a certificate of a senior officer of Black &
Company certifying the accuracy of certain statements set forth in the merger
agreement; (d) the effectiveness of all consents or approvals required under any
investment contract of Black & Company; (e) the receipt by First Security of an
opinion of Davis Wright & Tremaine, counsel to Black & Company; (f) the absence
of any developments or events having a material adverse effect on the business
of Black & Company; (g) the receipt by First Security of a comfort letter from
Black & Company's accountants in a form satisfactory to First Security; (h) any
approvals required by the Investment Company Act of 1940; (i) the receipt by
First Security of an affiliate's letter in the form attached to the merger
agreement from each person who, in the opinion of Black & Company and its
counsel, is an affiliate of Black & Company; (j) the approval of the merger by
Black & Company shareholders; (k) all Black & Company options shall have been
exercised or canceled; (l) Black & Company shall have accrued and paid all
liabilities in excess of $25,000; (m) Black & Company shall have terminated its
401(k) Plan and ESOP; and (n) Black & Company shall have redeemed all
outstanding preferred stock.
Termination
The merger agreement may be terminated at any time prior to the
closing:
(a) by the mutual consent of First Security and Black &
Company;
(b) by either party under certain conditions if the
closing has not taken place on or before July 24, 2000;
(c) by First Security or Black & Company upon notice
given to the other if any court or governmental entity of competent
jurisdiction will have issued a final permanent nonappealable order,
enjoining or otherwise prohibiting the merger;
(d) by either party upon certain breaches by the other
party of any representation, warranty, covenant or agreement set forth
in the merger agreement. In the event of the termination of the merger
agreement, all of the obligations and liabilities of the parties under
the merger agreement will terminate.
Indemnification
Subject to the other provisions of the merger agreement, Black &
Company and all shareholders of Black & Company common stock (but only in the
event of and to the extent of payments of the shares to be earned by Black &
Company) have agreed to indemnify, defend and hold harmless First Security,
First Security Van Kasper and their respective successive successors, assigns
and affiliates and the directors, officers, agents and employees of any such
entities from and against any and all damages imposed on, incurred or suffered
by or asserted against any indemnified party, directly or indirectly, to the
extent resulting from, arising out of or incurred with respect to (i) any breach
of any representation or
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warranty of Black & Company contained in the merger agreement, (ii) any breach
of any covenant in the merger agreement by Black & Company prior to the closing
of the merger, (iii) Black & Company's 401(k) plan and the administration
thereof; (iv) amounts paid by settlement or otherwise to resolve certain matters
for which shares of First Security common stock were held back.
The provisions for indemnity contained in the merger agreement will not
be effective until the aggregate amount of all damages (excluding damages
arising from the matters for which shares were heldback at the closing of the
merger) for which Black & Company is liable under the merger agreement exceeds
$250,000. However, if all such damages exceed $250,000, the indemnified parties
will be entitled to be indemnified for all damages for which they have not
received indemnification including the $250,000 of accumulated damages required
to trigger the indemnification obligation.
Any indemnifiable damages of any indemnified party will, to the extent
that such damages are incurred or asserted prior to the third-year and
three-month anniversary of the closing date, be offset against the shares to be
earned. Such offset (aside from any offset against the shares held back at
closing of the merger) will be the sole source of indemnification of an
indemnified party's damages.
Accounting treatment of the merger
First Security expects that the merger will be accounted for
as a "purchase" under generally accepted accounting principles.
The effect of the merger on Black & Company employee benefit plans
Until the effective time of the merger, all retirement and health insurance
plans maintained by Black & Company for the benefit of employees will remain in
effect without substantive change, except as may be required by applicable law
in connection with the intended termination of these plans as part of the
merger.
The Black & Company 401(k) Plan will be terminated prior to the effective
time of the merger. The parties will determine whether it is in the best
interests of the parties and the Black & Company employees to terminate any
other employee benefit plans or to merge such plans into an appropriate First
Security benefit plan. First Security will cooperate to enable the plan
participants to "roll-over" any benefits in such plans into any existing First
Security benefit plan as long as First Security is not required to make any
material amendment to, or experience an adverse effect on the qualification of,
such a First Security plan and only if First Security would incur no expense or
other adverse result in allowing such rollover of benefits
As of the effective time of the merger, the current Black & Company health
insurance plan likely will terminate. Subject to applicable law, all Black &
Company employees retained after the merger will be eligible to participate in
the First Security health insurance plan now in effect, in accordance with its
terms.
Regulatory notification and approval
First Security is required to make filings with certain regulatory
authorities in connection with the merger. These filings include an application
filed with the Federal Reserve Board for First Security to become a Financial
Holding Company pursuant to the recently adopted Gramm-Leach-Bliley Act of 1999,
as well as notice by First Security and First Security Van Kasper to the Federal
Reserve Board and the NASD of the merger. First Security's application to become
a Financial Holding Company was filed with the Federal Reserve Board on February
11, 2000. All other necessary applications and notices have been filed or are in
the process of being filed. First Security cannot predict whether it will obtain
all required regulatory approvals, the timing of such approvals, whether any
approvals will include
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conditions that would be detrimental to First Security or whether there will be
litigation challenging the approvals.
Miscellaneous
Survival of representations and warranties and covenants. Subject to
certain exceptions set forth in the merger agreement, the representations and
warranties and covenants of Black & Company and First Security contained in the
merger agreement will survive the closing of the merger and will continue in
full force and effect for a period of three years and three months, after which
such representations and warranties and covenants will terminate and have no
further force or effect.
Amendment, modification and waiver. The merger agreement may not be
amended, modified or waived except (a) by an instrument or instruments in
writing signed and delivered on behalf of each of the parties to the merger
agreement and (b) following the closing of the merger, by First Security, First
Security Van Kasper and either (i) the Black & Company representative identified
in the merger agreement, or (ii) by the written consent of a majority of the
former Black & Company shareholders.
FEDERAL INCOME TAX ASPECTS
The merger
The following is a summary of certain federal income tax consequences
of the merger to the holders of Black & Company common stock who exchange such
stock for First Security common stock pursuant to the merger. This summary
addresses only such shareholders who hold First Security common stock received
in exchange therefor as a capital asset. This does not address all federal
income tax considerations that may be relevant to particular shareholders in
light of their individual circumstances or who may be subject to special rules,
such as financial institutions, tax-exempt organizations, insurance companies,
dealers in securities, foreign shareholders, shareholders that hold Black &
Company common stock as part of a straddle, hedging or conversion transaction,
and shareholders who acquired their Black & Company common stock pursuant to the
exercise of employee stock options or otherwise as compensation. The following
summary is based upon the provisions of the Internal Revenue Code of 1986, as
amended, applicable Treasury Regulations thereunder, judicial decisions and
current administrative rulings, as of the date hereof, all of which are subject
to change, possibly on a retroactive basis. Tax consequences under state, local,
foreign, and other laws are not addressed herein. Each shareholder is advised to
consult his or her tax advisor as to the particular facts and circumstances
which may be unique to such shareholder and also as to any estate, gift, state,
local or foreign tax considerations arising out of the merger.
No rulings have been or will be requested from the Internal Revenue
Service with respect to any matters discussed herein. There can be no assurances
that future legislation, regulations, administrative rulings or court decisions
would not alter the tax consequences set forth below. The obligation of each of
First Security and Black & Company to consummate the merger is conditioned on
its receipt of an opinion from First Security's legal counsel, Ray, Quinney &
Nebeker, based on such facts, representations, and assumptions as counsel may
reasonably deem relevant (including certain representations regarding the
ownership of Black & Company stock), to the effect that 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. The following summary assumes
that the merger will be consummated as described in the Agreement and Plan of
Merger and this Proxy Statement/Prospectus/Proxy Solicitation.
Treatment of First Security and Black & Company. No gain or loss will
be recognized by First Security or Black & Company as a result of the merger.
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Exchange of Black & Company common stock for First Security common
stock. Subject to the discussion of the Taxation of the Shares Held Back and to
be Earned below, (i) a holder of Black & Company common stock whose shares of
Black & Company common stock are exchanged in the merger for First Security
common stock will not recognize gain or loss, except to the extent of cash, if
any, received in lieu of fractional shares (see "--Cash in Lieu of Fractional
Shares" below), (ii) the aggregate tax basis of the First Security common stock
received by such holder, including any First Security common stock received
pursuant to the Holdback and the Earnout, will be equal to the aggregate tax
basis of the Black & Company common stock exchanged therefor (excluding any
portion of the holder's basis allocated to fractional shares), and (iii) the
holding period of First Security common stock received will include the holding
period of the Black & Company common stock exchanged therefor.
Taxation of the shares held back and to be earned. Approximately 18.33%
of the aggregate merger consideration payable in shares of First Security common
stock will be withheld at the closing of the merger and issued to holders of
Black & Company common stock on the one-year anniversary of the closing of the
merger, subject to the limitations discussed in the merger agreement (the
"Holdback"). Additional shares of First Security common stock may be issued on
the three-year and three-month anniversary of the closing of the merger, subject
to separate and distinct limitations discussed in the merger agreement (the
"Earnout"). It is not expected that the maximum amount of Holdback and Earnout
shares of First Security common stock that could be issued will exceed 50% of
the aggregate merger consideration. Accordingly, any additional shares of First
Security common stock received pursuant to the Holdback and the Earnout will be
taxed the same as shares of First Security common stock received at the closing
of the merger; provided, however, that for Federal income tax purposes a portion
of the Holdback and Earnout shares will be treated as interest, equal to the
excess of (i) the value of such shares on the date received over (ii) the value
of such shares discounted back to the effective time of the merger, using a
discount rate equal to the applicable federal rate, as determined under the
Internal Revenue Code, in effect for the month which includes the effective time
of the merger. The interest income will be subject to federal income tax at
rates applicable to ordinary income. The tax basis of the Holdback and Earnout
shares will be increased by the amount treated as interest income. Each holder
of Black & Company common stock should consult his or her tax advisor as to the
tax consequences of the receipt of such shares.
Cash in lieu of fractional shares. A holder of Black & Company common
stock who receives cash in lieu of fractional shares of First Security common
stock will be treated as having received such fractional shares pursuant to the
merger, and then as having exchanged such fractional shares for cash in a
redemption by First Security. The amount of any gain or loss attributable to
fractional shares will be equal to the difference between the portion of the tax
basis of the Black & Company common stock exchanged in the merger that is
allocated to such fractional shares and cash received in lieu thereof. Any such
gain or loss will constitute long term capital gain or loss if such Black &
Company common stock has been held by the holder for more than one year at the
time of the consummation of the merger.
Generally, capital gain on assets held by individuals for more than 12 months
will be subject to tax at a rate not to exceed 20%.
Dissenting Black & Company shareholders. A holder of Black & Company
common stock that receives solely cash in exchange for such stock in the merger
pursuant to the exercise of dissenters' rights under Oregon law will recognize
gain or loss at the time of the consummation of the merger equal to the
difference between the tax basis of the Black & Company common stock surrendered
and the amount of the cash received therefor. Such gain or loss will constitute
long-term capital gain or loss if such Black & Company common stock has been
held as a capital asset for more than one year at the time of the consummation
of the merger. Generally, capital gain on assets held by individuals for more
than 12 months will be subject to tax at a rate not to exceed 20%.
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THIS FEDERAL INCOME TAX DISCUSSION IS FOR GENERAL INFORMATION ONLY AND MAY NOT
APPLY TO ALL BLACK & COMPANY SHAREHOLDERS. BLACK & COMPANY SHAREHOLDERS ARE
URGED TO CONSULT THEIR TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES OF THE
MERGER.
RIGHTS OF DISSENTING BLACK & COMPANY SHAREHOLDERS
The rights of Black & Company shareholders who dissent in connection
with the merger are governed by specific legal provisions contained in Oregon
law. The following summary of the provisions of Oregon law is not intended to be
a complete statement of such provisions and is qualified in its entirety by
reference to the full text of such statutory provisions, a copy of which is
attached as Appendix D to this Prospectus/Proxy Statement, and is incorporated
herein by reference.
THE REQUIRED PROCEDURE SET FORTH IN OREGON LAW MUST BE FOLLOWED
EXACTLY OR ANY DISSENTERS' RIGHTS MAY BE LOST.
If you disagree with the terms and conditions of the merger agreement,
including the calculation of the exchange ratio and the conditions associated
with the issuance of the shares of First Security common stock held back at
closing, or the requirement that additional shares be earned, you may exercise
certain rights, called dissenters' rights, under the Oregon Business
Corporations Act (the "Oregon Act"). In order to perfect your dissenters'
rights, however, you must follow certain procedures under the Oregon Act, a copy
of which is attached as Appendix D and a summary of which is set forth below.
* Before the vote is taken at the special meeting, you must notify
Black & Company in writing that you (i) intend to assert your dissenters'
rights by demanding payment for your shares if the merger is approved and
(ii) will not vote your shares in favor of the merger.
* While you may attend the special shareholders meeting and be
counted for purposes of establishing a quorum and may participate in
discussions of the merger, you automatically forfeit your dissenters'
rights if you vote your shares in favor of the merger.
* If the merger is approved and you have satisfied the conditions
set forth above, Black & Company will send to you a written notice not
later than ten (10) days after the approval of the merger. This notice will
tell you where you must send your demand for payment and where and when the
certificate for your shares must be sent. The notice will set forth the
date by which you must submit your demand for payment (the date will be not
less than thirty (30) days nor more than sixty (60) days after delivery of
the written notice).
* In order to perfect your dissenters' rights, you will then have to
demand payment for your shares, certify that you acquired your shares
before January 24, 2000, and deposit the certificate for your shares in
accordance with the notice from Black & Company. You will forfeit your
dissenters' rights if you do not comply with the instructions in that
written notice.
* Assuming you properly perfect your dissenters' rights, Black &
Company will pay you what Black & Company believes is the fair value of
your shares, plus accrued interest from the date of the merger. As of the
date of this Proxy Statement/Prospectus, the board of directors of Black &
Company does not believe the fair value will be greater than the value you
would receive for your shares in the merger.
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* If you disagree with Black & Company's assessment of the fair
value of your shares, you must notify Black & Company of your disagreement,
including your assessment of the fair value, and demand payment of your
assessment of the fair value.
* If you and Black & Company cannot come to an agreement regarding
the fair value of your shares, Black & Company will commence an action in
the Circuit Court of the State of Oregon for the County of Multnomah and
petition the court to determine the fair value of your shares. This
petition will be filed no later than sixty (60) days of receipt of your
notice stating that you disagree with Black & Company's assessment of the
fair value of your shares. The court then will determine the fair value of
your shares.
You must carefully follow the procedure set forth in the Oregon Act in
order to perfect your dissenters' rights. The information set forth above is
only a summary and you may not rely upon it to determine the procedure for
perfecting your dissenters' rights. The relevant provisions of the Oregon Act
are attached to this Proxy Statement/Prospectus as Appendix D and you should
carefully review those provisions and consult an attorney for professional
advice in this regard.
RESALE OF FIRST SECURITY SHARES RECEIVED IN THE MERGER
The shares of First Security common stock to be issued to Black &
Company shareholders in connection with the merger will be registered with the
Securities and Exchange Commission under the provisions of the Securities Act of
1933. Based on recently enacted federal legislation preempting such requirements
for Nasdaq National Market securities, no registration or qualification of such
shares will be pursued in any state in which any Black & Company shareholder
currently resides.
Resales of the First Security common stock received in connection with
the merger agreement will need to be in compliance with applicable state
securities laws and regulations, and this compliance will be the responsibility
of the selling or transferring shareholder. For most Black & Company
shareholders, the First Security shares received in the merger will be freely
transferable.
First Security shares received by persons who are deemed to be
"affiliates" of Black & Company for purposes of Rule 145 under the Securities
Act of 1933, may be resold by them only in transactions permitted by such Rule,
or as otherwise permitted under the Securities Act of 1933. Rule 145 applies
certain of the requirements and provisions of Rule 144 (applicable to
unregistered shares) to registered shares received by an affiliate of a party to
a merger transaction. Rule 144, in turn, applies certain restrictions on method
and amount of securities sales. As a condition to the closing on the merger
agreement, each person who is so identified is required to deliver to First
Security at or prior to closing a written agreement satisfactory to counsel for
First Security that such person and his or her "associates" (as defined for
purposes of Rule 145) will not offer to sell or otherwise dispose of any shares
of First Security common stock issued to such person or his or her associates
pursuant to the merger agreement in violation of the Securities Act of 1933 or
the regulations thereunder.
INFORMATION ABOUT FIRST SECURITY
General
First Security is a regional bank holding company headquartered in Salt
Lake City, Utah. It owns and operates four banks, with offices in the seven
western states of California, Idaho, New Mexico, Nevada, Oregon, Utah and
Wyoming, and several other financial services companies, some having a national
presence. Through its subsidiaries, First Security provides commercial and
agricultural loans, consumer banking, trust services, capital markets advice and
municipal underwriting services, treasury management,
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investment management, data processing, leasing and securities brokerage
services under approvals from the Federal Reserve Board. At September 30, 1999,
First Security and its subsidiaries had consolidated assets of approximately
$23.3 billion, consolidated deposits of $13.2 billion and shareholders' equity
of $1.8 billion. First Security has paid a regular dividend on its Common Stock
since 1928. Based on its approximately $23 billion in assets at September 30,
1999, First Security was the 38th largest bank holding company in the United
States.
First Security maintains its executive offices at 79 South Main Street,
Salt Lake City, Utah 84111, telephone (801) 246-6000.
The principal assets of First Security are all of the capital stock of
First Security Bank, NA and First Security Bank of New Mexico, N.A., both of
which provide a broad range of banking, fiduciary, and other financial services.
First Security Bank, N.A. is the largest bank in the State of Utah and the
second largest bank in the State of Idaho. First Security Bank, N.A. also has
offices in Oregon and Wyoming. At December 31, 1999 First Security Bank, N.A.
had 249 branches. First Security Bank of New Mexico, N.A. is ranked the 3rd
largest bank in the State of New Mexico, and the second largest in the
Albuquerque market. It currently has 46 branches.
First Security also owns 100% of the outstanding capital stock of First
Security Bank of Nevada, a Nevada state bank, and 100% of the outstanding shares
of First Security Bank of California, N.A., a national bank headquartered in
Irvine, California. Along with the banking organizations, First Security also
directly or indirectly owns the stock of various nonbank companies engaged in
businesses related to banking and finance, including management services,
securities brokerage, equipment leasing, insurance and investment management,
mutual funds, and a small business investment company. First Security Van
Kasper, is an investment banking company that was acquired by First Security on
February 12, 1999.
In addition to its equity investment in subsidiaries, First Security
directly or indirectly raises funds principally to finance the operations of its
nonbank subsidiaries. A substantial portion of First Security's annual income is
typically derived from dividends directly from its bank and nonbank
subsidiaries, and from interest on loans to First Security's nonbank
subsidiaries.
The Zions Bancorporation merger agreement
The following information describes certain information pertaining to
the First Security/Zions merger. This description is not complete and is
qualified in its entirety by reference to the more detailed information
contained in documents now on file with the Securities and Exchange Commission
and which are incorporated herein by reference.
General
First Security expects that the First Security/Zions merger, if it
closes, will close before the First Security Van Kasper/Black & Company merger.
If all conditions to the completion of the First Security/Zions merger are met,
you would become stockholders of the post-merger First Security. However, you
would not be entitled to vote on the merger of Zions with First Security because
you would not be shareholders of First Security on the record date for the
special meeting of shareholders of First Security. Therefore, when voting on the
principal terms of the First Security Van Kasper/Black & Company merger
agreement and deciding whether to exercise dissenters' rights with respect to
the First Security Van Kasper/Black & Company merger, you must consider the
probability that you will become stockholders of a combined First
Security/Zions.
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The First Security/Zions merger is subject to various conditions,
including:
* approval of the First Security/Zions merger agreement by the
First Security stockholders and the Zions shareholders;
* receipt of all governmental and other consents and approvals
that are necessary to permit completion of the First
Security/Zions merger; and
* other usual conditions.
First Security received approval for the Zions merger from the Board of
Governors of the Federal Reserve System on December 13, 1999. However, while
First Security expects that the Zions merger will close on or before March 31,
2000, First Security can make no guarantee to this effect.
Governance of First Security after the First Security/Zions merger
In the First Security/Zions merger agreement, the parties agreed to
various governance arrangements for First Security following completion of the
First Security/Zions merger, the terms of some of which are set forth in First
Security/Zions merger agreement and some of which have been incorporated into
the form of First Security's amended and restated certificate of incorporation
and the form of First Security's amended and restated by-laws. As part of the
transactions related to the First Security/Zions merger, First Security will
amend and restate its certificate of incorporation and by-laws in accordance
with those forms immediately prior to the First Security/Zions merger. In the
following discussion, references to the First Security certificate are to the
First Security certificate of incorporation as so amended and restated and
references to the First Security by-laws are to the First Security by-laws as so
amended and restated. (See "COMPARATIVE RIGHTS OF SHAREHOLDERS," page _____)
Board of Directors. The amended and restated First Security certificate
provides that until the annual meeting of stockholders in the year 2000, the
number of directors of the First Security board of directors will be 22,
consisting of 11 members designated by Zions and 11 members designated by First
Security. Commencing with the annual meeting of stockholders in the year 2000,
the number of directors will be 18, consisting of an even number of directors
originally designated by Zions and First Security, respectively, under the First
Security/Zions merger agreement. Commencing with the annual meeting of
stockholders in the year 2001, the number of directors will be 16, consisting of
an even number of directors originally designated by Zions and First Security,
respectively, under the First Security/Zions merger agreement. The First
Security certificate provides that if any director originally appointed by Zions
or First Security is unable to serve as a director for any reason, the
nominating committee of the new First Security board of directors will nominate
a replacement after the annual meeting of stockholders in the year 2002. Prior
to the annual meeting of stockholders in the year 2002, any vacancy created by
resignation, removal, death or disability of a director will be filled by the
Co-Chief Executive Officer designated by the same party (Zions or First
Security) in the First Security/Zions merger or, in his absence, by a majority
of continuing directors appointed by that party.
The First Security certificate provides that the directors of First
Security will be divided into three classes. The first class will initially
consist of 10 directors, the second class, seven, and the third class, five. At
and after the annual meeting of stockholders in the year 2000 when the number of
directors is reduced to 18, the first class will consist of six directors, and
the other two classes will remain unchanged. Finally, at and after the annual
meeting of stockholders in the year 2001 when the number of directors is reduced
to 16, the first class will consist of six directors, the second class, five,
and the third class five. The First Security/Zions merger agreement provides
that Zions will initially have the right to designate five directors to the
first class, three directors to the second class and three directors to the
third class and
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First Security will initially have the right to designate five directors to the
first class, four directors to the second class and two directors to the third
class.
Set forth below is a table of the persons expected to serve as senior
executive officers of First Security immediately following the First
Security/Zions merger:
Name Title
---- -----
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. Pat McMurray Executive Vice President
L. Scott Nelson Executive Vice President
Robert G. Sarver Executive Vice President
Scott C. Ulbrich Executive Vice President
Nominating committee. Pursuant to the First Security by-laws, the First
Security board of directors will designate a nominating committee, which will
have 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 will consist of two directors, one initially designated
by Zions and one initially designated by First Security. In the event that
either the Zions designee or the First Security designee cannot serve on the
nominating committee for any reason, then Harris H. Simmons, as the
Zions-appointed Co-Chief Executive Officer, and Spencer F. Eccles, as the First
Security Co-Chief Executive Officer, will mutually select a replacement. If the
Co-Chief Executive Officers cannot agree upon a replacement, then the
replacement member of the nominating committee will be (i) a director initially
appointed by Zions Bancorporation, if the director to be replaced was appointed
by Zions, or (ii) a director initially appointed by First Security, if the
director to be replaced was appointed by First Security. The replacement will be
selected by the remaining members of the board of directors initially nominated
by Zions or First Security, respectively.
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Executive committee. Pursuant to the First Security by-laws, the First
Security board of directors will also designate an executive committee,
consisting of six directors including both Harris H. Simmons, the current Zions
Chief Executive Officer, and Spencer F. Eccles, the current First Security Chief
Executive Officer, each of whom will be Co-Chairman of the executive committee.
The four remaining members of the executive committee will be comprised of an
equal number of directors appointed to the board by Zions and by First Security.
Each of the Zions Chief Executive Officer and the First Security Chief Executive
Office will 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 First Security. In addition, the First Security Chief Executive Officer will
continue to serve as a member of the executive committee after he ceases to
serve as Co-Chief Executive Officer for so long as he is a director of First
Security.
Pursuant to the First Security by-laws, 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 appointed
by Zions will be filled by the Zions Chief Executive Officer or by the
affirmative vote of a majority of the continuing directors appointed by Zions,
and any vacancy in the executive committee resulting from the removal,
resignation, death or disability of a member who was appointed by First Security
will be filled by the First Security Chief Executive Officer or by the
affirmative vote of a majority of the continuing directors appointed by First
Security.
The executive committee, when the board of directors is not in session,
will 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 will 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 First Security otherwise than in the usual and regular course of its business
or amending the First Security by-laws.
Amendment of corporate governance arrangements. In order to amend the
provisions of the First Security certificate and the First Security by-laws that
incorporate the governance arrangements described above and to take certain
other actions, the First Security certificate and the First Security by-laws
require the affirmative vote of (i) two-thirds of the directors of First
Security and (ii) the holders of not less than two-thirds of the voting power of
all outstanding shares of capital stock of First Security entitled to vote
generally in the election of directors, considered for these purposes as a
single class.
Competition
As noted above, First Security Bank, N.A. is the largest bank in Utah,
the second largest bank in Idaho, the 7th largest bank in Oregon, and the 8th
largest bank in Wyoming. As also noted, First Security Bank of New Mexico, N.A.
is the third largest bank in New Mexico (second largest in Albuquerque). In
California and Nevada First Security's banks are smaller, more localized
competitors, with competition coming from a variety of larger banks and credit
unions.
First Security's banks compete with other banking organizations in the
states in which they operate on the basis of price, service and convenience.
Other types of financial institutions, such as savings banks, savings and loan
associations, and credit unions offer a wide range of deposit and loan services
(including commercial loans) and, in some instances, fiduciary services. First
Security's banks also compete with brokerage firms and mutual funds, which
provide the substantial equivalent of checking accounts, credit cards and
similar devices that strongly resemble deposit products. Major retailers compete
for loans by
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offering credit cards and retail installment contracts. It is anticipated that
competition from nonbank organizations will continue to grow.
Description of First Security Capital Stock
The following statements are brief summaries of the material provisions
relating to First Security's preferred stock and First Security's common stock
and are qualified in their entirety by the provisions of First Security's
certificate of incorporation, which has been filed with the Securities and
Exchange Commission. (See, "Comparative Rights of Stockholders," page 58.)
Preferred Stock
The certificate of incorporation authorizes the issuance of 400,000
shares of preferred stock with no par value ("Preferred Stock"). The amended
Certificate of Incorporation will provide for the issuance of up to 10,000,000
shares of Preferred Stock. On December 31, 1999, there were 8,596 shares of
$3.15 Cumulative Convertible Preferred Stock, Series "A" (the "Series A
Preferred Stock") outstanding. Holders of Series A Preferred Stock have the
right to receive semi-annual dividends at the annual rate of $3.15 per share.
Such right is cumulative and such dividends are payable before dividends may be
paid on the First Security common stock. The Series A Preferred Stock is
convertible into the First Security common stock at a ratio of 41.00625 shares
of First Security common stock for each share of Series A Preferred Stock. This
conversion right is 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 First Security, the
holders of Series A Preferred Stock are entitled to receive cash value of $52.50
per share plus unpaid accumulated preferred dividends before any distribution is
made to holders of the First Security common stock. First Security 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 First Security's Series A Preferred Stock are entitled to
one vote per share on all matters submitted to a vote of stockholders. Voting
for the election of directors is not 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 First Security 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.
The board of directors of First Security is 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
has 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 have no
pre-emptive rights. The Series A Preferred Stock is not publicly traded.
Common Stock
First Security is authorized to issue 600,000,000 shares of First
Security common stock with a par value of $1.25 per share. The amended
certificate of incorporation will provide for the issuance of 425,000,000 shares
of common stock. As of December 31, 1999, there were outstanding 195,971,330
(net of treasury stock) shares of First Security common stock. (See, "First
Security Corporation Selected Financial Data," at page 16.). Payment of
dividends on the First Security common stock is subject to the prior rights of
First Security's outstanding Series A Preferred Stock.
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The holders of First Security common stock are 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.
Holders of First Security common stock are entitled to receive
dividends when and if declared by the board of directors of First Security out
of any funds legally available therefor, and are entitled upon liquidation,
after claims of creditors and preferences of First Security's Series A Preferred
Stock and any other series of preferred stock hereafter authorized, to receive
pro rata the net assets of First Security. First Security common stock has no
pre-emptive or conversion rights.
Shares of First Security common stock do not have cumulative voting
rights.
First Security common stock is not subject to redemption by either
First Security or a stockholder, but there is no restriction on the repurchase
by First Security of shares of First Security common stock except for certain
regulatory limits.
First Security's certificate of incorporation provides that, in
general, an affirmative vote of not less than 80% of the outstanding shares of
First Security common stock is required to approve or authorize certain major
corporate transactions involving First Security and holders of more than 10% of
the First Security common stock (including certain mergers, substantial
dispositions of assets, liquidation or dissolution, or recapitalization). The
80% vote is not required in some such circumstances, including certain
transactions which have been approved in advance by a majority of the board of
directors, or where holders of First Security common stock receive a price per
share that satisfies the fairness criteria set forth in the certificate of
incorporation.
Stockholder rights plan
As of August 28, 1990, First Security adopted a Stockholder Rights
Agreement ("the Plan") and the board of directors of First Security on that date
(a) declared a dividend of one "Right" for each share of Common Stock held of
record as of the close of business on September 8, 1989, and (b) authorized the
issuance of one Right to attach to each share of Common Stock issued after
September 8, 1989, and prior to the occurrence of certain events described in
the Plan. The Rights are attached to all Common Stock certificates that were
outstanding on September 8, 1989, or have been issued since that date (including
the shares of First Security common stock to be issued to Black & Company
Shareholders), and no separate Rights Certificates have been or will be
distributed until the occurrence of certain events described in the 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 Plan, entitle
the holders thereof to either purchase or receive additional shares of Common
Stock. Technical amendments were made to the Plan twice between 1989 and October
28, 1998.
On October 26, 1998, First Security amended the price at which a
registered holder would be entitled to purchase from First Security one
one-thousandth of a share of First Security's Junior Series B Preferred Stock,
without par value. The Exercise Price had formerly been set at $100 per right
(before adjustment for First Security's 1991, 1992, 1996, 1997 and 1998 3-for-2
stock splits, or $13.17 after split adjustments), and has been amended so as to
be set at $85 per right (after adjustment for such stock splits).
The board also adopted a new plan with legal and technical innovations
over the Plan (the "Successor Rights Plan") in its action on October 26, 1998.
The Successor Rights Plan took effect on August 28, 1999. In connection with the
Successor Rights Plan, the board declared a dividend of one right (a "Successor
Right") for each outstanding share of common stock payable on August 28, 1999 to
the stockholders of record as of that date.
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First Security's rights plans are 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 that these plans provide 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. First Security's rights plans are 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 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.
Regulation
To the extent that the following information describes statutory and
regulatory provisions, it is qualified in its entirety by reference to the full
text of those provisions. Also, such statutes, regulations and policies are
continually under review by Congress and state legislatures and federal and
state regulatory agencies. A change in statutes, regulations or regulatory
policies applicable to First Security could have a material effect on the
business of First Security.
Introduction
First Security, its banking subsidiaries and many of its nonbanking
subsidiaries are subject to extensive regulation by federal and state agencies.
The regulation of bank holding companies and their subsidiaries is intended
primarily for the protection of depositors, federal deposit insurance funds and
the banking system as a whole and not for the protection of security holders.
As discussed in more detail below, this regulatory environment, among
other things, may restrict First Security's ability to diversify into certain
areas of financial services, acquire depository institutions in certain states
and pay dividends on its capital stock. It may also require First Security to
provide financial support to one or more of its banking subsidiaries, maintain
capital balances in excess of those desired by management and pay higher deposit
insurance premiums as a result of the deterioration in the financial condition
of depository institutions in general.
Regulatory agencies
Bank Holding Company. First Security, as a bank holding company, is
subject to regulation under the Bank Holding Company Act and to inspection,
examination and supervision by the Board of Governors of the Federal Reserve
System (Federal Reserve Board) under the Bank Holding Company Act.
Subsidiary banks. First Security's national banking subsidiaries are
subject to regulation and examination primarily by the Office of the Comptroller
of the Currency (OCC) and secondarily by the Federal Reserve Board and the
Federal Deposit Insurance Corporation (FDIC). First Security's state-chartered
banking subsidiaries are subject to primary federal regulation and examination
by the FDIC or the Federal Reserve Board and, in addition, are regulated and
examined by their respective state banking departments.
Nonbank subsidiaries. Many of First Security's nonbank subsidiaries
also are subject to regulation by the Federal Reserve Board and other applicable
federal and state agencies. First Security's brokerage
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subsidiary, First Security Van Kasper, is regulated by the SEC, the National
Association of Securities Dealers, Inc., and state securities regulators. First
Security's insurance business through First Security Van Kasper and second-tier
subsidiaries is subject to regulation by applicable state insurance regulatory
agencies. Other nonbank subsidiaries of First Security are subject to the laws
and regulations of both the federal government and the various states in which
they conduct business.
Bank Holding Company activities
Anti-Tying restrictions. Bank holding companies and their bank and
nonbank affiliates are prohibited from tying the provision of certain services,
such as extensions of credit, to other services offered by a holding company or
its affiliates.
Annual reporting; Examinations. First Security is required to file an
annual report with the Federal Reserve Board, and such additional information as
the Federal Reserve Board may require pursuant to the Bank Holding Company Act.
The Federal Reserve Board may examine a bank holding company or any of its
subsidiaries and charge the company for the cost of such an examination. First
Security also will be subject to reporting and disclosure requirements under the
state and federal securities laws subsequent to the offering contemplated by
these materials.
Bank Holding Company capital adequacy requirements. The Federal Reserve
Board monitors the capital adequacy of bank holding companies. The Federal
Reserve Board uses a combination of risk-based guidelines and leverage ratios to
evaluate capital adequacy. The Federal Reserve Board has adopted a system using
internationally consistent risk-based capital adequacy guidelines to evaluate
the capital adequacy of bank holding companies. Under the risk-based capital
guidelines, different categories of assets are assigned different risk weights,
based generally on the perceived credit risk of the asset. These risk weights
are multiplied by corresponding asset balances to determine a "risk-weighted"
asset base. Certain off-balance sheet items, which previously were not expressly
considered in capital adequacy computations, are added to the risk-weighted
asset base by converting them to a balance sheet equivalent and assigning to
them the appropriate risk weight. Total capital is defined as the sum of "Tier
1" and "Tier 2" capital elements, with "Tier 2" being limited to 100% of "Tier
1." For bank holding companies, "Tier 1" capital includes, with certain
restrictions, common shareholders' equity, perpetual preferred stock and
minority interests in consolidated subsidiaries less certain intangibles. "Tier
2" capital includes, with certain limitations, certain forms of perpetual
preferred stock, as well as maturing capital instruments and the reserve for
possible loan losses and specified levels of certain intangibles.
In addition to the risk-based capital guidelines, the Federal Reserve
Board has adopted the use of a leverage ratio as an additional tool to evaluate
the capital adequacy of banks and bank holding companies. The leverage ratio is
defined to be a company's "Tier 1" capital divided by its adjusted total assets.
The leverage ratio adopted by the federal banking agencies requires a 3.0% "Tier
1" capital to adjusted total average assets ratio for institutions with a CAMELS
rating of 1. Institutions which are not CAMELS 1 rated will be expected to
maintain a 100 to 200 basis point cushion; i.e., these institutions will be
expected to maintain a leverage ratio of 4.0% to 5.0%, and institutions planning
acquisitions are expected to maintain higher ratios.
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The following table sets forth the current regulatory requirements for
capital ratios of bank holding companies as compared with First Security's
capital ratios at December 31, 1999:
-----------------------------------------------------------
Tier 1 Total
Capital to Capital to
Leverage Risk-Weighted Risk-Weighted
Ratio(1) Assets(2) Assets(3)
- --------------------------------------------------------------------------------
Regulatory minimum 4.00-5.00% 4.00% 8.00%
- --------------------------------------------------------------------------------
First Security at
September 30, 1999 7.12% 8.50% 10.38%
- --------------------------------------------------------------------------------
(1) The leverage ratio is defined as the ratio of Tier 1 capital (using
final 1992 risk-based capital guidelines to define Tier 1 capital) to
average assets, net of goodwill. Federal Reserve Board Guidelines
provide that all bank holding companies (other than those that meet
certain criteria) maintain a minimum leverage ratio of 3%, plus an
additional cushion of 100 to 200 basis points. The guidelines also
state that banking organizations experiencing internal growth or making
acquisitions will be expected to maintain "strong capital positions"
substantially above the minimum supervisory levels without significant
reliance on intangible assets.
(2) Bank Shareholders' equity less goodwill (Tier 1 capital) divided by
risk-weighted assets.
(3) Tier 1 capital plus reserve for possible loan losses (limited to 1.25%
of total risk-weighted assets) plus qualified subordinated and
convertible debt (Tier 2 capital) divided by risk-weighted assets.
Bank regulators continue to indicate their desire to raise capital
requirements applicable to banking organizations beyond their current levels.
However management is unable to predict whether and when higher capital
requirements would be imposed and, if so, to what levels and on what schedule.
Imposition of liability for undercapitalized subsidiaries. The Federal
Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA") requires each
federal banking agency to implement risk-based capital standards that take
account of interest rate risk, concentration of credit risk and the risks of
non-traditional activities, as well as reflect the actual performance and
expected risk of loss on multi-family mortgages. The law also requires each
federal banking agency to specify by regulation, the levels at which an insured
institution would be considered "well capitalized," "adequately capitalized,"
"undercapitalized," "significantly undercapitalized" and "critically
undercapitalized." Under the regulations adopted by the banking agencies, all of
First Security's subsidiary banks would be deemed to be "well capitalized."
FDICIA requires bank regulators to take "prompt corrective action" to
resolve problems associated with insured depository institutions. In the event
an institution becomes "undercapitalized," it must submit a capital restoration
plan. If an institution becomes "significantly undercapitalized" or "critically
undercapitalized," additional and significant limitations are placed on the
institution. The capital restoration plan of an undercapitalized institution
will not be accepted by the regulators unless each company "having control of"
the undercapitalized institution "guarantees" the subsidiary's compliance with
the capital restoration plan until it becomes "adequately capitalized." First
Security has control of all of its subsidiaries for purposes of this statute.
Under FDICIA, the aggregate liability of all companies controlling a
particular institution is limited to the lesser of 5% of the institution's
assets at the time it became undercapitalized or the amount necessary to bring
the institution into compliance with applicable capital standards. FDICIA grants
greater powers to the bank regulators in situations where an institution becomes
"significantly" or "critically" undercapitalized or fails to submit a capital
restoration plan. For example, a bank holding company controlling such an
institution can be required to obtain prior Federal Reserve Board approval of
proposed dividends, or might be required to consent to a merger or to divest the
troubled institution or other affiliates.
Additionally, Federal Reserve Board policy discourages the payment of
dividends by a bank holding company from borrowed funds as well as payments that
would adversely affect capital adequacy.
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Failure to meet the capital guidelines may result in the Federal Reserve Board
taking appropriate supervisory or enforcement actions.
The "prompt corrective action" provisions of FDICIA reflect the same
concerns which gave rise to a position adopted by the Federal Reserve Board
known as the "source of strength doctrine," which is based on the Federal
Reserve Board's Regulation Y. Regulation Y directs bank holding companies to
"serve as a source of financial and managerial strength" to their subsidiary
banks, and bars them from engaging in unsafe and unsound practices.
Acquisitions by Bank Holding Companies. The BHC Act requires every bank
holding company to obtain the prior approval of the Federal Reserve Board before
it may acquire all or substantially all of the assets of any bank, or ownership
or control of any voting shares of any bank, if after such acquisition it would
own or control, directly or indirectly, more than 5% of the voting shares of
such bank. In approving bank acquisitions by bank holding companies, the Federal
Reserve Board is required to consider the financial and managerial resources and
future prospects of the bank holding company and the banks concerned, the
convenience and needs of the communities to be served, and various competitive
factors. The Attorney General of the United States may, within 30 days after
approval of an acquisition by the Federal Reserve Board, bring an action
challenging such acquisition under the federal antitrust laws, in which case the
effectiveness of such approval is stayed pending a final ruling by the courts.
Interstate acquisitions. The Riegle-Neal Interstate Banking and
Branching Efficiency Act was enacted in 1994 to ease restriction on interstate
banking. The Riegle-Neal Act allows the Federal Reserve Board to approve an
application by an adequately capitalized and adequately managed bank holding
company to acquire a bank located in a state other than the acquiring company's
home state without regard to whether the transaction is prohibited by the laws
of any state. The Federal Reserve Board may not approve the acquisition of a
bank that has not been in existence for the minimum time period (up to five
years) specified by the statutory law of the acquired, or "target," bank's
state. The Riegle-Neal Act also prohibits the Federal Reserve Board from
approving an application if the applicant (and its depository institution
affiliates) controls or would control more than 10% of the insured deposits in
the United States or 30% or more of the deposits in the target bank's home state
or in any state in which the target bank maintains a branch. The Riegle-Neal Act
does not affect the authority of states to limit the percentage of total insured
deposits in the state that may be held or controlled by a bank or bank holding
company if the limitation does not discriminate against out-of-state banks or
bank holding companies. Individual states may also waive the 30% statewide
concentration limit contained in the Riegle-Neal Act.
Branching between states may be accomplished by merging commonly
controlled banks located in different states into one legal entity. Branching
may also be accomplished by establishing de novo branches or acquiring branches
in another state. A branch of an out-of-state bank operating in another state,
or "host state," is subject to the law of the host state regarding community
reinvestment, fair lending, consumer protection (including usury limits) and
establishment of branches.
The Riegle-Neal Act authorizes the FDIC to approve interstate branching
de novo by state-chartered banks solely in states that specifically allow for
such branching. The FDIC recently adopted regulations under the Riegle-Neal Act
to prohibit an out-of-state bank from using the new interstate branching
authority primarily for the purpose of deposit production. These regulations
include guidelines to ensure that interstate branches operated by an
out-of-state bank in a host state are reasonably helping to meet the credit
needs of the communities by the out-of-state bank.
Restrictions on transactions with affiliates. One set of restrictions
is found in Section 23A of the Federal Reserve Act, which affects loans to and
investments in First Security and any of its subsidiaries. Section 23A imposes
quantitative and qualitative limits on transactions between a bank and any
affiliate,
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and also requires certain levels of collateral for such loans. It also limits
the amount of advances to third parties, which are collateralized by the
securities or obligations of First Security or its subsidiaries.
Another set of restrictions is found in Section 23B of the Federal
Reserve Act. Among other things, Section 23B requires that certain transactions
between First Security's subsidiary banks and their affiliates must be on terms
substantially the same, or at least as favorable to First Security or its
subsidiaries, as those prevailing at the time for comparable transactions with
or involving other nonaffiliated companies. In the absence of such comparable
transactions, any transaction between First Security and its affiliates must be
on terms and under circumstances, including credit standards, that in good faith
would be offered to or would apply to nonaffiliated companies. First Security is
also subject to certain prohibitions against advertising which suggest that
First Security is responsible for the obligations of its affiliates.
The restrictions on loans to insiders contained in the Federal Reserve
Act and Regulation O now apply to all insured institutions and their
subsidiaries and holding companies. The aggregate amount of an institution's
loans to insiders is limited to the amount of its unimpaired capital and
surplus, unless the FDIC determines that a lesser amount is appropriate.
Insiders are subject to enforcement actions for knowingly accepting loans in
violation of applicable restrictions. Loans made prior to the enactment of
FDICIA are not subject to the restrictions.
Expanding enforcement authority. One of the major additional burdens
imposed on the banking industry by FDICIA is the increased ability of banking
regulators to monitor the activities of banks and their holding companies. In
addition, the Federal Reserve Board, the OCC and FDIC possess extensive
authority to police unsafe or unsound practices and violations of applicable
laws and regulations by depository institutions and their holding companies. For
example, the FDIC may terminate the deposit insurance of any institution which
it determines has engaged in an unsafe or unsound practice. The agencies can
also assess civil money penalties of up to $1 million per day, issue cease and
desist or removal orders, seek injunctions, and publicly disclose such actions.
FDICIA, FIRREA and other laws have expanded the agencies' authority in recent
years, and the agencies have not yet fully tested the limits of their powers.
Recent legislation
On November 12, 1999, President Clinton signed into law legislation
that allows bank holding companies to engage in a wider range of nonbanking
activities, including greater authority to engage in securities and insurance
activities. Under the Gramm-Leach-Bliley Act (the "Act"), a bank holding company
that elects to become a financial holding company may engage in any activity
that the Federal Reserve Board, in consultation with the Secretary of the
Treasury, determines by regulation or order is (1) financial in nature, (2)
incidental to any such financial activity, or (3) complementary to any such
financial activity and does not pose a substantial risk to the safety or
soundness of depository institutions or the financial system generally. This Act
makes significant changes in U.S. banking law, principally by repealing the
restrictive provisions of the 1933 Glass-Steagall Act. The Act specifies certain
activities that are deemed to be financial in nature, including lending,
exchanging, transferring, investing for others, or safeguarding money or
securities; underwriting and selling insurance; providing financial, investment,
or economic advisory services; underwriting, dealing in or making a market in
securities; and any activity currently permitted for bank holding companies by
the Federal Reserve Board under section 4(c)(8) of the Bank Holding Company Act.
The Act does not authorize banks or their affiliates to engage in commercial
activities that are not financial in nature. A bank holding company may elect to
be treated as a financial holding company only if all depository institution
subsidiaries of the holding company are well-capitalized, well-managed and have
at least a satisfactory rating under the Community Reinvestment Act.
National banks are also authorized by the Act to engage, through
"financial subsidiaries," in any activity that is permissible for a financial
holding company (as described above) and any activity that the Secretary of the
Treasury, in consultation with the Federal Reserve Board, determines is
financial in nature
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or incidental to any such financial activity, except (1) insurance underwriting,
(2) real estate development or real estate investment activities (unless
otherwise permitted by law), (3) insurance company portfolio investments and (4)
merchant banking. The authority of a national bank to invest in a financial
subsidiary is subject to a number of conditions, including, among other things,
requirements that the bank must be well-managed and well-capitalized (after
deducting from the bank's capital outstanding investments in financial
subsidiaries). The Act provides that state banks may invest in financial
subsidiaries (assuming they have the requisite investment authority under
applicable state law) subject to the same conditions that apply to national bank
investments in financial subsidiaries.
The Act also contains a number of other provisions that will affect our
operations and the operations of all financial institutions. One of the new
provisions relates to the financial privacy of consumers, authorizing federal
banking regulators to adopt rules that will limit the ability of banks and other
financial entities to disclose non-public information about consumers to
non-affiliated entities. These limitations will likely require more disclosure
to consumers, and in some circumstances will require consent by the consumer
before information is allowed to be provided to a third party.
At this time, we are unable to predict the impact the Act may have upon
our or our subsidiaries' financial condition or results of operations.
Future legislation
Changes to the laws and regulations in the states where we and our
subsidiaries do business can affect the operating environment of bank holding
companies and their subsidiaries in substantial and unpredictable ways. We
cannot accurately predict whether legislation will ultimately be enacted, and,
if enacted, the ultimate effect that it, or implementing regulations, would have
upon our or our subsidiaries' financial condition or results of operations.
INFORMATION ABOUT BLACK & COMPANY
General
Black & Company, an Oregon corporation headquartered in Portland,
Oregon, is a privately owned, full-service investment banking firm operating
primarily in the state of Oregon. Black & Company provides private brokerage
services to individual and institutional clients as well as a full range of
investment banking services and investment management services; manages,
underwrites and distributes equity securities; publishes proprietary equity
research; and makes markets in over fifty Nasdaq securities. Black & Company is
particularly well known for its research and knowledge of the retail clothing
and related industries, with certain of its analysts recognized nationally for
their expertise.
Black & Company's mission is two-fold: (i) to provide original
investment advice and superior private brokerage services to retail and
institutional investors, and (ii) to provide innovative investment banking
advice to its corporate finance clientele. The experience of Black & Company's
23 brokers and their strong community ties help differentiate Black & Company
from its regional competitors and enable Black & Company to access and serve its
investor clients more effectively and be recognized as one of the leading
investment banking firms in the Pacific Northwest.
Lawrence W. Black founded Black & Company in 1959. His goal was to form
an independent employee-owned company to provide superior investment advice and
services to retail clients and selected institutional investors. Black & Company
has grown steadily and profitably over the years, becoming one of the leading
full service regional investment banks in the Pacific Northwest.
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Lawrence W. Black is the current Chairman of the Board and Chief
Executive Officer of Black & Company. He also is active in the investment
community, serving on the board of directors of SMC Corporation, Mt. Bachelor
Corporation and the Communications Product Development Corporation. He is past
President of the Investment Securities Dealers of Portland, Oregon and a past
member of the New York Stock Exchange Regional Forms Advisory Committee.
Jennifer E. Black is the President and Senior Research Analyst
(specialty retail, footwear and apparel). She joined Black & Company in 1979 and
was elected President in 1999. In 1997, the Reuters Large Company Investment
Research Survey rated her the number one textile and apparel analyst in the
nation. She has held positions in the apparel industry as well as positions at
the equity-trading desk and in the research department of Black & Company. She
also currently serves on the Governor's Council of Economic Advisors for the
State of Oregon.
Frank J. Niezgoda is the Chief Operating Officer and Executive Vice
President of Black & Company. He joined Black & Company as Executive Vice
President in November 1997 and was elected to the board of directors in August
1998. In November 1998, he was elected Chief Operating Officer. His career
includes operations and management positions with Merrill Lynch, sales positions
with Prudential Securities, where he specialized in tax-advantaged strategies
for small institutions and high net worth individuals, as well as senior
executive positions (Executive Vice President and Compliance Director) for Drake
Capital Securities in Santa Monica, California and positions as compliance
director for Baraban Securities and Progressive Asset Management prior to
joining Black & Company.
Dennis Reiter is an Executive Vice President and Chief Financial
Officer for Black & Company, the latter of which he has held since 1985. He also
was the President of Black & Company between 1990 and 1994. In addition to his
executive experience in the securities industry, Mr. Reiter has serviced retail
accounts for over 25 years.
David A. Duley is Black & Company's Director of Research and a Senior
Research Analyst in the semiconductor/capital equipment, electronic components
segments. Prior to joining Black & Company in 1993 he was a financial analyst
for W.R. Grace & Company.
Black & Company employs over 52 people servicing approximately 11,000
retail accounts and several hundred prominent institutional investors. Black &
Company's original research has been a consistent trademark, fostering investor
client growth and contributing to the development of a diversified investment
banking practice targeting small- and mid-cap companies.
Strategy
Retail Distribution. Black & Company's primary line of business is the
execution of securities transactions through its registered representatives.
Black & Company has traditionally sought to attract and retain brokerage clients
by offering a high level of personal service. Black & Company's brokers operate
from Black & Company's corporate headquarters in Portland, Oregon.
A qualified licensed manager supervises the retail transaction
operation with direct responsibility for all activities of the operations. The
corporate office is capable of providing investment services to clients in
listed Nasdaq securities, corporate and municipal bonds, corporate
underwritings, mutual funds and tax-sheltered investments.
As of December 31, 1999, Black & Company serviced approximately 11,000
active retail accounts. Client assets aggregated over $375 million at that date.
48
<PAGE>
The cornerstone of Black & Company's franchise is its sales force
comprised of an experienced and productive group of 23 brokers. Black &
Company's brokers average seven years of tenure with Black & Company and ten
years of experience in the securities brokerage industry.
Black & Company brokers generate significant commission revenue in the
course of their daily business, in addition to serving as a prime distribution
and referral network for Black & Company's other main lines of business: capital
markets, investment banking and investment management. Black & Company insists
that its brokers adhere to the high standards of integrity and professionalism
in delivering a broad range of services in a personalized, service oriented
manner. Black & Company believes that this "private brokerage" philosophy has
fostered enduring client relationships, where in many cases the broker functions
as de facto portfolio manager for his or her clients.
Black & Company has been successful in recruiting and retaining
experienced brokers due to a corporate culture that supports and encourages
superior performance, a performance-based equity incentive compensation plan,
access to advanced technology, and a client service-driven rather than a firm
products-driven environment. Black & Company generally does not hire
inexperienced brokers or trainees. Throughout its history, Black & Company has
lost very few brokers to rival institutions while maintaining a successful new
broker recruitment effort. Black & Company's success in retaining its brokers
and attracting experienced brokers reflects its focus on service, with respect
to both clients and employees.
Corporate executive services. Black & Company has developed an
important business facilitating stock transactions for corporate clients and
their senior executives. Such services include execution of Rule 144 and Rule
145 stock transactions for corporate executives, evaluation and implementation
of 401(k) plans, stock repurchase programs, and ancillary services such as
employee seminars on retirement strategies, qualified and non-qualified plans
and cashless option exercises.
Corporate finance. Black & Company has developed a specialty in serving
the corporate finance needs of small- and mid-cap companies located in the
Pacific Northwest. In addition to technology companies, Black & Company has a
long-established practice in "low tech/no tech" industries, particularly in the
retail clothing and footwear industries. Black & Company's depth of experience,
intensive regional coverage, and reputation for integrity enable it to provide a
broad range of creative, intelligent capital raising and financial advisory
solutions to the challenges faced by its corporate customers, including
underwritten public offerings; institutional private placements; mergers and
acquisitions advisory services; and financial advisory services.
Black & Company has devoted considerable resources to building its
corporate finance and underwriting businesses over the past five years. These
initiatives have bolstered Black & Company's firm-wide client-oriented approach
and have resulted in significant corporate finance and underwriting business
over the years, contributing to a nearly four-fold increase in corporate finance
and underwriting revenues over the past four years to $2.7 million in fiscal
1999.
Firm Commitment Underwriting. Black & Company's strategy has been to
develop a disciplined, research-driven equity capital markets approach to the
securities business. An important element of Black & Company's success is its
commitment following a public equity offering to provide regular research
coverage and to make a market in the security. Securities analysts also provide
crucial input prior to commitment of Black & Company capital to an equity
underwriting. Since January 1996, Black & Company has managed or co-managed 15
public offerings raising more than $356 million.
49
<PAGE>
Lead- and Co-Managed Offerings since January 1996
Amount
Type of Black & Co Offered
Offer Date Issuer Deal Role ($MM)
1/18/96.... Nor'Wester common stock Manager 8,050,000
3/22/96.... Analogy common stock Co-manager 18,750,000
4/4/96..... Praegitzer common stock Co-manager 19,000,000
6/13/96.... Unify common stock Co-manager 25,680,000
8/23/96.... Metro One common stock Manager 20,400,000
9/13/96.... Security Bank common stock Manager 3,220,000
9/25/96.... Coffee People common stock Manager 13,950,000
11/13/96... Morgan Products common stock Manager 22,100,000
2/13/97.... Gentle Dental common stock Manager 7,500,000
11/6/97.... VBR Bancorp common stock Manager 8,500,000
3/12/98.... Cowlitz Bancorp common stock Manager 14,400,000
3/31/98.... Wilshire REIT common stock Co-Manager 160,000,000
3/31/98.... Krauses Furniture common stock Co-Manager 13,200,000
4/1/98..... South Umpua Bank common stock Manager 12,000,000
7/23/98.... Cost-U-Less common stock Co-Manager 9,660,000
-----------
TOTAL ... 356,410,000
Black & Company's strategy is to maintain long-term relationships with
its corporate clients by serving their capital raising needs beyond their
initial public offerings of securities. Black & Company also seeks to increase
its base of publicly held clients by serving as a manager or co-manager in
follow-on offerings for companies that Black & Company believes have attractive
investment characteristics, whether or not Black & Company participated as a
manager or co-manager in the initial public offering of securities for such
companies.
Mergers and acquisitions. The Corporate Finance Department's mergers
and acquisitions advisory services include exclusive sale representation,
acquisition advisory, management buyouts and corporate restructurings. Black &
Company also provides fairness opinions and valuation reports in a variety of
settings, including mergers and acquisitions, recapitalizations and
reorganizations, employee stock ownership plans, purchase price allocation, sale
of securities and stock option plans. Over the past 31 months, Black & Company
has acted as financial advisor in 22 mergers and acquisition transactions and
financial advisory engagements.
Merger, Acquisition and Financial Advisory Assignments since June 1997
Client Transaction Fee
InterWest Home Med Financial Advisor $15,000
Silicon Solutions Financial Advisor 50,000
South Umpqua Bank Advisory Fee 2,000
Air Portland Financial Advisor 50,000
Troutmans Emporium Financial Advisor 20,000
MEMC Advisory Fee 150,000
VXI Electronics Private Placement 58,134
Coffee People Fairness Opinion 782,483
SSE Telecom Advisory Fee 90,000
Precision Lumber Advisory Fee 15,000
United Grocers Sale of Division 71,250
Metheus Advisory Fee 316,837
ITEC Advisory Fee 26,980
Summit Design Advisory Fee 112,717
Mentor Graphics Advisory Fee 25,000
50
<PAGE>
Mendocino Brewing Advisory Fee 50,500
DaVinci Gourmet Advisory Fee 25,000
Videoland Advisory Fee 30,000
Portland Arena Football Advisory Fee 10,000
Strasbaugh Advisory Fee 25,000
FEIC Fairness Opinion 100,000
Wilshire Financial Purchaser Rep. 40,000
------
TOTAL $2,065,901
Equity research. The Research Department routinely publishes and
distributes a large volume of reports for the apparel and footwear,
semiconductor, telecommunications, Internet, software and other industries.
The research products and services are designed to help investing
clients achieve their financial goals. Black & Company's Research Department
places a high priority on increasing the efficiency with which information can
be disseminated and acted upon by the Company's investing clients.
Institutional sales. Black & Company has enjoyed a high level of
success in forging effective working relationships with major institutions,
including mutual fund companies and professional money managers, in large part
attributable to it own well-established research capabilities.
Equity trading. Black & Company's revenue from listed brokerage is
derived from commissions on business transacted on national and regional
exchanges, and such revenue is highly influenced by the volume of business and
stock prices. In such brokerage, Black & Company acts as agent for customers who
wish to buy or sell listed securities and effects the purchase or sale on the
relevant securities exchange. Black & Company utilizes independent floor brokers
to ensure sufficient coverage on the floors of these exchanges.
Black & Company acts as a broker-dealer in Nasdaq securities. As
principal, Black & Company acts as a market maker in the equity securities of
more than fifty companies, for most of which Black & Company is identified as an
investment banker, as well as companies in which Black & Company's investor
clients may have substantial and continuing interest. Generally, in making a
market Black & Company stands ready at any time to buy or sell, for its own
account as principal, a Nasdaq security in which Black & Company has registered
as market maker with the Nasdaq. Three traders focus on Nasdaq transactions.
Fixed income trading. Black & Company also acts as broker in U.S.
government, government agency, corporate and municipal fixed income securities.
The fixed income desk is operated almost exclusively to facilitate retail
orders, and does not make active markets in securities. The overnight inventory
positions of the fixed income desk, consisting of primarily municipal
securities, have generally varied between $250,000 and $1 million. The fixed
income desk is staffed with one trader.
Accounting, administration and operations
Black & Company's accounting, administration and operations personnel
are responsible for financial controls, internal and external financial
reporting, compliance with regulatory and legal requirements, office and
personnel services, Black & Company's management information and
telecommunications systems, and the processing of Black & Company's securities
transactions. Black & Company employees perform most of these functions. With
the exception of payroll processing, which is performed by an outside service
bureau, all data processing functions are performed by Black & Company
management information systems department.
51
<PAGE>
Pershing, a division of Donaldson Lefkin Jenrette, acts as Black &
Company's clearing broker and depository. A portion of Pershing's expenses, net
of certain revenues, are reimbursed by Black & Company based on the level of
transactions processed on behalf of Black & Company.
Competition
The securities business is intensely competitive. Many of Black &
Company's competitors have greater capital, financial and other resources. Black
& Company competes nationwide for growth-oriented institutional investor clients
and regionally for United States underwritings of equity offerings by emerging
growth companies in its areas of focus. In addition to competition from domestic
and foreign firms currently in the securities business, domestic commercial
banks and investment banking boutiques have recently entered the business. In
recent years, large international banks have attempted to enter the markets
served by United States investment banks, including the markets in which Black &
Company competes. These large international banks have hired investment banking,
research and sales and trading professionals from Black & Company and its
competitors in the past, and Black & Company expects that these and other
competitors will continue to try to recruit professionals away from Black &
Company. The loss of any key professional could materially and adversely affect
Black & Company's operating results. Black & Company expects competition from
domestic and international banks to increase as a result of the
Gramm-Leach-Bliley Act, which removes or relieves certain restrictions on
commercial banks. Black & Company's focus on growth companies also subjects it
to direct competition from a group of specialty securities firms and smaller
investment banking boutiques that specialize in providing services to the
emerging growth company sector.
The principal competitive factors influencing the company's business
are its professional staff, industry expertise, client relationship and its mix
of market and product capabilities.
Regulation
As an investment bank, Black & Company is subject to supervision and
regulation by the United States Securities and Exchange Commission, which is
responsible for carrying out the federal securities laws and serves as
supervisory body over all national securities exchanges and associations. The
regulation of broker-dealers has to a large extent been delegated by the federal
securities laws to self-regulatory organizations ("SROs"). The SRO responsible
for supervision of Black & Company and the only SRO to which Black & Company
reports is the National Association of Securities Dealers, Inc. ("NASD").
Subject to the approval by the SEC, the NASD adopts rules that govern the
industry and conducts periodic examination of the operations of Black & Company.
In addition, Black & Company is subject to regulation under the laws of the
State of Oregon and all other states in which it does business.
Broker-dealers are subject to regulations which cover all aspects of
the securities business, including sales methods, trade practices among
broker-dealers, use and safekeeping of customer's funds and securities, capital
structure of securities firms, record-keeping and the conduct of directors,
officers and employees.
As a registered broker-dealer and member of the NASD, Black & Company
is subject to certain net capital requirements (the "Net Capital Rule") set
forth in Rule 15c3-1 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). The Net Capital Rule, which specifies minimum capital
requirements for registered broker-dealers, is designed to measure the financial
soundness and liquidity of broker-dealers. Black & Company's net capital exceeds
the capital requirements mandated by the Exchange Act and the rules of all
regulatory organizations of which it is a member.
52
<PAGE>
Employees
As of December 31, 1999, Black & Company had 52 employees, 23 of which
were full-time registered representatives.
Legal Proceedings
In the course of doing business, Black & Company becomes involved in
administrative and judicial proceedings. Some of these proceedings involve
internal operations and some involve claims by third parties. As of the date
hereof, Black & Company is a party to the following administrative and judicial
proceedings, which, if resolved against Black & Company, could have a material
adverse impact on its business and financial results:
* American Industries, Inc. et al. v. Imaging Technologies Corp., et
al.
Multnomah County Circuit Court Case Number 9902-01229.
Plaintiffs brought this action alleging fraudulent solicitation of
their investments in Imaging Technologies Corporation ("ITEC") by
prematurely recognizing revenue, overstating ITEC's earnings,
concealing and failing to reveal the extent of ITEC's nonperforming
receivables, overstating the value of ITEC's inventory, and
understating an impending write-off by over $5,000,000. Plaintiffs
allege that they were fraudulently induced to invest more than
$5,000,000 in ITEC between November 14, 1997 and December 10, 1998. One
of the Plaintiffs alleges that Black & Company acted as its broker in
connection with purchases by that Plaintiff of ITEC stock and that
Black & Company had actual knowledge or failed to exercise due care to
obtain knowledge of ITEC's fraudulent practices. Black & Company has
not answered the Complaint pursuant to an agreement with Plaintiffs'
counsel, but will deny the allegations if required to file an Answer.
Black & Company continues to seek dismissal of charges against it prior
to filing the Answer.
* Bernard B. Kliks v. Black & Company, Inc. and Laurie Miller.
NASD Arbitration No. 99-03356.
Mr. Kliks alleges that Mr. Laurie Miller, a broker at Black & Company,
and Black & Company itself committed securities fraud, breach of
fiduciary duty, negligence and common law fraud in connection with
certain investments that Mr. Miller made for Mr. Kliks' account. Black
& Company has denied all allegations made by Mr. Kliks. Mr. Kliks has
made a claim for damages in the amount of $589,986, and seeks to
recover the commissions earned on the transactions by Mr. Miller since
January 1, 1996, together with punitive damages. Black & Company is
named under the theories of respondeat superior and aiding and abetting
Mr. Miller's conduct. Black & Company denies the allegations made by
Mr. Kliks.
* Sirena Apparel Group, Inc. SEC No. LA-1028.
Two employees of Black & Company have been subpoenaed in connection
with Sirena Apparel Group, Inc. ("Sirena"). Jennifer Black followed
Sirena closely and issued a series of positive releases regarding
Sirena's stock. Sirena experienced a sudden loss in market value and
was subsequently delisted in mid-1999. During the final weeks of
trading in Sirena stock, Ms. Black downgraded Sirena's recommendation
in her analyst reports and one Black & Company trader sold shares on
behalf of several clients prior to the delisting. The SEC subpoenaed
records from Black & Company and its two employees in connection with
an investigation of Sirena. Black & Company has fully complied with the
SEC's subpoena requests. It is unknown whether any fines
53
<PAGE>
or penalties will be issued against Black & Company or its employees in
connection with this matter.
* Former employees Laura Black and Shawn Willard have asserted claims
requesting: (1) rescission of stock purchases; and (2) wages and
compensation allegedly earned, but not paid. They seek payment of
$240,000 in commissions allegedly earned by Laura Black on the merger
of Coffee People and Gloria Jean and $16,000 allegedly earned by Shawn
Willard. Mr. Willard's claim consists of a $1,000 fee allegedly earned
in connection with a secondary public offering for Northrim Bank and
$15,000 allegedly due him for a three-month period in which his
scheduled compensation was reduced and not offset by other accounts he
claims he should have been allowed to manage. Black & Company has
denied these allegations and has a certificate signed by Ms. Black
stating that no compensation was due to her from the Company. The
demand for recession, if successful, would require Black & Company to
return to the claimants the amount they paid for their shares, which
totals 19,255 shares in the aggregate. The Company has offered to
settle all claims for $25,000.00.
* Black & Company is registered to conduct business as a broker-dealer
in most states. In certain states it has not registered or has
voluntarily withdrawn its license for a variety of reasons, including
because it was unclear that registration was required or the regulatory
requirements were too burdensome relative to the amount of business
Black & Company conducted in that state. In Missouri, Black & Company
conducted business without registration and it was subsequently
determined that it was required to be registered. A cease and desist
order was issued in 1992 against Black & Company requiring it to
register as a broker-dealer prior to offering or selling securities in
that state. Subsequent to the issuance of the order, brokers of Black &
Company sold securities in the state without registering Black &
Company or themselves as a broker-dealer in the state on the belief
that an exemption from registration was available. Black & Company
could face litigation or an administrative action in connection with
such sales. At this time, however, there are no such actions pending,
threatened or, to the best knowledge of Black & Company, contemplated.
If, on the first anniversary of the date of closing of the merger,
however, any such actions, proceedings or investigations are pending,
contemplated by governmental authorities or threatened against or
relating to Black & Company or its current or former officers,
directors, employees or representatives, First Security may retain some
or all of the shares held back to cover all liabilities and costs
reasonably expected to be incurred by Black & Company in connection
with such matters, including litigation costs and attorneys fees, until
such action, proceeding or investigation has been settled or dismissed,
the liability from such action, proceeding or investigation discharged,
or, in the case of a threatened action, proceeding or investigation, or
an action, proceeding or investigation contemplated by the government,
more than one year from the date of closing of the merger has elapsed
without such action, proceeding or investigation being commenced or
threatened.
Principal Black & Company shareholders
Black & Company is primarily owned by its officers and employees. Black
& Company has rewarded those employees who espouse its business principles with
equity ownership. As a result, as of December 31, 1999, ownership was spread
among 29 officers and employees.
Except as otherwise noted, the following table sets forth certain
information known to Black & Company with respect to beneficial ownership of the
Black & Company Shares as of December 31, 1999: (a) each stockholder known by
Black & Company to be the beneficial owner of more than five percent, in the
aggregate, of the outstanding Black & Company shares, (b) each director and
executive officer of Black & Company, and (c) all executive officers and
directors as a group. The information in the table
54
<PAGE>
was obtained from the books and records of Black & Company or, where applicable,
supplied to Black & Company by the beneficial owners below.
Black & Company knows of no person owning beneficially more than 5% of Black
& Company's common stock or preferred stock, except for the following persons
who beneficially owned, as of December 31, 1999, the number of shares of common
stock or preferred stock set forth opposite each such person's name in the table
below.
Common Stock
Number Percent
Name and Address of Shares of
of Beneficial Owner Owned (1) Class (1)
Lawrence S. Black, Chairman
One S.W. Columbia
Suite 1200
Portland, Oregon 97258.....................................92,641.64 28.4%
(2)
Jennifer E. Black, President and Director
One S.W. Columbia
Suite 1200
Portland, Oregon 97258.....................................16,221.00 4.9%
(3)
Todd M. Niedermeyer, Director
One S.W. Columbia
Suite 1200
Portland, Oregon 97258.....................................21,090.00 6.5%
(4)
David A. Duley, Director
One S.W. Columbia
Suite 1200
Portland, Oregon 97258.....................................17,023.75 5.2%
(5)
Frank J. Niezgoda, Chief Operating
Officer, Director
One S.W. Columbia
Suite 1200
Portland, Oregon 97258..................................... 3,681.00 1.1%
(6)
Dennis Reiter, Chief Financial Officer
One S.W. Columbia
Suite 1200
Portland, Oregon 97258..................................... 9,500.00 3.0%
(7)
Laurie R. Miller
One S.W. Columbia
Suite 1200
Portland, Oregon 97258.....................................37,584.64 11.5%
Robert M. Johnson
One S.W. Columbia
Suite 1200
Portland, Oregon 97258.....................................23,375.00 7.7%
(8)
55
<PAGE>
Ronald A. Sauer
One S.W. Columbia
Suite 1200
Portland, Oregon 97258.....................................27,671.58 8.5%
(9)
Herbert D. Black
One S.W. Columbia
Suite 1200
Portland, Oregon 97258.....................................16,370.00 5.0%
(10)
All directors and officers as a group
(6 persons) .............................................160,156.64 48.2%
(11)
(1) Includes shares of voting common stock which may be acquired upon exercise
of options exercisable without consideration of the merger within 60 days of the
date, shares of Series A Preferred Stock and non-voting common stock, but
excludes options that are not currently exercisable and will only become
exercisable if all conditions of the merger are satisfied.
(2) Includes 5,000 shares of Series A preferred stock with a liquidation
preference, other common stock bearing interest at the rate of 8% per annum.
Such preferred stock is non-voting, non-convertible and redeemable by the
company at any time upon payment of $10.00 per share plus a dividend of $0.24767
per share plus any accrued but unpaid interest.
(3) Includes 1,812 shares of voting common stock which may be acquired upon
exercise of options exercisable within 60 days of the date hereof without
consideration of the merger but excludes 18,438 additional shares which may be
acquired if all conditions of the merger are satisfied.
(4) Includes 2,000 shares of voting common stock which may be acquired upon
exercise of options exercisable within 60 days of the date hereof without
consideration of the merger but excludes 16,500 additional shares which may be
acquired if all conditions of the merger are satisfied.
(5) Includes 1,026 shares of voting common stock which may be acquired upon
exercise of options exercisable within 60 days of the date hereof without
consideration of the merger but excludes 16,578.75 additional shares which may
be acquired if all conditions of the merger are satisfied.
(6) Includes 750 shares of voting common stock which may be acquired upon
exercise of options exercisable within 60 days of the date hereof without
consideration of the merger but excludes 13,250 additional shares which may be
acquired if all conditions of the merger are satisfied.
(7) Includes 500 shares of voting common stock which may be acquired upon
exercise of options exercisable within 60 days of the date hereof without
consideration of the merger but excludes 2,500 additional shares which may be
acquired if all conditions of the merger are satisfied.
(8) Includes 2,125 shares of voting common stock which may be acquired upon
exercise of options exercisable within 60 days of the date hereof without
consideration of the merger but excludes 13,875 additional shares which may be
acquired if all conditions of the merger are satisfied.
(9) All shares are non-voting common stock.
(10) Includes 1,000 shares of voting common stock which may be acquired upon
exercise of options exercisable within 60 days of the date hereof without
consideration of the merger but excludes 4,100 additional shares which may be
acquired if all conditions of the merger are satisfied.
(11) Includes 6,088.25 shares of voting common stock which may be acquired upon
exercise of options exercisable within sixty (60) days of the date hereof
without consideration of the merger but excludes 73,866.75 additional shares
which may be acquired if all conditions of the merger are satisfied. Also
includes 27,671.58 shares of non-voting common stock and 5,000 shares of Series
A Preferred Stock. See footnote 2 above for a description of such preferred
shares.
56
<PAGE>
COMPARATIVE RIGHTS OF SHAREHOLDERS
Upon consummation of the merger, the Black & Company shareholders will
become shareholders of First Security and their rights will (i) cease to be
defined and governed by Oregon law and will be defined and governed by Delaware
law and (ii) cease to be defined and governed by the restated articles of
incorporation and bylaws of Black & Company and will be defined and governed by
either (i) First Security's certificate of incorporation and bylaws if the First
Security/Zions merger is not closed prior to the closing of the Black & Company
merger, or (ii) First Security's Amended and Restated Certificate of
Incorporation and Amended and Restated Bylaws, if the First Security/Zions
merger closes before the Black & Company merger closes. Certain provisions of
First Security's certificate of incorporation and bylaws or its Amended and
Restated Certificate of Incorporation and Amended and Restated Bylaws (assuming
the adoption of the same prior to the close of the Black & Company merger), as
the case may be, alter the rights of shareholders from those that Black &
Company shareholders presently have and also alter certain powers of management.
These provisions are summarized below. This summary is qualified in its entirety
by reference to First Security's certificate of incorporation and bylaws, and
First Security's Amended and Restated Certificate of Incorporation and Amended
and Restated Bylaws, as applicable, as well as the Restated Articles of
Incorporation of Black & Company (the "Black & Company Articles"), the Bylaws of
Black & Company (the "Black & Company Bylaws") and applicable law. In addition,
First Security could implement certain other changes by amending its charter
documents.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
Black & Company First Security First Security After the
First Security/Zions Merger
- ---------------------------------------------------------------------------------------------------
CAPITAL STOCK
- ---------------------------------------------------------------------------------------------------
Authorized Capital
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
600,000 common shares 600,000,000 common shares 425,000,000 common shares
authorized, no par value, authorized, $1.25 par value. authorized, par value $1.25
consisting of 500,000 shares per share.
of voting common stock and
100,000 shares of non-voting
common stock.
- ---------------------------------------------------------------------------------------------------
9,000 shares of preferred 400,000 shares of preferred 10,000,000 shares of preferred
stock authorized, no par stock authorized, no par stock authorized, no par
value. value, 18,052 shares of which value, 18,052 shares of which
are designated as Series A are designated as Series A
preferred stock. Preferred.
- ---------------------------------------------------------------------------------------------------
As of January 24, 2000, As of September 30, 1999, Based on the number of shares
306,976.15 shares of Black & 195,745,158 shares of First of Zions and First Security
Company voting common stock, Security common stock were common stock outstanding as of
27,671.58 shares of non-voting issued and outstanding and November 18, 1999,
common stock and 9,000 shares 8,691 shares of First Security approximately 172,079,379
of preferred stock were issued preferred stock were issued shares of the combined company
and outstanding. and outstanding. would be issued and
outstanding after the First
Security/Zions merger and
8,596
- ---------------------------------------------------------------------------------------------------
57
<PAGE>
- ---------------------------------------------------------------------------------------------------
Black & Company First Security First Security After the
First Security/Zions Merger
- ---------------------------------------------------------------------------------------------------
shares of preferred stock will
be issued and outstanding
after the merger.
- ---------------------------------------------------------------------------------------------------
BOARD OF DIRECTORS
- ---------------------------------------------------------------------------------------------------
Classification
- ---------------------------------------------------------------------------------------------------
All directors are elected All directors are elected Directors are divided into
annually. annually. three classes. Following the
first two annual meetings of
stockholders, each class is
elected for a term of three
years. For a description of
the classes prior to such
time, see "The First
Security/Zions Merger."
- ---------------------------------------------------------------------------------------------------
Number of Directors
- ---------------------------------------------------------------------------------------------------
Fixed at six directors. No fewer than six and no more The board will consist of:
than 30, as fixed by the -22 directors until the annual
bylaws. Currently fixed at 20. 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.
- ---------------------------------------------------------------------------------------------------
Removal
- ---------------------------------------------------------------------------------------------------
The stockholders, by a No provisions in First The stockholders, by a
majority vote of the Security's organizational majority vote of the
outstanding shares, may remove documents. Under Delaware law, outstanding shares, may remove
a director for cause at a a director may be removed by a a director for cause. Cause
meeting called for the purpose majority vote of the will be deemed to exist only
of removing the director. shareholders with or without if the director has been
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.
- ---------------------------------------------------------------------------------------------------
58
<PAGE>
- ---------------------------------------------------------------------------------------------------
Black & Company First Security First Security After the
First Security/Zions Merger
- ---------------------------------------------------------------------------------------------------
Vacancies and Newly Created Directorships
- ---------------------------------------------------------------------------------------------------
Either the stockholders or The board may fill vacancies Prior to the annual meeting of
board may fill board vacancies or newly-created directorships stockholders in the year 2002,
by majority vote. The first to by a majority of the directors any vacancy created by the
act to fill the vacancy then in office resignation, removal, death or
precludes the other group from disability of a director will
acting. be filled by the Co-Chief
Executive Officer designated
by the same party (Zions or
First Security) in the First
Security/Zions 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.
- ---------------------------------------------------------------------------------------------------
Executive Committee
- ---------------------------------------------------------------------------------------------------
The bylaws permit the board to The bylaws permit the board to The combined company will have
designate committees designate committees an executive committee
consisting of at least two consisting of two or more consisting of six directors,
members. The bylaws do not directors by resolution. The including the chief executive
address an executive committee board has organized an officers of both First
executive committee consisting Security and Zions, who will
of seven directors. act as co-chairmen.
- ---------------------------------------------------------------------------------------------------
Nominating Committee
- ---------------------------------------------------------------------------------------------------
The bylaws permit the board to The bylaws permit the board to From the completion of the
designate committees designate committees merger until 2002, the board
consisting of at least two consisting of two or more will maintain a nominating
members. The bylaws do not directors by resolution. The committee to nominate and
specifically address a board has designated a recommend directors to the
nominating committee. nominating committee stockholders. The committee
consisting of seven directors. will consist of one director
appointed by First Security
and one director appointed by
Zions.
- ---------------------------------------------------------------------------------------------------
Special Meetings of the Board
- ---------------------------------------------------------------------------------------------------
Any director may call a The chairman, the secretary or The president or by a majority
special meeting upon two days' a majority of the board of of the board of directors may
notice setting forth the date, directors may call a special call a special meeting.
time and place of the meeting. meeting of the board.
- ---------------------------------------------------------------------------------------------------
59
<PAGE>
- ---------------------------------------------------------------------------------------------------
Black & Company First Security First Security After the
First Security/Zions Merger
- ---------------------------------------------------------------------------------------------------
Director Liability
- ---------------------------------------------------------------------------------------------------
No provisions in the No provisions in First The Amended and Restated
organizational documents. Security's organizational Certificate of Incorporation
documents. limits the liability of
directors for breach of
fiduciary duty except to the
extent that such limitation is
not permitted under Delaware
law.
- ---------------------------------------------------------------------------------------------------
SHAREHOLDERS
- ---------------------------------------------------------------------------------------------------
Shareholder/Stockholder Action by Written Consent
- ---------------------------------------------------------------------------------------------------
Action by written consent Action by written consent Action by written consent of
without a meeting not permitted without a meeting if stockholders not permitted.
addressed in organizational all stockholders consent.
documents.
- ---------------------------------------------------------------------------------------------------
Special Meeting of Shareholders/Stockholders
- ---------------------------------------------------------------------------------------------------
Only the President, the board Only the chairman of the board Only the board of directors
of directors or 10% of all or by a majority of a board of may call a special meeting of
votes entitled to be cast may directors may call a special the stockholders.
call a special meeting of the meeting of the stockholders.
stockholders.
- ---------------------------------------------------------------------------------------------------
Voting Rights and Requirements
- ---------------------------------------------------------------------------------------------------
Elections for the board of Elections for the board of Elections for the board of
directors are decided by a directors are decided by a directors are decided by a
plurality of the votes cast plurality of the votes cast plurality of the votes cast.
under Oregon law. In all other under Delaware law. In all In all other matters, unless
matters, unless provided by other matters, unless otherwise provided by law or
law or by the certification of otherwise provided by law or by the certificate of
incorporation or the bylaws, by the certification of incorporation or the bylaws,
the affirmative vote of the incorporation or the bylaws, the affirmative vote of the
holders of a majority of the the affirmative vote of the holders of a majority of the
shares shall be the act of the holders of a majority of the shares cast shall be the act
stockholders. Stockholders are shares cast shall be the act of the stockholders.
entitled to one vote for each of the stockholders. Stockholders are entitled to
share on record for all Stockholders are entitled to one vote for each share on
matters. one vote for each share on record for all matters.
record for all matters.
- ---------------------------------------------------------------------------------------------------
60
<PAGE>
- ---------------------------------------------------------------------------------------------------
Black & Company First Security First Security After the
First Security/Zions Merger
- ---------------------------------------------------------------------------------------------------
Stockholder Proposals and Nominations of Directors
- ---------------------------------------------------------------------------------------------------
Notice of any proposal to be Notice of any proposal to be Notice of any proposal to be
presented by 10% of all the presented by a stockholder or presented by a stockholder or
votes entitled to be cast on a of any person to be nominated of any person to be nominated
particular issue must be as a director must be given as a director must be given
delivered to the Secretary not less than 90 nor more than not less than 90 nor more than
describing the purpose or 120 days before the first 120 days before the
purposes for which the meeting anniversary of the prior stockholder meeting. Notice
is to be held. year's stockholder meeting. must include the text of the
Notice must include, with proposal and a brief
respect to any nominee for description of the reasons in
director, the information support of the proposal, the
regarding such person required stockholder's name and
by Regulation S-K promulgated address, the number and class
under the Securities Act of of all shares owned by the
1933 and, with respect to all stockholder, the name and
proposals, a brief description address of any person upon
of the business to be whose behalf such stockholder
conducted, the reasons for is acting, or with whom such
conducting such business, any stockholder is acting in
material interest in such concert, the number and class
business of the stockholder or of all shares of each class of
any owner of shares on whose stock owned by any such person
behalf the proposal is made and any material interest of
and, with respect to the such stockholder in the
stockholder giving notice and proposal. In addition the
any person on whose behalf the notice with respect to a
proposal is made, their name nominee for director must
and address and the class and include the name of the person
number of shares owned by such to be nominated, the number
person. and class of all shares owned
by such person, the
information regarding such
person required by Regulation
S-K promulgated under the
Securities Act of 1933 and
such person's signed consent.
- ---------------------------------------------------------------------------------------------------
Dividend Rights
- ---------------------------------------------------------------------------------------------------
Under Oregon law, the Under Delaware law, the Under Delaware law, the
directors may declare and pay directors may declare and pay directors may declare and pay
dividends only if, after dividends out of statutory dividends out of statutory
giving the distributing surplus or, if there is no surplus or, if there is no
effect: (i) the corporation surplus, out of net profits surplus, out of net profits
would be able to pay its debts for the fiscal year in which for the fiscal year in which
as they become due in the the dividend is declared the dividend is declared
usual course of business; and and/or for the preceding and/or for the preceding
(ii) the corporation's total fiscal year as long as the fiscal year as long as the
assets would at least equal amount of capital of the amount of capital of the
the sum of its total corporation following the corporation following the
liabilities plus, unless the declaration and payment of the declaration and payment of the
articles of incorporation dividend is not less than the dividend is not less than the
permit otherwise, the amount aggregate amount of the aggregate amount of the
that would be needed if the capital represented by the capital represented by the
corporation were to be issued and outstanding stock issued and outstanding stock
of all classes having a of all classes having a
preference upon the preference upon the
distribution of assets. First distribution of assets.
- ---------------------------------------------------------------------------------------------------
61
<PAGE>
- ---------------------------------------------------------------------------------------------------
Black & Company First Security First Security After the
First Security/Zions Merger
- ---------------------------------------------------------------------------------------------------
dissolved at the time of Security's bylaws restrict
distribution, to satisfy the distributions of dividends by
preferential rights upon requiring the corporation to
dissolution of stockholders set aside any amounts that the
whose preferential rights are directors feel are necessary
superior to those receiving to reserve to meet
the distribution. contingencies, equalize
dividends or repair or
maintain property.
- ---------------------------------------------------------------------------------------------------
Liquidation Rights
- ---------------------------------------------------------------------------------------------------
Upon liquidation, dissolution Upon liquidation, dissolution Upon liquidation, dissolution
or winding up of the combined or winding up of the combined or winding up of the combined
company, the holders of Series company, the holders of Series company, the holders of Series
A preferred shares are A preferred shares of First A preferred shares of First
entitled to receive out of the Security are entitled to Security are entitled to
assets $10.00 per share, if receive out of the assets receive out of the assets
the liquidation is $52.50 per share, if the $52.50 per share, if the
involuntary, and the liquidation is involuntary, liquidation is involuntary,
applicable redemption value and the applicable redemption and the applicable redemption
(as specified in the value (as specified in the value (as specified in the
certificate) if the certificate) if the certificate) if the
liquidation is voluntary. In liquidation is voluntary. In liquidation is voluntary. In
addition to such amount, the addition to such amount, the addition to such amount, the
holders will also receive a holders will also receive a holders will also receive a
further amount equal to unpaid further amount equal to unpaid further amount equal to unpaid
accumulated dividends before accumulated dividends before accumulated dividends before
any distributions are made to any distributions are made to any distributions are made to
the common shareholders. The the common shareholders. The the common shareholders. The
assets remaining after such assets remaining after such assets remaining after such
distribution shall be paid to distribution shall be paid to distribution shall be paid to
the common shareholders. the common shareholders. the common shareholders.
- ---------------------------------------------------------------------------------------------------
Inspection Rights
- ---------------------------------------------------------------------------------------------------
Any excerpts of minutes of any Any records maintained by the Any records maintained by the
meeting of the board, records combined company in the combined company in the
of any action of a committee regular course of its regular course of its
of the board while acting in business, including its stock business, including its stock
place of the board, minutes of ledger, books of account and ledger, books of account and
any meeting of the minute books, will be provided minute books, will be provided
stockholders and records of upon the request of any person upon the request of any person
action taken by the entitled to inspect them. entitled to inspect them.
stockholders or board without
a meeting, accounting records,
tax returns and the record of
stockholders will be provided
upon the request of any person
entitled to inspect them
provided stockholder's demand
is made for a proper purpose.
- ---------------------------------------------------------------------------------------------------
Dissenters' Rights
- ---------------------------------------------------------------------------------------------------
Under Oregon law, appraisal Under Delaware law, appraisal Under Delaware law, appraisal
rights are available for rights are available for rights are available for
merger and consolidation merger and consolidation merger and consolidation
transactions effected pursuant transactions effected pursuant transactions effected pursuant
to various to various sections of the to various sections of
- ---------------------------------------------------------------------------------------------------
62
<PAGE>
- ---------------------------------------------------------------------------------------------------
Black & Company First Security First Security After the
First Security/Zions Merger
- ---------------------------------------------------------------------------------------------------
sections of the applicable applicable Delaware law. applicable Delaware law.
Oregon law. However, appraisal However, appraisal rights are However, appraisal rights are
rights are not permitted in not permitted in these not permitted in these
these transactions if the transactions if the stock is transactions if the stock is
stock is listed on the Nasdaq listed on the Nasdaq or if the listed on the Nasdaq or if the
Stock Market. stock is held by more than stock is held by more than
2,000 stockholders. No 2,000 stockholders. No
appraisal rights are available appraisal rights are available
for shares of stock of the for shares of stock of the
constituent surviving constituent surviving
corporation if the merger did corporation if the merger did
not require the approval of not require the approval of
the stockholders of the the stockholders of the
surviving corporation. These surviving corporation. These
provisions do not apply if the provisions do not apply if the
stockholder receives for his stockholder receives for his
shares anything except shares shares anything except shares
of the corporation surviving of the corporation surviving
the consummation of the plan the consummation of the plan
of merger or consolidation, of merger or consolidation,
shares of a corporation whose shares of a corporation whose
shares are listed on a shares are listed on a
national exchange or Nasdaq or national exchange or Nasdaq or
held of record by not less held of record by not less
than 2,000 holders or cash in than 2,000 holders or cash in
lieu of fractional shares. lieu of fractional shares.
- ---------------------------------------------------------------------------------------------------
63
<PAGE>
- ---------------------------------------------------------------------------------------------------
Black & Company First Security First Security After the
First Security/Zions Merger
- ---------------------------------------------------------------------------------------------------
OTHER MATTERS
- ---------------------------------------------------------------------------------------------------
Amendment of Articles of Incorporation
- ---------------------------------------------------------------------------------------------------
Under Oregon law, the Articles Under Delaware law the Under the Articles of
of Incorporation may be Certificate of Incorporation Incorporation of the combined
amended by a majority of Black may be amended by a majority company, Article SEVENTH
& Company's stockholders. of First Security's (classification and number of
stockholders. directors, term of office and
removal of directors) may not
be amended, modified or
repealed except by the
affirmative vote of
(1) two-thirds of the
directors of the combined
company and (2) the holders of
not less than two-thirds of
the voting power of all
outstanding shares of capital
stock entitled to vote in the
election of directors. Article
EIGHTH (restrictions on
certain business transactions
with significant stockholders)
may not be amended, nor may it
be repealed in whole or in
part, until authorized by the
favorable vote of not less
than 80% of all of the votes
entitled to vote in elections
of directors.
- ---------------------------------------------------------------------------------------------------
Amendment of Bylaws
- ---------------------------------------------------------------------------------------------------
The board may alter, amend or The board may alter, amend or The Amended and Restated
repeal bylaws by a majority repeal bylaws by a majority Bylaws provide that such
vote, unless a particular vote. The stockholders may bylaws may be amended or
bylaw provides expressly that amend, adopt or repeal the repealed, and new bylaws
the board may not amend or bylaws by a vote of 80% of the adopted, by the board of
repeal that bylaw. outstanding shares. directors, but the
stockholders entitled to vote
may adopt additional bylaws
and may amend or repeal any
by-law whether or not adopted
by the board of directors.
However, various sections of
the bylaws (those pertaining
to special stockholders'
meetings; powers, number and
qualifications of directors;
election, term of office,
resignation, removal and
vacancies of directors;
special director committees;
executive and nominating
committees; officer and
election of officers; term of
office, resignation, removal
and vacancies of officers; and
amendment of bylaws) may not
be amended except upon the
affirmative vote of
64
<PAGE>
- ---------------------------------------------------------------------------------------------------
Black & Company First Security First Security After the
First Security/Zions Merger
- ---------------------------------------------------------------------------------------------------
(1) two-thirds of the
directors of the combined
company and (2) the holders of
not less than two-thirds of
the voting power of all
outstanding shares of capital
stock of the combined company
entitled to vote generally in
the election of directors.
- ---------------------------------------------------------------------------------------------------
Limitation on Business Transactions
- ---------------------------------------------------------------------------------------------------
No provisions. Except under certain Except under certain
circumstances, business circumstances, business
transactions (defined as, transactions (defined as,
among other things, mergers or among other things, mergers or
consolidations of the consolidations of the
corporation, sale of a corporation, sale of more than
substantial part of the 20% of the corporation assets
corporate assets or any or any recapitalization or
recapitalization or reclassification of securities
reclassification of securities of the corporation) are not
of the corporation) are not permitted with a related
permitted with a related person (defined as any person
person (defined as any person or entity which owns 10% of
or entity which owns 10% of the votes of the outstanding
the votes of the outstanding shares of stock of the
shares of stock of the corporation) except upon the
corporation) or any interest affirmative vote of 80% of all
except upon the affirmative the shares of stock entitled
vote of the holders of not to vote in elections of
less than 80% of the voting directors.
power of the voting stock.
- ---------------------------------------------------------------------------------------------------
</TABLE>
65
<PAGE>
LEGAL MATTERS
Ray, Quinney & Nebeker, P.C. will pass upon certain other matters with
respect to the merger for First Security and First Security Van Kasper. As of
the record date for Black & Company's special shareholders meeting, attorneys at
Ray, Quinney & Nebeker, as a group, were beneficial owners of no more than 4% of
the total outstanding First Security common stock and held no shares of Black &
Company common stock. A shareholder of Ray, Quinney & Nebeker is the daughter of
the Chairman and Chief Executive Officer of First Security.
Davis Wright & Tremaine will pass upon certain matters in connection
with the merger for Black & Company.
EXPERTS
The consolidated financial statements of First Security incorporated in
this Prospectus/Proxy Statement by reference from First Security's Annual Report
on Form 10-K for the year ended December 31, 1998, 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.
WHERE YOU CAN FIND MORE INFORMATION
Available Additional Information
First Security is subject to the informational reporting requirements
of the Exchange Act, and in accordance therewith files periodic reports, Proxy
Statements and other information with the SEC. First Security's recent filings
with the commission can be inspected and copied at the Public Reference
Facilities maintained by the commission at 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the commission's regional office at 1801 California Street,
Suite 4800, Denver, Colorado 80202-2648. Copies of such material can be obtained
from the Public Reference Section of the commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates. Such information may also be
accessed electronically by means of the commission's home page on the Internet
(http://www.sec.gov.). In addition, the First Security common stock is traded by
means of the Nasdaq Stock Market, and such reports, Proxy Statements and other
information concerning First Security should be available for inspection and
copying at the offices of the National Association of Securities Dealers, Inc.,
1735 K Street, N.W., Washington, D.C. 20006.
First Security has filed with the commission a Registration Statement
on Form S-4 under the Securities Act of 1933, as amended ("Securities Act"),
with respect to the First Security common stock offered hereby. This
Prospectus/Proxy Statement does not contain all the information set forth in the
registration statement and the exhibits thereto, certain portions of which have
been omitted as permitted by the rules and regulations of the Commission. For
further information, reference is made to the registration statement, including
the exhibits thereto.
Statements contained in this Prospectus/Proxy Statement or in any
documents incorporated in this Prospectus/Proxy Statement by reference as to the
contents of any contract or other document referred to herein or therein are not
necessarily complete, and in each instance reference is made to the copy of such
contract or other document filed as an exhibit to the registration statement or
such other document, each such statement being qualified in all respects by such
reference. The registration statement may be inspected by anyone without charge
at the principal office of the commission in Washington, D.C., and copies of all
or any part of it may be obtained from the commission upon payment of the
prescribed fees.
66
<PAGE>
Incorporation of Certain Documents By Reference
There are incorporated herein by reference the following documents
filed with the commission by First Security (File No. 1-6906):
(a) First Security's Annual Report on Form 10-K for the year ended
December 31, 1998; and
(b) First Security's Proxy Statement dated March 16, 1999; and
(c) First Security's Quarterly Reports on Form 10-Q for the
quarters ended March 31, June 30 and September 30, 1999;
(d) First Security's Current Reports on Form 8-K dated November
22, 1999; December 29, 1999; January 20, 2000; February 11,
2000 and March 3, 2000; and
(e) First Security's Amendment No. 2 to Registration Statement on
Form S-4 dated February 17, 2000.
All documents filed by First Security with the commission pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this
Prospectus/Proxy Statement and prior to the effective date of the Black &
Company merger are incorporated herein by reference, and such documents will be
deemed to be a part hereof from the date of filing of such documents. Any
statement contained herein or in a document incorporated or deemed to be
incorporated by reference herein will be deemed to be modified or superseded for
purposes of this Prospectus/Proxy Statement to the extent that a statement
contained herein or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any statement so modified or superseded will not be deemed, except as
so modified or superseded, to constitute a part of this Prospectus/Proxy
Statement.
67
<PAGE>
APPENDIX A
AGREEMENT OF MERGER, AS AMENDED
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
Dated January 24, 2000
By and Among
FIRST SECURITY CORPORATION,
FIRST SECURITY VAN KASPER, INC.,
BLACK & COMPANY, INC.
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I THE MERGER.......................................................A-2
1.1 THE MERGER..........................................................A-2
1.2 DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION.................A-3
1.3 SUBSEQUENT ACTIONS..................................................A-3
ARTICLE II CONVERSION OF SECURITIES.........................................A-4
2.1 CONVERSION OF CAPITAL STOCK OF MERGING ENTITIES.....................A-4
(a) Conversion of Company Capital Stock...............................A-4
(b) Definitions Pertaining to Base Consideration......................A-4
(c) FSC Stock.........................................................A-5
2.2 HOLDBACK AMOUNT.....................................................A-5
(a) Adjustments to Exchange Ratio for the Holdback....................A-6
2.3 CONTINGENT CONSIDERATION............................................A-7
(a) Payment of Contingent Consideration...............................A-7
(b) Definitions Pertaining to Contingent Consideration................A-7
(c) Calculation of EBT................................................A-8
(d) Definition of Adjusted Clearance Fees.............................A-8
(e) Notice of EBT.....................................................A-9
(f) Disputes Regarding EBT............................................A-9
(g) Management of Surviving Corporation...............................A-9
2.4 DISSENTING SHARES...................................................A-9
(a) No Conversion.....................................................A-9
(b) Appraisal Rights..................................................A-10
(c) Notice............................................................A-10
2.5 EXCHANGE OF SHARES AND CERTIFICATES.................................A-10
(a) Exchange Procedures; Transfer of Shares...........................A-10
(b) Distributions with Respect to Unexchanged Shares..................A-11
(c) No Further Ownership Rights in Company Capital Stock; No
Transfer Following the Effective Time............................A-11
(d) Fractional Shares.................................................A-12
(e) No Liability......................................................A-12
(f) Share Transfer Books..............................................A-12
ARTICLE III COVENANTS OF THE COMPANY........................................A-13
3.1 CONDUCT OF BUSINESS PENDING THE CLOSING.............................A-13
(a) Change in Capital Stock; Issuance of Shares.......................A-13
(b) Options, Warrants, and Rights.....................................A-13
(c) Dividends.........................................................A-13
(d) Purchase of Shares................................................A-14
(e) Benefit Plans.....................................................A-14
(f) Conduct of Business...............................................A-14
(g) Acquisitions and Mergers..........................................A-14
(h) Liens; Indebtedness; Increase in Compensation, etc................A-14
(i) Amendments to Charter, etc........................................A-14
3.2 INVESTIGATION; ACCESS...............................................A-14
3.3 REGULATORY APPROVALS................................................A-15
3.4 TERMINATION OF EMPLOYEE BENEFIT PLANS...............................A-15
3.5 INFORMATION FOR PROXY STATEMENT.....................................A-16
3.6 ENVIRONMENTAL REPORTS...............................................A-16
i
<PAGE>
3.7 NOTIFICATION OF ACTIONS.............................................A-16
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND DIRECTORS......A-16
4.1 ORGANIZATION, CONDUCT OF BUSINESS, ETC..............................A-17
4.2 CAPITALIZATION......................................................A-17
4.3 OPTIONS, SARS, WARRANTS, ETC........................................A-17
4.4 AUTHORIZATION; VALIDITY OF AGREEMENT................................A-17
4.5 COMPANY FINANCIAL STATEMENTS; NO UNDISCLOSED LIABILITIES............A-18
4.6 ENVIRONMENTAL MATTERS...............................................A-18
4.7 TITLE TO PROPERTIES.................................................A-19
4.8 ABSENCE OF DEFAULTS.................................................A-20
4.9 ABSENCE OF MATERIAL ADVERSE CHANGES.................................A-20
4.10 ACTIONS, PROCEEDINGS AND INVESTIGATIONS............................A-20
4.11 ABSENCE OF BROKERAGE COMMISSIONS, ETC..............................A-21
4.12 MATERIAL CONTRACTS.................................................A-21
4.13 COMPLIANCE WITH LAWS; DOCUMENTATION................................A-21
4.14 EMPLOYEE BENEFITS..................................................A-22
4.15 TAXES AND TAX RETURNS..............................................A-25
4.16 CONSENTS AND APPROVALS.............................................A-25
4.17 INSURANCE..........................................................A-26
4.18 LABOR MATTERS; COMPLIANCE WITH WARN ACT............................A-26
4.19 INVESTMENT ADVISORY CONTRACTS, FUNDS AND CLIENTS...................A-27
4.20 AGREEMENTS WITH REGULATORY AGENCIES................................A-28
4.21 INVESTMENT SECURITIES..............................................A-29
4.22 INTEREST RATE RISK MANAGEMENT INSTRUMENTS..........................A-29
4.23 YEAR 2000..........................................................A-29
4.24 DISCLOSURE.........................................................A-29
ARTICLE V COVENANTS, REPRESENTATIONS AND WARRANTIES OF FSC AND FSVK.........A-30
5.1 ORGANIZATION, CONDUCT OF BUSINESS, ETC..............................A-30
5.2 AUTHORIZATION AND VALIDITY OF AGREEMENT.............................A-30
5.3 FSC REPORTS.........................................................A-30
5.4 FSC FINANCIAL STATEMENTS; TAX RETURNS...............................A-31
5.5 ABSENCE OF MATERIAL CHANGES.........................................A-31
5.6 ABSENCE OF DEFAULTS UNDER AGREEMENTS................................A-31
5.7 ACTIONS, PROCEEDINGS, AND INVESTIGATIONS............................A-32
5.8 REGULATORY APPROVALS................................................A-32
5.9 FSC COMMON STOCK....................................................A-32
5.10 REGISTRATION OF SHARES.............................................A-32
5.11 AGREEMENTS WITH REGULATORY AGENCIES................................A-33
5.12 SATISFACTION OF CONDITIONS IN SECTION 15(F) OF THE 1940 ACT........A-33
5.13 NOTIFICATION OF ACTIONS............................................A-33
ARTICLE VI PROXY STATEMENT; SHAREHOLDER MEETINGS............................A-33
6.1 PROXY STATEMENT.....................................................A-33
6.2 SHAREHOLDER MEETING.................................................A-34
ARTICLE VII CONDITIONS OF CLOSING...........................................A-34
7.1 CONDITIONS OF CLOSING FOR ALL PARTIES...............................A-34
(a) Regulatory Approval...............................................A-34
(b) Registration Statement, etc.......................................A-35
(c) No Injunction, etc................................................A-35
(d) Tax Matters.......................................................A-35
(e) Section 280G......................................................A-35
ii
<PAGE>
7.2 CONDITIONS OF CLOSING FOR FSC AND FSVK..............................A-35
(a) Shareholder Approval..............................................A-35
(b) Company Resolutions; Corporate Documents..........................A-35
(c) Company Representations and Warranties............................A-36
(d) Comfort Letters...................................................A-36
(e) Opinion of Company Counsel........................................A-36
(f) Affiliate's Letters...............................................A-36
(g) Condition of the Company..........................................A-37
(h) Employment Agreements.............................................A-37
(i) Money Market Funds................................................A-38
(j) Investment Contract Consents......................................A-38
(k) Bruce Alexander Release...........................................A-38
(l) Options...........................................................A-38
(m) Accrual of Liabilities............................................A-38
(n) Termination of 401 (k) Plan.......................................A-38
(o) Redemption of Company Preferred Stock.............................A-39
(p) Stoel Rives Matter................................................A-39
(q) Kliks Matter......................................................A-39
7.3 CONDITIONS OF CLOSING FOR THE COMPANY AND THE SHAREHOLDERS..........A-39
(a) FSC and FSVK Representations and Warranties.......................A-39
(b) Opinion of FSC Counsel............................................A-39
(c) FSC and FSVK Resolutions; Corporate Documents....................A-39
(c) D&O Insurance.....................................................A-40
ARTICLE VIII CLOSING OF MERGER.............................................A-40
8.1 CLOSING.............................................................A-40
8.2 FILING OF CERTIFICATE OF MERGER AND ARTICLES OF MERGER..............A-40
ARTICLE IX TERMINATION.....................................................A-40
9.1 TERMINATION.........................................................A-40
9.2 EFFECT OF TERMINATION...............................................A-41
ARTICLE X INDEMNIFICATION..................................................A-42
10.1 INDEMNIFICATION BY THE COMPANY AND THE SHAREHOLDERS................A-42
10.2 INDEMNIFICATION PROCEDURE..........................................A-43
10.3 DISPUTES...........................................................A-44
10.4 TIME LIMIT.........................................................A-44
ARTICLE XI ADDITIONAL COVENANTS............................................A-44
11.1 COSTS..............................................................A-44
11.2 SATISFACTION OF CONDITIONS IN SECTION 15(F) OF THE 1940 ACT........A-45
11.3 NASDAQ LISTING APPLICATION.........................................A-45
11.4 REGISTRATION OF CONTINGENT CONSIDERATION SHARES....................A-45
11.5 RETENTION BONUS....................................................A-45
11.6 INSTRUMENTS OF TRANSFER, ETC.......................................A-46
11.7 COMPANY REPRESENTATIVE.............................................A-46
11.8 ACCELERATION OF EARN OUT...........................................A-47
11.9 SHAREHOLDER APPROVAL...............................................A-47
11.10 NOTICES...........................................................A-48
11.11 AMENDMENTS........................................................A-49
11.12 ENTIRE AGREEMENT..................................................A-49
11.13 ASSIGNMENT........................................................A-49
11.14 COUNTERPARTS......................................................A-50
11.15 EXCLUSIVE MERGER AGREEMENT........................................A-50
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11.16 PUBLIC STATEMENTS.................................................A-50
11.17 CONFIDENTIALITY...................................................A-50
11.18 ALTERNATIVE STRUCTURE.............................................A-51
Exhibits
Exhibit A - Form of Articles of Merger
Exhibit 2.3 - Calculation of EBT
Exhibit 2.5(a) - Form of Lost Stock Certificate
Exhibit 7.1(d) - Form of Tax Opinion
Exhibit 7.2(d) - Form of Comfort Letter
Exhibit 7.2(e) - Form of Opinion Letter of Davis Wright Tremaine LLP
Exhibit 7.2(f) - Form of Affiliate's Letter
Exhibit 7.3(b) - Form of Opinion of Ray, Quinney & Nebeker
Exhibit 11.9 - Shareholder's Voting Agreement
Schedules
Schedule 4.2 - Company Capital Stock
Schedule 4.3 - Company Options
Schedule 4.5 - Financial Statements
Schedule 4.6 - Environmental Claims
Schedule 4.9 - Absence of Material Changes
Schedule 4.10 - Litigation
Schedule 4.12 - Material Contracts
Schedule 4.13 - Compliance with Laws
Schedule 4.14 - Employee Benefits
Schedule 4.16 - Regulatory Consents
Schedule 4.17 - Insurance Policies
Schedule 4.19(a) - Investment Advisory Contracts
Schedule 4.19(b) - Clients Subject to ERISA
Schedule 4.23 - Year 2000
Schedule 5.6 - Absence of Defaults
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AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization, dated as of January 24, 2000
(this "Agreement"), is made and entered into by and among FIRST SECURITY
CORPORATION, a Delaware corporation ("FSC"), FIRST SECURITY VAN KASPER, INC., a
Utah corporation ("FSVK"), BLACK & COMPANY, INC., an Oregon corporation (the
"Company"), and the Company's directors.
R E C I T A L S:
A. FSC is a corporation duly organized and existing under the laws of
the State of Delaware, with its principal place of business located at in Salt
Lake City, Utah. FSC is authorized by its Articles of Incorporation to issue (i)
400,000 shares of preferred stock, each of no par value ("FSC Preferred Stock"),
18,052 of which are designated as Class A Preferred Stock, of which 8,596 were
issued and outstanding on November 30, 1999, and (ii) 600,000,000 shares of
common stock, each of $1.25 par value ("FSC Common Stock"), of which as of
November 30, 1999, there were 195,911,896 (net of Treasury) shares issued and
outstanding.
B. FSVK is a corporation duly organized and existing under the laws of
the State of Utah. FSC owns beneficially and of record all of the issued and
outstanding shares of FSVK Common Stock.
C. The Company is a corporation duly organized and existing under the
laws of the State of Oregon. The Company is authorized by its Articles of
Incorporation to issue (i) 600,000 shares of common stock, each of no par value
("Company Common Stock"), of which as of the date of this Agreement there were
334,587.73 shares issued and outstanding, (ii) 9,000 shares of Series A
preferred stock, $10.00 par value ("Company Preferred Stock"), of which there
were 9,000 shares issued and outstanding as of the date of this Agreement, and
(iii) options outstanding for 197,279 shares of Company Common Stock (the
"Options").
D. The parties hereto desire that the Company be merged with and into
FSVK (the "Merger") pursuant to this Agreement and those certain Articles of
Merger in the form attached hereto as Exhibit A (the "Articles of Merger").
E. The Boards of Directors of FSC, FSVK and the Company or authorized
committees thereof, have approved the Merger on the terms and conditions set
forth herein.
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F. The parties intend that the Merger qualify as a reorganization under
Section 368(a) of the Internal Revenue Code.
A G R E E M E N T:
NOW, THEREFORE, in consideration of foregoing and the respective
representations, warranties, covenants, agreements and conditions set forth
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound hereby, covenant and agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger.
(a) Pursuant to the laws of the States of Utah and Oregon, and
subject to the terms and conditions of this Agreement, at the date and time of
the filing of the Articles of Merger with the Secretary of State of the State of
Oregon and the Division of Corporations and Commercial Code, Department of
Commerce of the State of Utah (the last time and date of such filings being the
"Effective Time"), FSC, FSVK and the Company shall consummate the Merger
pursuant to which (a) the Company shall be merged with and into FSVK, and the
separate corporate existence of the Company shall thereupon cease; (b) FSVK
shall be the successor or surviving corporation in the Merger (sometimes
referred to as the "Surviving Corporation") and shall continue to be governed by
the laws of the State of Utah; and (c) the separate corporate existence of FSVK
with all its rights, privileges, immunities, powers and franchises shall
continue unaffected by the Merger, except as set forth in this Article I. FSVK,
as the Surviving Corporation, shall thereupon and thereafter possess all the
rights, privileges, powers and franchises, of a public as well as a private
nature, and shall be subject to all restrictions, disabilities and duties of the
merging entities on whatever account, including subscriptions for shares and all
other things in action or belonging to the merging entities shall be taken and
deemed to be vested in FSVK without further act or deed. FSVK shall thenceforth
be responsible for all the debts, liabilities and duties of each of the merging
entities and may be prosecuted to judgment as if the Merger had not taken place,
or FSVK may be substituted in place of the merging entities and neither the
rights of creditors nor any liens upon any property of either shall be impaired
by the Merger.
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(b) As of the Effective Time, the Articles of Domestication of
FSVK as in effect immediately prior to the Merger shall be the Articles of
Incorporation of the Surviving Corporation until thereafter amended as provided
by law and such Articles of Domestication. The bylaws of FSVK as in effect
immediately prior to the Effective Time shall be the bylaws of the Surviving
Corporation until thereafter changed or amended as provided under applicable
law.
1.2 Directors and Officers of the Surviving Corporation. The directors
and officers of the Surviving Corporation at the Effective Time shall be the
directors and officers of FSVK as of immediately prior to the Effective Time,
and shall serve in their respective positions until their successors shall have
been duly elected or appointed and qualified or until their earlier death,
resignation or removal in accordance with the certificate of incorporation and
the bylaws of the Surviving Corporation.
1.3 Subsequent Actions. If, at any time after the Merger, FSVK shall
consider or be advised that any deeds, bills of sale, assignments, assurances,
or any other actions or things are necessary or desirable to vest, perfect, or
confirm of record or otherwise in FSVK its right, title, or interest in, to, or
under any of the rights, properties, or assets of the Company acquired or to be
acquired by FSVK as a result of or in connection with the Merger, or otherwise
to carry out this Agreement, the officers and directors of FSVK shall be
authorized to execute and deliver, in the name and on behalf of the Company or
otherwise, all such deeds, bills of sale, assignments, and assurances, and to
make and do, in the name and on behalf of the Company or otherwise, all such
other actions and things as may be necessary or desirable to vest, perfect, or
confirm any right, title, and interest in, to, and under such rights,
properties, or assets in FSVK or otherwise to carry out this Agreement.
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ARTICLE II
CONVERSION OF SECURITIES
2.1 Conversion of Capital Stock of Merging Entities.
(a) Conversion of Company Capital Stock. In accordance with
this Agreement, as of the Effective Time, by virtue of the Merger and without
any further action on the part of the holders of any shares of stock of the
Company (hereinafter individually, a "Shareholder" and collectively,
"Shareholders"), each issued and outstanding share of Company Common Stock (of
which there shall be no more than 531,866.73 shares fully diluted and assuming
all Options shall have been exercised or cancelled) ("Company Capital Stock"),
other than shares as to which dissenters' rights are perfected ("Dissenting
Shares"), and all rights in respect thereof, shall be converted, ipso facto,
into the right to receive the Base Consideration (as defined in Section 2.1(b)
below).
Prior to the Effective Time, all shares of Company Preferred Stock
shall have been redeemed and cancelled. As of the Effective Time, all shares of
Company Capital Stock, including all option shares, shall no longer be
outstanding and shall automatically be canceled and retired and shall cease to
exist. Each holder of a certificate representing any shares of Company Capital
Stock shall cease to have any rights with respect thereto, except the right to
receive, upon the surrender of any such certificates, the Base Consideration
upon the terms and subject to the conditions set forth herein.
(b) Definitions Pertaining to Base Consideration.
"FSC Share Price" shall mean the average of the last sales
price per share of FSC Common Stock on the Nasdaq National
Market for the ten (10) consecutive trading days ending on the
trading day which is five (5) trading days prior to the
Effective Time (the "Closing Calculation Period").
"Company Share Price" shall mean $7,500,000 divided by the
total number of issued and outstanding shares of Company
Capital Stock immediately prior to the Effective Time.
"Exchange Ratio" shall mean (in each case, rounded to the
nearest one thousandth of a share) that number of shares of
FSC Common Stock (rounded to the nearest one thousandth)
determined as follows:
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Company Share Price
-------------------
FSC Share Price
"Base Consideration" for each share of Company Capital Stock
issued and outstanding immediately prior to the Effective Time
shall mean that number of duly authorized, validly issued,
fully paid and nonassessable shares of FSC Common Stock equal
to the Exchange Ratio.
(c) FSC Stock. All shares of FSC Common Stock which are
outstanding immediately prior to the Effective Time shall continue to be
outstanding after the Effective Time.
2.2 Holdback Amount. Twenty percent (20%) of the Base Consideration
payable in shares of FSC Common Stock (the "Holdback") shall be withheld by FSC
at Closing (as defined in Section 8.1 below) and issued each Shareholder of
record as of the Effective Time as soon as reasonably practical after the first
anniversary of the Closing Date provided that (1) there are no actions,
proceedings or investigations pending, contemplated by governmental authorities
or threatened against or relating to the Company or its current or former
officers, directors, employees or representatives relating, directly or
indirectly, to the matters disclosed in Schedule 4.13 hereto and/or Sirena
Apparel Group, Inc., and (2) all claims, causes of action and proceedings
against the Company in the matter of American Industries, Inc. et al. v. Imaging
Technologies Corp., et al., shall have been dismissed, released or fully
discharged and there shall be no additional actions, proceedings, claims or
investigations pending, contemplated by governmental authorities or threatened
against or relating to the Company or its officers, directors, employees or
representatives in connection with such matter. If any actions, proceedings or
investigations relating to the matters referenced in this Section 2.2(a) have
been commenced, contemplated by governmental authorities or threatened on or
before the first anniversary of the Effective Time, FSC and FSVK shall be
entitled to retain the Holdback, or any portion thereof, to cover any and all
liability and costs reasonably expected to be incurred by the Company in
connection with such matters, including litigation costs and attorneys' fees,
until such action, proceeding or investigation has been settled or dismissed,
the liability arising therefrom discharged, or, in the case of a threatened
action, proceeding or investigation, or an action, proceeding or investigation
contemplated by the government, more than one year has elapsed without such
action, proceeding or investigation being commenced or again threatened.
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Notwithstanding the foregoing, the Holdback shall be subject to offset
(and shall be appropriately adjusted at the time of any such offset for all
purposes hereunder) by any amounts owed to FSC or FSVK pursuant to the
provisions of Section 10.1(d) hereof. Amounts to be offset against the Holdback
shall be determined by (i) dividing the amount or amounts to be offset by the
market price of FSC Common Stock at the time of offset calculated in the same
manner that the FSC Share Price was calculated at the Effective Time and (ii)
subtracting the resulting number of shares of FSC Common Stock from the number
of shares of FSC Common Stock that would be obtained by dividing the Holdback by
the FSC Share Price. The full amount of the Holdback, including any increase in
value resulting from an increase in the market value of FSC Common Stock, shall
be subject to offset.
(a) Adjustments to Exchange Ratio for the Holdback. The
Exchange Ratio shall be appropriately adjusted with respect to the Holdback so
as to ensure that the Shareholders as of the Effective Time will realize the
effects of transactions relating to FSC or the FSC Common Stock occurring
subsequent to the Effective Time as if such Shareholders had been issued the FSC
Common Stock representing the Holdback as of the Effective Time. These events
shall include, without limitation: (i) a split or combination of the FSC Common
Stock, or payment of a stock dividend or other stock distribution in FSC Common
Stock; (ii) an issuance to all holders of FSC Common Stock of rights or warrants
to purchase FSC Common Stock; (iii) a distribution to all holders of FSC Common
Stock of capital stock (other than FSC Common Stock) or evidences of
indebtedness of FSC or of assets (including securities, but excluding those
rights, warrants, dividends and distributions referred to above); and (iv)
distributions of cash on the FSC Common Stock; provided, however, that if a cash
distribution to be paid by FSC in an amount that would reasonably be expected to
impair the ability of the Merger to qualify as a reorganization under Section
368(a) of the Code, such distribution amount shall be paid instead in shares of
FSC Stock.
In the event of (i) a reclassification of the FSC Common Stock or (ii)
a consolidation, merger or combination involving FSC or a sale or conveyance to
another person of all or substantially all of the property and assets of FSC, in
each case, as a result of which the holders of FSC Common Stock shall be
entitled to receive stock, other securities, other property or assets (including
cash) with respect to or in exchange for such FSC Common Stock, the Shareholders
as of the Effective Time shall be entitled, upon the occurrence of such event,
to the kind and amount of shares or stock, other securities or other property or
assets (including cash) which they would have owned or been entitled to receive
upon such
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reclassification, consolidation, merger, combination, sale or conveyance had the
shares of FSC Common Stock representing the Holdback been issued prior to such
event.
FSC shall take no action, or fail to take any action, which would or is
reasonably likely to have the effect of avoiding the adjustment provisions
contemplated hereby.
2.3 Contingent Consideration.
(a) Payment of Contingent Consideration. Subject to and in
accordance with the provisions of this Section 2.3, each Shareholder shall have
the right to receive the Contingent Consideration (as defined in Section 2.3(b)
below) for each share of Company Capital Stock (other than Dissenting Shares)
held by such Shareholder as of the Effective Time. If earned as provided herein,
the Contingent Consideration shall be paid on or before April 30, 2003 (the
"Contingent Consideration Payment Date"). The shares of FSC Common Stock to be
issued in respect of the Contingent Consideration shall be registered under the
Securities Act of 1933 (the "Act") and approved for quotation on the Nasdaq
National Market.
(b) Definitions Pertaining to Contingent Consideration.
"Earn Out FSC Share Price" shall mean the FSC Share Price.
"Earn Out Amount" shall be determined as follows:
(i) If the Company's aggregate, accumulated earnings
before taxes, calculated as set forth in this Section 2.3
(the "EBT") for the three (3) year period commencing at
the Effective Time and ending on the last day of the
month nearest to the three year and three month
anniversary of the Effective Time of this Agreement,(1)
(the "Earn Out Period") equals or exceeds $8,000,000, the
Earn Out Amount shall equal $4,750,000 divided by the
total number of issued and outstanding shares of Company
Capital Stock immediately prior to Effective Time.
_______________________
(1) For example, if the Effective Time is March 14, 2000, the Earn Out Period
ends on May 31, 2003. If the Effective Time is March 15, 2000, the Earn Out
Period ends on June 30, 2003.
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(ii) If the EBT is less than $8,000,000, but equals or
exceeds $5,000,000, for the Earn Out Period, the Earn Out
Amount shall equal $3,750,000 divided by the total number
of issued and outstanding shares of Company Capital
Stock.
(iii) If the EBT for the Earn Out Period is less than
$5,000,000, the Earn Out Amount shall be zero and the
Shareholders shall not have the right to receive any
Contingent Consideration.
"Earn Out Exchange Ratio" shall mean (in each case, rounded to
the nearest one thousandth of a share) that number of shares
of FSC Common Stock (rounded to the nearest one thousandth)
determined as follows:
Earn Out Amount
-------------------------
Earn Out FSC Share Price
"Contingent Consideration" for each share of Company Capital
Stock shall mean that number of duly authorized, validly
issued, fully paid and nonassessable shares of FSC Common
Stock equal to the Earn Out Exchange Ratio.
(c) Calculation of EBT. For purposes of this Section 2.3,
"EBT" for the Earn Out Period shall mean Revenues less Expenses, as defined
below, generated in the normal course of the Company's business as paid or
accrued by the Company in accordance with Generally Accepted Accounting
Principles ("GAAP") consistent with the Company's prior practices The items of
Revenue and Expense to be calculated in determining EBT are identified in
Exhibit 2.3.
(d) Definition of Adjusted Clearance Fees. For purposes of
Section 2.3(c) above, Adjusted Clearance Fees shall mean actual clearing fees
(incurred in the normal course of the Company's business) less a minimum monthly
add back to be derived from savings realized from renegotiating the Company's
clearing agreement (the "Add-Back"), which Add-Back shall be deducted from the
actual clearing fees until such time that the Company's back office is converted
over to FSVK's back office (the "BOC date"). For purposes of this Section
2.3(d), the minimum monthly Add-Back shall not be less than $32,000. After the
BOC date, the Adjusted Clearance Fees shall be the actual clearing fees of the
new clearing agreement.
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(e) Notice of EBT. FSVK shall determine the EBT for the Earn
Out Period within sixty (60) days of the third anniversary of the Effective Time
and shall thereafter deliver prompt notice (the "EBT Notice") of such amount to
the Shareholders, who (through the Company Representative as defined in Section
11.8) shall have the right to inspect, audit and make extracts from all of the
records, files and books of account of FSVK relating to the EBT for purposes of
verifying the amount of the Contingent Consideration payable pursuant to this
Section 2.3, at reasonable times during business hours, upon advance notice to
FSVK.
(f) Disputes Regarding EBT. The Shareholders (through the
Company Representative) shall have thirty (30) days from the receipt of the EBT
Notice to notify FSVK if they dispute the amount of the EBT. If FSVK has not
received notice of any such dispute within such 30-day period, the EBT contained
in the EBT Notice shall be final. If, however, the Shareholders (through the
Company Representative) have delivered notice of such a dispute to FSVK within
such 30-day period, then FSVK shall, pursuant to Article II, pay such amount of
the Contingent Consideration that is not subject to any dispute and FSVK shall
engage FSC's independent accounting firm to review the amount of the disputed
EBT, the books of the Company operated as a division of FSVK, and the EBT Notice
(and related information) to determine the amount, if any, that the EBT is in
error. FSVK shall use reasonable efforts to make its determination of the EBT
(the "Revised EBT") if any, within thirty (30) days of the appointment of its
independent accounting firm to review the EBT. The determination shall be final
and binding on the parties hereto. The costs of such determination shall be
borne by FSC if the Revised EBT is higher than the EBT and by the Shareholders
in all other cases. The independent accounting firm relied upon by FSVK for
purposes of this Section 2.3(f) shall be a "Big 5" accounting firm.
(g) Management of Surviving Corporation. Until the latest of
January 1, 2003, or the expiration of the Earn Out Period, FSVK shall operate
the Black & Company division of FSVK, and will provide adequate financial,
technical and management support for the Black & Company division. FSVK agrees
that separate income statement accounting records will be kept for the Company
during the period from the Effective Time through the third anniversary of the
Effective Time.
2.4 Dissenting Shares.
(a) No Conversion. Notwithstanding any provision of this
Agreement to the contrary, Dissenting Shares shall not be converted into or
represent a right to receive the Base
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Consideration pursuant to Section 2.1, including the Holdback, if any, payable
pursuant to Section 2.2, nor the Contingent Consideration pursuant to Section
2.3, but the holder thereof shall be entitled to only such rights as are granted
by the Oregon Business Corporation Act.
(b) Appraisal Rights. Notwithstanding the provisions of
Section 2.4(a) above, if any Shareholder who demands appraisal of such
Shareholder's shares of Company Capital Stock under the Oregon Business
Corporation Act effectively withdraws or loses (through failure to perfect or
otherwise) his or her right to appraisal, then as of the Effective Time or the
occurrence of such event, whichever later occurs, such Shareholder's shares of
Company Capital Stock shall automatically be converted into and represent only
the right to receive the Base Consideration, including the Holdback Amount, if
any, payable pursuant to Section 2.2, as provided in Section 2.1 hereof and the
Contingent Consideration pursuant to Section 2.3, if any, without interest,
following surrender of the certificate or certificates representing such shares
of Company Capital Stock pursuant to Section 2.5 hereof.
(c) Notice. The Company shall give FSC prompt notice of any
written demands for appraisal or payment of the fair value of any shares of
Company Capital Stock, withdrawals of such demands, and any other instruments
served on the Company pursuant to the Oregon Business Corporation Act. Except
with the prior written consent of FSC, the Company shall not voluntarily make
any payment with respect to any demands for appraisal, settle or offer to settle
any such demands.
2.5 Exchange of Shares and Certificates.
(a) Exchange Procedures; Transfer of Shares. As soon as
reasonably practicable after the Effective Time, FSC shall mail to each holder
of record of a certificate or certificates which immediately prior to the
Effective Time represented outstanding shares of Company Capital Stock (the
"Certificates") whose shares were converted into the right to receive shares of
FSC Common Stock pursuant to Section 2.1 hereof (i) a letter of transmittal
(which shall specify that delivery shall be effected, and risk of loss and title
to the Certificates shall pass, only upon delivery of the Certificates to FSC
and which shall be in such form and have such other provisions as FSC may deem
reasonably necessary) and (ii) instructions for use in effecting the surrender
of the Certificates in exchange for certificates representing shares of FSC
Common Stock, and cash in lieu of fractional shares of FSC Common Stock. Upon
surrender of a Certificate for cancellation to FSC, together with such documents
as may reasonably be required by FSC, the holder of such Certificate shall be
entitled to receive in exchange therefor (i) a certificate representing that
whole number of shares which such
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holder has the right to receive pursuant to the provisions of Section 2.1 above
and (ii) cash in lieu of any fractional shares as contemplated by this Section
2.5, and the Certificate so surrendered shall forthwith be canceled. In the
event of a transfer of ownership of Company Capital Stock which is not
registered in the transfer records of the Company, a certificate representing
the proper number of shares of FSC Common Stock may be issued to a person other
than the person in whose name the Certificate so surrendered is registered, if
such Certificate shall be properly endorsed or otherwise be in proper form for
transfer and the person requesting such payment shall pay any transfer or other
taxes required by reason of the issuance of shares of FSC Common Stock to a
person other than the registered holder of such Certificate or establish to the
satisfaction of FSC that such tax has been paid or is not applicable. Until
surrendered as contemplated by this Section 2.5, each Certificate shall be
deemed at any time after the Effective Time to represent only the right to
receive upon such surrender the Base Consideration and cash in lieu of any
fractional shares of FSC Common Stock as contemplated by this Section 2.5, and,
if applicable, the Holdback Amount and/or the Contingent Consideration. No
interest shall be paid or accrue on any cash payable in lieu of any fractional
shares of FSC Common Stock. A Lost Stock Certificate Affidavit in the form
attached hereto as Exhibit 2.5(a), together with either an insurance bond or
indemnification agreement running to the benefit of FSC as determined by FSC in
its sole discretion, may be submitted in lieu of a Certificate.
(b) Distributions with Respect to Unexchanged Shares. No
dividends, payments or other distributions with respect to FSC Common Stock with
a record date after the Effective Time, including the payment of the Holdback
and/or the Contingent Consideration, shall be paid to the holder of any
unsurrendered Certificate with respect to the shares of FSC Common Stock
represented thereby, and no cash payment in lieu of fractional shares shall be
paid to any such holder pursuant to Section 2.5(e) hereof, until the surrender
of such Certificate in accordance with this Article II. Subject to the effect of
applicable laws, upon surrender of any such Certificate, there shall be paid to
the holder of the Certificate a certificate representing whole shares of FSC
Common Stock issued in exchange therefor, and the amount of any cash payable
without interest in lieu of a fractional share of FSC Common Stock to which such
holder is entitled pursuant to Section 2.5(e) and the amount of any dividends or
other distributions with a record date or payment date after the Effective Time
theretofore paid with respect to such whole shares of FSC Common Stock.
(c) No Further Ownership Rights in the Company Capital Stock;
No Transfer Following the Effective Time. All shares of FSC Common Stock issued
upon the surrender for
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exchange of Certificates in accordance with the terms of this Article II
(including any cash paid pursuant to Section 2.5(e) hereof) shall be deemed to
have been issued (and paid) in full satisfaction of all rights pertaining to the
shares of Company Capital Stock theretofore represented by such Certificates,
and there shall be no further registration of transfers on the stock transfer
books of FSVK as the successor to the Company of the shares of Company Capital
Stock which were outstanding immediately prior to the Effective Time. If, after
the Effective Time, Certificates are presented to FSVK or FSC for any reason,
they shall be canceled and exchanged as provided in this Article II, except as
otherwise provided by law.
(d) Fractional Shares.
(i) No certificates representing fractional shares of FSC
Common Stock shall be issued upon the surrender for exchange of Certificates or
payment of the Contingent Consideration, and such fractional share interests
shall not entitle the owner thereof to vote or to any other rights of a
stockholder of FSC.
(ii) Notwithstanding any other provision of this
Agreement, each Shareholder of Company Capital Stock converted pursuant to the
Merger who would otherwise have been entitled to receive a fraction of a share
of FSC Common Stock (after taking into account all Certificates delivered by
such holder) shall receive, in lieu thereof, cash (without interest) in an
amount equal to (A) such fraction multiplied by (B) the FSC Share Price or, if
applicable, the Earn Out FSC Share Price.
(e) No Liability. None of FSC, FSVK, or the Company shall be
liable to any person in respect of any shares of FSC Common Stock (or dividends
or distributions with respect thereto) or cash delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law. If any
Certificates shall not have been surrendered prior to five years after the
Effective Time, or immediately prior to such earlier date on which any shares of
FSC Common Stock, any cash in lieu of fractional shares of FSC Common Stock, or
any dividends or distributions with respect to FSC Common Stock in respect of
such Certificate would otherwise escheat to or become the property of any
governmental entity, any such shares, cash, dividends or distributions in
respect of such Certificate shall, to the extent permitted by applicable law,
become the property of the Surviving Corporation free and clear of all claims or
interest of any person previously entitled thereto.
(f) Share Transfer Books. The share transfer books of the
Company shall be closed as of the close of business on the day that is two (2)
days prior to the Effective Time. After the Effective Time,
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there shall be no further registration of transfers on the share transfer books
of the Surviving Corporation of shares of the Company Capital Stock which were
outstanding immediately prior to the Merger.
ARTICLE III
COVENANTS OF THE COMPANY
3.1 Conduct of Business Pending the Closing. Except as otherwise
contemplated hereby, between the date hereof and the Effective Time, or the time
when this Agreement terminates as provided herein, the Company shall conduct its
operations and business in the usual and ordinary course of business and
consistent with past practice and use its commercially reasonable efforts to
retain for the benefit of FSC and FSVK the continuing services of the present
officers and employees of the Company, to preserve the goodwill of customers and
others having business relations with the Company, to preserve the benefits of
all contractual relationships with others and to keep in force at least at their
present limits all policies of insurance currently in effect. Without limiting
the generality of the foregoing, and except as otherwise specifically permitted
by this Agreement, during the period from the date hereof to the earlier of the
Effective Time or the termination of this Agreement, the Company shall not,
without the prior written authorization of the Chairman and Chief Executive
Officer of FSVK:
(a) Change in Capital Stock; Issuance of Shares. Make any
change in its authorized capital stock, or issue, agree to issue or permit the
Company to become obligated to issue any shares of capital stock, or securities
convertible into capital stock;
(b) Options, Warrants, and Rights. Grant or issue any options,
warrants or other rights, including stock appreciation rights, of any kind
relating to the purchase of shares of capital stock, or securities convertible
into capital stock (except for the Options outstanding on the date hereof as
described in Schedule 4.3, the Company hereby represents and warrants that no
options, warrants, stock appreciation rights or other rights to purchase shares
of its capital stock are outstanding on the date hereof);
(c) Dividends. Declare or pay any dividends or other
distributions on any shares of capital stock other than dividends payable upon
redemption of the Preferred Shares; provided that the total aggregate amount of
such dividends does not exceed $3,000;
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(d) Purchase of Shares. Purchase or otherwise acquire, or
agree to acquire, any shares of stock, other than in a fiduciary capacity and
other than the redemption of all issued and outstanding shares of Company
Preferred Stock immediately prior to Closing for not more than $93,000 including
all earned but unpaid dividends;
(e) Benefit Plans. Except as required by law, or as provided
in subsection 4.14(k) below, or as otherwise agreed to by FSC, enter into or
amend any pension, retirement, stock option, stock appreciation, profit sharing,
deferred compensation, consultant, bonus, group insurance or similar benefit
plan in respect of any directors, officers or other employees;
(f) Conduct of Business. Except as contemplated by this
Agreement, take or omit to take any action which (i) causes the Company not to
conduct its business in a manner consistent with normal business practices,
including with respect to the securities or asset portfolios of the Company,
(ii) has a material and adverse effect on the financial condition (present or
prospective), business, properties, assets or operations of the Companies (the
parties hereto recognize that the operation of the Company until the Effective
Time is the responsibility of the Company and its Board of Directors and
officers; nevertheless, the Company shall keep FSVK advised of all important
changes in the financial condition (present or prospective), business,
properties, assets or operations of the Company);
(g) Acquisitions and Mergers. Acquire or merge with any other
company or acquire any significant part of the assets of any other company;
(h) Liens; Indebtedness; Increase in Compensation, etc. Except
in the ordinary course of business, (i) mortgage, pledge or subject to a lien or
any other encumbrance any of its assets, dispose of any assets, incur or cancel
any indebtedness or claims, purchase or lease any assets having a purchase price
or lease cost, in the aggregate, of more than $25,000, or (ii) increase any
compensation or benefits payable to officers or employees, except to pay routine
merit increases in accordance with past practices.
(i) Amendments to Charter, etc. Amend the Company's Articles
of Incorporation or make any material amendments to the Company's bylaws which
would interfere in any manner with the transactions contemplated by this
Agreement.
3.2 Investigation; Access. The Company shall diligently endeavor to (i)
take or cause to be taken all action required under this Agreement on its part
to be taken as promptly as practicable so as to permit the consummation of the
transactions contemplated by this Agreement at the earliest possible date and
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cooperate fully with FSC and FSVK to that end, including, without limitation,
providing to FSC and FSVK, and their respective employees, accountants and
counsel, access to the Company's books, records, reports, tax returns and
facilities and to its employees, accountants, and counsel; provided, however,
that such investigation to be conducted by FSC and FSVK shall be performed in
such a manner which will not unreasonably interfere with the normal operations,
or customer or employee relations, of the Company and shall be in accordance
with procedures established by the parties having due regard for the foregoing,
and (ii) furnish all necessary information for inclusion in any applications
relating to the consents, approvals and permissions of regulatory authorities
referred to in Article VII.
FSC covenants and agrees that FSC and its representatives,
counsel, accountants, agents and employees will hold in strict confidence all
documents and information concerning the Company received from any of them
(except to the extent that such documents or information are a matter of public
record or require disclosure in the Proxy Statement/Prospectus, the Registration
Statement to be filed by FSC pursuant to Section 5.10, or any of the public
information of any applications required to be filed with any governmental or
regulatory agency to obtain the approvals and consents required to effect the
transactions contemplated hereby), and if the transactions contemplated herein
are not consummated, such confidence shall be maintained and all such documents
shall be returned to the Company.
3.3 Regulatory Approvals. The Company shall (i) use reasonable efforts
in good faith to obtain all necessary regulatory approvals and to take or cause
to be taken all other action required under this Agreement on its part to be
taken as promptly as practicable so as to permit the consummation of the
transactions contemplated by this Agreement at the earliest possible date, and
cooperate fully with FSC and FSVK to that end, and (ii) furnish all necessary
information for inclusion in any applications relating to the consents,
approvals, and permissions of regulatory authorities referred to in Article VII.
The Company shall have the right to review all applications to such regulatory
authorities before the filing thereof and to comment upon the form of such
applications and the information contained therein. The Company knows of no
reasons why the transactions contemplated by this Agreement should not be
approved by the regulatory authorities.
3.4 Termination of Employee Benefit Plans. Pursuant to Section 4.14(k)
of this Agreement, the Company shall terminate the Black & Company 401(k) Plan
and Trust ("Company 401(k) Plan"). On or before the Effective Time, the Company,
FSVK and FSC shall determine whether it is in the best interests of the parties
hereto and the employees of the Company to terminate any other employee benefit
plans (as described in Section 4.14) or to merge such plans into an appropriate
FSC benefit plan. FSC will
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cooperate in such determination to enable the plan participants to "roll-over"
any benefits of said plans into any existing benefit plan maintained by FSC as
to which such benefits may be transferred without necessity of material
amendment to, or adverse effect on qualification of, such FSC plan and provided
further that FSC incurs no expense or other adverse result in allowing such
rollover of benefits.
3.5 Information for Proxy Statement. Upon request by FSC, the Company
shall timely prepare and deliver to FSC, in such form required by rules and
regulations of the United States Securities and Exchange Commission (the "SEC"),
all information, descriptions, accounting reports and schedules (including
audited financial statements in the form required by Regulation S-X of the SEC,
as may be required) and other materials required for preparation and filing of
the Registration Statement contemplated by Section 5.10 of this Agreement.
3.6 Environmental Reports. Within twenty (20) days of execution of this
Agreement, the Company shall cause to be prepared, by firms reasonably
acceptable to FSC, Phase I Environmental Reports with respect to real property
owned by the Company, if any. In the event a Phase I report indicates that the
Company may be a potentially liable party for remedial action under any
environmental laws (as such term is defined in Section 4.6 below), then the
Company shall cause Phase II Environmental Reports to be prepared detailing any
possible exposure under such laws. The cost of said Phases I and II
Environmental Reports and the cost of any remedial action determined to be
necessary by such reports shall be borne by the Company.
3.7 Notification of Actions. The Company covenants and agrees to
immediately notify FSC and FSVK in the event of any action which materially
affects any of the covenants set forth in this Article III.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND DIRECTORS
As an inducement to FSC and FSVK to enter into this Agreement and
consummate the transactions contemplated hereby, and in addition to any
representations and warranties made elsewhere in this Agreement, the Company and
its directors, solely in their capacity as directors and not in their capacity
as individuals or shareholders, represent and warrant to FSC and FSVK as of the
date of this Agreement and as of the Effective Time (unless otherwise specified)
as follows:
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4.1 Organization, Conduct of Business, etc. The Company (i) is duly
organized and validly existing under the laws of the State of Oregon, (ii) has
all requisite power and authority (corporate and other) to own its properties
and conduct its business as now being conducted, (iii) is duly qualified to do
business in each jurisdiction in which the character of the properties owned or
leased by it therein or in which the transaction of its business makes such
qualification necessary, except where failure to so qualify would not have a
material adverse effect on the Company or its business, operations, properties,
assets or condition (financial or otherwise), and (iv) is not transacting
business, or operating any properties owned or leased by it, in violation of any
provision of federal or state law or any rule or regulation promulgated
thereunder, which violation would have a material adverse effect on the Company
or its business, operations, properties, assets or condition (financial or
otherwise). The Company does not own any equity interest in any other business
organization and the Company is not a party to any joint venture or similar
enterprise.
4.2 Capitalization. The authorized capital stock of the Company
consists solely of 600,000 shares of Company Common Stock and 9,000 shares of
Company Preferred Stock. As of the date hereof, there are 334,587.73 shares of
Company Common Stock issued and outstanding and 9,000 shares of Company
Preferred Stock issued and outstanding. The outstanding shares of Company Common
Stock and the holders of record thereof, and the outstanding shares of Company
Preferred Stock and the holders of record thereof, are identified on Schedule
4.2 hereto. All of the outstanding shares of capital stock of the Company have
been duly authorized and are validly issued, fully paid and nonassessable.
4.3 Options, SARs, Warrants, etc. Schedule 4.3 identifies the holders
of each of the Options, the number of Options held by each holder of Options and
the Option exercise price with respect thereto. Except for the Options, there
are no outstanding stock appreciation rights or options, warrants, calls, units
or commitments of any kind relating to the issuance, sale, purchase or
redemption of, or securities convertible into, capital stock of the Company.
4.4 Authorization; Validity of Agreement. The Company has the corporate
power and authority to execute and deliver this Agreement. This Agreement has
been duly and validly approved by the Board of Directors of the Company, has
been duly executed and delivered on behalf of the Company, and, subject to
approval by the shareholders of the Company, constitutes a valid and binding
agreement of the Company, enforceable against the Company in accordance with its
terms, except as the enforceability thereof may be limited by bankruptcy,
liquidation, receivership, conservatorship, insolvency, moratorium or other
similar laws affecting the rights of creditors generally and by general
equitable principles.
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4.5 Company Financial Statements; No Undisclosed Liabilities. The
Company's audited Balance Sheets as of May 31, 1999, and its audited Statements
of Income and Statements of Cash Flow for the year ended May 31, 1999, and the
Company's unaudited interim Balance Sheet for the period ended October 31, 1999,
heretofore delivered to FSC (hereinafter the "Financial Statements"), were
prepared in accordance with GAAP consistently applied (except for such interim
statement which requires year-end adjustments) and present fairly the Company's
financial condition, results of operations and changes in cash flow as of such
dates.
The Company will provide to FSVK on a monthly basis prior to
the Effective Time interim financial statements relating to the Company.
Except as and to the extent stated in the Financial Statements
delivered or to be delivered pursuant to this Section 4.5 and in Schedule 4.5,
and except for those liabilities incurred in the normal course of the Company's
business, the Company has no liabilities or obligations, secured or unsecured
(whether accrued, absolute, contingent or otherwise), and whether due or to
become due, including but not limited to liabilities on account of taxes, other
governmental charges or lawsuits subsequently brought, that exceed $50,000 in
the aggregate. Except as set forth on Schedule 4.5, there are no suits, actions
or proceedings pending or, to the knowledge of the Company or its directors or
officers, threatened, or any contingent liability which would give rise to any
right of indemnification on the part of any director or officer of the Company
or his or her heirs, executors or administrators, as against the Company or any
successor to the business of the Company.
4.6 Environmental Matters. For purposes of this Section 4.6, the term
"environmental laws" shall include all state and federal laws designed to
protect human health or the environment, as amended from time to time, and all
regulations promulgated thereunder, including, without limitation, the Clean Air
Act, 42 U.S.C.A.ss.ss. 7401, et seq., the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C.A.ss.ss. 9601, et seq., the Federal
Water Pollution Control Act, 33 U.S.C.A.ss.ss. 1251, et seq., the Resource
Conservation and Recovery Act, 42 U.S.C.A.ss.ss. 6901, et seq., and the Toxic
Substances Control Act, 15 U.S.C.A.ss.ss. 2601, et seq. "Hazardous substance"
shall include all petroleum products as well as any toxic or hazardous material,
hazardous waste or other hazardous or regulated substance defined in or
regulated by any environmental law.
Except as set forth in Schedule 4.6, to the best knowledge of
the Company and its directors after due inquiry, neither the Company, nor any
property of the Company, is subject to any
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pending or potential claim, liability or obligation to any person arising under
any environmental law. With respect to the real property owned or leased by the
Company, to the best knowledge of the Company and its directors:
(a) No such property is presently contaminated by, and no such
property has ever been used or is presently being used by any person to
generate, manufacture, refine, transport, treat, store, handle or dispose of,
any hazardous substance in any regulated form or quantity.
(b) No such property has ever contained or presently contains,
or has been used or is being used by any person for storage of, asbestos,
ureaformaldehyde foam insulation, PCBs, dioxins, mercury, lead or uranium (or
other heavy metal) products or tailings, or any other hazardous substance in any
regulated form or quantity, whether contained in construction or fill materials
or used or stored thereon or therein.
(c) Neither the Company nor any other tenant or occupant of
any such property has received a summons, citation, directive, letter, notice of
violation, request for information or other communication, written or oral, from
any local, state or federal agency concerning any possible intentional or
unintentional action or omission on the part of any person which has resulted in
the possible release of any hazardous substance affecting such property or
concerning any other possible violation of any environmental law affecting the
property.
(d) To the extent any permit, approval or registration is or
has been required to be obtained or maintained under any environmental law with
respect to any such property, any improvement of or on any such property or any
activity occurring on any such property, each such permit, approval or
registration has been obtained and is in good standing. In addition, all such
permits, approvals and registrations have been disclosed to FSC in writing.
(e) No such property contains or has ever contained any
storage tank used or intended for use to store any hazardous substance.
4.7 Title to Properties. Except as reflected in the Financial
Statements delivered or to be delivered pursuant to Section 4.5, the Company
owns, free and clear of any liens, claims, charges, options, or other
encumbrances, all of the property, real, personal or mixed, reflected in the
Financial Statements and all property acquired since such date. The Company has
not received a notice of violation of any applicable zoning regulation,
ordinance or other law, order, regulation or requirement relating to its
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operations or its properties. To the best knowledge of the Company and its
directors, there are no such violations of material nature and all buildings and
structures used by the Company substantially conform with all applicable
ordinances, codes and regulations. In the opinion of the Company and its
directors, all such properties which are material to the business or operations
of the Company are in a good state of maintenance and repair and are adequate
for its current uses and purposes. During each of the past three calendar years,
the Company and its properties have been insured for customary risks with
customary limits, deductibles, and exclusions, and such insurance protection
continues in effect as of the date hereof. The Company has made available to FSC
true and correct copies of all deeds, title insurance policies and surveys it
has with respect to the real property owned by it and copies of all leases with
respect to real property leased by it.
4.8 Absence of Defaults. The execution of this Agreement and the
Articles of Merger does not and performance of the transactions contemplated by
them will not (assuming Company shareholder approval and applicable regulatory
approval) (a) violate the provisions of the Articles of Incorporation or Bylaws
of the Company, or (b) violate the provisions of or place the Company in default
under any agreement, indenture, mortgage, lien, lease, contract, instrument,
order, judgment, decree, ordinance, statute, or regulation to which the Company
is subject, to which any property of the Company is subject, or to which the
Company is a party, which violations or defaults would in the aggregate have a
material adverse effect on the business, operations, properties, assets, or
condition (financial or otherwise) of the Company.
4.9 Absence of Material Adverse Changes. Except as set forth on
Schedule 4.9, since October 31, 1999, there has been no material adverse change,
and no development involving a reasonably foreseeable prospective material
adverse change, in or affecting the financial condition (present or
prospective), business, properties, assets or operations (present or
prospective) of the Company, other than general developments or changes
affecting the economy or the Company's industry as a whole. Since October 31,
1999, the Company has conducted its businesses only in the ordinary course and
consistent with prudent investment-banking and brokerage service standards.
4.10 Actions, Proceedings and Investigations. Set forth on Schedule
4.10 hereto is a complete and accurate listing of all litigation, administrative
or other proceedings to which the Company is a party. Any and all amounts paid
in connection with such proceedings shall be subject to the terms and conditions
of Article X, including Sections 10.1(c) and (d). There are no actions,
proceedings or investigations pending, or, to the knowledge of the Company or
its directors, threatened or contemplated
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against or relating to the Company or any of its properties or assets (and said
officers are not aware of any facts that would give rise to any such claim),
which would materially and adversely affect the financial condition (present or
prospective), business, properties, assets or operations (present or
prospective) of the Company, or the ability of the Company to consummate the
Merger contemplated hereby.
4.11 Absence of Brokerage Commissions, etc. Except for the Company's
agreement with Berkshire Capital Corporation, the details of which have been
fully disclosed to FSC, all negotiations relative to this Agreement and the
transactions contemplated hereby have been carried on by the Company directly
with FSC and FSVK without the participation or intervention of any other person,
firm or corporation employed or engaged by or on behalf of the Company in such a
manner as to give rise to any valid claim against the Company, FSC or FSVK, for
a brokerage commission, finder's fee or like payment.
4.12 Material Contracts. Except for those documents listed on Schedule
4.12 hereto, copies of which documents have been made available by the Company
to FSC, the Company is not a party to or bound by any commitment, agreement or
other instrument which (i) is material to the business, operations, properties,
assets or financial condition of the Company; (ii) limits the freedom of the
Company to compete in any line of business or with any person; or (iii) requires
the Company to transfer funds (other than in the ordinary course of business)
to, make an investment in or guarantee the debt of any entity. Except as set
forth in Schedule 4.12, the Company is not a party to any contract or agreement,
including but not limited to any lease, service contract or employment agreement
which (i) provides for a remaining term in excess of two (2) years from and
after the date hereof, or (ii) provides for a total payment thereunder in excess
of $25,000.00. The Company is not in default, and there has not occurred any
event that with the lapse of time or giving of notice or both would constitute
such a default, in any respect which has or may have a material adverse effect
on the business, operations, properties, assets or financial condition of the
Company under any of the agreements or other instruments referred to in this
Section 4.12.
4.13 Compliance With Laws; Documentation. Except as set forth on
Schedule 4.13, to the best knowledge of the Company and its directors: the
conduct by the Company of its business does not violate or infringe any domestic
or foreign laws, statutes, ordinances, rules or regulations, the enforcement of
which, individually or in the aggregate, would materially and adversely affect
the business, operations, properties, assets or condition (financial or
otherwise) of the Company; and the Company has complied in all material respects
with every local, state or federal law or ordinance, and
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every regulation or order issued thereunder, now in effect and applicable to the
Company governing or pertaining to broker-dealers and/or investment advisers and
has all licenses and permits which are necessary for the conduct of the
Company's business. The Company is duly registered with the SEC. Set forth on
Schedule 4.13 is a list of the states in which the Company is registered as a
broker-dealer and/or investment adviser. The Company is not required by the
nature of its business or assets, to register in any other state or with any
other governmental agency. The Company has made available to FSC true, complete
and correct copies of its Form BD and such other filings as are required by any
applicable governmental entity.
4.14 Employee Benefits.
(a) Schedule 4.14 contains a true and complete list of each
employee benefit, compensation or welfare benefit plan, program or agreement
sponsored, maintained or contributed to, or required to be contributed to, by
the Company (the "Plans"). The Company does not have any formal plan or
commitment, whether legally binding or not, to create any additional Plan or
modify or change any existing Plan that would affect any employee or terminated
employee of the Company.
(b) Except as set forth in Schedule 4.14, there are no
employment agreements entered into by the Company and no other deferred
compensation or salary continuation agreements or commitments maintained or
agreed to by the Company.
(c) With respect to each of the Plans, the Company has
heretofore made available to FSC true and complete copies of each of the
following documents: (i) each Plan and related trust, if any, (including all
amendments thereto); (ii) annual report and actuarial report, if required to be
filed under the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), for the last two (2) years and the latest financial statement, if
any, for each such Plan; (iii) the most recent summary plan description,
together with each summary of material modifications, required under ERISA; (iv)
the most recent determination letter received from the Internal Revenue Service
("IRS") with respect to each Plan that is intended to be qualified under Section
401 of the Internal Revenue Code (the "Code"); and (v) information which
identifies (x) all asserted or unasserted claims arising under any Plan, (y) all
claims presently outstanding against any Plan, (z) a description of any future
compliance action required with respect to any Plan under ERISA, or federal or
state law.
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(d) All required contributions have been, or will be, made
with respect to each Plan on or prior to the Effective Time of this Agreement
and have been properly recorded on the Financial Statements. Each trust
associated with the Plans, if any, is fully funded as of the date of this
Agreement. Schedule 4.14 sets forth the amount of monthly payments due and owing
for each month that the Plans are continued and the amount of liability for
claims if the Company were to terminate the Plans and the costs involved in any
such termination. There are no other material liabilities that would be incurred
in connection with the termination of the Plans.
(e) Each of the Plans has been operated and administered since
inception in all material respects in accordance with applicable laws,
including, but not limited to, ERISA and the Code and each of the Plans that is
intended to be "qualified" within the meaning of Section 401(a) of the Code is
so qualified. The Plans are legally valid and binding and in full force and
effect. All reports, forms and other documents required to be filed with any
government entity with respect to any Plan (including without limitation,
summary plan descriptions, Form 5500 and summary annual reports) have been
timely filed and are accurate.
(f) All amendments required under the Code have been made by
the Company and approved by the IRS with respect to each Plan on or prior to the
date of this Agreement.
(g) Except as set forth in Schedule 4.14, no Plan provides
benefits, including, without limitation, death or medical benefits (whether or
not insured), with respect to current or former employees beyond their
retirement or other termination of service (other than (A) coverage mandated by
applicable law, (B) death benefits, (C) retirement benefits under any "employee
pension plan," as that term is defined in Section 3(2) of ERISA, (D) deferred
compensation benefits accrued as liabilities on the books of the Company, or (E)
benefits the full cost of which is borne by the current or former employee (or
his or her beneficiary)).
(h) There are no pending or, to the knowledge of the Company
and its directors, threatened or anticipated claims (other than routine claims
for benefits) by, on behalf of or against any of the Plans or any trusts related
thereto.
(i) Except as set forth in Schedule 4.14 or in subsection
4.14(k) below, the consummation of the transactions contemplated by this
Agreement will not (either alone or upon the occurrence of any additional acts
or events) (A) entitle any current or former employee of the Company to
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severance pay, employment compensation or any other payment, benefit or award,
or (B) accelerate or modify the time of payment or vesting, or increase the
amount of any benefit, award or compensation due any such employee.
(j) The Company has never had liabilities to the Pension
Benefit Guaranty Corporation ("PBGC"). No material liability to the PBGC has
been or will be incurred by the Company or other trade or business under "common
control" with the Company (as determined under Section 414(c) of the Code) (each
a "Common Control Entity") on account of any termination of a Plan subject to
Title IV of ERISA. On and after September 2, 1974, no filing has been made by
the Company (or any Common Control Entity) with the PBGC (and no proceeding has
been commenced by the PBGC) to terminate any Plan subject to Title IV of ERISA
maintained, or wholly or partially funded, by the Company (or any Common Control
Entity). Neither the Company nor any Common Control Entity, has (i) ceased
operations at a facility so as to become subject to the provisions of Section
4062(e) of ERISA, (ii) withdrawn as a substantial employer so as to become
subject to the provisions of Section 4063 of ERISA, (iii) ceased making
contributions on or before the Effective Time to any Plan subject to Section
4064(a) of ERISA to which the Company (or any Common Control Entity) made
contributions during the five years prior to the Effective Time, or (iv) made a
complete or partial withdrawal from a multi-employer plan (as defined in Section
3(37) of ERISA) so as to incur withdrawal liability as defined in Section 4201
of ERISA (without regard to subsequent reduction or waiver of such liability
under Section 4207 or 4208 of ERISA).
(k) Notwithstanding any general provision hereof to the
contrary, the Company shall, as soon as practicable but in all events at least
one week prior to the Effective Time, terminate the Company 401(k) Plan by a
separate Company Board of Directors' resolution, and shall forthwith apply to
the IRS for a determination letter regarding qualification of the Company 401(k)
Plan upon such termination. The resolution terminating such plan shall provide
by amendment and/or other proper documentation for distribution of the accounts
of all participants to the participants as soon as practicable following the
issuance of a favorable determination letter by the IRS.
(l) With respect to each Plan:
(1) no prohibited transactions (as defined in Section 406
or 407 of ERISA or Section 4975 of the Code) have occurred for which a statutory
exemption is not available;
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(2) no action or claims (other than routine claims for
benefits made in the ordinary course of Plan administration for which Plan
administrative review procedures have not been exhausted) are pending,
threatened or imminent against or with respect to the Plan, the Company or any
fiduciary (as defined in Section 3(21) of ERISA), of the Plan;
(3) neither the Company, nor any fiduciary (including the
directors) has any knowledge of any facts which could give rise to any such
action or claim; and
(4) it provides that it may be amended or terminated at
any time and, except for benefits protected under Section 411(d) of the Code,
all benefits payable to current, terminated employees or any beneficiary may be
amended or terminated by the Company at any time without liability.
(m) Neither the Company nor any fiduciary has any
liability or is threatened with any liability (whether joint or several) (i) for
any excise tax imposed by Sections 4971, 4975, 4976, 4977 or 4979 of the Code,
or (ii) to a fine under Section 502 of ERISA.
(n) All of the health benefit Plans listed in Schedule
4.14, to the extent applicable, are in compliance with the continuation of group
health coverage (COBRA) provisions, the Health Insurance Portability Act
provisions, the Mental Health Parity Act provisions, the Newborns' and Mothers'
Health Protection Act, and the Women's Cancer Rights Act including but not
limited to Section 4980B and 9801 through 9832 of the Code and Sections 601
through 608, 701 through 703, 711, 712, 732, and 733 of ERISA.
4.15 Taxes and Tax Returns. The Company has delivered (or will deliver
within five (5) days of execution of this Agreement) true and correct copies of
all tax returns filed for the fiscal years ending May 31, 1996, 1997, and 1998.
The Company has filed all federal, state and local tax returns and forms
(including but not limited to Forms 1099), which are required by law to be filed
or delivered as of the date hereof and has paid all taxes which have become due.
Where payment of such taxes is not required to be made as of the date hereof,
the Company has set up an adequate reserve or accrual for the payment of all
taxes required to be paid in respect of the periods covered by such returns.
4.16 Consents and Approvals. Except for (i) the filing of applications
and notices, as applicable, with the Federal Reserve Board, the Nasdaq National
Market System or other self-regulatory organization in the securities and
commodities field, including without limitation, the National
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Association of Securities Dealers, Inc. (hereafter a "Self Regulatory
Authority") and approval of such applications, (ii) the filing of the Company
Articles of Merger with the Oregon Secretary of State and Utah Department of
Commerce, Division of Corporations and Commercial Code, (iii) approval by a
majority of the Company's Shareholders, and (iv) the consents and approvals set
forth in Schedule 4.16, no consents or approvals of, or filings or registration
with, any governmental entity or with any third party are necessary in
connection with (A) the execution and delivery by the Company of this Agreement
or (B) the consummation by the Company of the transactions contemplated by this
Agreement.
4.17 Insurance. Schedule 4.17 contains a true, complete and correct
description of all material policies of fire, liability, production, completion
bond, errors and omissions, workmen's compensation and other forms of insurance
owned or held by the Company, copies of which have previously been made
available to FSC. All such policies are in full force and effect, all premiums
with respect thereto covering all periods up to and including the Effective Time
have been paid, and no notice of cancellation or termination has been received
with respect to any such policy. During the last three years the Company has not
been refused any insurance with respect to its assets or operations, nor has its
coverage been limited, by any insurance carrier to which it has applied for any
such insurance or with which it has carried insurance.
4.18 Labor Matters; Compliance with WARN Act.
(a) (i) The Company is in compliance in all material
respects with all applicable state and federal laws, rules and regulations
respecting employment and employment practices, terms and conditions of
employment, occupational safety and health and wages and hours; (ii) to the
knowledge of the Company, there is no unfair labor practice complaint or charge
against the Company pending or threatened before the National Labor Relations
Board; (iii) there is no labor strike, dispute, slowdown or stoppage pending or
threatened against or affecting the Company and there has been no such job
action during the past three years; (iv) no representation question exists
respecting the employees of the Company, and there is no current organizing
activities among the employees of any such entity; (v) to the knowledge of the
Company, there are no pending or threatened lawsuits, administrative proceedings
or investigations between the Company and current or former officers or
employees, including without limitation, any claims for wrongful termination,
breach of any express or implied contract of employment or for violation of
equal employment opportunity laws; and (vi) there is no grievance arising out of
any collective bargaining agreement or other grievance procedure.
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(b) The Company is not liable for payments or benefits as
a result of any "plant closing," "mass layoff" or "employment loss" (as each is
defined in the Worker Adjustment and Retraining Notification Act of 1988 (the
"WARN Act")) which has not been satisfied in full; nor has the Company been
affected by any transaction or engaged in layoffs or employment terminations
sufficient in number to trigger application of any similar state or local law.
None of the employees of the Company has suffered an "employment loss" (as
defined in the WARN Act).
(c) There are no written personnel policies, rules or
procedures applicable to employees of the Company.
4.19 Investment Advisory Contracts, Funds and Clients.
(a) Schedule 4.19(a) contains a list of (i) all of the
clients to which the Company provides investment management, investment
advisory, sub-advisory, administration or other services on the date hereof
pursuant to written advisory agreements (the "Clients"), including an indication
of whether the asset under management is a mutual fund subject to regulation
under the Investment Company Act of 1940 (the "1940 Act"), (ii) each contract or
agreement, and all amendments thereto, in effect on the date hereof relating to
the rendering of investment advisory or management services, including without
limitation all sub-advisory services or administration services to any Client or
other person (together with any such contract or agreement entered into after
the date hereof, the "Investment Contracts"), (iii) the most recent date on
which each Investment Contract with an investment company was renewed or
continued, and (iv) the net asset value of each Client's assets under management
as of October 31, 1999. The Company does not provide investment management,
investment advisory, administration or other services except pursuant to the
Investment Contracts. None of the Investment Contracts, or any other
arrangements or understanding relating to the rendering of investment advisory
or management services, including without limitation all sub-advisory services,
securities lending or administration services to any Client or other person,
contains any undertaking by the Company to cap, return or reimburse any or all
fees thereunder, or provides for performance-based fees.
(b) To the knowledge of the company and its directors,
Schedule 4.19(b) identifies each Client of the Company that is subject to ERISA.
The accounts of the Company's Clients have been managed in compliance in all
material respects with the applicable requirements of ERISA and all other
applicable laws and regulations.
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(c) No material controversy or disagreement exists
between the Company, on the one hand, and any Client(s), on the other as
required to be disclosed in the Company's Form ADV, Form BD and other filings
with any governmental entity or Self Regulatory Authority.
(d) The Company has adopted a formal code of ethics and a
written policy regarding insider trading and front running, a true, complete and
correct copy of which has been made available to FSC. Such code and policy
comply in all material respects with Section 204A of the Investment Advisers Act
of 1940 (the "Investment Advisers Act"). The policies of the Company with
respect to avoiding conflicts of interest are as set forth in the most recent
Form ADV thereof, as amended, a true, complete and correct copy of which has
been delivered or supplied to FSC. There have been no violations or allegations
of violations of such policies or the conflict of interest policy of the Company
that have occurred or been made that have or would be reasonably likely to have
a material adverse effect upon the Company.
(e) Neither the Company nor any other person "associated"
(as defined under the Investment Advisers Act) with any such entity has for a
period not less than ten years prior to the date hereof been convicted of any
crime or is or has been subject to any disqualification that would be a basis
for denial, suspension or revocation of registration of an investment adviser
under Section 203(e) of the Investment Advisers Act or Rule 206(4)-4(b)
thereunder and there is no reasonable basis for, or proceeding or investigation,
whether formal or informal, or whether preliminary or otherwise, that is
reasonably likely to become the basis for, any such disqualification, denial,
suspension or revocation.
(f) No exemptive orders have been obtained, nor are any
requests pending therefor, with respect to the Company under the Securities
Exchange Act of 1934 (the "1934 Act"), the 1933 Act, the 1940 Act or the
Investment Advisers Act.
4.20 Agreements with Regulatory Agencies. As of the date of this
Agreement, the Company is not subject to any cease-and-desist or other order
issued by, or a party to any written agreement, consent agreement or memorandum
of understanding with, or a party to any commitment letter or similar
undertaking to, or subject to any order or directive by, or a recipient of any
supervisory letter from, or subject to any resolutions adopted at the request of
any Self Regulatory Authority or governmental entity that materially restricts
the conduct of its business or that in any material manner relates to its
capital adequacy, its credit policies, its management or its business (each a
"Regulatory Agreement"), nor has the
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Company or any of its directors (i) been advised since January 1, 1998 by any
Self Regulatory Authority or governmental entity that it is considering issuing
or requesting any such Regulatory Agreement or (ii) have knowledge of any
pending or threatened regulatory investigation.
4.21 Investment Securities. The Company has good and marketable title
to all securities held by it (except securities sold under repurchase agreements
or held in any fiduciary or agency capacity), free and clear of any lien or
encumbrance, except to the extent such securities are pledged in the ordinary
course of business consistent with prudent business practices to secure
obligations of the Company. Such securities are valued on the books of the
Company in accordance with GAAP.
4.22 Interest Rate Risk Management Instruments. Any interest rate
swaps, caps, floors and option agreements and other interest rate risk
management arrangements, whether entered into for the account of the Company or
for the account of a customer were entered into in the usual and ordinary course
of business and, to the best knowledge of the Company and its directors, in
accordance, in all material respects, with prudent business practice and
applicable rules, regulations and policies of any Self Regulatory Authority and
with counterparties believed to be financially responsible at the time.
4.23 Year 2000. Except as set forth on Schedule 4.23, each of the
Company's mission critical and core systems are fully Year 2000 compliant. For
purposes of this Section 4.23, Year 2000 compliant means that the Company's
mission critical and core systems were not materially adversely affected by the
change in date from the year 1999 to the year 2000.
4.24 Disclosure. No representation or warranty by the Company contained
in this Agreement, nor any statement or certificate furnished or to be furnished
by the Company to FSC or FSVK or their representatives required herein, contains
or will contain any untrue statement of a material fact, or omits or will omit
to state any material fact required to make the statements herein or therein
contained not misleading or necessary in order to provide a prospective
purchaser of the business of the Company with adequate information as to the
Company and its condition (financial or otherwise), properties, assets,
liabilities, business and prospects, and the Company has disclosed to FSC and
FSVK in writing all material adverse facts known to them relating to same.
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ARTICLE V
COVENANTS, REPRESENTATIONS AND WARRANTIES OF FSC AND FSVK
As an inducement to the Company to enter into this Agreement, and in
addition to any representations and warranties made elsewhere in this Agreement,
FSC and FSVK jointly and severally covenant, represent and warrant to the
Company and the Company's Shareholders as of the date of this Agreement and as
of the Effective Time as follows:
5.1 Organization, Conduct of Business, etc. FSC and FSVK (i) are each
duly organized and validly existing and in good standing under the laws of
Delaware (in the case of FSC) or the State of Utah (in the case of FSVK), (ii)
have all requisite power and authority (corporate and other) to own their
respective properties and conduct their respective businesses as now being
conducted, (iii) are each duly qualified to do business and are in good standing
in each jurisdiction in which the character of the properties owned or leased by
them therein or in which the transaction of their respective businesses makes
such qualification necessary, except where failure to so qualify would not have
a material adverse effect on FSC and its consolidated subsidiaries, and (iv) are
not transacting business, or operating any properties owned or leased by any of
them, in violation of any provision of federal or state law or any rule or
regulation promulgated thereunder, which violation would have a material adverse
effect on FSC and its consolidated subsidiaries.
5.2 Authorization and Validity of Agreement. FSC and FSVK each have the
corporate power and authority to execute and deliver this Agreement. This
Agreement has been duly and validly approved by the Executive Committee of the
Board of Directors of FSC, the respective Board of Directors of FSC and FSVK,
and by FSC as the sole shareholder of FSVK, has been duly executed and delivered
on their behalf, and constitutes a valid and binding agreement of each of FSC
and FSVK, enforceable in accordance with its terms, subject to approval of the
sole shareholder of FSVK.
5.3 FSC Reports. Since January 1, 1998, FSC has filed all reports,
registrations and statements, together with any amendments required to be made
with respect thereto, that were required to be filed with (i) the SEC, including
but not limited to Form 10-K, Form 10-Q, Form 8-K and proxy statements, (ii) the
Federal Reserve Board, (iii) the Office of the Comptroller of the Currency (the
"OCC"), (iv) the FDIC, and (v) other applicable state securities or banking
authorities. All such reports and statements filed with the SEC, the Federal
Reserve Board, the OCC, the FDIC, and other applicable state securities or
banking authorities are collectively referred to herein as the "FSC Reports." As
of their respective
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dates, or as amended and supplemented by subsequent reports, to the best
knowledge of the officers of FSC, the FSC Reports complied in all material
respects with all the statutes, rules and regulations enforced or promulgated by
the regulatory authority with which they were filed and do not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they are made, not misleading.
5.4 FSC Financial Statements; Tax Returns. FSC's Consolidated Balance
Sheets as of September 30, 1999, and its Consolidated Statements of Income and
Consolidated Statements of Cash Flow for the years then ended, heretofore
delivered to the Company, were prepared in accordance with GAAP consistently
applied and present fairly its consolidated financial condition, results of
operations and changes in financial position as of such dates and for such
periods. FSC and FSVK, to the extent applicable, have filed all federal, state
and local tax returns and forms (including but not limited to Forms 1099), which
are required by law to be filed or delivered as of the date hereof and has paid
all taxes which have become due. Where payment of such taxes is not required to
be made as of the date hereof, FSC and FSVK, to the extent applicable, have set
up an adequate reserve or accrual for the payment of all taxes required to be
paid in respect of the periods covered by such returns.
Except as and to the extent stated in the FSC Financial
Statements provided by FSC to the Company and except for those liabilities
incurred in the normal course of FSC's or any of its subsidiaries' respective
businesses, FSC and its consolidated subsidiaries do not have any material
liabilities or obligations, secured or unsecured (whether accrued, absolute,
contingent or otherwise).
5.5 Absence of Material Changes. Except for the proposed merger of
Zions Bancorporation ("Zions") with and into FSC (the "Zions Merger") and the
proposed reorganization and consolidation of FSC's and Zions' subsidiaries
following the Effective Time of the Zions Merger, there has been no material
change, and no development involving a reasonably foreseeable prospective
material change in or affecting the financial condition (present or
prospective), businesses, properties or operations of FSC and its consolidated
subsidiaries that is not reported in FSC's filings with the SEC as of the
Effective Time.
5.6 Absence of Defaults Under Agreements. Except as set forth on
Schedule 5.6, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will conflict with or
result in a breach of or constitute a default under any provision of FSC's
Articles of
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Incorporation, FSVK's Articles of Domestication, or the Bylaws of either FSC or
FSVK, or any agreement to which FSC or FSVK is a party or by which either of
them is bound or to which any of their respective properties is subject, or
result in the creation of any liens or encumbrances upon their respective
assets, and no consents or waivers thereunder are required to be obtained in
connection with the transactions contemplated hereby except for the approval of
required regulatory authorities and the Shareholders of the Company.
5.7 Actions, Proceedings, and Investigations. Except as set forth in
FSC's filings with the SEC, there are no actions, proceedings or investigations
pending, or to the knowledge of the executive officers of FSC, threatened or
contemplated, against or relating to FSC or any of its properties, which would
materially and adversely affect the financial condition (present or
prospective), business, properties or operations of FSC and its consolidated
subsidiaries, or the ability of FSC or FSVK to consummate the Merger
contemplated hereby.
5.8 Regulatory Approvals. FSC and FSVK shall (i) use reasonable efforts
in good faith to obtain all necessary regulatory approvals and to take or cause
to be taken all other action required under this Agreement on their part to be
taken as promptly as practicable so as to permit the consummation of the
transactions contemplated by this Agreement at the earliest possible date, and
cooperate fully with the Company to that end, and (ii) furnish all necessary
information for inclusion in any applications relating to the consents,
approvals, and permissions of regulatory authorities referred to in Article VII.
FSC knows of no reasons why the transactions contemplated by this Agreement
should not be approved by the regulatory authorities. FSC shall give the Company
prompt notice of receipt of the regulatory approvals referred to in Section VII
and shall provide the Company with copies of any written comments by any
regulatory authorities regarding or relating to the non-confidential portions of
the regulatory applications filed in connection with the transactions
contemplated hereby.
5.9 FSC Common Stock. All of the outstanding FSC Common Stock is duly
authorized and validly issued, fully paid and nonassessable. The FSC Common
Stock comprising the Base Consideration, including the Holdback, and the
Contingent Consideration to be issued and delivered pursuant to the Merger, is
and will remain duly authorized, and when issued as contemplated hereby, shall
be duly authorized, validly issued, fully paid and nonassessable.
5.10 Registration of Shares. FSC will at FSC's sole cost and expense use
reasonable efforts to cause a Registration Statement on Form S-4 or other
appropriate form (the "Registration Statement") to
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be filed and declared effective under the 1933 Act, with respect to the FSC
Common Stock which is to be issued in connection with the transactions
contemplated by this Agreement, which Registration Statement, at the time it
becomes effective, and at the Effective Time, shall in all material respects
conform to the requirements of the 1933 Act and the General Rules and
Regulations of the SEC under said Act (the "1933 Rules"), and the FSC Common
Stock to be issued by FSC in connection with the Merger shall be duly qualified
or exempted, as the case may be, under applicable state blue sky securities laws
in those states in which the Company has informed FSC that its shareholders
reside. FSC will furnish the Company, its counsel and accountants drafts of
Registration Statement filings sufficiently in advance of filing so as to afford
a reasonable opportunity for review and comment.
5.11 Agreements with Regulatory Agencies. As of the date of this
Agreement, except as disclosed in FSC's SEC Documents, neither FSC nor FSVK is
subject to any cease-and-desist or other order issued by, or is a party to any
Regulatory Agreement. Neither FSC nor FSVK (i) has been advised since January 1,
1999, by any Self Regulatory Authority or governmental entity that it is
considering issuing or requesting any such Regulatory Agreement or (ii) has
knowledge of any pending or threatened regulatory investigation.
5.12 Satisfaction of Conditions in Section 15(f) of the 1940 Act.
Neither FSC nor FSVK (nor any affiliate of FSC or FSVK which will act as an
investment adviser, or a corporate trustee performing the functions of an
investment adviser, of a registered investment company upon the consummation of
the Merger) has any express or implied understanding, arrangement or intention
to impose an unfair burden on any registered investment company as a result of
the transactions contemplated herein.
5.13 Notification of Actions. FSC and FSVK covenant and agree to
immediately notify the Company in the event of the breach of any of the
covenants set forth in this Article V.
ARTICLE VI
PROXY STATEMENT; SHAREHOLDER MEETINGS
6.1 Proxy Statement. FSC (with the assistance of the Company) shall
prepare the Registration Statement, as provided in Paragraph 5.10 above, which
Registration Statement will include a Proxy Statement to be used with respect to
providing the Shareholders of the Company with notice of the shareholder meeting
for the Company. The Company represents and warrants that the information it
provides for use in the Proxy Statement will comply in all material respects
with the requirements of the
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1934 Act and the applicable rules and regulations promulgated by the SEC under
the 1934 Act (the "1934 Rules"), and will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements contained therein not misleading, except that
the Company makes no representation with respect to information furnished by FSC
or FSVK expressly for inclusion in the Proxy Statement. FSC and FSVK represent
and warrant that the Proxy Statement will comply in all material respects with
the requirements of the 1934 Act and the applicable 1934 Rules, and will not
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements contained
therein not misleading, except that FSC and FSVK make no representation with
respect to information furnished in writing by the Company expressly for
inclusion in the Proxy Statement.
6.2 Shareholder Meeting. This Agreement shall be submitted for
approval, ratification and confirmation by the Shareholders of the Company at a
meeting thereof to be called in accordance with the applicable provisions of law
and held as promptly as practicable after the execution of this Agreement and in
no event later than the expiration of forty-five (45) days without the filing of
any post-effective amendment to the Registration Statement to be filed by FSC
pursuant to Paragraph 5.10, following the effectiveness of said Registration
Statement. The Company will mail the Proxy Statement prepared by FSC as part of
the Registration Statement to its Shareholders for purposes of the meeting of
its Shareholders.
ARTICLE VII
CONDITIONS OF CLOSING
7.1 Conditions of Closing For All Parties.
The consummation of the transactions contemplated by this Agreement is
conditioned upon the following:
(a) Regulatory Approval. All consents, approvals and
permissions and the satisfaction of all of the requirements prescribed by law,
including but not limited to the consents, approvals and permissions of all
applicable regulatory authorities which are necessary to the carrying out of the
Merger as described in this Agreement, shall have been procured; provided,
however, the approvals referred to in this subparagraph (a) shall not have
imposed any significant conditions which FSC and FSVK on the one hand, or the
Company, on the other, reasonably deem to be materially disadvantageous or
burdensome.
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(b) Registration Statement, etc. The FSC Common Stock to be
issued by FSC hereunder as Base Consideration shall be the subject of the
Registration Statement and shall be qualified or exempted under state securities
laws as appropriate. The Registration Statement shall have been declared
effective and shall not be subject to a stop order or any threatened stop order.
Such FSC Common Stock shall have been included for listing in the NASDAQ
National Market subject to official notice of issuance.
(c) No Injunction, etc. There shall not have been instituted
any litigation, regulatory proceeding or other matter which challenges the
legality or effectiveness of the transactions contemplated hereby or seeks an
order, decree or injunction enjoining or prohibiting the consummation of the
Merger.
(d) Tax Matters. FSVK and the Company shall have received
(unless otherwise dispensed with by them) an opinion from Ray, Quinney &
Nebeker, counsel to FSC and FSVK, in the form attached hereto as Exhibit 7.1(d),
to the effect (i) that the Merger will constitute a nontaxable reorganization in
accordance with Section 368(a) of the Code, and (ii) that any other matters
agreed to by the parties will be favorably treated for tax purposes. As of the
date hereof, the Company is not aware of any reason why the Merger should not
constitute nontaxable reorganizations in accordance with such Code section.
(e) Section 280G. There shall have been no payments received
by any person as a result of the transactions contemplated hereby that would
constitute an "excess parachute payment" within the meaning of Section 280G of
the Code.
7.2 Conditions of Closing for FSC and FSVK. The obligations of FSC and
FSVK, respectively, to consummate the transactions contemplated by this
Agreement are conditioned upon the following:
(a) Shareholder Approval. A majority of the Shareholders of
the Company shall have approved this Agreement and the Merger contemplated
hereby (unless a higher percentage of the outstanding shares of the Company must
approve the transaction under Oregon law, the Articles of Incorporation or
Bylaws of the Company).
(b) Company Resolutions; Corporate Documents. The Company
shall have delivered to FSC and FSVK (i) a copy of its Articles of Incorporation
as certified by the Oregon Secretary of State; (ii) a copy of its bylaws
certified by its corporate secretary, (iii) a certificate of good standing dated
as of the Effective Time, issued by the appropriate governmental agency, (iv)
certified copies of resolutions
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duly adopted by its Board of Directors approving this Agreement and directing
the submission thereof to a vote of the Shareholders of the Company, and (v)
certified copies of resolutions duly adopted by the Shareholders of the Company
(owning the outstanding shares as required by subparagraph (a) above) approving
this Agreement and the Merger, all as contemplated hereby.
(c) Company Representations and Warranties. Unless waived in
writing by FSC and FSVK, the representations and warranties of the Company
contained in this Agreement shall be true and correct on and as of the Effective
Time with the same effect as though made on and as of such date. Except as
otherwise contemplated by this Agreement, the Company shall have performed in
all material respects all of its obligations and agreements hereunder
theretofore to be performed by it. FSC and FSVK shall have received at the
Closing a certificate to the foregoing effect dated as of the Effective Time and
executed on behalf of the Company by a duly authorized executive officer.
(d) Comfort Letters. FSC shall have received letters from
Geffen Mesher & Company, dated (i) the effective date of the Registration
Statement and (ii) shortly prior to the Effective Time, in form and substance
satisfactory to FSC, with respect to the Company's financial condition, which
letters shall be based upon customary specified procedures undertaken by such
firm. The "comfort letters" contemplated hereby shall include, but not be
limited to, those matters identified in Exhibit 7.2(d) attached hereto.
(e) Opinion of Company Counsel. FSC and FSVK shall have
received at the Closing from Davis Wright Tremaine LLP, counsel to the Company,
a written opinion, dated the Effective Time, substantially in the form of
Exhibit 7.2(e) hereto.
(f) Affiliate's Letters. FSC shall have received a letter from
each person who, in the opinion of the Company and its counsel (who shall be
entitled to rely on written certificates of such persons), is an "affiliate" (as
that term is defined in Rule 405 promulgated by the SEC under the 1933 Act) of
the Company in the form attached hereto as Exhibit 7.2(f). Such "affiliate's"
letter shall include covenants with respect to the continued ownership of the
FSC Stock to be received pursuant to the Merger.
(g) Condition of the Company. FSC and FSVK shall have
reasonably determined, based on an audit and review by their officers,
accountants and legal counsel, conducted prior to or immediately after the
execution of this Agreement and updated as of the Effective Time, as provided
herein below, that
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(i) the financial condition and assets of the Company shall not have been
materially and adversely affected since the date of this Agreement; (ii) there
are no claims, suits, actions or proceedings pending or, to the best knowledge
of the Company and its directors, threatened, nor are there any investigations
or reviews pending or, to the best knowledge of the Company, threatened against,
relating to or affecting the Company which, if adversely determined, would have
a Company Material Adverse Effect (as defined below); and (iii) the net earnings
after taxes for the fiscal years ended 1997, 1998 and 1999 are as reported in
the Financial Statements delivered to FSC and FSVK pursuant to Section 4.5. For
purposes of this Section 7.2(g), Company Material Adverse Effect is defined as
any event, change or effect, individually or in the aggregate with such other
events, changes or effects that is or could reasonably be expected to be
materially adverse to (i) the business, operations, properties (including
tangible properties), condition (financial or otherwise), results of operations,
assets, liabilities or regulatory status of the Company, or (ii) the ability of
the Company to consummate any of the transactions or to perform its obligations
under this Agreement or any other agreements executed in connection herewith, it
being understood that none of the following shall be deemed by itself or by
themselves, either alone or in combination, to constitute a material adverse
effect: (a) conditions generally affecting the brokerage and investment banking
industries, or companies providing services similar to those provided by the
Company, (b) any effect arising out of or resulting from actions contemplated by
the parties in connection with the announcement of this Agreement and the
transactions contemplated hereby, or (c) any matter identified in the Company
Disclosure Schedule. For purposes of this paragraph 7.2(g), the parties further
agree that a material adverse affect shall mean a decrease in the net book value
of the Company of not less than $500,000.
(h) Employment Agreements. Each of Lawrence S. Black, Jennifer
Black, Frank Niezgoda, and David Duley shall have executed and delivered an
Employment Agreement in the form heretofore mutually agreed upon by each of the
foregoing persons and FSVK.
(i) Money Market Funds. In accordance with Section 15 of the
1940 Act, the respective Boards of Directors of any money market funds operated
pursuant to Rule 2a-7 under the 1940 Act (subject to the approval of the
Shareholders of such money market funds) and non-money market funds, including
in each case a majority of directors who are not "interested persons" (as such
term is defined in the 1940 Act) or parties to the investment advisory contracts
of such funds (the "Non-Interested Directors") shall have approved new
investment advisory contracts with FSC, FSVK or a wholly-owned Subsidiary of FSC
upon terms identical with those of each such fund; and the Board of Directors,
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including a majority of the Non-Interested directors, of each of the funds shall
have approved new underwriting, distribution or dealer contracts, if any, with
FSC pursuant to Section 15 of the 1940 Act and any other requirements applicable
thereto contained in the 1940 Act.
(j) Investment Contract Consents. The Company shall have
obtained and delivered to FSC the written consents or approvals of Clients, in
form and substance reasonably acceptable to FSC, or new Investment Contracts,
substantially in the form of the existing Investment Contract with such Client,
with respect to Investment Contracts relating to assets under the management by
the Company, and such consents, approvals or contracts shall be in full force or
effect.
(k) Bruce Alexander Release. In or about September 1998, Bruce
Alexander, an employee of the Company at such time, made a capital contribution
to the Company in the amount of $40,000 (the "Alexander Contribution"), in
exchange for 40,000 shares of Company Preferred Stock. Prior to the Effective
Time, the Company shall have redeemed all shares of Company Preferred Stock held
by Mr. Alexander and shall have received from Mr. Alexander a full and complete
release and waiver, in a form acceptable to FSC in its sole discretion, of any
and all claims against the Company, its successors and assigns, arising out of
or related to the Alexander Contribution, for the purchase of the Company
Preferred Stock.
(l) Options. All Options shall have been exercised or
cancelled (and no additional Options shall have been issued as of the Effective
Time) and the Company's one (1) Stock Option Plan(s) shall have been terminated.
(m) Accrual of Liabilities. The Company shall have accrued and
paid all liabilities in excess of $25,000, including, without limitation, any
and all costs associated with the acquisition of the Company by FSC (e.g.,
accounting, legal and consultant fees), senior staff bonuses, leasehold
improvement expenses, accounts payable contingency fund expenses, litigation
settlement expenses, and Y2K remediation fees. FSVK acknowledges that such
payments may be made from the funds obtained by the Company pursuant to the
exercise of the Options. FSVK expresses no opinion as to whether such payments
or accruals are authorized under applicable laws.
(n) Termination of 401(k) Plan. The Company shall have
terminated its 401(k) Plan and ESOP at least one week prior to the Effective
Time.
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(o) Redemption of Company Preferred Stock. Prior to the
Effective Time, the Company shall have redeemed all issued and outstanding
shares of Company Preferred Stock.
(p) Stoel Rives Matter. The Company shall have settled and
obtained a release from the law firm of Stoel Rives LLP for legal fees incurred
in connection with a proposed offering of securities for G.I. Joe's Sports &
Auto Store.
(q) Kliks Matter. The Company shall have increased its
contingent loss reserve to at least $100,000 designated solely for the matter of
Bernard B. Kliks v. Black & Company, Inc., NASD Arbitration No. 99-03356.
7.3 Conditions of Closing for the Company and the Shareholders. The
obligation of the Company and the Shareholders to consummate the transactions
contemplated by this Agreement is conditioned upon the following:
(a) FSC and FSVK Representations and Warranties. Unless waived
in writing by the Company, the representations and warranties of FSC and FSVK
contained in this Agreement shall be correct on and as of the Effective Time
with the same effect as though made on and as of such date, except for changes
which are not, in the aggregate, material and adverse to the financial
condition, business, properties or operations of FSC and its consolidated
subsidiaries, and, except as otherwise contemplated by this Agreement, FSC and
FSVK shall have performed in all material respects all of their obligations and
agreements hereunder theretofore to be performed by them. The Company shall have
received at the Closing a certificate to the foregoing effect dated the
Effective Time and executed on behalf of FSC and FSVK by one of their duly
authorized executive officers.
(b) Opinion of FSC Counsel. The Company shall have received at
the Closing from Ray, Quinney & Nebeker, a written opinion, dated the Effective
Time, substantially in the form of Exhibit 7.3(b) hereto.
(c) FSC and FSVK Resolutions; Corporate Documents. FSC shall
have delivered to the Company a certified copy of resolutions duly adopted by
the Executive Committee of the Board of Directors of FSC approving this
Agreement and the Merger, all as contemplated hereby. FSVK shall have delivered
to the Company a certified copy of resolutions duly adopted by the Board of
Directors of FSVK approving this Agreement and the Merger, all as contemplated
hereby. FSVK shall deliver to the Company (i) a copy of FSVK's bylaws certified
by its corporate secretary, and (ii) a certificate of good
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standing dated as of a recent date, issued by the Utah Department of Commerce,
Division of Corporations and Commercial Code.
(d) D&O Insurance. FSC shall use its reasonable best efforts
to procure Directors and Officers Liability Insurance that serves to reimburse
the present and former officers and directors of the Company with respect to
claims against such directors and officers arising from facts or events
occurring at or prior to the Effective Time which insurance shall contain terms
and conditions no less advantageous as that coverage currently in force. FSC
shall be required to procure this coverage for a premium of no more than 150% of
the current annual policy premium.
ARTICLE VIII
CLOSING OF MERGER
8.1 Closing. Unless the Agreement is earlier terminated in
accordance with Article IX, below, the closing of the transactions contemplated
herein (the "Closing") shall take place at a time and date to be agreed upon by
the parties, and if such date is not agreed upon by the parties, the Closing
shall occur on or before the fifth business day after satisfaction or waiver of
all of the conditions precedent set forth in Article VII and the expiration of
the required waiting period following approval of FSC's application to the
Federal Reserve Board, if any, relating to the Merger but in no event later than
thirty (30) days after the expiration of such period (the "Closing Date"), at
FSVK's offices in San Francisco, California, or such other place or manner as
may be mutually agreed by the parties.
8.2 Filing of Certificate of Merger and Articles of Merger.
The parties shall execute articles of merger in substantially the form attached
hereto as Exhibit A and shall cause such articles of merger to be filed with the
Utah Department of Commerce, Division of Corporations and Commercial Code, and
the Oregon Secretary of State's Office on the Closing Date or as soon thereafter
as practicable.
ARTICLE IX
TERMINATION
9.1 Termination. This Agreement may be terminated at any time prior to
the Effective Time:
(a) by mutual consent of the Executive Committee of FSC and
Board of Directors of FSVK, and the Board of Directors of the Company; or
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(b) by the Executive Committee of FSC and Board of Directors
of FSVK, or the Board of Directors of the Company, at any time after the
expiration of six (6) months from the date hereof, if the Merger shall not
theretofore have been consummated by the failure to satisfy the conditions to
Closing not within the control of the electing party; or
(c) by the Company, upon written notice to FSC and FSVK at any
time if any representation or warranty of FSC and FSVK contained in this
Agreement was materially incorrect when made or becomes materially incorrect on
or prior to the Effective Time, or if FSC or FSVK fails to comply with any of
its respective covenants contained in this Agreement, and the same is not cured
within thirty (30) days after notice of such inaccuracy or noncompliance; or
(d) by FSC and FSVK upon written notice to the Company at any
time if any representation or warranty of the Company contained in this
Agreement was materially incorrect when made or becomes materially incorrect on
or prior to the Effective Time, or if the Company fails to comply with any of
its covenants contained in this Agreement, and the same is not cured within
thirty (30) days after notice of such inaccuracy or noncompliance; or
(e) by FSC and FSVK or the Company upon written notice to the
other party at any time if a majority of the Company's Shareholders (or such
higher level mandated by the Articles of Incorporation or bylaws of the Company)
fails to approve the Merger at the meeting of the Shareholders contemplated
hereby, or if the Merger is disapproved by any governmental authority or Self
Regulatory Authority whose approval is necessary and the basis for such approval
cannot be remedied within a reasonable period of time.
9.2 Effect of Termination. In the event of termination and abandonment
hereof pursuant to the provisions of Section 9.1, this Agreement shall become
void and have no force or effect, except that provisions of this Agreement
relating to confidentiality or payment of expenses and this Section shall
survive the termination. Such termination shall not relieve any party of
liability for any default prior to such termination.
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ARTICLE X
INDEMNIFICATION
10.1 Indemnification by the Company and the Shareholders.
(a) Subject to the other provisions of this Article X, for the
duration of the Earn Out Period (hereafter the "Indemnification Period"), and
regardless of any investigation at any time made by or on behalf of FSC or FSVK
in respect thereof or prior knowledge of FSC or FSVK of any Damages (as defined
below in this Section 10.1(a)) or any breach of this Agreement, the Company and
the Company's Shareholders covenant and agree to indemnify, defend and hold
harmless FSC, FSVK and their respective successors, assigns and affiliates and
the directors, officers, agents and employees of any of them (collectively, the
"FSC Indemnified Parties") from and against any and all losses imposed on,
incurred or suffered by or asserted against any FSC Indemnified Party, directly
or indirectly, to the extent resulting from, arising out of or incurred with
respect to (i) any breach of any representation or warranty of the Company
contained in this Agreement; (ii) any breach of any covenant of the Company
and/or the Shareholders contained in this Agreement prior to the Closing; (iii)
the Company's 401(k) plan and its administration thereof; (iv) amounts paid to
resolve by settlement or otherwise the actions identified on Schedule 4.10 and
the Compliance of Law issue identified on Schedule 4.13; and (v) regulatory
fines and or customer complaints or arbitration relating to the operation of the
Company prior to the Effective Time (collectively, "Damages").
(b) The recovery of any Damages of any FSC Indemnified Party
shall be limited to an offset against the Contingent Consideration pursuant to
the indemnification procedures set forth in Section 10.2 below. If there is any
dispute as to the right of indemnification of any FSC Indemnified Party
hereunder at the time any portion of the Contingent Consideration is due to be
paid hereunder, FSC may, in its reasonable discretion, withhold all or any
portion of such portion due until such time as the dispute has been resolved in
accordance with Section 10.3 hereof.
(c) Notwithstanding Sections 10.1(a) and (b) above, there
shall be no liability for indemnification under this Section 10.1 unless and
until the aggregate amount of Damages exceeds $250,000, at which time the
Indemnitor (as defined in Subsection 10.2(a) below) shall be liable for all
Damages from the first dollar.
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(d) The limitations set forth in Sections 10.1(b) and (c)
above shall not apply to any and all losses imposed on, incurred or suffered by
or asserted against an FSC Indemnified Party, including, without limitation,
attorney's fees and costs, resulting from, arising out of or incurred in
connection with (i) the matter of American Industries, Inc. et al. v. Imaging
Technologies Corp., et al., Multnomah County Circuit Court Case No. 9902-01229,
(ii) Sirena Apparel Group, Inc., or (iii) the Compliance of law issue identified
on Schedule 4.13 (the "Holdback Damages"). The Company and the Shareholders
hereby agree that FSC and FSVK shall be entitled to offset, dollar for dollar,
any and all Holdback Damages against the Holdback (until the full amount of the
Holdback is exhausted or paid to the Shareholders as provided in Section 2.2),
and then solely against the Contingent Consideration, if any, until FSC and FSVK
have been paid in full.
(e) The representations and warranties set forth in Article IV
above shall terminate upon termination of the Earn Out Period.
10.2 Indemnification Procedure.
(a) Promptly after receipt by an FSC Indemnified Party of
notice (a "Claim") of the assertion of any claim or the commencement of any
action, claim, suit, arbitration, inquiry, subpoena, discovery requests,
proceeding or investigation by or before any governmental entity (an "Action")
against it in respect to which indemnity or reimbursement may be sought against
an indemnitor hereunder (an "Indemnitor"), such FSC Indemnified Party shall
notify the Company Representative (as defined in Section 11.8) in writing of the
Claim stating, in reasonable particularity, the nature of the Claim and the
basis for assertion of such Claim, but the failure to so notify the Company
Representative shall not relieve any Indemnitor of any liability it may have to
such FSC Indemnified Party hereunder except to the extent such failure shall
have materially prejudiced the Indemnitor in defending such Claim.
Notwithstanding the foregoing, notice of Claim is hereby deemed given to the
Company Representative as of the Effective Date, and no additional notice shall
be required with respect to any and all matters identified in Schedules 4.10 and
4.13 hereto.
(b) The Company Representative shall be entitled to
participate in and, to the extent the Company Representative elects by written
notice to such FSC Indemnified Party within thirty (30) days after receipt by
the Company Representative of notice of such Claim, to assume the defense of
such Claim on behalf of any Indemnitor, at the expense of any such Indemnitor,
with counsel chosen by the Company Representative and reasonably satisfactory to
such FSC Indemnified Party.
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Notwithstanding that the Company Representative shall have elected by such
written notice to assume the defense of any claim on behalf of any Indemnitor,
such FSC Indemnified Party shall have the right to participate in the
investigation and defense thereof with separate counsel chosen by such FSC
Indemnified Party, but in such event the fees and expenses of such counsel shall
be paid by such FSC Indemnified Party.
(c) The Company Representative shall not settle any claim
without obtaining a general release from the party making the Claim for all FSC
Indemnified Parties as a condition of such settlement without any restrictions,
limitations or liabilities placed on any of the FSC Indemnified Parties as a
result thereof. The FSC Indemnified Party shall be permitted to settle any claim
without the prior written approval of the Company Representative so long as such
settlement is reasonable as determined by the Board of Directors of FSVK in its
sole discretion.
10.3 Disputes. If there is any dispute as to the right of
indemnification and defense hereunder, the disputing party shall give the other
party written notice of such dispute, specifying in detail the basis of the
dispute, not later than twenty (20) business days after receipt of a demand for
indemnification. If the dispute cannot be resolved amicably, any party may
institute suit against the other party in the United States District Court
located in Portland, Oregon, or in Salt Lake City, Utah, to resolve the matter.
All parties hereby waive the right to a jury trial in any such lawsuit.
10.4 Time Limit. If there is no dispute as to the right to
indemnification with respect to any such demand within such twenty (20) business
day period, time being of the essence, or upon resolution of any such dispute by
the parties or by a court, the FSC Indemnified Party entitled to indemnification
shall be promptly paid the amount owed to it pursuant to this Article X.
ARTICLE XI
ADDITIONAL COVENANTS
11.1 Costs. Each of the parties to this Agreement shall pay its own
charges and costs incurred or to be incurred in connection with the execution
and performance of this Agreement. In the event of a willful breach of a
material agreement or covenant contained herein by the Company, on the one hand,
or FSC and FSVK, on the other, which breach either directly or indirectly
results or would result in a failure to consummate the Merger, and which breach
cannot be cured or is not cured within thirty (30) days after written notice of
such breach is given to the party committing such breach, the party causing such
breach
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shall be liable to the other party for damages for any and all damages caused by
such breach; provided, however, that either party may elect to forego the
recovery of damages and pursue its right to the specific performance or
enforcement of the terms and provisions of this Agreement.
11.2 Satisfaction of Conditions in Section 15(f) of the 1940 Act. FSC
agrees to use its commercially reasonable efforts to assure compliance with the
conditions of Section 15(f) of the 1940 Act. FSC agrees that for a period of not
less than three years after the Effective Time, FSC shall use its commercially
reasonable efforts to ensure that no more than 25% of the members of the Board
of Directors of any registered investment company shall be "interested persons"
(as defined in the 1940 Act) of FSC and/or FSVK (or such other entity which acts
as adviser to the funds) or of the predecessor investment adviser of such
registered investment company.
11.3 Nasdaq Listing Application. Prior to the Effective Time, FSC will
file with the Nasdaq National Market a notification for listing of shares
covering the shares of FSC Common Stock issuable in the Merger.
11.4 Registration of Contingent Consideration Shares. The FSC Common
Stock to be issued by FSC hereunder as Contingent Consideration shall be the
subject of a Registration Statement and shall be qualified or exempted under
state securities laws as appropriate prior to issuance. FSC shall use its
reasonable efforts to cause the Registration Statement to have been declared
effective and to not be subject to a stop order or any threatened stop order
prior to the date on which the Contingent Consideration is delivered to the
Company's Shareholders and shall remain effective for a period of not less than
twelve months thereafter. Such FSC Common Stock shall have been included for
listing in the Nasdaq National Market subject to official notice of issuance.
11.5 Retention Bonus. FSVK agrees to pay $1.75 million in retention
bonuses ("Retention Bonuses") to employees of Black & Company operated as a
division of FSVK during the four calendar years following the Effective Time;
provided, however, that in no event shall more than $437,500 in Retention
Bonuses be paid in any single calendar year. The employees who shall receive the
Retention Bonus awards, the amount of each Retention Bonus and the timing and
any conditions for payment thereof shall be determined by the Executive Officers
of FSVK with the input of the Company Representative (as defined in Section 11.7
below).
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11.6 Instruments of Transfer, etc. Each of the parties hereto shall
cooperate with the other parties in every way in carrying out the transactions
contemplated herein, in delivering instruments to perfect the conveyances,
assignments and transfers contemplated herein, and in delivering all documents
and instruments reasonably deemed necessary or useful by counsel for any party
hereto.
11.7 Company Representative.
(a) For purposes of this Agreement, Lawrence S. Black shall act as the
representative on behalf of all of the holders of shares of Company Capital
Stock as of the Effective Time (the "Company Representative") subject to the
provisions of Section 11.7(b) below. In the event that the Company
Representative shall die or resign or otherwise terminate or decline to accept
his authority hereunder, his successor shall be any Shareholder and shall be
elected by the vote or written consent of a majority in interest of the
Shareholders of the Company Capital Stock as of the Effective Time. The Company
Representative shall keep the Shareholders reasonably informed of any decision
of a material nature. Subject to the provisions of Section 11.7(b) below, (i)
the Company Representative is authorized to take any action deemed by the
Company Representative appropriate or necessary to carry out the provisions of,
and to determine the rights of the Shareholders under Articles II and X, and is
designated as the agent of, and authorized to act on behalf of, the Shareholders
for all purposes, including without limitation, to accept a service of process
upon the Shareholders, and (ii) all decisions of the Company Representative
shall be binding upon the Shareholders.
(b) Any Shareholder may, upon written notice to both FSC and the
Company Representative, which notice shall provide an address for receipt of
notices for such Shareholder, terminate the authority and agency of the Company
Representative as provided herein (except for purposes of Article X and Section
2.3). Thereafter, such Shareholder shall have the right to act independently.
(c) The Company Representative shall not be liable to any of the
Shareholders for any error of judgment, act done or omitted by him in good
faith, or mistake of fact or law unless caused by his own gross negligence or
willful misconduct.
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11.8 Acceleration of Contingent Consideration.
(a) If at any time prior to the third anniversary of the Effective
Time, there is a Change of Control, as defined in Section 11.8(b) below, with
respect to FSC (other than and not including a Change of Control resulting from
the merger or any other combination with Zions Bancorporation), the Contingent
Consideration payable pursuant to Section 2.3 above shall immediately vest and
be payable to the Company's Shareholders, subject only to offset pursuant to
Article X of this Agreement, and registration of the FSC Common Stock to be
issued as Contingent Consideration, which registration FSC or the surviving
corporation, as the case may be, shall undertake immediately following the
expiration of the Indemnification Period and payment of indemnifiable Claims.
(b) For purposes of Section 11.8(a) above, a "Change in Control" shall
be deemed to have occurred if there occurs any consolidation of FSC with, or
merger of FSC into, any other entity, any merger of another entity into FSC, or
any sale or transfer of all or substantially all of the assets of FSC, directly
or indirectly, to another person (other than (i) any such transaction pursuant
to which the holders of FSC Common Stock immediately prior to such transaction
have, directly or indirectly, shares of capital stock of the continuing or
surviving corporation immediately after such transaction which entitle such
holders to exercise in excess of 51% of the total voting power of all shares of
capital stock of the continuing or surviving corporation entitled to vote
generally in the election of directors and (ii) any merger (1) which does not
result in any reclassification, conversion, exchange or cancellation of
outstanding shares of FSC Common Stock or (2) which is effected solely to change
the jurisdiction of incorporation of FSC and results in a reclassification,
conversion or exchange of outstanding shares of FSC Common Stock solely into
shares of common stock).
(c) Notwithstanding any provision in this Agreement to the contrary,
and in accordance with the terms and conditions of Article X concerning FSC's
right of offset against the Contingent Consideration during the Earn Out Period,
in the event of a Change in Control, as defined in Subsection (b) above, prior
to the third anniversary of the Effective Time, payment of the Contingent
Consideration shall not be accelerated.
11.9 Shareholder Approval. Lawrence S. Black, Jennifer Black, Frank
Niezgoda, David Duley and Todd M. Niedermeyer, shall have signed the
Shareholder's Voting Agreement in the form attached hereto as Exhibit 11.9 prior
to execution of this Agreement.
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11.10 Notices. All notices, requests, consents and demands shall be
given to or made upon the parties at their respective addresses set forth below,
or at such other address as a party may designate in writing delivered to the
other parties. Unless otherwise agreed in this Agreement, all notices, requests,
consents and demands shall be given or made by personal delivery, by confirmed
air courier, by facsimile transmission ("fax"), with a copy to follow by first
class mail, or by certified first class mail, return receipt requested, postage
prepaid, to the party or parties addressed as aforesaid. If sent by confirmed
air courier, such notice shall be deemed to be given upon the earlier to occur
of the date upon which it is actually received by the addressee or the business
day upon which delivery is made at such address as confirmed by the air courier
(or if the date of such confirmed delivery is not a business day, the next
succeeding business day). If mailed, such notice shall be deemed to be given
upon the earlier to occur of the date upon which it is actually received by the
addressee or the second business day following the date upon which it is
deposited in a first-class postage-prepaid envelope in the United States mail
addressed as aforesaid. If given by fax, such notice shall be deemed to be given
upon the date it is actually received by the addressee, as confirmed by the fax
activity report generated upon transmission of such fax.
(a) If to FSC and FSVK, to:
First Security Van Kasper, Inc.
79 South Main, Suite 200
Salt Lake City, Utah 84111
Attn: Scott C. Ulbrich, Chairman
and Chief Executive Officer
Fax Number (801) 359-6928
With a copy to:
First Security Corporation
79 South Main Street
Salt Lake City, Utah 84111
Attn: Sylvia I. Iannucci, Esq.
Associate General Counsel
Fax Number: (801) 359-6928
With a copy to:
Ray, Quinney & Nebeker
400 Deseret Building
79 South Main Street
Salt Lake City, Utah 84111
Attn: R. Gary Winger, Esq.
Fax Number: (801) 532-7543
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If to the Company, to:
Black & Company, Inc.
One Southwest Columbia #1200
Portland, Oregon 97258
Attn: Lawrence S. Black, Chairman
and Chief Executive Officer
Fax Number: (503) 248-7551
With a copy to:
Davis Wright Tremaine LLP
1300 SW Fifth Avenue
Portland, Oregon 97201-5682
Attn: Benjamin G. Wolff, Esq.
Fax Number: (503) 778-5299
Each party hereto shall notify promptly the other in writing of the
occurrence of any event which will or may result in the failure to satisfy the
conditions specified in Article VII hereof. Between the date of this Agreement
and the Effective Time, each party hereto will advise the other of the
satisfaction of such conditions as they occur.
11.11 Amendments. This Agreement may not be amended, modified or waived
except (a) by an instrument or instruments in writing signed and delivered on
behalf of each of the parties hereto and (b) following the Effective Time, by
FSC, FSVK and either (i) the Company Representative or (ii) by the written
consent of the majority of the Shareholders.
11.12 Entire Agreement. This Agreement and all exhibits and schedules
hereto and other documents incorporated or referred to herein, contain the
entire agreement of the parties and there are no representations, inducements or
other provisions other than those expressed in writing. No modification, waiver
or discharge of any provision of or breach of this Agreement shall (i) be
effective unless it is executed in writing by the party effecting such
modification, waiver or discharge, or (ii) affect the right of either party
hereto thereafter to enforce any other provision or to exercise any right or
remedy in the event of a breach by a party hereto, whether or not similar.
11.13 Assignment. This Agreement may not be assigned by any party
hereto except with the prior written consent of the other parties.
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11.14 Counterparts. Any number of counterparts of this Agreement may be
signed and delivered and each shall be considered an original and together they
shall constitute one agreement.
11.15 Exclusive Merger Agreement. The Company and the Board of
Directors of the Company covenant and agree that, between the date hereof and
the date of the meeting of the Shareholders of the Company described in Article
VI hereof, they will not, either directly or indirectly, solicit or attempt to
procure offers relating to the merger or acquisition of the Company with or by
any entity not a party to this Agreement, or negotiate or enter into any
agreements relating to the merger or acquisition of the Company with or by any
such third party, and such persons further agree to use his or her best efforts
to obtain the approval of the merger by the Shareholders of the Company.
Notwithstanding the foregoing, neither the Company nor any of their respective
officers or directors shall be required by this Section 11.15 to take or refrain
from taking any action if to do so would, in the opinion of the Company's legal
counsel, violate the duties imposed by law on the Company directors or officers
to the Shareholders.
11.16 Public Statements. No party to this Agreement shall issue any
press release or other public statement concerning the transactions contemplated
by this Agreement without first providing the other parties hereto with a
written copy of the text of such release or statement and obtaining the consent
of the other parties respecting such release or statement, which consent will
not be unreasonably withheld. The consent provided for in this Section 11.16
shall not be required if the delay necessary to obtain such consent would
preclude the timely issuance of a press release or public statement as required
by law. The provisions of this Section 11.16 shall not be construed as
prohibiting the filing of copies of this Agreement or descriptions of this
Agreement with regulatory agencies as to which regulatory approvals are
contemplated by this Agreement.
11.17 Confidentiality. Each party shall use all information that it
obtains from the others pursuant to this Agreement solely for the effectuation
of the transactions contemplated by this Agreement or for other purposes
consistent with the intent of this Agreement and shall not use any of such
information for any other purpose, including, without limitation, the
competitive detriment of the other parties. Each party shall maintain as
strictly confidential all information it learns from the others and shall, upon
expiration or termination of this Agreement, return promptly to the other
parties all documentation (and copies thereof) provided by them or made
available by third parties. Each party may disclose such information to its
respective affiliates, counsel, accountants, tax advisers and consultants. This
provision shall not prohibit the use or disclosure of confidential information
pursuant to court order or which has otherwise become publicly available.
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11.18 Alternative Structure. Notwithstanding anything to the contrary
contained in this Agreement, prior to the Closing, 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,
(ii) be capable of consummation in as timely a manner as the structure
contemplated herein and (iii) not otherwise be prejudicial to the interest of
the Shareholders of the Company. This Agreement and any related documents shall
be appropriately amended in order to reflect any such revised structure.
[This space left blank intentionally]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first set forth above.
FIRST SECURITY CORPORATION
By /s/ Morgan J. Evans
-------------------
Morgan J. Evans,
President and Chief Operating Officer
FIRST SECURITY VAN KASPER, INC.
By /s/ Scott C. Ulbrich
---------------------
Scott C. Ulbrich, Chairman and
Chief Executive Officer
BLACK & COMPANY, INC.
By /s/ Lawrence S. Black
---------------------
Lawrence S. Black,
Chairman and Chief Executive Officer
DIRECTORS:
/s/ Lawrence S. Black
---------------------
Lawrence S. Black
/s/ Jennifer Black
------------------
Jennifer Black
/s/ Frank Niezgoda
------------------
Frank Niezgoda
/s/ Todd M. Niedermeyer
-----------------------
Todd M. Niedermeyer
/s/ David Duley
---------------
David Duley
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Exhibit 2.3
Calculation of EBT
<PAGE>
Calculation of EBT
The following is the list of all items of revenue and expense to be included in
the calculation of EBT as generated in the normal course of business of the
Black & Company Division, prepared in accordance with generally accepted
accounting principles as consistently applied.
Item of Revenue and Expense Definition
- ------------------------------- --------------------------------------------
REVENUE
Commissions Includes: (i) sales commissions generated by
secondary market orders placed (both listed
and over-the-counter commissions) with Black
& Company Division salesmen; and (ii) sales
concessions on securities sold by Black &
Company Division salesmen in connection with
public offerings.
Realized and Unrealized Trading profits, if any, generated by any
Trading Profits trading activities conducted by the Black &
Company Division, less applicable
Commissions as defined above.
Interest Income Interest and dividend income, if any,
generated by investments held by the Black &
Company Division.
Corporate Finance Fees With respect to corporate finance
assignments originated by employees of the
Black & Company Division: (i) 100% of M&A
advisory fees; (ii) 100% of private
placement fees; (iii) 100% of the management
fee portion of the gross spread on public
offerings; and (iv) 100% of financial
advisory fees, in each case net of finder's
fees, if any.
Other Miscellaneous Income All other revenues not defined above which
are generated by the Black & Company
Division.
EXPENSES
Commissions Expense Commissions expense paid in connection with
Commissions as defined above.
Payroll Expenses Salaries, bonuses, employee taxes and
employee benefits of Black & Company
Division employees. With respect to
corporate finance assignments originated by
employees of the Black & Company Division,
Payroll Expenses will also include bonuses
with respect to each such transaction for
transaction team members who are not
employees of the Black & Company Division,
and an allocation of VK Division Corporate
Finance Department general and
administrative expenses. This allocation
will be the lesser of (a) 5% of Corporate
Finance Fees as defined above, and (b)
$20,000 per corporate finance transaction as
defined under Corporate Finance Fees above.
A monthly credit of $23,000 will be
subtracted from Payroll Expenses, which
credit represents the estimated amount of
pro forma savings to be realized upon
shutting down the trading desk for the
shorter of (i) the transition period between
closing of the transaction and the date on
which the trading desk is shut down, and
<PAGE>
(ii) three months.
Bonus expense with respect to the following
items will be expensed to the division in
which the associated sales commissions are
recorded: (i) payouts on commission
overrides on stocks covered by Black &
Company Division research analysts; (ii)
payouts on commission overrides for
institutional accounts where the institution
has allotted the commissions, either
verbally or in writing, to Black & Company
Division research analysts; and (iii)
commission overrides on sales commissions
generated during the first two years a new
account is open with any new institutional
accounts opened by employees of the Black &
Company Division, which accounts are
assigned to salesmen who are not Black &
Company Division employees. Payroll Expenses
will not include any finder's fees paid with
respect to Corporate Finance Fees as defined
above.
Clearance Fees Actual charges incurred, less the Add-Back,
as defined in Section 2.2 (d).
Interest Expense Actual interest expense, if any, incurred by
the Black & Company Division. Any extensions
of credit by FSVK will be charged at FSVK's
cost of funds. The Black & Company Division
will not be charged a cost of capital for
the capital committed to the operation of
its business.
Communication Cost Actual costs incurred for services and
equipment used by the Black & Company
Division. A monthly credit of $27,000 will
be subtracted from Communications costs,
which credit represents the estimated amount
of pro forma savings to be realized upon
shutting down the trading desk for the
shorter of (i) the transition period between
closing of the transaction and the date on
which the trading desk is shut down, and
(ii) three months.
Occupancy Cost Actual rent and related expenses for the
Black & Company Division.
Promotional Cost Actual costs incurred for advertising and
promotions by the Black & Company Division.
The cost of promotional materials prepared
by the Parent will be charged to the Black &
Company Division at the Parent's cost.
Professional Fees Actual expenses incurred. Neither
Professional Fees nor any other expense
category will include any allocations from
FSVK or FSC for internal legal, compliance,
accounting or management services.
Data Processing Cost Cost of depreciation of existing equipment
and replacement equipment acquired in the
ordinary course. Data Processing Cost will
not include accelerated write-downs of
equipment incurred in connection with
system-wide upgrades mandated by FSVK or
FSC.
Retention Payments The cost of retention payments accrued for
the benefit of Black & Company Division
employees.
Goodwill Amortization No charge will be incurred for amortization
of goodwill arising from the acquisition of
the Black & Company Division.
Other Miscellaneous Expenses All other expenses customarily accrued under
GAAP that are not
<PAGE>
defined above which are incurred by the
Black & Company Division. The following
items will be expensed by the VK Division:
(i) travel expenses incurred by
administrative personnel of the Black &
Company Division at the direction of FSVK or
FSC; (ii) travel expenses incurred by senior
management of the Black & Company Division
in order to attend meetings of the Board of
Directors of FSVK; and (iii) travel expenses
incurred by Black & Company Division
research analysts attributable to visits to
FSVK regional offices or to FSVK's
institutional accounts, which visits are not
conducted in connection with corporate
finance transactions as defined under
Corporate Finance Fees.
<PAGE>
AMENDMENT TO AGREEMENT
AND PLAN OF REORGANIZATION
This Amendment to the Agreement and Plan of Reorganization (the
"Amendment') is entered into this 29th day of February, 2000, by and among First
Security Corporation ("FSC"), First Security Van Kasper, Inc. ("FSVK"), Black &
Company, Inc. (the "Company") and the Company's directors for the purpose of
amending that certain Agreement and Plan of Reorganization dated January 24,
2000 among the parties hereto (the "Merger Agreement").
The Merger Agreement is hereby amended to decrease the amount of the
Holdback set forth in paragraph 2.2 of the Merger Agreement from 20% of the Base
Consideration payable pursuant to the Merger Agreement to $1,375,000 (or
approximately 18.33% of the Base Consideration).
No other change or modification is intended or made by this Amendment;
the Merger Agreement shall remain, in all other respects, in full force and
effect; and this Amendment is, by execution of this Amendment, incorporated and
integrated into and made a part of the Merger Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first set forth above.
FIRST SECURITY CORPORATION
By /s/ Morgan J. Evans
-------------------
Morgan J. Evans,
President and Chief Operating Officer
FIRST SECURITY VAN KASPER, INC.
By /s/ Scott Ulbrich
-----------------
Scott C. Ulbrich, Chairman and
Chief Executive Officer
BLACK & COMPANY, INC.
By /s/ Lawrence S. Black
---------------------
Lawrence S. Black,
Chairman and Chief Executive Officer
<PAGE>
DIRECTORS:
/s/ Lawrence S. Black
---------------------
Lawrence S. Black
/s/ Jennifer E. Black
---------------------
Jennifer E. Black
/s/ Frank J. Niezgoda
---------------------
Frank J. Niezgoda
/s/ Todd M. Niedermeyer
-----------------------
Todd M. Niedermeyer
/s/ David A. Duley
------------------
David A. Duley
<PAGE>
APPENDIX B
FORM OF BLACK & COMPANY PROXY CARD
BLACK & COMPANY, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR THE SPECIAL MEETING OF
STOCKHOLDERS TO BE HELD ON APRIL 7, 2000
The undersigned hereby appoints ______ and ______, and each of them, as
attorneys and proxies of the undersigned, with full power of substitution, to
vote all of the shares of stock of Black & Company, Inc., an Oregon corporation,
that the undersigned may be entitled to vote at the Special Meeting of
Stockholders of Black & Company, Inc. to be held at One Southwest Columbia,
Suite 1200, Portland Oregon 97258 on April 7, 2000 at 2:00 p.m., P.S.T., and at
any and all postponements, continuations and adjournments thereof, with all
powers that the undersigned would possess if personally present, upon and in
respect of the following matter and in accordance with the following
instructions, with discretionary authority as to any and all other matters that
may properly come before the meeting. The undersigned hereby acknowledges
receipt of the: (1) notice of special meeting of stockholders of Black &
Company, Inc., and (2) accompanying Proxy Statement/Prospectus. Unless a
contrary direction is indicated, this proxy will be voted for Proposal 1 as more
specifically described in the Proxy Statement/Prospectus. If specific
instructions are indicated, this proxy will be voted in accordance therewith.
[X] Please mark votes as in this example
- --------------------------------------------------------------------------------
Proposal No. 1: For Against Abstain I Plan to
Attend the
Meeting:
To approve the Agreement and Plan
of Reorganization dated January 24,
2000, as amended, by and among
First Security Corporation, First
Security Van Kasper, Inc., and
Black & Company, Inc., as amended. [ ] [ ] [ ] [ ]
- --------------------------------------------------------------------------------
This proxy is solicited on behalf of the Board of Directors of Black & Company,
Inc. Whether or not you plan to attend the meeting in person, please sign and
promptly mail this proxy in the return envelope so that your stock may be
represented at the meeting.
Sign exactly as your name(s) appears on your stock certificate. If shares of
stock stand of record in the names of two or more persons or in the name of
husband and wife, whether as joint tenants or otherwise, both or all of such
persons should sign this proxy. If a corporation holds shares of stock of
record, the proxy should be executed by the president or vice president and the
secretary or assistant secretary. If a partnership holds shares of stock of
record, the proxy should be executed in partnership name by an authorized
person. Executors, trustees, administrators, guardians, attorneys-in-fact or
other fiduciaries should give their full title. Please date the proxy.
Signature:____________________________ Signature:__________________________
Date: ________________________________ Date: ______________________________
Name (print): ________________________ Name (print): ______________________
Title (if applicable): _______________ Title (if applicable): _____________
<PAGE>
APPENDIX C
EXTRACTS FROM OREGON LAW CONCERNING DISSENTERS' RIGHTS OF
BLACK & COMPANY SHAREHOLDERS
DISSENTERS' RIGHTS
(Right to Dissent and Obtain Payment for Shares)
60.551 Definitions for 60.551 to 60.594. As used in ORS 60.551 to 60.594.
(1) "Beneficial shareholder" means the person who is a beneficial owner
of shares held in a voting trust or by a nominee as the record shareholder.
(2) "Corporation" means the issuer of the shares held by a dissenter
before the corporate action, or the surviving or acquiring corporation by merger
or share exchange of that issuer.
(3) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under ORS 60.554 and who exercises that right when and in the
manner required by ORS 60.561 to 60.587.
(4) "Fair value," with respect to a dissenter's shares, means the value
of the shares immediately before the effectuation of the corporate action to
which the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action unless exclusion would be inequitable.
(5) "Interest" means interest from the effective date of the corporate
action until the date of payment, at the average rate currently paid by the
corporation on its principal bank loans or, if none, at a rate that is fair and
equitable under all the circumstances.
(6) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder, (1987 c.52ss.124; 1989 c.1040ss.80)
60.554 Right to Dissent. (1) Subject to subsection (2) of this section,
a shareholder is entitled to dissent from, and obtain payment of the fair value
of the shareholder's shares in the event of, any of the following corporate
acts:
(a) Consummation of a plan of merger to which the corporation
is a party if shareholder approval is required for the merger by ORS
60.487 or the articles of incorporation and the shareholder is entitled
to vote on the merger or if the corporation is a subsidiary that is
merged with its parent under ORS 60.491;
(b) Consummation of a plan of share exchanges to which the
corporation is a party as the corporation whose shares will be
acquired, if the shareholder is entitled to vote on the plan;
(c) Consummation of a sale or exchange of all or substantially
all of the property of the corporation other than in the usual and
regular course of business, if the shareholder is entitled
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<PAGE>
to vote on the sale or exchange, including a sale in dissolution, but
not including a sale pursuant to court order or a sale for cash
pursuant to a plan by which all or substantially all of the net
proceeds of the sale will be distributed to the shareholders within one
year after the date of sale;
(d) An amendment of the articles of incorporation that
materially and adversely affects rights in respect of a dissenter's
shares because it:
(A) Alters or abolishes a preemptive right of the
holder of the shares to acquire shares or other securities; or
(B) Reduces the number of shares owned by the
shareholder to a fraction of a share if the fractional share
so created is to be acquired for cash under ORS 60.141; or
(e) Any corporate action taken pursuant to a shareholder vote
to the extent the articles of incorporation, bylaws or a resolution of
the board of directors provides that voting or nonvoting shareholders
are entitled to dissent and obtain payment for their shares.
(2) A shareholder entitled to dissent and obtain payment for the
shareholder's shares under ORS 60.551 to 60.594 may not challenge the corporate
action creating the shareholder's entitlement unless the action is unlawful or
fraudulent with respect to the shareholder or the corporation.
(3) Dissenters' rights shall not apply to the holders of shares of any
class or series if the shares of the class or series were registered on a
national securities exchange or quoted on the National Association of Securities
Dealers, Inc. Automated Quotation System as a National Market System issue on
the record date for the meeting of shareholders at which the corporate action
described in subsection 1. of this section is to be approved or on the date a
copy or summary of the plan of merger is mailed to shareholders under ORS
60.491, unless the articles of incorporation otherwise provide. (1987 c.52
ss.125; 1989 c.1040 ss.31; 1993 c.403 ss.9)
60.557 Dissent by nominees and beneficial owners. (1) A record
shareholder may assert dissenters' rights as to fewer than all the shares
registered in the shareholder's name only if the shareholder dissents with
respect to all shares beneficially owned by any one person and notifies the
corporation in writing of the name and address of each person on whose behalf
the shareholder asserts dissenters' rights. The rights of a partial dissenter
under this subsection are determined as if the shares regarding which the
shareholder dissents and the shareholder's other shares were registered in the
names of different shareholders.
(2) A beneficial shareholder may assert dissenters' rights as to shares
held on the beneficial shareholder's behalf only if:
(a) The beneficial shareholder submits to the corporation the
record shareholder's written consent to the dissent not later than the
time the beneficial shareholder asserts dissenters' rights; and
(b) The beneficial shareholder does so with respect to all
shares of which such shareholder is the beneficial shareholder or over
which such shareholder has power to direct the vote. (1987 c.52 ss.126)
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<PAGE>
(Procedure for Exercise of Rights)
60.561 Notice of dissenters' rights. (1) If proposed corporate action
creating dissenters' rights under ORS 60.554 is submitted to a vote at a
shareholders' meeting, the meeting notice must state that shareholders are or
may be entitled to assert dissenters' rights under ORS 60.551 to 60.594 and be
accompanied by a copy of ORS 60.551 to 60.594.
(2) If corporate action creating dissenters' rights under ORS 60.554 is
taken without a vote of shareholders, the corporation shall notify in writing
all shareholders entitled to assert dissenters' rights that the action was taken
and send the shareholders entitled to assert dissenters' rights the dissenters'
notice described in ORS 60.567. (1987 c.52 ss.127)
60.564 Notice of intent to demand payment. (1) If proposed corporate
action creating dissenters' rights under ORS 60.554 is submitted to a vote at a
shareholders' meeting, a shareholder who wishes to assert dissenters' rights
shall deliver to the corporation before the vote is taken written notice of the
shareholder's intent to demand payment for the shareholder's shares if the
proposed action is effectuated and shall not vote such shares in favor of the
proposed action.
(2) A shareholder who does not satisfy the requirements of subsection
(1) of this section is not entitled to payment for the shareholder's shares
under this chapter. (1987 c.52 ss.128)
60.567 Dissenters' notice. (1) If proposed corporate action creating
dissenters' rights under ORS 60.554 is authorized at a shareholders' meeting,
the corporation shall deliver a written dissenters' notice to all shareholders
who satisfied the requirements of ORS 60.564.
(2) The dissenters' notice shall be sent no later than 10 days after
the corporate action was taken, and shall:
(a) State where the payment demand shall be sent and where and
when certificates for certificated shares shall be deposited;
(b) Inform holders of uncertificated shares to what extent
transfer of the shares will be restricted after the payment demand is
received;
(c) Supply a form for demanding payment that includes the date
of the first announcement of the terms of the proposed corporate action
to news media or to shareholders and requires that the person asserting
dissenters' rights certify whether or not the person acquired
beneficial ownership of the shares before that date;
(d) Set a date by which the corporation must receive the
payment demand. This date may not be fewer than 30 nor more than 60
days after the date the subsection (1) of this section notice is
delivered; and
(e) Be accompanied by a copy of ORS 60.551 to 60.594. (1987
c.52ss.129)
60.571 Duty to demand payment. (1) A shareholder sent a dissenters'
notice described in ORS 60.567 must demand payment, certify whether the
shareholder acquired beneficial ownership of the shares before the date required
to be set forth in the dissenters' notice pursuant to ORS 60.567(2)(c), and
deposit the shareholder's certificates in accordance with the terms of the
notice.
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<PAGE>
(2) The shareholder who demands payment and deposits the shareholder's
shares under subsection (1) of this section retains all other rights of a
shareholder until these rights are canceled or modified by the taking of the
proposed corporate action.
(3) A shareholder who does not demand payment or deposit the
shareholder's share certificates where required, each by the date set in the
dissenters' notice, is not entitled to payment for the shareholder's shares
under this chapter. (1987 c.52 ss.130)
60.574 Share restrictions. (1) The corporation may restrict the
transfer of uncertificated shares from the date the demand for their payment is
received until the proposed corporate action is taken or the restrictions
released under ORS 60.581.
(2) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
(1987 c.52 ss.131)
60.577 Payment. (1) Except as provided in ORS 60.584, as soon as the
proposed corporate action is taken, or upon receipt of a payment demand, the
corporation shall pay each dissenter who complied with ORS 60.571, the amount
the corporation estimates to be the fair value of the shareholder's shares, plus
accrued interest.
(2) The payment must be accompanied by:
(a) The corporation's balance sheet as of the end of a fiscal
year ending not more than 16 months before the date of payment, an
income statement for that year and the latest available interim
financial statements, if any;
(b) A statement of the corporation's estimate of the fair
value of the shares;
(c) An explanation of how the interest was calculated;
(d) A statement of the dissenter's right to demand payment
under ORS 60.587; and
(e) A copy of ORS 60.551 to 60.493. (1987 c.52ss.132; 1987
c.579ss.4)
60.581 Failure to take action. (1) If the corporation does not take the
proposed action within 60 days after the date set for demanding payment and
depositing share certificates, the corporation shall return the deposited
certificates and release the transfer restrictions imposed on uncertificated
shares.
(2) If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under ORS 60.567 and repeat the payment demand procedure.
(1987 c.52 ss.133)
60.584 After-acquired shares. (1) A corporation may elect to withhold
payment required by ORS 60.577 from a dissenter unless the dissenter was the
beneficial owner of the shares before the date set forth in the dissenters'
notice as the date of the first announcement to news media or to shareholders of
the terms of the proposed corporate action.
(2) To the extent the corporation elects to withhold payment under
subsection (1) of this section, after taking the proposed corporate action, it
shall estimate the fair value of the shares plus
C-4
<PAGE>
accrued interest and shall pay this amount to each dissenter who agrees to
accept it in full satisfaction of such demand. The corporation shall send with
its offer a statement of its estimate of the fair value of the shares an
explanation of how the interest was calculated and a statement of the
dissenter's right to demand payment under ORS 60.587. (1987 c.52 ss.134)
60.587 Procedure if shareholder dissatisfied with payment or offer. (1)
A dissenter may notify the corporation in writing of the dissenter's own
estimate of the fair value of the dissenter's shares and amount of interest due,
and demand payment of the dissenter's estimate, less any payment under ORS
60.577 or reject the corporation's offer under ORS 60.584 and demand payment of
the dissenter's estimate of the fair value to the dissenter's shares and
interest due, if:
(a) The dissenter believes that the amount paid under ORS
60.577 or offered under ORS 60.584 is less than the fair value of the
dissenter's shares or that the interest due is incorrectly calculated;
(b) The corporation fails to make payment under ORS 60.477
within 60 days after the date set for demanding payment; or
(c) The corporation, having failed to take the proposed
action, does not return the deposited certificates or release the
transfer restrictions imposed on uncertificated shares within 60 days
after the date set for demanding payment.
(2) A dissenter waives the right to demand payment under this section
unless the dissenter notifies the corporation of the dissenter's demand in
writing under subsection (1) of this section within 30 days after the
corporation made or offered payment for the dissenter's shares. (1987
c.52ss.135)
(Judicial Appraisal of Shares)
60.591 Court action. (1) If a demand for payment under ORS 60.587
remains unsettled, the corporation shall commence a proceeding within 60 days
after receiving the payment demand under ORS 60.587 and petition the court under
subsection (2) of this section to determine the fair value of the shares and
accrued interest. If the corporation does not commence the proceeding within the
60-day period, it shall pay each dissenter whose demand remains unsettled the
amount demanded.
(2) The corporation shall commence the proceeding in the circuit court
of the county where a corporation's principal office is located, or if the
principal office is not in this state, where the corporation's registered office
is located. If the corporation is a foreign corporation without a registered
office in this state, it shall commence the proceeding in the county in this
state where the registered office of the domestic corporation merged with or
whose shares were acquired by the foreign corporation was located.
(3) The corporation shall make all dissenters, whether or not residents
of this state, whose demands remain unsettled parties to the proceeding as in an
action against their shares. All parties must be served with a copy of the
petition. Nonresidents may be served by registered or certified mail or by
publication as provided by law.
(4) The jurisdiction of the circuit court in which the proceeding is
commenced under subsection (2) of this section is plenary and exclusive. The
court may appoint one or more persons as appraisers to receive evidence and
recommend decision on the question of fair value. The appraisers have
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<PAGE>
the powers described in the court order appointing them, or in any amendment to
the order. The dissenters are entitled to the same discovery rights as parties
in other civil proceedings.
(5) Each dissenter made a party to the proceeding is entitled to
judgment for:
(a) The amount, if any, by which the court finds the fair
value of the dissenter's shares, plus interest, exceeds the amount paid
by the corporation; or
(b) The fair value, plus accrued interest, of the dissenter's
after-acquired shares for which the corporation elected to withhold
payment under ORS 60.584. (1987 c.52ss.136)
60.594 Court costs and counsel fees. (1) The court in an appraisal
proceeding commenced under ORS 60.591 shall determine all costs of the
proceeding, including the reasonable compensation and expenses of appraisers
appointed by the court. The court shall assess the costs against the
corporation, except that the court may assess costs against all or some of the
dissenters, in amounts the court finds equitable, to the extent the court finds
the dissenters acted arbitrarily, vexatiously, or not in good faith in demanding
payment under ORS 60.587.
(2) The court may also assess the fees and expenses of counsel and
experts of the respective parties in amounts the court finds equitable.
(a) Against the corporation and in favor of any or all
dissenters if the court finds the corporation did not substantially
comply with the requirements of ORS 60.561 to 60.587; or
(b) Against either the corporation or a dissenter, in favor of
any other party, if the court finds that the party against whom the
fees and expenses are assessed acted arbitrarily, vexatiously or not in
good faith with respect to the rights provided by this chapter.
(3) If the court finds that the services of counsel for any dissenter
were of substantial benefit to other dissenters similarly situated, and that the
fees for those services should not be assessed against the corporation, the
court may award to counsel reasonable fees to be paid out of the amount awarded
the dissenters who were benefited. (1987 c.52ss.137)
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<PAGE>
Part II. INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers
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. The Registration Statement includes the following
Exhibits:
Exhibit
Number Description of Exhibit
2(1) Agreement and Plan of Reorganization dated as of January 24,
2000, by and among First Security, First Security Van Kasper,
and Black & Company (Included as Appendix A to the
Prospectus/Proxy Statement).
2(2) Amendment to Agreement and Plan of Reorganization dated
February 29, 2000, by and among First Security Van Kasper and
Black & Company (Included with the Agreement and Plan of
Reorganization as Appendix A to the Prospectus/Proxy
Statement).
3(1) Certificate of Amendment of Certificate of Incorporation,
dated May 6, 1993 (Exhibit 3.1 to First Security's Annual
Report on Form 10-K for the year ended Dec. 31, 1997,
incorporated by reference).
3(2) Certificate of Amendment of Certificate of Incorporation,
dated May 8, 1996 (Exhibit 3.2 to First Security's Annual
Report on Form 10-K for the year ended Dec. 31, 1997,
incorporated by reference).
3(3) Restated First Security Bylaws, as amended Jan. 26, 1998
(Exhibit 3.3 to First Security's Annual Report on Form 10-K
for the year ended Dec. 31, 1997, incorporated by reference).
3(4) Certificate of Designation Series A Preferred Stock, dated
Aug. 27, 1990 (Exhibit 3.4 to First Security's Annual Report
on Form 10-K for the year ended Dec. 31, 1997, incorporated by
reference).
3(5) First Security Corporation's proposed Amended and Restated
Certificate of Incorporation and proposed Amended and Restated
Bylaws (Exhibits A-1 and A-2 to First Security's
Prospectus/Proxy and its registration statement in Form S-4,
filed November 22, 1999. File No. 333-91401, incorporated by
reference).
<PAGE>
4(1) No instruments defining the rights of holders of long-term
debt of First Security and its subsidiaries have been included
as exhibits because the total amount of indebtedness
authorized under any such instrument does not exceed 10% of
the total assets of First Security and its subsidiaries on a
consolidated basis.
4(2) Rights Agreement between First Security and First Security
Bank, N.A., dated Aug. 28, 1990, 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 Aug. 28,
1990, filed Sept. 1, 1990, incorporated by reference) and as
amended and extended in 1998 (see Exhibit 4 to First
Security's Current Report of Form 8-K, dated November 2, 1998,
incorporated by reference).
4(3) Amendment Agreement between First Security and First Security
Bank, N.A., dated Sept. 26, 1990, amending the Rights
Agreement between the same parties dated Aug. 28, 1990,
(Exhibit 1 to First Security's Amendment #1 on Form 8-A, dated
Oct. 10, 1990, filed Oct. 16, 1990, amending First Security's
Report on Form 8-K, dated Aug. 28, 1990, filed Sept. 1, 1990,
incorporated by reference).
4(4) Adoption of Successor Shareholder Rights Agreement filed in
Registrant's Current Report on Form 8-K dated Nov. 2, 1998
(incorporated by reference).
5 Opinion of Ray, Quinney & Nebeker as to the legality of the
shares being registered.
8 Form of Opinion of Ray, Quinney & Nebeker re: Tax Matters.
10(1) Amended and Restated First Security Comprehensive Management
Incentive Plan dated Apr. 21, 1998 (Exhibit 10.1 to First
Security's Annual Report on Form 10-Q for the quarter ended
Sept. 30, 1999, incorporated by reference).
10(2) Employment Agreement between First Security and Spencer F.
Eccles, dated Feb. 2, 1998 (Exhibit 10.2 to First Security's
Annual Report on Form 10-K for the year ended Dec. 31, 1997,
incorporated by reference).
10(3) Employment Agreement between First Security and Morgan J.
Evans, dated Feb. 2, 1998 (Exhibit 10.3 to First Security's
Annual Report on Form 10-K for the year ended Dec. 31, 1997,
incorporated by reference).
10(4) Employment Agreement between First Security and Michael P.
Caughlin, dated Feb. 2, 1998 (Exhibit 10.4 to First Security's
Annual Report on Form 10-K for the year ended Dec. 31, 1997,
incorporated by reference).
10(5) Employment Agreement between First Security and Brad D. Hardy,
dated Feb. 2, 1998 (Exhibit 10.5 to First Security's Annual
Report on Form 10-K for the year ended Dec. 31, 1997,
incorporated by reference).
<PAGE>
10(6) Employment Agreement between First Security and Mark D.
Howell, dated Feb. 2, 1998 (Exhibit 10.6 to First Security's
Annual Report on Form 10-K for the year ended Dec. 31, 1997,
incorporated by reference).
10(7) Employment Agreement between First Security and J. Patrick
McMurray, dated Feb. 2, 1998 (Exhibit 10.7 to First Security's
Annual Report on Form 10-K for the year ended Dec. 31, 1997,
incorporated by reference).
10(8) Employment Agreement between First Security and L. Scott
Nelson, dated Feb. 2, 1998 (Exhibit 10.8 to First Security's
Annual Report on Form 10-K for the year ended Dec. 31, 1997,
incorporated by reference).
10(9) Employment Agreement between First Security and Scott C.
Ulbrich, dated Feb. 2, 1998 (Exhibit 10.9 to First Security's
Annual Report on Form 10-K for the year ended Dec. 31, 1997,
incorporated by reference).
10(10) Employment Agreement between First Security and David R.
Golden, dated Jan. 19, 1999 (Exhibit 10.11 to First Security's
Annual Report Form 10-K for the year ended Dec. 31, 1998,
incorporated by reference).
10(11) The form of First Security's Deferred Compensation Plan
Deferral Election -- 01/01/95 -- 12/31/95 (Exhibit 10.10 to
First Security's Annual Report on Form 10-K for the year ended
Dec. 31, 1994, incorporated by reference).
10(12) Agreement and Plan of Merger, dated as of June 6, 1999 by and
among Zions Bancorporation (Zions) and First Security (Exhibit
99.1 to First Security's Report on Form 13D, filed June 16,
1999, incorporated by reference; also Exhibit 99.1 to First
Security's Report on Form 13D, filed June 18, 1999,
incorporated by reference).
10(13) Stock Option Agreement, dated as of June 8, 1999, by and
between Zions and First Security (Exhibit 99.2 to First
Security's report on Form 13D, filed June 15, 1999,
incorporated by reference).
10(14) Stock Option Agreement, dated as of June 8, 1999, by and
between First Security and Zions (Exhibit 99.2 to First
Security's Report on Form 13D, filed June 18, 1999,
incorporated by reference).
13(1) First Security's Annual Report on Form 10-K for the year ended
December 31, 1998 (hereby incorporated by reference).
21 First Security's Subsidiaries (Exhibit 21 to First Security's
Annual Report on Form 10-K for the year ended December 31,
1998, incorporated by reference).
23(1) Consent of Deloitte & Touche LLP for First Security.
23(2) Consent of Ray, Quinney & Nebeker (filed as part of Exhibit 5
and Exhibit 8(1)).
24 Power of Attorney (included in signature pages of original
filing of Registration Statement).
<PAGE>
99.1 Form of Black & Company Shareholder proxy card.
Item 22. Undertakings.
First Security hereby undertakes that, for purposes of determining
any liability under the Securities Act, each filing of First Security's annual
report pursuant to Section 13(a) or Section 15(d) of the Exchange Act, as
amended (and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Exchange Act), that is incorporated by
reference in the registration statement will be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time will be deemed to be the initial bona fide offering
thereof.
First Security hereby undertakes that, prior to any public reoffering
of the securities registered hereunder through 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.
THE UNDERTAKING AS TO INDEMNIFICATION OF OFFICERS AND DIRECTORS
REQUIRED TO BE DISCLOSED BY ITEM 512(i) OF REGULATION S-K IS FOUND IN
"COMPARATIVE RIGHTS OF SHAREHOLDERS--DIRECTORS LIABILITY" IN THE PROSPECTUS /
PROXY STATEMENT.
First Security hereby undertakes that every prospectus (i) that is
filed pursuant to the paragraph immediately preceding, or (ii) that purports to
meet the requirements of Section 10(a)(3) of the 1933 Act and is used in
connection with an offering of securities subject to Rule 415, will be filed as
a part of an amendment to the registration statement and will not be used until
such amendment is effective; and that, for purposes of determining any liability
under the Securities Act, each such post-effective amendment will be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time will be deemed to be the initial
bona fide offering thereof.
First Security hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 10(b), 11 or 13 of this Form, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective time of the merger of the registration statement
through the date of responding to the request.
First Security hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired, that was not the subject of and included in the
registration statement when it became effective.
<PAGE>
First Security hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration
statement:
(i) To include any prospectus required by section
10(a)(3) of the Securities Act;
(ii) To reflect in the prospectus any facts or events
arising after the effective time of the merger of the
registration statement (or the most recent
post-effective amendment thereof) which, individually
or in the aggregate, represent a fundamental change
in the information set forth in the registration
statement;
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in
the registration statement or any material change to
such information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment will be
deemed to be a new registration statement relating to the
securities offered therein, and the offering of such
securities at that time will be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
<PAGE>
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 1st day of March 2000.
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 Brad D. Hardy and A. Robert Thorup, and
each of them, his or her true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for him or her and in his or her 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 or she might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and agents or
either of them, or their substitutes, may lawfully do or cause to be done by
virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the date or dates indicated.
Signature Title Date
- --------- ----- ----
/s/ Spencer F. Eccles Chairman and Chief
- ----------------------- Executive Officer, Director
Spencer F. Eccles
/s/ Morgan J. Evans President and Chief
- ----------------------- Operating Officer, Director
Morgan J. Evans
/s/ Brad D. Hardy Executive Vice President, General
- ----------------------- Counsel and Chief Financial Officer
Brad D. Hardy (Principal Financial and
Accounting Officer)
<PAGE>
/s/ James C. Beardall Director
- -----------------------
James C. Beardall
/s/ Rodney H. Brady Director
- -----------------------
Rodney H. Brady
/s/ James E. Bruce Director
- -----------------------
James E. Bruce
Director
- -----------------------
Thomas D. Dee II
/s/ Dr. David P. Gardner Director
- -----------------------
Dr. David P. Gardner
/s/ Robert H. Garff Director
- -----------------------
Robert H. Garff
/s/ Jay Dee Harris Director
- -----------------------
Jay Dee Harris
Director
- -----------------------
Robert T. Heiner
Director
- -----------------------
Karen H. Huntsman
/s/ G. Frank Joklik Director
- -----------------------
G. Frank Joklik
/s/ B. Z. Kastler Director
- -----------------------
B. Z. Kastler
/s/ Dr. J. Bernard Machen Director
- -----------------------
Dr. J. Bernard Machen
Director
- -----------------------
Joseph G. Maloof
<PAGE>
Director
- --------------------------
Michele Papen-Daniel, Ph.D.
Director
- -----------------------
Scott S. Parker
Director
- -----------------------
James L. Sorenson
/s/ Harold J. Steele Director
- -----------------------
Harold J. Steele
/s/ James R. Wilson Director
- -----------------------
James R. Wilson
OPINION OF RAY, QUINNEY & NEBEKER AS TO
THE LEGALITY OF THE SHARES BEING REGISTERED.
March 1, 2000
First Security Corporation Black & Company, Inc.
Attn: Morgan J. Evans, President Attn: Lawrence S. Black, Chairman and
79 South Main Street Chief Executive Officer
Salt Lake City, Utah 84111 One Southwest Columbia
Suite 1200
Portland, Oregon 97258
Re: Registration and Issuance of First Security Corporation Common
Stock to Shareholders of Black & Company, Inc.
Dear Messrs. Evans and Black:
This Firm has acted as counsel to First Security Corporation, a
Delaware corporation (the "Company"), in connection with its registration of
350,000 shares of its common stock, par value $1.25 (the "Shares") for use in
the merger (as defined in the Prospectus/Proxy Statement included in the
Company's Registration Statement on Form S-4 as filed with the Securities and
Exchange Commission on March , 2000.)
In connection with this representation, we have examined the originals,
or copies identified to our satisfaction, of such minutes, agreements, corporate
records and filings and other documents necessary to our opinion contained in
this letter. We have also relied as to certain matters of fact upon
representations made to us by officers and agents of the Company and of Black &
Company. Based upon and in reliance on the foregoing, it is our opinion that:
1. The Company has been duly incorporated and is validly existing and
in good standing as a corporation under the laws of the State of
Delaware; and has full corporate power and authority to own its
properties and conduct its business as described in the
Prospectus/Proxy Statement referred to above.
2. When issued and distributed to the shareholders of Black & Company,
Inc. under the terms of the merger agreement, the Shares will be duly
and validly issued and will be fully paid and nonassessable.
<PAGE>
Morgan J. Evans
Lawrence S. Black
March 1, 2000
Page 2
3. The shareholders of the Company have no pre-emptive rights to
acquire additional shares of First Security common stock in respect of
the Shares.
We hereby consent to the use of our name in the Prospectus/Proxy
Statement and therein being disclosed as counsel to the Company in this matter.
Very truly yours,
RAY, QUINNEY & NEBEKER
By: /s/ A. R. Thorup
--------------------------------------------------------
A. Robert Thorup, a Shareholder and Director of the Firm
FORM OF OPINION OF RAY, QUINNEY & NEBEKER RE: TAX MATTERS.
March ___, 2000
First Security Van Kasper, Inc. Black & Company, Inc.
Attn: Scott C. Ulbrich, Chief Attn: Lawrence S. Black, Chairman and
Executive Officer Chief Executive Officer
79 South Main Street One Southwest Columbia, #1200
Salt Lake City, Utah 84111 Portland, Oregon 97258
Ladies and Gentlemen:
We have acted as counsel to First Security Van Kasper, Inc., a Utah
corporation ("FSVK"), in connection with the Merger (the "Merger") of Black &
Company, Inc. ("Black & Co.") with and into FSVK, as set forth in that certain
Agreement and Plan of Reorganization, dated as of January 24, 2000 as amended on
February 29, 2000, (the "Agreement"), by and among First Security Corporation
("FSC"), FSVK, Black & Co. and certain named Shareholders and as more fully
described in that certain S-4 Registration Statement dated as of ______________,
2000, filed with the Securities and Exchange Commission, together with any
pre-effective filing amendments (the "Registration Statement"). This opinion is
delivered to you pursuant to the Agreement. Unless otherwise defined herein,
capitalized terms will have the meanings given them in the Agreement. Further
all references to the Code are to the Internal Revenue Code of 1986, as amended.
In connection with this opinion, we have reviewed a signed copy of the
Agreement, the Registration Statement and all other documents we have deemed
necessary or appropriate for purposes of this opinion. In addition, we expressly
rely upon the representations and facts set forth in the Agreement, the
Registration Statement, and in certificates of responsible officers of FSC, FSVK
and Black & Co. concerning matters within the areas of responsibility of such
officers, dated ______________, 2000, and ______________, 2000, respectively
(the "Certificates"). If any of the representations and facts set forth in the
Agreement, the Registration Statement and the Certificates upon which this
opinion is based are not true and accurate, both on the date of this letter and
at the effective date of the Merger, then we express no opinion. Further, our
opinion assumes that the Merger will occur fully in accordance with the terms
and provisions of the Agreement insofar as they are pertinent to this opinion.
If it does not, then we express no opinion.
Based on the foregoing, and subject to the qualifications and
exceptions heretofore and hereafter set forth, it is our opinion that for
Federal income tax purposes:
(1) The Merger will constitute a reorganization within the
meaning of Section 368(a) of the Code.
(2) Neither Black & Co. nor FSVK will recognize gain or loss
as a result of the Merger.
(3) No gain or loss will be recognized by the holders of Black
& Co. Common Stock who exchange such stock for FSC Common Stock
pursuant to the Merger (with the exception of gain recognized upon the
receipt of cash in lieu of fractional shares (see paragraph (6)
below)).
(4) The basis of the FSC Common Stock received by the holders
of the Black & Co. Common Stock pursuant to the Merger will be the same
as the basis of the Black & Co. Common
<PAGE>
Morgan J. Evans
Lawrence S. Black
March 1, 2000
Page 2
Stock surrendered in exchange therefor, after appropriate reduction for
the basis of fractional shares for which cash is received.
(5) The holding period of the FSC Common Stock received by the
holders of the Black & Co. Common Stock pursuant to the Merger will
include the holding period of the Black & Co. Common Stock surrendered
in exchange therefor, provided that the Black & Co. Common Stock so
surrendered was held as a capital asset at the time of the exchange.
(6) Any cash received by the holders of the Black & Co. Common
Stock in lieu of a fractional share of FSC Common Stock will be treated
as having been received in redemption of the fractional share so cashed
out and will result in taxable gain or loss. The amount of such gain or
loss will be the difference between the cash received and the basis of
the fractional share interest surrendered in exchange therefor.
Provided the fractional share interest was held as a capital asset at
the time of redemption, such gain or loss will constitute capital gain
or loss.
The opinions set forth above are predicated upon and are limited by the
assumptions set forth herein and are further subject to the qualifications,
assumptions, exceptions and limitations set forth below:
(a) The opinions and conclusions set forth herein are based
upon the Federal income tax laws of the United States, including the
Code, Treasury Regulations and judicial and administrative
interpretations thereof, as they exist on the date of this letter.
There can be no assurance that the legal authorities upon which our
opinion is based will not be modified, revoked, supplemented or
otherwise changed, with possible retroactive effect. If there is a
material change in the legal authorities or the facts, information,
covenants, statements, representations or assumptions upon which our
opinion is based, we express no opinion. We undertake no obligation to
reexamine or revise our opinions in the light of any such changes.
(b) The opinions set forth herein are limited to those Federal
income tax consequences of the Merger which are specifically addressed
in the six numbered paragraphs above. In particular, no opinion is
expressed with respect to the tax consequences of the Merger under Code
Sections 55 through 59 and the Regulations thereunder (providing for
alternative minimum tax). We also express no opinion or conclusions
with regard to foreign, state or local income tax consequences.
(c) The opinions set forth herein are given only as of the
date hereof. We undertake no obligation to advise you of changes of law
or fact that occur after the date of this opinion letter.
(d) The opinions set forth herein are given solely to FSVK and
to Black & Co. for their benefit and are given solely in connection
with the Merger and shall not be deemed binding for any other purpose,
and you shall not have the right to rely thereon for any other purpose.
Very truly yours,
RAY, QUINNEY & NEBEKER
By: /s/ Gerald T. Snow
-----------------------------------
Gerald T. Snow, a Shareholder and
Director of the Firm
CONSENT OF DELOITTE & TOUCHE LLP
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration
Statement of First Security Corporation on Form S-4 of our report dated February
24, 1999, appearing 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 Prospectus/Proxy Statement, which is part of
this Registration Statement.
DELOITTE & TOUCHE LLP
Salt Lake City, Utah
March 1, 2000
__________________________
__________________________
__________________________
Dear Shareholder:
On February 23, 2000, the directors of Republic Bank, Inc. (the
"Company") adopted a resolution recommending that the Company's shareholders
amend the Articles of Incorporation of the Company to increase the number of
shares of common stock which the Company is authorized to issue from 100,000 to
200,000 shares. The Amendment will permit the Company to issue additional shares
of stock. The Board believes that such action is in the best interests of the
Company and its existing shareholders.
Pursuant to the Board's recommendation, the holders of a majority of the
outstanding shares of stock in the Company approve such amendment
by Action by Written Consent
FORM OF BLACK & COMPANY SHAREHOLDER PROXY CARD
BLACK & COMPANY, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR THE SPECIAL MEETING OF
STOCKHOLDERS TO BE HELD ON APRIL 7, 2000
The undersigned hereby appoints ______ and ______, and each of them, as
attorneys and proxies of the undersigned, with full power of substitution, to
vote all of the shares of stock of Black & Company, Inc., an Oregon corporation,
that the undersigned may be entitled to vote at the Special Meeting of
Stockholders of Black & Company, Inc. to be held at One Southwest Columbia,
Suite 1200, Portland Oregon 97258 on April 7, 2000 at 2:00 p.m., P.S.T., and at
any and all postponements, continuations and adjournments thereof, with all
powers that the undersigned would possess if personally present, upon and in
respect of the following matter and in accordance with the following
instructions, with discretionary authority as to any and all other matters that
may properly come before the meeting. The undersigned hereby acknowledges
receipt of the: (1) notice of special meeting of stockholders of Black &
Company, Inc., and (2) accompanying Proxy Statement/Prospectus. Unless a
contrary direction is indicated, this proxy will be voted for Proposal 1 as more
specifically described in the Proxy Statement/Prospectus. If specific
instructions are indicated, this proxy will be voted in accordance therewith.
[X] Please mark votes as in this example
- --------------------------------------------------------------------------------
Proposal No. 1: For Against Abstain I Plan to
Attend the
Meeting:
To approve the Agreement and Plan
of Reorganization dated January 24,
2000, as amended, by and among
First Security Corporation, First
Security Van Kasper, Inc., and
Black & Company, Inc., as amended. [ ] [ ] [ ] [ ]
- --------------------------------------------------------------------------------
This proxy is solicited on behalf of the Board of Directors of Black & Company,
Inc. Whether or not you plan to attend the meeting in person, please sign and
promptly mail this proxy in the return envelope so that your stock may be
represented at the meeting.
Sign exactly as your name(s) appears on your stock certificate. If shares of
stock stand of record in the names of two or more persons or in the name of
husband and wife, whether as joint tenants or otherwise, both or all of such
persons should sign this proxy. If a corporation holds shares of stock of
record, the proxy should be executed by the president or vice president and the
secretary or assistant secretary. If a partnership holds shares of stock of
record, the proxy should be executed in partnership name by an authorized
person. Executors, trustees, administrators, guardians, attorneys-in-fact or
other fiduciaries should give their full title. Please date the proxy.
Signature:________________________ Signature:____________________________
Date: ____________________________ Date: ________________________________
Name (print): ____________________ Name (print): ________________________
Title (if applicable): ___________ Title (if applicable): _______________
