As filed with the Securities and Exchange Commission on October ___, 2002
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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PRE-EFFECTIVE AMENDMENT NO. 1 TO
FORM S-4
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
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ZIONS BANCORPORATION
(Exact name of registrant as specified in its charter)
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Utah 6712 87-0227400
(State or Other (Primary Standard Industrial (I.R.S. Employer
Jurisdiction of Classification Code Number) Identification No.)
Incorporation or
Organization)
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One South Main, Suite 1134
Salt Lake City, Utah 84111
(801) 524-4787
(Address, Including Zip Code, and Telephone Number, Including
Area Code of Registrant's Principal Executive Offices)
Harris H. Simmons
Chairman, President and Chief Executive Officer
Zions Bancorporation
One South Main, Suite 1134
Salt Lake City, Utah 84111
(801) 524-4787
(Name, Address, Including Zip Code, and Telephone
Number, Including Area Code, of Agent for Service)
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Copies to:
Brian D. Alprin, Esq. James E. Brophy, III, Esq.
Laurence S. Lese, Esq. Ryley Carlock & Applewhite
Duane Morris LLP One North Central Avenue, Suite 1200
1667 K Street, N.W., Suite 700 Phoenix, Arizona 85004-4417
Washington, D.C. 20006 (602) 258-7701
(202) 776-7800
Approximate date of commencement of proposed sale to the public: As
soon as practicable after the registration statement is declared effective and
all of the conditions to the proposed merger of Frontier State Bank with and
into National Bank of Arizona, a wholly-owned subsidiary of Zions
Bancorporation, are satisfied, as is described in the enclosed proxy
statement/prospectus.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [_]
The Registrant hereby amends this registration statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until this registration statement
shall become effective on such date as the Securities and Exchange Commission,
acting pursuant to said Section 8(a), may determine.
Frontier
State Bank
Member FDIC
[GRAPHIC OMITTED]
MERGER PROPOSED - YOUR VOTE IS VERY IMPORTANT
The board of directors of Frontier State Bank has unanimously approved
the sale of Frontier to Zions Bancorporation. In the proposed transaction,
Frontier will merge into National Bank of Arizona, a wholly-owned subsidiary of
Zions. Following the merger, National Bank of Arizona will be the surviving
banking association. The Frontier board believes that the merger is in the best
interests of our shareholders and unanimously recommends that our shareholders
vote to approve the merger agreement and the merger. We will hold a special
meeting of our shareholders to consider and vote upon the merger agreement, the
merger and related matters.
After we complete the merger, Zions will issue to the former Frontier
shareholders up to a maximum of 204,000 shares of Zions common stock.If the
merger became effective as of the date of this document and if Zions issued
204,000 shares of its common stock upon completion of the merger, each Frontier
share would represent the right to receive 0.2160 of a share of Zions common
stock. The closing price of Zions common stock on the Nasdaq National Market on
October ___, 2002, was $[_____]. See "The Merger - What You Will Receive,"
beginning on page ___. We expect the merger to be a tax-free transaction for our
shareholders, except for any cash they receive instead of fractional shares of
Zions common stock. Zions common stock trades on the Nasdaq National Market
under the symbol "ZION."
The merger agreement must be approved by an affirmative vote of the
holders of at least two-thirds of the outstanding shares of Frontier common
stock entitled to vote. Your vote is very important. Failure to vote is
equivalent to voting against the merger agreement and the merger. Please
complete, sign, date and promptly return the accompanying proxy card in the
enclosed postage-paid envelope. No vote of Zions' shareholders is required to
approve the transaction.
The date, time and place of our special meeting of shareholders are as
follows:
[________ ___], 2002 at 10:00 a.m. local time
Frontier State Bank
Bill Hancock Center
550 North Ninth Place
Show Low, Arizona 85902
Tony J. Swartz
President and Chief Executive Officer of
Frontier State Bank
Neither the SEC nor any state securities commission has approved or
disapproved of the Zions shares to be issued under this proxy
statement/prospectus or determined if this proxy statement/prospectus is
truthful or complete. Any representation to the contrary is a criminal offense.
The shares of Zions common stock offered by this proxy
statement/prospectus are not savings accounts, deposits or other obligations of
any bank or non-bank subsidiary of any of the parties. Neither the FDIC nor any
other governmental agency insures or guarantees any loss to you of your
investment value in the Zions common stock.
Proxy statement/prospectus dated _________, 2002, and first mailed to
shareholders on or about __________, 2002.
Frontier State Bank
550 North Ninth Place
Show Low, Arizona 85902
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
Frontier State Bank, an Arizona banking corporation, will hold a
special meeting of shareholders at Bill Hancock Center located at 550 North
Ninth Place, Show Low, Arizona on ___________, 2002 at 10:00 a.m. local time for
the following purposes:
1. To consider and vote upon a proposal to approve the Agreement and
Plan of Merger, dated as of August 16, 2002, by and among Frontier State Bank,
Zions Bancorporation, a Utah corporation, and National Bank of Arizona, a
national banking association and a wholly-owned subsidiary of Zions, and to
approve the merger of Frontier State Bank with and into National Bank of Arizona
and related matters described in the merger agreement; and
2. To transact such other business as may properly come before the
Frontier State Bank special meeting.
We describe more fully the merger agreement, the merger and related
matters in the attached proxy statement/prospectus, which includes a copy of the
merger agreement as Appendix A.
We have fixed the close of business on _____________, 2002 as the
record date for determining the shareholders of Frontier entitled to vote at our
special meeting and any adjournments or postponements of the meeting. Only
holders of record of Frontier common stock at the close of business on that date
are entitled to notice of and to vote at our special meeting.
The board of directors of Frontier unanimously recommends that you vote
"FOR" approval of the merger agreement, the merger and related matters. The
affirmative vote of at least two-thirds of the outstanding shares of Frontier
common stock entitled to vote at the meeting is required to approve the merger
agreement, the merger and related matters. Frontier shareholders have a right to
dissent from the merger agreement and to obtain payment in cash of the fair
value of their Frontier shares by complying precisely with the procedures
described in the accompanying proxy statement/prospectus.
The board of directors of Frontier requests that you complete, date and
sign the enclosed proxy card and mail it promptly in the accompanying
postage-prepaid envelope. You may revoke any proxy that you deliver prior to our
special meeting by delivering a writing to the President and Chief Executive
Officer of Frontier stating that you have revoked your proxy or by delivering a
later dated proxy. Shareholders of record of Frontier common stock who attend
our meeting may vote in person, even if they have previously delivered a signed
proxy.
By Order of the Board of Directors of
Frontier State Bank
/s/Tony J. Swartz
Tony J. Swartz
President and Chief Executive Officer
Frontier State Bank
Show Low, Arizona
____________, 2002
QUESTIONS AND ANSWERS ABOUT THE MERGER
This proxy statement/prospectus provides you with detailed information
about the merger agreement, the merger and related matters that we will submit
for shareholder approval at the Frontier special meeting of shareholders. We
encourage you to read this entire document carefully. This proxy
statement/prospectus incorporates important business and financial information
about Zions that is not included in or delivered with this document.
Shareholders may obtain this information without charge by requesting in writing
or by telephone as follows:
Zions Bancorporation
One South Main, Suite 1134
Salt Lake City, Utah 84111
Attention: Ms. Jennifer R. Jolley
Assistant Secretary
Tel: (801) 524-4787
If you would like to request documents from us, please do so by
___________, 2002 to receive them prior to the Frontier special meeting. See
"Where You Can Find More Information," beginning at page ___.
Q: WHAT IS THE PURPOSE OF THIS DOCUMENT?
A: This document serves as both a proxy statement of Frontier and a prospectus
of Zions. As a proxy statement, it is being provided to you because the Frontier
board of directors is soliciting your proxy for use at the Frontier special
meeting of shareholders called, among other purposes, to consider and vote on
the merger agreement among Frontier, Zions and National Bank of Arizona. As a
prospectus, it is being provided to you because Zions is offering to exchange
shares of its common stock for your shares of Frontier common stock upon
completion of the merger.
Q: WHY ARE FRONTIER AND NATIONAL BANK OF ARIZONA PROPOSING TO MERGE?
A: We are proposing to merge Frontier with and into National Bank of Arizona
because we believe that combining the strengths of National Bank of Arizona,
Frontier, and Zions is in the best interests of each company, its shareholders
and customers. Please see "The Merger - Recommendations of the Frontier Board
and Frontier's Reasons for the Merger," beginning at page XX, for the various
factors considered by the Frontier board in recommending that Frontier
shareholders vote FOR the proposal to approve the merger agreement and the
merger.
Q: WHAT WILL I RECEIVE IN THE MERGER?
A: Upon completion of the merger, Frontier shareholders will receive up to a
maximum total of 204,000 shares of Zions common stock for all of the outstanding
shares of Frontier common stock that they own. If the average closing deposits
or the closing net worth of Frontier falls below levels specified in the merger
agreement, the number of shares of Zions common stock issuable to Frontier
shareholders would be less than the maximum total of 204,000 shares. If there
are no reductions to the maximum total of 204,000 shares of Zions common stock
to be issued, then assuming that all currently outstanding options to purchase
Frontier common stock are exercised before the merger, each of the 944,246
shares of Frontier common stock that would then be outstanding would be
exchangeable for 0.2160 of a share of Zions common stock. However, the exchange
ratio is variable, depending upon the condition of Frontier when the merger
becomes effective. The exchange ratio set forth above will be reduced if
Frontier's average closing deposits or closing net worth falls below levels
specified in the merger agreement. Consequently, you should not rely upon the
exchange ratio set forth in this paragraph, which is provided for illustrative
purposes only. See "The Merger - What You Will Receive," beginning at page XX.
Q: WHAT ARE THE TAX CONSEQUENCES OF THE MERGER TO ME?
A: We expect the merger to be tax-free to Frontier shareholders who receive
shares of Zions common stock in exchange for their shares of Frontier common
stock. Zions will not issue fractional shares in the merger. Cash received by
Frontier shareholders instead of fractional shares generally will be taxable.
Zions and Frontier will have no obligation to complete the merger unless
Frontier and Zions receive a legal opinion that the merger will qualify as a
transaction that is generally tax-free for federal income tax purposes. The
legal opinion will not bind the Internal Revenue Service, however, which could
take a different view of the transaction. See "Material Federal Income Tax
Consequences," beginning at page XX.
Q: DO I HAVE RIGHTS TO DISSENT FROM THE MERGER?
A: Yes. Under the National Bank Act, Frontier shareholders have rights to
dissent from the merger agreement and the merger and to receive a payment in
cash for the fair value of their shares of Frontier common stock. To perfect
their dissenters' rights, holders of these shares of Frontier common stock must
follow precisely the required statutory procedures. If you hold shares of
Frontier common stock and you dissent from the merger agreement and the merger
and follow the required procedures precisely, your shares of Frontier common
stock will not become shares of Zions common stock upon completion of the
merger. Instead, your only right will be to receive a cash payment for the value
of your shares, as that value is determined by the appraisal process. If you
fail to follow the procedures precisely, you might not be able to perfect your
dissenters' rights and receive cash for the value of your shares. See "Rights of
Dissenting Shareholders," beginning at page XX and the information at Appendix
B, below.
Q: ARE THERE ANY CONDITIONS TO THE MERGER OCCURRING?
A: Yes. The merger must be approved by the Arizona State Banking Department and
the Office of the Comptroller of the Currency and by a two-thirds majority of
Frontier's shareholders. National Bank of Arizona has received the approval of
the Arizona State Banking Department and is awaiting action by the Comptroller
of the Currency. Completion of the merger is also subject to certain other
conditions, including no material adverse change in the financial condition of
Zions or Frontier. See "The Merger - Conditions to Complete Merger," beginning
at page XX.
Q: WHAT DOES THE FRONTIER BOARD OF DIRECTORS RECOMMEND?
A: After careful consideration, the Frontier board of directors determined that
the merger is advisable and is fair and in the best interests of Frontier and
its shareholders and approved the merger agreement and the merger. Accordingly,
the Frontier board unanimously recommends that you vote FOR the proposal to
approve the merger agreement and approve the merger. See "The Merger -
Recommendation of the Frontier Board and Frontier's Reasons for the Merger,"
beginning at page 25.
Q: ARE THERE RISKS TO THIS MERGER?
A: Yes. For a description of some of the risks, see "Risk Factors," beginning
at page XX.
Q: WHAT DO I NEED TO DO NOW?
A: After you have carefully read this proxy statement/prospectus, indicate on
your proxy card how you want your shares to be voted, then sign, date and mail
the proxy card in the enclosed postage-paid envelope as soon as possible so that
your shares may be represented and voted at the Frontier special meeting. In
addition, you may attend the Frontier special meeting in person and vote,
whether or not you have signed and mailed your proxy card. If you sign, date and
return your proxy but do not indicate how you want to vote, your proxy will be
counted as a vote in favor of the merger agreement and the merger. If you do not
vote or abstain from voting, it will have the effect of a vote against the
merger agreement and the merger.
Q: CAN I CHANGE MY VOTE AFTER I HAVE MAILED MY SIGNED PROXY CARD?
A: Yes. There are three ways for you to revoke your proxy and change your vote.
First, you may send a later-dated, signed proxy card before our special meeting.
Second, you may attend our special meeting in person and vote. Third, you may
revoke any proxy by written notice to the President and Chief Executive Officer
of Frontier prior to the Frontier meeting. If you have instructed a broker to
vote your shares, you must follow directions received from your broker to change
your vote.
Q: WHY IS IT IMPORTANT FOR ME TO VOTE?
A: We cannot complete the merger without the approval of holders of two-thirds
of the outstanding shares of Frontier common stock.
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Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A: No. You should not send in your stock certificates at this time. Promptly
following completion of the merger, Zions will mail instructions to all former
Frontier shareholders for exchanging their stock certificates.
Q: IS THERE OTHER INFORMATION I SHOULD CONSIDER?
A: Yes. Much of the business and financial information about Zions that may be
important to you is not included in this document. Instead, that information is
incorporated by reference to documents separately filed by Zions with the
Securities and Exchange Commission (SEC). This means that Zions may satisfy its
disclosure obligations to you by referring you to one or more documents
separately filed by it with the SEC. See "Where You Can Find More Information,"
beginning at page ___, for a list of documents that Zions has incorporated by
reference into this proxy statement/prospectus and for instructions on how to
obtain copies of those documents. The documents are available to you without
charge.
Q: WHAT IF THERE IS A CONFLICT BETWEEN DOCUMENTS?
A: You should rely on the LATER FILED DOCUMENT. Information in this proxy
statement/prospectus may update information contained in one or more of the
Zions documents incorporated by reference. Similarly, information in documents
that Zions may file after the date of this proxy statement/prospectus may update
information contained in this proxy statement/prospectus or information
contained in previously filed documents.
Q: WHEN DO YOU EXPECT TO MERGE?
A: We are working toward completing the merger as quickly as possible. We expect
to complete the merger in the fourth quarter of 2002.
Q: WHOM SHOULD I CALL WITH QUESTIONS OR TO OBTAIN ADDITIONAL COPIES OF THIS
PROXY STATEMENT/PROSPECTUS?
A: If you have questions about the special meeting or if you need additional
copies of this proxy statement/prospectus, you should contact:
Frontier State Bank
550 North Ninth Place
Show Low, Arizona 85902
Attention: Tony J. Swartz
President and Chief Executive Officer
Phone Number: (928) 537-2933
3
TABLE OF CONTENTS
Page
QUESTIONS AND ANSWERS ABOUT THE MERGER........................................1
SUMMARY.......................................................................8
The Merger...............................................................8
The Frontier Shareholders' Meeting......................................13
You May Change Your Vote If You Wish....................................14
Forward-Looking Statements May Prove Inaccurate.........................14
Additional Information..................................................15
Summary Historical Consolidated Financial Data..........................16
CURRENT DEVELOPMENTS.........................................................18
RISK FACTORS.................................................................21
Frontier has entered into a cease and desist order (the "order")
with the Federal Deposit Insurance Corporation ("FDIC") and
the Arizona Superintendent of Banks and is required to comply
with the order. If the merger is not completed for any reason,
Frontier must raise additional capital and take other action
to implement the order that will involve significant expense to
Frontier. The order may constitute a breach of the merger
agreement that allows Zions to elect not to proceed with the
merger, which would obligate Frontier to pay a termination fee
to Zions.............................................................21
Failure to complete the merger could severely disadvantage Frontier.....21
If Frontier's net worth or deposits are not maintained at
specified levels, Zions and National Bank of Arizona are
free to choose not to proceed with the merger.......................21
If the merger has not occurred by December 30, 2002, either Zions
or Frontier may choose not to proceed with the merger................22
You will receive fewer shares of Zions common stock if Frontier's
operations are not maintained at or above specified levels...........22
The value of what you will receive in the merger will rise and
fall as the market price of Zions common stock rises and falls.......22
You will have less influence as a shareholder of Zions than as a
shareholder of Frontier..............................................22
4
The market price of the shares of Zions common stock may be affected by
factors different from those affecting the shares of Frontier
common stock.........................................................22
Zions' future acquisitions will dilute your ownership of Zions
and may cause Zions to become more susceptible to adverse
economic events......................................................22
THE FRONTIER SHAREHOLDERS' MEETING...........................................23
When and Where the Frontier Special Meeting Will Be Held................23
What Will Be Voted on at the Frontier Special Meeting...................23
Shareholders Entitled to Vote...........................................23
Vote Required to Approve the Merger.....................................23
Number of Shares that Must Be Represented for a Vote to Be Taken........23
Voting Your Shares......................................................24
How Proxies Are Counted.................................................24
Changing Your Vote......................................................24
Solicitation of Proxies and Costs.......................................24
Recommendation of Frontier Board........................................25
PROPOSAL 1 THE MERGER.......................................................25
General ...............................................................25
Background of the Merger................................................25
Recommendation of the Frontier Board and Frontier's Reasons for
the Merger...........................................................28
No Opinion of Financial Advisor.........................................29
What You Will Receive...................................................29
Frontiers' Officers and Directors Have Interests that May Influence
or Even Obligate Them to Support and Approve the Merger..............30
Frontier Has Agreed to a Cease and Desist Order.........................30
Accounting Treatment....................................................31
Regulatory Approvals....................................................32
Frontier Board of Directors Support Agreement...........................33
Voting Agreements.......................................................33
Dissenters' or Appraisal Rights.........................................33
5
Inclusion of Zions' Common Stock on Nasdaq National Market..............33
Dividends...............................................................33
Exchange of Frontier Certificates.......................................34
Frontier Stock Options..................................................35
Representations and Warranties..........................................35
Conduct of Business Pending Completion of the Merger....................36
Conditions to Complete the Merger.......................................38
Termination and Termination Fees........................................39
Amendment and Waiver....................................................40
Survival of Certain Provisions..........................................40
Restrictions on Resales by Affiliates...................................41
Allocation of Costs and Expenses........................................41
REGULATION AND SUPERVISION...................................................41
Support of Subsidiary Banks.............................................42
Liability of Commonly Controlled Banks..................................43
Depositor Preference Statute............................................43
Capital Requirements....................................................43
Dividend Restrictions...................................................43
MATERIAL FEDERAL INCOME TAX CONSEQUENCES.....................................44
PRICE RANGE OF COMMON STOCK AND DIVIDENDS....................................45
DESCRIPTION OF ZIONS CAPITAL STOCK...........................................46
COMPARISON OF SHAREHOLDERS' RIGHTS...........................................47
RIGHTS OF DISSENTING SHAREHOLDERS............................................51
OTHER MATTERS................................................................52
LEGAL MATTERS................................................................53
EXPERTS......................................................................53
WHERE YOU CAN FIND MORE INFORMATION..........................................53
6
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS....................54
Appendix A - Agreement and Plan of Merger, dated as of August 16, 2002, among
National Bank of Arizona, Frontier State Bank, and Zions Bancorporation.
Appendix B - Sections of the National Bank Act, codified at 12 U.S.C. ss.
215a(b) through (d), regarding dissenters' rights of Frontier shareholders.
7
SUMMARY
This brief summary does not contain all of the information that is
important to you. You should carefully read this entire document and the
documents to which we have referred you to fully understand the merger. See
"Where You Can Find More Information," beginning at page ___.
The Merger
WHAT FRONTIER SHAREHOLDERS WILL RECEIVE UPON COMPLETION OF THE MERGER (SEE PAGE
___)
Upon completion of the merger, Frontier shareholders will receive up to
a maximum total of 204,000 shares of Zions common stock in exchange for all the
shares of Frontier common stock that they own. If the "average closing deposits"
fall below $85,000,000 or the "closing net worth" of Frontier falls below
$6,500,000, the number of shares of Zions common stock issued to Frontier
shareholders will be less than the maximum total of 204,000 shares. The number
of Zions shares to be exchanged for the outstanding Frontier shares will be
calculated by formula, as follows: Each share of Frontier common stock will be
converted into that number of shares of Zions common stock calculated by
dividing the "consideration number" by the number of shares of Frontier common
stock issued and outstanding at the effective time of the merger. See "The
Merger - What You Will Receive" beginning at page ___ for a more comprehensive
discussion of this calculation, and for definitions of terms, including
"consideration number," "average closing deposits" and "closing net worth."
Under the merger agreement, the ratio in which Frontier shares are
converted into the right to receive Zions shares is variable, depending upon the
condition of Frontier at the effective time. Assuming that there are no
reductions to the maximum number of 204,000 shares of Zions common stock
issuable in the merger and that all currently outstanding options to purchase
Frontier common stock are exercised before the merger, then each of the 944,246
shares of Frontier common stock that would then be outstanding would be
exchangeable for 0.2160 of a share of Zions common stock. The exchange ratio is
for illustrative purposes only. If Frontier's average closing deposits or
closing net worth falls below levels specified in the merger agreement, the
exchange ratio will be reduced; consequently, you should not rely upon the
exchange ratio set forth in this paragraph. We cannot determine at this time the
exchange ratio. It will be calculated at the effective time of the merger and
may be less than the illustrative exchange ratio that we have used in this
paragraph. The closing price of Zions common stock on the Nasdaq National Market
on October ___, 2002, was $[_______] per share. See "Price Range of Common Stock
and Dividends," beginning at page XX.
Zions will not issue fractional shares of its common stock in the
merger. Any Frontier common shareholder who would otherwise be entitled to
receive a fraction of a share of Zions common stock will instead receive cash
for such fractional share. To determine the cash value of a fraction of a share
of Zions common stock, Frontier and Zions have agreed that a share of Zions
stock will be valued at $50.98.
You should not send in your Frontier stock certificates for exchange
until instructed to do so after we complete the merger (see page ___).
FRONTIER HAS ENTERED INTO A CEASE AND DESIST ORDER WITH THE FEDERAL DEPOSIT
INSURANCE CORPORATION ("FDIC") AND THE ARIZONA SUPERINTENDENT OF BANKS (THE
"SUPERINTENDENT") AND IS REQUIRED TO COMPLY WITH THE ORDER (SEE PAGE ___)
Frontier and its board of directors work closely with the FDIC and the
Superintendent to fulfill their regulatory obligations and to assure that
Frontier is operated in a safe and sound manner. In October 2000, Frontier
entered into a memorandum of understanding with the Superintendent and the FDIC
under which Frontier agreed to take various actions to improve the condition of
the Bank, including improving management by obtaining a senior lending officer;
improving loan credit quality and tightening credit requirements; increasing
supervision by the board of directors; establishing better internal credit
accountability review and improving the adequacy of the Frontier loan loss
reserve; correcting regulatory violations; implementing an internal audit
program; and increasing capital, among other things. At the time Frontier
commenced negotiations with Zions concerning a potential merger, Frontier had
addressed nearly all the issues outlined in the memorandum of understanding, and
had taken action to reduce the size of the bank in order to meet capital ratio
requirements. At the time Frontier commenced merger discussions with Zions,
Frontier's chief financial officer and senior credit officer resigned (although
8
the former senior credit officer has continued as a consultant to the bank).
Once Frontier entered into a letter of intent with Zions, Frontier suspended its
efforts to raise capital, because completion of the merger would eliminate any
necessity to do so. Over the past year, the Frontier board has worked with the
FDIC and the Superintendent to address their concerns about certain issues
involving Frontier, including loan quality, Frontier's level of capital, and the
adequacy of Frontier's credit management. On September 11, 2002, the Frontier
board consented to the issuance of a cease and desist order with the FDIC and
the Superintendent which, among other things, requires Frontier to take
corrective action if the merger is not completed and is designed to assure the
safety and soundness of Frontier and compliance with all applicable laws and
regulations. See "Risk Factors," beginning at page ____, and "The Merger -
Frontier Has Agreed to a Cease and Desist Order," beginning at page ____, for
additional information. The cease and desist order will be irrelevant, if the
merger is completed. If the merger should fail to occur for any reason,
management of Frontier believes that it will be able to comply with the
requirements of the cease and desist order, including meeting required capital
ratios, to continue its operations as an independent bank. The Frontier board
did not consider the memorandum of understanding and Frontier's regulatory
posture to be a major factor in determining whether Frontier should consider a
merger or seek to remain independent and seek to raise additional capital. See
"The Merger - Background of the Merger" and "Frontier Has Entered Into a Cease
and Desist Order."
SOME FRONTIER SHAREHOLDERS HAVE AGREED TO VOTE FOR THE MERGER (SEE PAGE ___)
Nineteen shareholders of Frontier, all of whom are influential with
regard to Frontier or its management, and who include officers, directors,
former directors and their affiliates and relatives, have signed agreements
under which they have agreed individually that they will vote in favor of the
merger agreement and the merger all shares of Frontier common stock they
beneficially own and that they will use their best efforts to cause any other
shares of Frontier common stock over which they share voting power to be voted
in favor of the merger agreement and the merger. These shares represent
approximately [69.5%] of the outstanding common stock of Frontier entitled to
vote as of the record date of the meeting, enough to approve the merger without
the concurrence of any other Frontier shareholders.
Additionally, all of Frontier's eight directors, including Mr. Tony J.
Swartz, the President and Chief Executive Officer of Frontier, who own
approximately [26.6%] of the outstanding common stock of Frontier entitled to
vote as of the record date of the meeting, have agreed with Zions, subject to
any fiduciary duty they have to Frontier or its shareholders, to support the
merger agreement and to recommend its adoption by the other Frontier
shareholders and to refrain from soliciting any offer of merger or acquisition
of any of the shares or substantially all of the assets of Frontier.
ZIONS PLANS TO CONTINUE ITS DIVIDEND POLICY FOLLOWING THE MERGER (SEE PAGE ___)
The current annualized rate of cash dividends on the shares of Zions
common stock is $0.80 per share. After the merger, Zions expects that it will
continue to pay quarterly cash dividends in a manner that is consistent with its
past practices, subject to approval and declaration by its board of directors.
The payment of cash dividends by Zions in the future will depend on its
financial condition and earnings, business conditions and other factors.
TRANSACTION GENERALLY TAX-FREE TO FRONTIER SHAREHOLDERS (SEE PAGE ___)
We expect the merger to be tax-free to Frontier shareholders who
receive shares of Zions common stock. Cash received by Frontier shareholders
instead of fractional shares in the merger generally will be taxable.
Zions and Frontier will have no obligation to complete the merger
unless they receive a legal opinion that the merger will qualify as a
transaction that is generally tax-free for federal income tax purposes. In that
case, the federal income tax treatment of the merger will be as described under
"Material Federal Income Tax Consequences," beginning at page XX. The legal
opinion will not bind the Internal Revenue Service, however, which could take a
different view of the transaction.
FRONTIER SHAREHOLDERS WILL HAVE DISSENTERS' RIGHTS (SEE PAGE ___)
Under the National Bank Act and the Arizona Revised Statutes, Frontier
shareholders have dissenters' rights. If dissenting shareholders follow all
prescribed procedures, they will have the right to receive payment in cash of
the fair value of their shares of Frontier common stock rather than shares of
Zions common stock following completion of the merger. TO PERFECT THEIR
9
DISSENTERS' RIGHTS, HOLDERS OF SHARES OF FRONTIER COMMON STOCK MUST FOLLOW
PRECISELY THE REQUIRED STATUTORY PROCEDURES, INCLUDING FILING NOTICES WITH
FRONTIER, OR VOTING AGAINST THE MERGER AGREEMENT AND THE MERGER. If you hold
shares of Frontier common stock and you dissent from the merger agreement and
the merger and follow the required procedures, your shares of Frontier common
stock will not become shares of Zions common stock upon completion of the
merger. Instead, your only right will be to receive the value of your shares in
cash, as the value is determined by the appraisal process. If you fail to follow
the procedures precisely, you might not be able to perfect your dissenters'
rights and receive cash for the value of your shares, but instead will only be
entitled to receive shares of Zions common stock in exchange for your shares of
Frontier common stock. We have attached, as Appendix B to this document, the
applicable provisions of the National Bank Act relative to dissenters' rights.
See "Rights of Dissenting Shareholders," beginning at page XX.
INCLUSION OF SHARES OF ZIONS STOCK FOR TRADING ON THE NASDAQ NATIONAL MARKET
(SEE PAGE ___)
Zions' issued and outstanding shares are traded on the Nasdaq National
Market under the symbol "ZION." If the merger is completed, Zions will list the
shares of its common stock to be issued to the former Frontier shareholders in
the merger on the Nasdaq National Market.
COMPARATIVE PER SHARE MARKET PRICE INFORMATION (SEE PAGE ___)
Shares of Zions common stock trade on the Nasdaq National Market. There
is no public market for the shares of Frontier common stock. On August 16, 2002,
the last full trading day prior to the public announcement of the signing of the
merger agreement, and on October _______, 2002, the last practicable trading day
prior to the printing of this document, the closing prices of Zions common stock
were as follows:
August 16, 2002 October __, 2002
---------------- ----------------
Zions ....................... $ 53.34 $ [_________]
Equivalent Market Value Per
Share of Frontier (1) .... $ 11.52 $ [_________]
(1) This amount is achieved by multiplying the market price of Zions stock by an
assumed exchange ratio of 0.2160. The exchange ratio is variable, however,
depending on the condition of Frontier when the merger becomes effective.
Consequently, you should not rely upon the assumed exchange ratio of 0.2160. See
"The Merger - What You Will Receive," beginning at page XX.
DETERMINATION OF EXCHANGE RATIO (SEE PAGE ___)
The exchange ratio in the merger is variable. In exchange for all the
outstanding shares of Frontier common stock, the shareholders of Frontier will
receive up to a maximum of 204,000 shares of Zions common stock. However, Zions
would issue fewer than 204,000 shares upon completion of the merger, if:
o the average closing deposits of Frontier are below
$85,000,000, or
o the closing net worth of Frontier is below $6,500,000.
If, at the effective time of the merger, the average closing deposits
of Frontier are $85,000,000 or more, the closing net worth of Frontier is
$6,500,000 or more and all Frontier stock options have been exercised, the
exchange ratio would be 0.2160 of a share of Zions common stock for each
outstanding share of Frontier common stock. If the market price of Zions common
stock on the effective date of the merger is $[53.34], which was the market
price of Zions common stock on October ___, 2002, the last practicable date
prior to printing this document, each share of Frontier common stock would have
an equivalent market value of $[11.52].
If Frontier's average closing deposits are less than $85,000,000 or
Frontier's closing net worth is less than $6,500,000, the number of Zions'
shares delivered will be reduced. The amount of the reduction is calculated by
dividing the sum of (i) the amount by which Frontier's closing net worth is less
than $6,500,000 and (ii) 8.5% of the amount by which Frontier's net closing
deposits are less than $85,000,000 by $50.98 (the agreed value of a Zions share
for purposes of the merger). The resulting quotient is the number of shares that
will be deducted from the 204,000 shares of Zions stock in order to determine
10
the actual number of shares Zions will exchange for Frontier stock. While the
market value of a share of Zions stock may be greater or less than $50.98 at the
time of the merger, the divisor used in this formula is nevertheless fixed at
$50.98.
For example, if the average closing deposits of Frontier are
$82,000,000, the closing net worth of Frontier is $6,100,000, and the market
value of Zions common stock is $_____, as it was on October ___, 2002, the last
practicable date prior to printing this document, and assuming that 944,246
Frontier shares are outstanding, the exchange ratio would under those
circumstances be 0.2024 of a share of Zions common stock for each outstanding
share of Frontier common stock or an equivalent market value of $10.80 for each
share of Frontier common stock.
The market price of Zions common stock will fluctuate prior to the
merger in the normal course of trading on a day-to-day basis. You should obtain
current stock price quotations for Zions common stock. You can get these
quotations from a newspaper, on the Internet, or by calling your broker.
NO FINANCIAL ADVISOR HAS OPINED AS TO THE FAIRNESS OF THE EXCHANGE RATIO TO
SHAREHOLDERS (SEE PAGE ___)
Frontier has not engaged an independent financial advisor to advise the
Frontier board or to opine as to the financial fairness of what will be received
by Frontier's shareholders in the merger. Nevertheless, the Frontier board has
reviewed data concerning similar transactions and has evaluated a number of
factors and, after evaluation, unanimously believes the value to be received to
be fair to the Frontier shareholders from a financial point of view and in the
best interests of Frontier's shareholders.
WHEN WE EXPECT THE MERGER TO CLOSE (SEE PAGE ___)
We expect to complete the merger as soon as practicable following
approval of the merger by the shareholders of Frontier at the special meeting of
shareholders and satisfaction of all other conditions to the merger, including
approval of the merger by the Office of the Comptroller of the Currency and the
expiration of statutory waiting periods. We anticipate completion of the merger
during the fourth quarter of 2002.
THE COMPANIES INVOLVED IN THE MERGER
ZIONS BANCORPORATION
One South Main, Suite 1134
Salt Lake City, Utah 84111
(801) 524-4787
Zions Bancorporation is a multi-bank holding company organized under
the laws of Utah in 1955, and registered as a bank holding company and a
financial holding company under the Bank Holding Company Act of 1956. Zions and
its subsidiaries own and operate six commercial banks with a total of 409
offices. Zions provides a full range of banking and related services through its
banking and other subsidiaries, primarily in Utah, Arizona, California,
Colorado, Idaho, Nevada and Washington. On June 30, 2002, Zions had total
consolidated assets of approximately $25.7 billion, consolidated loans (net of
unearned income and fees) of approximately $18.5 billion, total consolidated
deposits of approximately $18.8 billion, and shareholders' equity of
approximately $2.3 billion. Active full-time equivalent employees totaled 8,221
at June 30, 2002. Zions focuses on maintaining community-minded banking by
strengthening its core business lines of retail banking, small and medium-sized
business lending, residential mortgage and investment activities. The banks
provide a wide variety of commercial and retail banking and mortgage-lending
products and services. The banks provide commercial loans, lease financing, cash
management, lockbox, customized draft processing, and other special financial
services for business and other commercial banking customers. A wide range of
personal banking services are provided to individuals, including bank card,
student and other installment loans and home equity lines of credit, checking
accounts, savings accounts, time certificates of various types and maturities,
trust services, safe deposit facilities, direct deposit and 24 hour ATM access.
11
NATIONAL BANK OF ARIZONA
335 North Wilmot Road
Tucson, Arizona 85711
(520) 571-1500
National Bank of Arizona is a wholly-owned subsidiary of Zions.
National Bank of Arizona, organized in 1985 under the National Bank Act as a
national bank, is a member bank of the Federal Reserve System. Through its 52
branches, National Bank of Arizona provides commercial banking services
throughout the state of Arizona. As of June 30, 2002, National Bank of Arizona
had assets of approximately $2.7 billion, deposits of approximately $2.3
billion, loans of approximately $1.8 billion, and shareholders' equity of
approximately $204 million and is the fourth largest bank in Arizona.
FRONTIER STATE BANK
550 North Ninth Place
Show Low, Arizona 85902
(928) 537-2933
Frontier State Bank is an Arizona banking corporation incorporated in
1982. Frontier has six branches located in Show Low, Camp Verde, Eagar,
Heber/Overgaard, Pinetop and Taylor/Snowflake, Arizona. Frontier provides a full
range of banking services to the general public, with an emphasis on consumer
and small business banking. As of June 30, 2002, Frontier had total assets of
approximately $93.9 million, total deposits of approximately $86.5 million,
total loans of approximately $61.0 million and shareholders' equity of
approximately $6.8 million.
BOARD OF DIRECTORS AND MANAGEMENT OF THE COMBINED COMPANY FOLLOWING THE MERGER
Following the merger, the Zions board of directors and executive
officers will be the same as they were prior to the merger, the board of
directors and executive officers of National Bank of Arizona will be the same as
they were prior to the merger, and the members of the Frontier board and the
Frontier executive officers will cease to serve.
FRONTIER'S REASONS FOR THE MERGER (SEE PAGE ___)
Management and the Frontier board believe that it is in the best
interests of Frontier and its shareholders to merge with National Bank of
Arizona. In considering the merger, the board unanimously determined that the
Zions offer would maximize value for Frontier shareholders, while providing a
favorable tax structure in which Frontier shareholders will receive readily
marketable securities without recognizing taxable gain or loss on the receipt of
Zions stock (except for gain or loss recognized with respect to any cash
received in the merger instead of fractional shares). Further, the board
believes that the merger will result in positive effects for Frontier's
employees, customers, and the communities in which Frontier operates and will
offer Frontier's shareholders an opportunity to participate in the banking and
financial business Zions has developed. As stated above under "Frontier Has
Entered into a Cease and Desist Order with the Federal Deposit Insurance
Corporation," Frontier entered into a memorandum of understanding with the FDIC
and the Superintendent in October 2000, and consented to the entry of a cease
and desist order with the FDIC and the Superintendent on September 11, 2002. The
Frontier board did not consider the memorandum of understanding and Frontier's
regulatory posture to be a major factor in determining whether Frontier should
consider a merger or seek to remain independent and seek to raise additional
capital.
To review the Frontier board's reasons for the merger in greater
detail, see "The Merger - Recommendation of Frontier Board and Frontier's
Reasons for the Merger," beginning at page ___.
WE RECOMMEND THAT FRONTIER SHAREHOLDERS APPROVE THE MERGER AGREEMENT (SEE PAGE
___)
The Frontier board believes that the merger is fair to you and is in
your best interests, and unanimously recommends that you vote FOR the proposal
to approve the merger agreement, the merger and the related matters.
COMPLETION OF THE MERGER REQUIRES SATISFACTION OF VARIOUS CONDITIONS (SEE PAGE
___)
We must satisfy a number of conditions before completion of the merger,
including:
12
o approval of the proposed merger by Frontier shareholders;
o approval by government regulators and the expiration of
associated waiting periods;
o receipt by Zions and Frontier of a legal opinion regarding
treatment of the merger as a tax-free reorganization under
Section 368(a)(1) of the Internal Revenue Code of 1986; and
o no material adverse change in the financial condition of
Frontier or Zions.
Where the law permits, Zions or Frontier may waive some of the
conditions to the merger if it deems a waiver to be in the best interests of its
shareholders. Although we anticipate completing the merger during the fourth
quarter of 2002, we cannot be certain when (or if) the conditions to the merger
will be satisfied or when (or if) we will complete the merger.
WE MAY AMEND THE TERMS OF THE MERGER AND WAIVE SOME CONDITIONS (SEE PAGE ___)
We may jointly amend the terms of the merger, and each of us could
elect to waive some of the conditions to completion of the merger, where the law
permits. However, after our shareholders approve the merger agreement and the
merger, they must approve any amendment or waiver that would reduce or change
what they will receive upon completion of the merger.
WE MAY DECIDE NOT TO COMPLETE THE MERGER (SEE PAGE ___)
Frontier and Zions can agree to terminate the merger agreement at any
time. In addition, either Frontier or Zions may terminate the merger agreement
if either of the following occurs:
o the merger is not completed by December 30, 2002; or
o a determination that the other party has materially breached
the merger agreement, and has not cured the breach within the
time allowed, or a determination that the representations and
warranties of the other party were materially incorrect when
made.
WE HAVE NOT YET RECEIVED ALL THE REGULATORY APPROVALS WE NEED
Completion of the merger requires the approval of the Office of the
Comptroller of the Currency. The U.S. Department of Justice has input into this
approval process. Once the Office of the Comptroller of the Currency approves
the merger, we have to wait at least 15 days and may have to wait for up to 30
days before we can complete the merger. Completion of the merger also requires
the approval of the Arizona State Banking Department.
We have filed all of the required applications and notices with the
requisite federal and state banking agencies. We are awaiting the action of the
Office of the Comptroller of the Currency on the application we filed with it.
National Bank of Arizona has received the approval it needs from the Arizona
State Banking Department to complete the merger. Zions has received written
confirmation by the Utah Department of Financial Institutions that its approval
will not be required to complete the merger.
THE FRONTIER SHAREHOLDERS' MEETING
Frontier will hold a special meeting of shareholders at Bill Hancock
Center, located at 555 North Ninth Place, Show Low, Arizona on _____________,
2002 at 10:00 a.m. local time. At the special meeting, Frontier shareholders
will consider and vote upon the following proposals:
1. A proposal to consider and approve the merger agreement, which will
approve the merger and the following actions described in merger agreement:
13
o Frontier will merge with and into National Bank of Arizona,
with National Bank of Arizona being the surviving banking
association; and
o Zions will issue up to a maximum of 204,000 shares of its
common stock to the former shareholders of Frontier upon
completion of the merger.
2. Such other business as may properly come before the special meeting.
Only holders of record of Frontier common stock at the close of
business on __________, 2002, which is the record date for the Frontier special
meeting, will be entitled to vote at the Frontier special meeting and any
adjournments or postponements of the meeting. You can cast one vote for each
share of Frontier common stock that you owned on the record date.
Approval of the merger agreement and completion of the merger require,
among other things, approval by the holders of at least 66 2/3% of the
outstanding shares of Frontier common stock entitled to vote.
As of the record date, a total of [911,764] shares of Frontier common
stock were eligible to be voted at the Frontier special meeting. On that date,
Frontier's eight directors, including Mr. Tony J. Swartz, its President and
Chief Executive Officer, were the beneficial owners of approximately [26.6%] of
the outstanding shares of Frontier common stock. Directors and executive
officers of National Bank of Arizona and their affiliates as of the record date
owned an aggregate of approximately 0.96% of the outstanding common stock of
Frontier; it is expected that these persons will vote their Frontier shares to
approve the merger agreement and the merger. Nineteen shareholders of Frontier,
all of whom are officers and/or directors of Frontier, former directors of
Frontier and their relatives or their affiliates and other persons who exercise
influence over the management of Frontier, have signed voting agreements under
which they have agreed individually that they will vote all shares of Frontier
common stock they beneficially own in favor of the merger agreement and the
merger and that they will use their best efforts to cause any other shares of
Frontier common stock over which they share voting power to be voted in favor of
the merger agreement and the merger. The number of shares subject to these
agreements aggregate to [633,711] shares or approximately [69.5%] of the common
stock of Frontier entitled to vote at the meeting and enough to approve the
merger without the concurrence of any other Frontier shareholders.
YOU MAY CHANGE YOUR VOTE IF YOU WISH
You may change your vote at any time before the voting of your proxy at
the shareholders' meeting. You can change your vote in any of the following
ways:
o You can send a written notice dated after the date of your
proxy stating that you would like to revoke your proxy. You
should send your written notice to Frontier at the address
below.
o You can complete a new proxy card and send it to Frontier, and
the new proxy card will automatically replace any earlier
dated proxy card that you previously returned; or
o You can attend the shareholders' meeting and vote in person.
Attending the special meeting will not by itself revoke your
proxy.
You should send any written notice of revocation, request for a new
proxy card or a completed new proxy card to Frontier at 550 North Ninth Place,
Show Low, Arizona 85902, Attention: Mr. Tony J. Swartz, President and Chief
Executive Officer.
FORWARD-LOOKING STATEMENTS MAY PROVE INACCURATE (PAGE ___)
This proxy statement/prospectus, including information incorporated by
reference into this document, may contain forward-looking statements about
Zions. There are a number of factors that may cause actual conditions, events or
results to differ significantly from those described in the forward-looking
statements. Some of these factors are described or referenced in "Cautionary
Statement Regarding Forward-Looking Statements," beginning at page ___.
14
ADDITIONAL INFORMATION
If you have questions about the merger or would like additional copies
of this proxy statement/prospectus, you should contact:
Frontier State Bank
550 North Ninth Place
Show Low, Arizona 85902
Attention: Tony J. Swartz
President and Chief Executive Officer
Phone Number: (928) 537-2933
15
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA
The following selected financial data of Zions Bancorporation for the
five-year period ended December 31, 2001 and the six-month periods ended June
30, 2002 and June 30, 2001 are derived from and qualified by reference to Zions'
consolidated financial statements. You should read these data in conjunction
with the financial statements, related notes and other financial information
incorporated by reference into this document. See "Where You Can Find More
Information," beginning at page XX. Income for prior periods and all related
ratios have been adjusted for the add-back of goodwill amortization under
Statement of Financial Accounting Standards No. 142, Goodwill and Other
Intangible Assets.
Six Months Ended
June 30, Year Ended December 31,
----------------------- -----------------------------------------------------------
2002 2001 2001 2000 1999 1998 1997
---------- ---------- ---------- ---------- ---------- ---------- ----------
(unaudited) (dollars in millions, except per share data)
Consolidated Statement of Income Data:
Interest income .......................... $ 733.7 $ 814.3 $ 1,592.0 $ 1,626.2 $ 1,359.3 $ 1,032.8 $ 717.0
Interest expense ......................... 218.4 363.4 642.2 822.8 617.8 458.9 347.4
Net interest income ................... 515.3 450.9 949.8 803.4 741.5 573.9 369.6
Provision for loan losses ................ 33.8 25.0 73.2 31.8 18.0 14.0 5.9
Net interest income after provision for
loan losses.......................... 481.5 425.9 876.6 771.6 723.5 559.9 363.7
Noninterest income ....................... 199.8 205.9 419.4 192.6 266.8 210.5 148.5
Noninterest expense ...................... 435.3 409.6 855.8 721.3 681.8 557.0 313.1
Income before income taxes ............... 246.0 222.2 440.2 242.9 308.5 213.4 199.1
Income taxes ............................. 85.0 80.1 157.8 79.7 109.5 69.6 67.7
Income before minority interest and
cumulative effect of change in
accounting principle................... 161.0 142.1 282.4 163.2 199.0 143.8 131.4
Minority interest ........................ (.7) (3.4) (7.8) 1.5 4.9 0.4 --
Income before cumulative effect of change
in accounting principle................ 161.7 145.5 290.2 161.7 194.1 143.4 131.4
Cumulative effect of change in accounting
principle(1)........................... (32.4) (7.2) (7.2) -- -- -- --
Net income ............................... 129.3 138.3 283.0 161.7 194.1 143.4 131.4
Income before cumulative effect, as
adjusted(2)............................ 161.7 161.2 323.3 187.7 218.5 163.3 136.6
Net income, as adjusted(2) ............... 129.3 154.1 316.1 187.7 218.5 163.3 136.6
Operating cash earnings(3) ............... 168.2 166.6 337.7 281.7 243.0 194.5 138.5
Income before cumulative effect per common
share (diluted)........................ $ 1.75 $ 1.59 $ 3.15 $ 1.86 $ 2.26 $ 1.75 $ 1.92
Net income per common share (diluted) ... 1.40 1.51 3.07 1.86 2.26 1.75 1.92
Income before cumulative effect per common
share (diluted), as adjusted(2)........ 1.75 1.77 3.51 2.15 2.55 1.99 2.00
Net income per common share (diluted), as
adjusted(2)............................ 1.40 1.69 3.43 2.15 2.55 1.99 2.00
Operating cash earnings per common share
(diluted)(3)........................... 1.82 1.82 3.66 3.23 2.84 2.37 2.03
Weighted-average common and common-
equivalent shares outstanding during
the period (in thousands).............. 92,658 91,339 92,174 87,120 85,695 81,918 68,258
Consolidated Balance Sheet Data (at period
end):
Loans(4) ................................. $ 18,453 $ 16,476 $ 17,311 $ 14,378 $ 12,791 $ 11,219 $ 5,463
Total assets ............................. 25,735 23,488 24,304 21,939 20,281 18,050 10,794
Deposits ................................. 18,788 17,170 17,842 15,070 14,062 14,221 7,830
Total shareholders' equity ............... 2,337 2,198 2,281 1,779 1,660 1,453 857
Six Months Ended
June 30, Year Ended December 31,
----------------- -----------------------------------------------------
2002 2001 2001 2000 1999 1998 1997
----- ----- ----- ----- ----- ----- -----
(unaudited) (dollars in millions, except per share data)
Other Data:
Return on average assets(2) ............... 1.01% 1.36% 1.33% 0.86% 1.10% 1.13% 1.41%
Operating cash return on average assets(3). 1.35 1.51 1.47 1.34 1.26 1.41 1.45
Return on average common equity(2) ........ 11.37 15.37 14.83 11.20 13.98 12.51 20.18
Operating cash return on average common
equity(3)............................... 23.34 25.82 25.44 27.43 26.79 26.58 25.42
Efficiency ratio(2) ....................... 60.00 59.02 59.16 62.57 64.16 67.58 58.34
Operating cash efficiency ratio(3) ........ 58.66 57.66 57.40 57.44 60.31 61.30 57.81
Net interest margin ....................... 4.65 4.62 4.64 4.27 4.31 4.56 4.29
Nonperforming assets to net loans and
leases, other real estate owned and
other nonperforming assets.............. 0.63 0.53 0.69 0.49 0.58 0.58 0.31
Allowance for loan losses to nonperforming
loans................................... 260.01 300.18 236.65 320.69 310.87 354.94 655.59
Allowance for loan losses to net loans and
leases................................... 1.43 1.40 1.50 1.36 1.60 1.89 1.62
Tier 1 leverage ........................... 6.48 6.69 6.56 6.38 6.16 5.91 6.92
Tier 1 risk-based capital ................. 8.05 8.35 8.25 8.53 8.64 8.40 11.96
Total risk-based capital .................. 11.86 11.63 12.20 10.83 11.29 11.34 13.85
Total branches ............................ 409 413 412 373 362 345 241
16
(1) For the six months ended June 30, 2001 and the year ended December 31,
2001, the cumulative effect adjustment relates to the adoption of SFAS
No. 133, net of income tax benefit of $4.5 million. For the six months
ended June 30, 2002, the cumulative effect adjustment relates to
impairment in carrying value of Zions' investments in certain
e-commerce subsidiaries, measured as of January 1, 2002, net of income
tax benefit of $2.7 million, associated with the adoption of SFAS No.
142.
(2) Adjusted according to SFAS No. 142 for the add-back of goodwill
amortization, net of income tax benefit.
(3) Before amortization of goodwill and core deposit intangible assets and
merger expenses, the impairment loss on First Security Corporation
common stock and the cumulative effect of adoption of SFAS No. 133 and
SFAS No. 142.
(4) Net of unearned income and fees, net of related costs.
SFAS No. 142 became effective for Zions beginning January 1, 2002.
Under this statement, goodwill and intangible assets deemed to have indefinite
lives are no longer amortized, but are subject to specified annual impairment
tests. Other intangible assets are amortized over their useful lives. The
following table presents transitional disclosures required by SFAS No. 142. The
purpose of these transitional disclosures is to reconcile prior period amounts
of income before cumulative effect and net income to their respective adjusted
amounts for the add-back of goodwill amortization.
Earnings
Six Months
Ended
June 30, Year Ended December 31,
--------------- ------------------------------------------
2002 2001 2001 2000 1999 1998 1997
------ ------ ------ ------ ------ ------ ------
(unaudited) (dollars in millions, except per share data)
Income before cumulative effect of
change in accounting principle ....... $161.7 $145.5 $290.2 $161.7 $194.1 $143.4 $131.4
Add-back of goodwill amortization, net
of income tax benefit ................ -- 15.7 33.1 26.0 24.4 19.9 5.2
------ ------ ------ ------ ------ ------ ------
Income before cumulative effect, as
adjusted ............................. $161.7 $161.2 $323.3 $187.7 $218.5 $163.3 $136.6
====== ====== ====== ====== ====== ====== ======
Net income .............................. $129.3 $138.3 $283.0 $161.7 $194.1 $143.4 $131.4
Add-back of goodwill amortization, net
of income tax benefit ................ -- 15.8 33.1 26.0 24.4 19.9 5.2
------ ------ ------ ------ ------ ------ ------
Net income, as adjusted ................. $129.3 $154.1 $316.1 $187.7 $218.5 $163.3 $136.6
====== ====== ====== ====== ====== ====== ======
Earnings Per Share (Diluted)
Six Months
Ended
June 30, Year Ended December 31,
------------- -------------------------------------
2002 2001 2001 2000 1999 1998 1997
----- ----- ----- ----- ----- ----- -----
(unaudited) (dollars in millions, except per share data)
Income before cumulative effect of change
in accounting principle .................... $1.75 $1.59 $3.15 $1.86 $2.26 $1.75 $1.92
Add-back of goodwill amortization, net of
income tax benefit ......................... -- 0.18 0.36 0.29 0.29 0.24 0.08
----- ----- ----- ----- ----- ----- -----
Income before cumulative effect, as adjusted .. $1.75 $1.77 $3.51 $2.15 $2.55 $1.99 $2.00
===== ===== ===== ===== ===== ===== =====
Net income .................................... $1.40 $1.51 $3.07 $1.86 $2.26 $1.75 $1.92
Add-back of goodwill amortization, net of
income tax benefit ......................... -- 0.18 0.36 0.29 0.29 0.24 0.08
----- ----- ----- ----- ----- ----- -----
Net income, as adjusted ....................... $1.40 $1.69 $3.43 $2.15 $2.55 $1.99 $2.00
===== ===== ===== ===== ===== ===== =====
17
CURRENT DEVELOPMENTS
By press release dated October 17, 2002, included in its current report
on Form 8-K filed with the SEC on October 21, 2002, incorporated by reference
into this document, Zions reported third quarter net income of $39.4 million, or
$0.43 per diluted share, compared to $81.5 million, or $0.87 per diluted share
for the three months ended September 30, 2001, as adjusted for the add-back of
goodwill amortization (under Statement of Financial Accounting Standards
("SFAS") No. 142). Zions' third quarter results included a number of
non-recurring items, most of which related to previously announced restructuring
efforts, asset impairments and venture capital investment write-downs. Zions'
third quarter 2002 results reflected the impact of these items as follows:
Pretax Tax-Effected
Amount Amount Per Diluted
($ in millions) ($ in millions) Average Share
--------------- ---------------- ------------------
Net impact of non-recurring items on continuing operations . (33.8) (20.8) ($0.23)
Net impact from discontinued operations .................... (33.9) (25.9) ($0.28)
Total net impact of non-recurring items .................... (67.7) (46.7) ($0.51)
During the second quarter of 2002, Zions completed the sale of an
e-commerce related business, Digital Signature Trust, in exchange for a 33%
ownership interest in Identrus. During the third quarter of 2002, Zions decided
to curtail further its e-commerce related business activities, by restructuring
and/or offering for sale parts of its Lexign and Phaos subsidiaries.
Accordingly, impairment and restructuring charges were recognized related to
these businesses. In accordance with SFAS No. 144, these subsidiaries were
treated as discontinued operations. The $22.8 million ($0.25 per diluted share)
after-tax impairment charge (reflected in the above-referenced Form 8-K) results
from the SFAS No. 144 requirement that such discontinued operations be carried
at the lower of their carrying value amount or fair value less costs to sell.
During the third quarter of 2002, Zions recognized additional after-tax losses
from operations of $3.1 million ($0.03 per diluted share) related to these
discontinued operations. For the third quarter of 2002, Zions also incurred a
loss of $0.8 million (slightly less than $0.01 per diluted share) related to its
investment in Identrus.
During the third quarter of 2002, Zions also recognized in net income
from continuing operations after-tax impairment charges related to venture
capital investments and an other than temporary decline in value of a minority
interest in an investment banking firm of $16.7 million ($0.18 per diluted
share). Other after-tax restructuring and impairment losses on long-lived assets
of $4.1 million ($0.05 per diluted share) are also included in net income from
continuing operations for the quarter.
Zions reported net interest income of $261.3 million for the three
months ended September 30, 2002 compared to $247.1 million for the same period
in 2001. Zions made a provision for loan losses of $22.3 million for the three
months ended September 30, 2002 compared to $21.5 million for the same period in
2001. Zions reported non interest expense of $219.2 million for the three months
ended September 30, 2002 compared to $214.6 million for the same period in 2001.
Zions reported return on average assets of 0.59% and return on average common
equity of 6.51% for the three months ended September 30, 2002 compared to 1.32%
and 14.51% for the respective items for the same period in 2001.
18
Financial highlights for the quarter are as follows:
ZIONS BANCORPORATION AND SUBSIDIARIES
FINANCIAL HIGHLIGHTS
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------- ---------------------------
(In thousands, except per share and ratio data) 2002 2001 2002 2001
----------- ----------- ----------- -----------
(Adjusted) (2)
EARNINGS (3)
Taxable-equivalent net interest income ....................... $ 266,660 $ 252,214 $ 792,247 $ 713,074
Net Interest income .......................................... 261,306 247,118 776,560 697,969
Noninterest income ........................................... 74,815 106,044 270,246 310,412
Provision for loan losses .................................... 22,309 21,470 56,104 46,477
Noninterest expense .......................................... 219,158 214,582 640,120 622,047
Income before income taxes and minority interest ............. 94,654 117,110 350,582 339,857
Income taxes ................................................. 31,772 43,031 120,744 122,816
Minority interest ............................................ (2,486) (3,251) (3,211) (6,638)
Income from continuing operations ............................ 65,368 77,330 233,049 223,679
Loss from discontinued operations ............................ (25,922) (4,533) (31,897) (5,386)
Cumulative effect adjustments ................................ -- -- (32,369) (7,159)
Net Income ................................................... 39,446 72,797 168,783 211,134
Income before cumulative effect, as adjusted (1) ............. 39,446 81,549 201,152 242,795
Net income, as adjusted (1) .................................. 39,446 81,549 168,783 235,636
19
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------- ---------------------------
(In thousands, except per share and ratio data) 2002 2001 2002 2001
----------- ----------- ----------- -----------
(Adjusted) (2)
PER COMMON SHARE (3)
Net income (diluted) ......................................... 0.43 0.78 1.83 2.29
Income from continuing operations (diluted), as adjusted (1).. 0.71 0.92 2.52 2.70
Loss from discontinued operations (diluted) .................. (0.28) (0.05) (0.34) (0.06)
Income before cumulative effect (diluted) as adjusted (1)..... 0.43 0.87 2.18 2.64
Net income (diluted), as adjusted (1) ........................ 0.43 0.87 1.83 2.56
Dividends .................................................... 0.20 0.20 0.60 0.60
Book Value ................................................... -- -- 25.86 24.29
SELECTED RATIOS (1)
Return on average assets ..................................... 0.59% 1.32% 0.87% 1.34%
Return on average common equity .............................. 6.51% 14.51% 9.68% 15.07%
Efficiency ratio ............................................. 74.23% 59.43% 64.57% 59.16%
Net interest margin .......................................... 4.53% 4.65% 4.61% 4.63%
(1) Adjusted according to SFAS No. 142 for the add back of goodwill
amortization, net of income tax benefit.
(2) Adjusted according to SFAS No. 142 for the impairment to goodwill and
reflected as a cumulative effect adjustment, net of income tax benefit.
(3) Adjusted according to SFAS No. 144 for discontinued operations, net of
income tax benefit.
20
RISK FACTORS
By approving the merger, Frontier shareholders will be choosing to
invest in Zions' common stock in exchange for shares of Frontier common stock.
An investment in Zions' common stock involves a degree of risk. In addition to
the other information included in this document, including the matters addressed
in "Cautionary Statement Regarding Forward-Looking Statements," beginning at
page XX, you should carefully consider the matters described below in
determining whether to approve the merger agreement.
FRONTIER HAS ENTERED INTO A CEASE AND DESIST ORDER (THE "ORDER") WITH THE
FEDERAL DEPOSIT INSURANCE CORPORATION ("FDIC") AND THE ARIZONA SUPERINTENDENT OF
BANKS AND IS REQUIRED TO COMPLY WITH THE ORDER. IF THE MERGER IS NOT COMPLETED
FOR ANY REASON, FRONTIER MUST RAISE ADDITIONAL CAPITAL AND TAKE OTHER ACTION TO
IMPLEMENT THE ORDER THAT WILL INVOLVE SIGNIFICANT EXPENSE TO FRONTIER. THE ORDER
MAY CONSTITUTE A BREACH OF THE MERGER AGREEMENT THAT ALLOWS ZIONS TO ELECT NOT
TO PROCEED WITH THE MERGER, WHICH WOULD OBLIGATE FRONTIER TO PAY A TERMINATION
FEE TO ZIONS.
The FDIC and the Arizona Superintendent of Banks have expressed concern
about Frontier's management, the level of capital, Frontier's asset quality, and
other aspects of Frontier's operations. In October 2000, Frontier entered into a
memorandum of understanding with the Superintendent and the FDIC under which
Frontier agreed to address these concerns. At the time Frontier commenced
negotiations with Zions concerning a potential merger, Frontier had addressed
nearly all the issues outlined in the memorandum of understanding, and had taken
action to reduce the size of the bank in order to meet capital ratio
requirements. At the time Frontier commenced merger discussions with Zions,
Frontier's chief financial officer and senior credit officer resigned (although
the former senior credit officer has continued as a consultant to the bank).
Once Frontier entered into a letter of intent with Zions, Frontier suspended
efforts to raise capital, because completion of the merger would eliminate any
necessity to do so. To assure the safety and soundness of Frontier if the merger
fails to occur, the Frontier board entered into the Order with the FDIC and the
Superintendent in September 2002 which requires Frontier to take corrective
action with respect to these problems. If the merger should fail to occur for
any reason, Frontier would be obligated to satisfy all conditions of the Order;
compliance could entail Frontier's raising approximately $500,000 to $750,000 of
additional capital and incurring additional expenses of approximately $470,000.
In addition, if Zions should terminate the merger agreement, Frontier may be
obligated to pay Zions a termination fee of up to $500,000. See "The Merger -
Frontier Has Agreed to a Cease and Desist Order," beginning at page XX.
FAILURE TO COMPLETE THE MERGER COULD SEVERELY DISADVANTAGE FRONTIER.
In order to complete the merger, Frontier must focus on meeting all
merger conditions. If for any reason the merger does not occur, that failure
could adversely affect Frontier's business and make it difficult for Frontier to
attract other acquisition partners, if it should choose to do so. Frontier has
the liquidity necessary to pay the additional expenses that may be incurred to
comply with the cease and desist order and the termination fee that it may be
obligated to pay if Zions should terminate the merger agreement. If the merger
is not completed, Frontier would be forced to raise additional capital to
satisfy the costs for meeting the requirements of the cease and desist order and
for any termination fees that it may owe to Zions. Frontier would seek such
additional capital first from its shareholders or seek other affiliation or
acquisition alternatives. If Frontier could not raise capital or otherwise
comply within the time required by the cease and desist order, Frontier would be
required to seek additional time for compliance. Frontier has had discussions
with several of its shareholders and other potential affiliate targets about the
need to raise additional capital and has considered other steps to meet capital
ratio requirements, if the merger does not occur. On the basis of those
discussions, the Frontier board believes that it would be able to meet the
capital ratio requirements and to hire qualified management to comply with the
conditions of the cease and desist order and to continue its operations as an
independent bank. See the Risk Factor in the previous paragraph.
IF FRONTIER'S NET WORTH OR DEPOSITS ARE NOT MAINTAINED AT SPECIFIED LEVELS,
ZIONS AND NATIONAL BANK OF ARIZONA ARE FREE TO CHOOSE NOT TO PROCEED WITH THE
MERGER.
If Frontier's consolidated net worth at the effective time of the
merger is less than $6 million plus amounts received by Frontier on the exercise
of Frontier stock options, or if the deposits of Frontier at the effective time
of the merger as averaged over the relevant fifteen-business-day period are less
than $80 million, Zions and National Bank of Arizona are free to choose not to
proceed with the merger. See "The Merger - Conditions to Complete the Merger,"
21
beginning at page XX. On September 30, 2002, Frontier's consolidated net worth
was approximately $6.8 million and its deposits were approximately $88 million.
IF THE MERGER HAS NOT OCCURRED BY DECEMBER 30, 2002, EITHER ZIONS OR FRONTIER
MAY CHOOSE NOT TO PROCEED WITH THE MERGER.
Either Zions or Frontier may terminate the merger agreement if the
merger has not been completed by December 30, 2002, unless the failure of the
merger to have been completed has resulted from the failure of the party seeking
to terminate the merger agreement to have performed its obligations. See "The
Merger - Termination and Termination Fees," beginning at page XX.
YOU WILL RECEIVE FEWER SHARES OF ZIONS COMMON STOCK IF FRONTIER'S OPERATIONS ARE
NOT MAINTAINED AT OR ABOVE SPECIFIED LEVELS.
Upon completion of the merger, Frontier common stock will be converted
into shares of Zions common stock, up to a maximum of 204,000 shares. Each
Frontier share will be converted into the right to receive a fraction of one
share of Zions common stock. Because Frontier's average closing deposits or its
closing net worth may be less than levels specified in the merger agreement, the
number of shares of Zions common stock to be issued in the merger may be fewer
than 204,000 shares. See "The Merger - What You Will Receive," beginning at page
___. Accordingly, at the time of your vote, you will not know or be able to
calculate the number of Zions shares or value of the Zions shares you will
receive.
THE VALUE OF WHAT YOU WILL RECEIVE IN THE MERGER WILL RISE AND FALL AS THE
MARKET PRICE OF ZIONS COMMON STOCK RISES AND FALLS.
Between the date of this document and the effective date of the merger,
and following the merger, the market price of Zions common stock will rise and
fall. Changes in the price of Zions common stock will affect the value of what
you will receive.
YOU WILL HAVE LESS INFLUENCE AS A SHAREHOLDER OF ZIONS THAN AS A SHAREHOLDER OF
FRONTIER.
The shareholders of Frontier currently have the right to control
Frontier through their ability to elect the board of directors of Frontier and
vote on other matters affecting Frontier. The merger will transfer control of
Frontier to Zions. After completion of the merger, former Frontier shareholders
will own less than 1/4 of 1% of Zions' outstanding common stock. Consequently,
the former Frontier shareholders will exercise much less influence over the
management and policies of Zions than they currently exercise over the
management and policies of Frontier.
THE MARKET PRICE OF THE SHARES OF ZIONS COMMON STOCK MAY BE AFFECTED BY FACTORS
DIFFERENT FROM THOSE AFFECTING THE SHARES OF FRONTIER COMMON STOCK.
Upon completion of the merger, holders of the Frontier common stock
will become holders of Zions common stock. Zions' current businesses and markets
differ from those of Frontier and, accordingly, the results of operations of
Zions after the merger may be affected by factors different from those currently
affecting the results of operations of Frontier. For a discussion of the
businesses of Zions and Frontier and of certain factors to consider in
connection with those businesses, see the documents incorporated by reference
into this document and referred to under "Where You Can Find More Information,"
beginning at page XX.
ZIONS' FUTURE ACQUISITIONS WILL DILUTE YOUR OWNERSHIP OF ZIONS AND MAY CAUSE
ZIONS TO BECOME MORE SUSCEPTIBLE TO ADVERSE ECONOMIC EVENTS.
Zions has acquired other companies with its common stock in the past
and intends to acquire or make investments in banks and other complementary
businesses with its common stock in the future. Future business acquisitions
could be material to Zions, and the degree of success achieved in acquiring and
integrating these businesses into Zions could have a material effect on the
value of Zions common stock. Zions may issue additional shares of common stock
22
to pay for those acquisitions, which would dilute your ownership interest in
Zions. Acquisitions also could require Zions to use substantial cash or other
liquid assets or to incur debt. In those events, Zions could become more
susceptible to economic downturns and competitive pressures.
THE FRONTIER SHAREHOLDERS' MEETING
WHEN AND WHERE THE FRONTIER SPECIAL MEETING WILL BE HELD
Frontier will hold a special meeting of its shareholders at the Bill
Hancock Center, located at 550 North Ninth Place, Show Low, Arizona on
____________, 2002 at 10:00 a.m. local time.
WHAT WILL BE VOTED ON AT THE FRONTIER SPECIAL MEETING
At the special meeting, the Frontier shareholders will consider a
proposal
o To approve the merger agreement, which will approve the merger
of Frontier with and into National Bank of Arizona and related
matters; and
o To transact such other business as may properly come before
the Frontier special meeting.
Frontier shareholders will take action on the above matters at a
special meeting on ___________, 2002, or any later date to which the special
meeting is postponed or adjourned.
The Frontier board is unaware of other matters to be voted on at the
Frontier special meeting. If other matters do properly come before the Frontier
special meeting, including consideration of a motion to adjourn the special
meeting to another time and/or place for the purpose of soliciting additional
proxies, Frontier intends that the persons named in the proxies will exercise
their discretion to vote the shares represented by proxies in the accompanying
form, as they determine to be appropriate.
SHAREHOLDERS ENTITLED TO VOTE
Frontier has set _____________, 2002 as the record date to determine
which Frontier shareholders will be entitled to vote at the Frontier special
meeting. Only Frontier shareholders at the close of business on the record date
will be entitled to receive notice of and to vote at the Frontier special
meeting. As of the record date, there were [911,764] issued and outstanding
shares of Frontier common stock and [32,482] issued and outstanding stock
options that were subject to exercise. Each Frontier shareholder on the record
date is entitled to one vote per share, and may cast such votes either in person
or by properly executed proxy.
VOTE REQUIRED TO APPROVE THE MERGER
Approval of the merger agreement, the merger and related matters
requires the affirmative vote of holders of 66 2/3% of the outstanding shares of
Frontier common stock entitled to vote at the Frontier special meeting.
Therefore, abstentions and broker non-votes will have the same effect as votes
against approval of the merger agreement, the merger and related matters.
Accordingly, the Frontier board urges Frontier shareholders to complete, date
and sign the accompanying proxy and return it promptly in the enclosed
postage-paid envelope.
NUMBER OF SHARES THAT MUST BE REPRESENTED FOR A VOTE TO BE TAKEN
In order to have a quorum, a majority of the total voting power of the
outstanding shares of Frontier's common stock entitled to vote at the Frontier
special meeting must be represented at the Frontier special meeting in person or
by proxy.
23
VOTING YOUR SHARES
The Frontier board is soliciting proxies from the Frontier
shareholders. This will give you an opportunity to vote at the Frontier special
meeting. When you deliver a valid proxy, the shares represented by that proxy
will be voted in accordance with your instructions by a named agent. If you do
not vote by proxy or attend the Frontier special meeting and vote in person, it
will have the same effect as voting against the merger. If you vote by proxy but
make no specification on your proxy card that you have otherwise properly
executed, the agent will vote the shares FOR approval of the merger agreement,
the merger and related matters.
HOW PROXIES ARE COUNTED
We will count as present at the Frontier meeting for purposes of
determining the presence or absence of a quorum for the transaction of business
at the Frontier special meeting
o those shares of Frontier common stock held by persons
attending the Frontier special meeting whether or not they are
voting, and
o those shares of Frontier common stock for which Frontier has
received proxies, including proxies with respect to which
holders of those shares have abstained from voting.
CHANGING YOUR VOTE
Any Frontier shareholder may revoke the proxy at any time before the
vote at the meeting in one or more of the following ways:
o delivering a written notice of revocation to the President and
Chief Executive Officer of Frontier bearing a later date than
the proxy;
o submitting a later-dated proxy; or
o appearing in person and voting at the meeting. Attendance at
the Frontier special meeting will not by itself constitute a
revocation of a proxy, unless you complete and submit a
ballot.
You should send any written notice of revocation or subsequent proxy to
Frontier, Attention: Mr. Tony J. Swartz, President and Chief Executive Officer,
550 North Ninth Place, Show Low, Arizona 85902, or hand deliver the notice of
revocation or subsequent proxy to Mr. Swartz at or before the taking of the vote
at the Frontier special meeting.
SOLICITATION OF PROXIES AND COSTS
Frontier will bear its costs of solicitation of proxies. Frontier will
make arrangements with brokerage houses, custodians, nominees and fiduciaries
for forwarding of proxy solicitation materials to beneficial owners of shares
held of record by these brokerage houses, custodians, nominees and fiduciaries,
and Frontier will reimburse these brokerage houses, custodians, nominees and
fiduciaries for their reasonable expenses incurred in connection with the
solicitation. In addition to solicitation by use of the mails, directors,
officers and employees acting on behalf of Frontier may solicit proxies in
person or by telephone, telegraph, facsimile or other means of communications.
Frontier will not compensate these directors, officers and employees but may
reimburse them for reasonable out-of-pocket expenses in connection with such
solicitation. You may direct any questions or requests for assistance regarding
this proxy statement/prospectus and related proxy materials to Mr. Tony J.
Swartz, President and Chief Executive Officer of Frontier, by telephone at (928)
537-2933.
REGARDLESS OF THE NUMBER OF SHARES YOU OWN, YOUR VOTE IS IMPORTANT TO
US. PLEASE COMPLETE, SIGN, DATE AND PROMPTLY RETURN THE ACCOMPANYING PROXY CARD
IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
24
RECOMMENDATION OF FRONTIER BOARD
The Frontier board has unanimously approved the merger agreement, the
merger and the related matters. The Frontier board believes that the merger
agreement, the merger and related matters are in the best interests of Frontier
and the Frontier shareholders, and unanimously recommends that the Frontier
shareholders vote FOR approval of the merger agreement, the merger and the
related matters. See "The Merger - Recommendation of the Frontier Board and
Frontier's Reasons for the Merger," beginning at page ___.
PROPOSAL 1
THE MERGER
The following summary describes the material terms of the merger
agreement and the merger. We have attached a copy of the merger agreement to
this proxy statement/prospectus as Appendix A, and we have incorporated it into
this document by reference. We urge all shareholders to read the merger
agreement carefully in its entirety. We qualify this summary in its entirety by
reference to the merger agreement.
GENERAL
We expect to complete the merger in the fourth quarter of 2002. Under
the merger agreement, Frontier will merge with and into National Bank of Arizona
and following the merger the separate corporate existence of Frontier will
cease. National Bank of Arizona will survive and continue its corporate
existence as a national banking association under the laws of the United States.
The merger of Frontier with and into National Bank of Arizona will become
effective upon receipt of a certification letter from the Office of the
Comptroller of the Currency and the filing of articles of merger with the
Arizona Corporation Commission, or at such later time specified in these
documents. Completion of the merger is subject to the satisfaction or waiver of
conditions set forth in the merger agreement and described in "The Merger -
Conditions to Complete the Merger," beginning at page ___. When we refer below
to the effective time of the merger of Frontier and National Bank of Arizona, we
mean the time the merger is completed.
The National Bank of Arizona articles of association will be the
articles of association of the combined company. The National Bank of Arizona
bylaws will be the bylaws of the combined company.
Each share of Frontier common stock issued and outstanding at the
effective time of the merger will be converted into the right to receive shares
of Zions common stock in accordance with the provisions of the merger agreement.
Upon completion of the merger, Zions will issue to the former Frontier
shareholders up to a maximum of 204,000 shares of Zions common stock for all the
shares of Frontier common stock outstanding as of the effective time of the
merger. This calculation assumes that there is no decline in the average closing
deposits of Frontier below $85,000,000, nor a decline in the closing net worth
of Frontier below $6,500,000. The maximum of 204,000 shares of Zions common
stock to be issued in the merger will be reduced if the average closing deposits
of Frontier fall below $85,000,000 or if the closing net worth of Frontier falls
below $6,500,000. See "The Merger - What You Will Receive," beginning at page
XX.
BACKGROUND OF THE MERGER
At various times prior to November 2001, the Frontier board considered
proposals from investors and other banking institutions for a merger or other
acquisition transaction. The board considered each of these proposals on its own
merits. From time to time over the past several years, senior management of
National Bank of Arizona has made inquiries of senior management of Frontier
concerning the possible merger of Frontier and National Bank of Arizona. These
inquiries were very general in nature, did not include any specific proposals,
and did not lead to acquisition discussions.
Prior to November 2001, the board's Strategic Planning Committee and
the Frontier board generally operated under a strategy that contemplated that
Frontier would remain an independent bank. The success of this strategy,
25
however, was dependent upon Frontier's ability to raise capital to support its
growth and its ability to continue to be an effective competitor in its banking
markets.
In October 2000, the Frontier board entered into a memorandum of
understanding with the FDIC and the Arizona Superintendent of Banks in order to
strengthen the bank and improve the quality of its assets. In the opinion of the
Frontier board, the bank had, by November 2001, made substantial progress in
addressing the memorandum of understanding issues, other than increasing
capital. Once Frontier entered into a letter of intent with Zions and began
serious merger discussions, Frontier elected to suspend its efforts to raise
additional capital and instead focus on completing the merger, which would
eliminate any requirements to raise capital. Frontier's regulatory posture was
not a major factor in determining whether Frontier should consider a merger or
seek to remain independent and seek additional capital. The board's primary
focus was on selecting a course of action that would over time deliver the
greatest value to Frontier's shareholders.
On October 29, 2001, John J. Gisi, chairman and chief executive officer
of National Bank of Arizona, contacted Greg Butler, chairman of the Frontier
board, and expressed an interest in discussing a possible merger between
Frontier and National Bank of Arizona. During this period, the Frontier board
was also contacted by an investor group that indicated an interest in acquiring
a majority of Frontier's issued and outstanding stock or, in the alternative,
purchasing the bank.
On November 29, 2001, the Frontier board met in executive session to
consider the two indications of interest received by Frontier. After discussion
concerning pricing and the valuation of Frontier, the Frontier board appointed a
committee consisting of directors Greg Butler, Elizabeth McCarty and Mark Wirth
to contact National Bank of Arizona and discuss the potential of a merger with
National Bank of Arizona.
In February 2002, the Frontier board advised National Bank of Arizona
that although Frontier had an interest in a potential merger, other matters
required the board's attention, and the board would revisit a potential merger
with National Bank of Arizona at a later time. The board's response to National
Bank of Arizona reflected, in part, a difference in opinion among directors
whether a merger was in the best interest of Frontier's shareholders.
In March 2002, the Frontier board again discussed the possibility of an
acquisition transaction. After reaching a general consensus that Frontier's
shareholders would benefit from increased stock liquidity and an affiliation
with a larger bank, the Frontier board concluded that it would consider
potential merger candidates if they provided Frontier and its shareholders with
appropriate value and a competitive advantage. With the board's approval,
Frontier executed a confidentiality agreement with National Bank of Arizona to
discuss a potential acquisition. The Frontier board appointed two members, Mark
Wirth and Elizabeth McCarty, as its representatives to discuss and begin to
negotiate a potential acquisition transaction. This committee was advised that
the Frontier board was seeking a price that was a multiple of book value of
1.25x or higher. The committee was instructed to contact at least five other
banking institutions in order to determine their interest, possible pricing, and
the timing of a potential transaction.
The committee contacted six potential merger candidates, including
National Bank of Arizona and the investor group that had previously expressed an
interest in Frontier. In response, during April 2002 representatives of National
Bank of Arizona and Zions conducted a due diligence review of the business and
operations of Frontier. Meanwhile, Frontier also received indications of
interest from the investor group to acquire a majority of Frontier's stock or to
purchase the bank. The investor group also conducted a limited due diligence
review of Frontier. On April 26, 2002, National Bank of Arizona submitted to
Frontier a non-binding indication of interest in acquiring Frontier in exchange
for shares of Zions stock with a base value of $10.9 million, subject to certain
reductions and contingent on additional due diligence with respect to the loan
portfolio, certain regulatory issues, and other aspects of the business and
operations of Frontier. The investor group also submitted on May 2, 2002, a
written, non-binding proposal for the purchase of a controlling interest in
Frontier or, in the alternative, all of Frontier.
The board of directors of Zions approved the acquisition of Frontier at
its April 26, 2002 meeting.
The Frontier board's committee considered the responses of National
Bank of Arizona and the investor group and presented them to the entire Frontier
board on May 11, 2002, together with a written report evaluating the proposals
and recommending that the Frontier board pursue the National Bank of Arizona
proposal, because that proposal provided greater value to Frontier shareholders,
26
from a financial point of view, and would provide readily tradable shares to
Frontier shareholders. After considering the committee's recommendation, the
Frontier board unanimously determined to pursue a merger with National Bank of
Arizona and authorized the execution of a non-binding letter of intent. Frontier
and National Bank of Arizona executed a non-binding letter of intent on May 11,
2002, and entered into negotiations to reach a definitive agreement whereby
Frontier would be merged into National Bank of Arizona.
Representatives of National Bank of Arizona and Zions conducted an
additional due diligence review of Frontier and its business and operations
during July 2002 to update its earlier findings and to assess the consequences
of natural disasters that occurred in June 2002 and affected many parts of the
service area of Frontier since the time of National Bank of Arizona's and Zions'
prior due diligence. The board of directors of National Bank of Arizona approved
the merger with Frontier at its July 12, 2002 meeting.
On [July 22,] 2002, National Bank of Arizona and Zions made a revised
offer to Frontier of a maximum of 204,000 shares of Zions stock, subject to
reduction in the event that net worth and deposit maintenance levels are not
satisfied by Frontier. National Bank of Arizona presented Frontier with a draft
of a merger agreement embodying this proposal on [July 23,] 2002.
On August 2, 2002, Frontier's president and chief executive officer
presented the terms and conditions of proposed merger agreement among Frontier,
National Bank of Arizona, and Zions to the Frontier board. The Frontier board
o reviewed the terms and conditions of the proposed merger;
o considered the amount and nature of what was being offered to
Frontier shareholders in exchange for their Frontier stock;
o considered the effect of the proposed merger on Frontier, its
shareholders, employees and customers; and
o considered alternatives to the proposed merger.
After considering Frontier's value, consulting with its professional
advisors, and reviewing the competing offer from the investor group, the
Frontier board concluded that merging with National Bank of Arizona was in the
best interests of Frontier and its shareholders and that what Zions and National
Bank of Arizona offered to pay was fair from a financial point of view to
Frontier shareholders. At this meeting the Frontier board approved the terms and
conditions of merger proposed by National Bank of Arizona and Zions and
unanimously voted to approve the merger with National Bank of Arizona. The
Frontier board instructed the president and chief executive officer to finalize
the terms and conditions to be contained in the definitive merger agreement,
subject to the approval of a committee consisting of directors Ray Roles, Tony
Swartz, Neal Thompson, and Mark Wirth.
During the first half of August 2002, the parties and their counsel
resolved various issues, including the levels of net worth and deposits that
Frontier would need to maintain to avert a reduction in the number of shares of
Zions stock to be paid to shareholders of Frontier; certain conditions to the
merger involving the minimum net worth and minimum average deposits of Frontier;
and the termination fee to be paid to a party who terminates the merger
agreement for various reasons. During this period, counsel for the parties
finalized the text of the merger agreement with respect to these and other
issues.
The Frontier board's merger committee approved the final text of this
agreement on August 16, 2002, and the agreement was executed by Frontier,
National Bank of Arizona, and Zions on August 16, 2002. National Bank of Arizona
issued a press release on August 19, 2002 announcing the agreement.
27
RECOMMENDATION OF THE FRONTIER BOARD AND FRONTIER'S REASONS FOR THE MERGER
The Frontier board believes that the terms of the merger agreement are
fair and in the best interests of Frontier and its shareholders. In reaching its
unanimous determination to approve the merger agreement, the Frontier board
consulted with its management and legal counsel, and considered a number of
factors, including without limitation, the following:
o Frontier's prospects if it were to remain
independent;
o the possibility of raising additional capital;
o the value of the Zions shares offered for Frontier's
stock;
o the price offered for Frontier stock by other
investors;
o the value of merger consideration received by other
banks of comparable size and quality;
o Zions' business, management, growth history and
commitment to banking in rural communities;
o the desirability of providing Frontier shareholders
with readily tradable securities,
o the likelihood of obtaining timely all required
regulatory approvals;
o the competitive conditions in the Arizona banking
business and the banking business in northeastern
Arizona;
o the likelihood of obtaining better transaction value
for shareholders;
o the likelihood of completing the merger in a
relatively short period; and
o the benefit of Frontier shareholders receiving
readily tradable shares of Zions stock in the merger.
In reaching its determination to approve and recommend the merger
agreement, the Frontier board did not assign any specific weights to the
foregoing factors, and individual directors may have weighed factors
differently. The board placed significant weight on its assessment of the
quality of Zions as a financial institution, the value of the transaction to
Frontier shareholders, the stock liquidity a merger would provide for Frontier's
shareholders, and Zions' commitment to a community banking approach to
Frontier's customer base. The board concluded that the merger with Zions and
National Bank of Arizona will provide Frontier shareholders enhanced liquidity
and marketability of their shares and a better opportunity for growth.
Additionally, the Frontier board concluded that National Bank of Arizona's
community banking approach is compatible with Frontier's overall approach to its
customers and employees, and that the two entities will be able to form a strong
banking commitment to Arizona's rural communities.
In considering whether the merger was in the best interests of
Frontier's shareholders, the board of directors also considered the bank's
regulatory position and the possibility that Frontier might become subject to a
cease and desist order. See "The Merger - Frontier Has Agreed to a Cease and
Desist Order," beginning at page ___. In the view of a majority of the Frontier
board, this factor was not determinative in recommending that shareholders
approve Zions' proposal because Frontier had other alternatives to address its
regulatory issues, including raising capital and strengthening management, and
the board believed that the bank had made significant progress in that regard.
For the reasons set forth above, the Frontier board believes that the
merger is fair to, and in the best interests of, Frontier and its shareholders.
ACCORDINGLY, THE FRONTIER BOARD UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND
28
RECOMMENDS THAT THE FRONTIER SHAREHOLDERS VOTE FOR THE APPROVAL OF THE MERGER
AGREEMENT AND THE MERGER.
NO OPINION OF FINANCIAL ADVISOR
Frontier has not engaged an independent financial advisor to advise or
opine as to the financial fairness of what will be received by the Frontier
shareholders in the merger. Nevertheless, the Frontier board unanimously
believes the value to be received to be fair to the Frontier shareholders from a
financial point of view. In reaching this conclusion, the Frontier board
considered offers the board had received from other investors; the likelihood of
obtaining more valuable merger consideration; the value of merger consideration
paid by other institutions in acquiring banks of similar size and quality to
Frontier; the quality of Zions' and NBA's management; and Zions' record of
growth and historical ability to deliver value to its shareholders. See "The
Merger - Recommendation of the Frontier Board and Frontier's Reasons for the
Merger," beginning at page XX.
WHAT YOU WILL RECEIVE
In the merger, holders of Frontier common stock will receive shares of
Zions common stock. With the exception of shares of Frontier for which cash is
paid by Frontier upon perfection of a Frontier shareholder's dissenters' rights,
at the effective time of the merger each share of Frontier common stock issued
and outstanding immediately prior to the effective time will automatically be
converted into the right to receive that number of shares of Zions common stock
calculated by dividing the "consideration number," as defined below, by the
number of shares of Frontier common stock that shall be issued and outstanding
at the effective time of the merger.
We define various terms used to calculate the exchange ratio, as
follows:
o The term "exchange ratio" means the "consideration number"
divided by the number of shares of Frontier common stock that
are issued and outstanding at the effective time of the
merger.
o The term "consideration number" means 204,000 shares of Zions
common stock, minus the "reduction number."
o The term "reduction number" means the number reached by
summing the following two items:
o if the average closing deposits are less than
$85,000,000, 8.5 percent of the difference between
$85,000,000 and the average closing deposits, and
o if the closing net worth is less than $6,500,000, 100
percent of the difference between $6,500,000 and the
closing net worth; then
o dividing that sum by $50.98, and rounding the result
to the nearest whole number.
o The term "average closing deposits" means the average of the
total deposits of Frontier over the fifteen-business-day
period ending on the business day before the effective time of
the merger.
o The term "closing net worth" means the consolidated net worth
of Frontier in accordance with generally accepted accounting
principles as of the close of business on the business day
before the effective time of the merger.
Upon completion of the merger, Frontier shareholders will receive up to
a maximum of 204,000 shares of Zions common stock for all the shares of Frontier
common stock that they own. However, if Frontier's average closing deposits fall
below $85,000,000 or Frontier's closing net worth falls below $6,500,000, the
number of shares of Zions common stock issued to Frontier shareholders would be
less than the maximum total of 204,000 shares. As of September 30, 2002, the
last practicable date prior to printing this document, the total deposits of
Frontier were $88,308,248 and the consolidated net worth of Frontier was
$6,785,462.
29
If there is no reduction to the maximum number of 204,000 shares of
Zions common stock issuable in the merger and all currently outstanding options
to purchase Frontier common stock are exercised before the merger, then each of
the 944,246 shares of Frontier common stock that would then be outstanding would
be exchangeable for 0.2160 of a share of Zions common stock. We have provided
this exchange ratio for illustrative purposes only. As we have described above,
the merger consideration to be received by Frontier's shareholders is variable
and may change if Frontier's average closing deposits or closing net worth falls
below levels specified in the merger agreement. Consequently, you should not
rely upon the assumed exchange ratio referenced above to be the exchange ratio.
We cannot determine at this time the exchange ratio. It will be calculated at
the effective time of the merger and may be less than the illustrative exchange
ratio that we have used in this paragraph.
At the effective time of the merger, holders of Frontier common stock
will cease to be shareholders of Frontier and will no longer have any rights as
Frontier shareholders, other than the right to receive Zions stock, and cash in
lieu of fractional shares; for this purpose, Zions' stock will be valued at
$50.98 per share. After the effective time, there will be no transfers on
Frontier's stock transfer books of any shares of Frontier common stock.
FRONTIER'S OFFICERS AND DIRECTORS HAVE INTERESTS THAT MAY INFLUENCE OR EVEN
OBLIGATE THEM TO SUPPORT AND APPROVE THE MERGER
Various Frontier directors and officers are entitled under Frontier's
organizational documents and Arizona law to receive indemnification against
losses, claims, damages and liabilities incurred in connection with threatened
or actual suits, claims or proceedings (whether civil, criminal or
administrative) arising from events, matters, actions or omissions that occurred
prior to the merger. Zions and National Bank of Arizona have agreed that
following the merger neither will take any action to abrogate or diminish any of
these rights to indemnification. Consequently, these Frontier directors and
officers may have interests in the merger that are different from, or are in
addition to, your interests in the merger. See "The Merger - Conduct of Business
Pending Completion of the Merger - Indemnification," beginning at page ___. As a
result, these directors and officers, who owned approximately [26.6%] of the
issued and outstanding Frontier common stock as of the record date of the
meeting, and hold options that may be exercised with respect to an additional
[1.6%] of Frontier common stock may be more likely to vote to approve the merger
agreement and the merger than if they did not have these interests.
All of Frontier's directors, including Mr. Tony J. Swartz, its
President and Chief Executive Officer, have already agreed to recommend the
merger to the Frontier shareholders for approval, subject to fulfilling their
fiduciary duty to Frontier and its shareholders, and to vote in favor of the
proposal to approve the merger agreement and the merger. As of the close of
business on the record date for the Frontier special meeting, these directors
beneficially owned approximately [26.6%] of the outstanding shares of Frontier
common stock entitled to vote at the meeting and hold options that may be
exercised with respect to an additional [3.6%] of Frontier common stock . See
"The Merger - Voting Agreements," beginning at page ___.
Frontier Has Agreed to a Cease and Desist Order
Frontier and its board of directors work closely with the FDIC and the
Arizona Superintendent of Banks to fulfill their regulatory obligations and to
assure that Frontier is operated in a safe and sound manner. Over the past year,
the FDIC and the Arizona Superintendent of Banks have expressed concern about
the quality of some of Frontier's loans, the level of Frontier's capital, the
adequacy of Frontier's credit management, and the establishment of improved
procedures to eliminate similar problems in the future. In October 2000,
Frontier entered into a memorandum of understanding with the Superintendent and
the FDIC under which Frontier agreed to take various actions to improve the
condition of the bank, including improving management by obtaining a senior
lending officer, improving loan credit quality and tighten credit requirements,
increase supervision by the board of directors, establish better internal credit
accountability review and improve the adequacy of the Frontier loan loss
reserve, correct regulatory violations, implement an internal audit program, and
increase capital, and other things. At the time Frontier commenced negotiations
with Zions concerning a potential merger, Frontier had addressed nearly all the
issues outlined in the memorandum of understanding, and had taken substantial
steps toward meeting the capital ratio requirements of the memorandum of
understanding. At about the time Frontier began merger discussions with Zions,
Frontier's chief financial officer and senior credit officer resigned, although
the former senior credit officer has continued as a consultant to the bank. Once
Frontier entered into a letter of intent with Zions, Frontier suspended its
efforts to raise capital, because the merger would eliminate any necessity to do
so.
30
The Frontier board has continued to work closely with the FDIC and the
Superintendent to address these issues. The FDIC and Superintendent have advised
Frontier that any remaining regulatory issues will be resolved if the merger is
completed. Nevertheless, to assure the soundness of Frontier, if the proposed
merger is not completed, the Frontier board in September 2002 entered into a
cease and desist order with the FDIC and the Superintendent which, among other
things, requires that Frontier, within 90 days after September 29, 2002, the
effective date of the order, assure that adequate management is in place,
including the retention of a chief financial officer, senior lending officer, a
qualified senior compliance officer, and a chief executive officer; increase the
supervision and oversight of Frontier's compliance program; increase Tier 1
capital to equal or exceed 7.5% of Frontier's total assets; charge off any
assets classified as "loss" and one-half of any assets classified as "doubtful";
curb extensions of credit to borrowers whose loans are classified as
"substandard" or "doubtful"; over a period of 360 days, decrease Frontier's
substandard or doubtful loans from a total of $6.8 million to not more than $2.3
million; correct certain guidance and lending control deficiencies; adopt and
implement a profit plan; eliminate certain regulatory violations; and take other
action designed to assure the safety and soundness of Frontier and compliance
with all applicable laws and regulations.
If the merger is completed, the cease and desist order will be
irrelevant; and the staff of the FDIC has confirmed to Frontier in writing that
the cease and desist order will not apply to Zions or National Bank of Arizona,
as the surviving bank. If the merger is not completed, Frontier must raise
capital and take other action to implement the order. These actions would
involve significant expense to Frontier. To do so, Frontier will be required to
raise additional capital (in the approximate amount of $500,000 to $750,000) and
will be required to incur expenses to assure that the other conditions of the
cease and desist order are met, including employing the necessary management
personnel to comply with the terms and conditions of the cease and desist order.
Frontier estimates that, in addition to meeting the increased capital
requirements, the cost of complying with the cease and desist order would be
approximately $470,000. See "Risk Factors - Frontier has entered into a cease
and desist order." The issuance of the order may also constitute a breach of the
merger agreement that would allow Zions to elect not to proceed with the merger.
At this time, Zions has not advised Frontier that it does not intend to proceed
with the merger.
If the merger is not completed, Frontier will seek to raise capital and
take other action to satisfy the terms of the cease and desist order. Based on
discussions with shareholders and others who have expressed an interest in
investing in Frontier, the Frontier board believes that it will be able to
satisfy the requirements of the cease and desist order.
As of June 30, 2002, Frontier's capital ratios exceed the minimum
capital levels established by FDIC regulation, and Frontier is considered well
capitalized under the regulatory framework for prompt corrective action
established by FDIC regulation, although Frontier's Tier 1 capital as of that
date does not equal or exceed the level of 7.5% of Frontier's total assets that
the FDIC and the Superintendent previously requested and that is now required by
the cease and desist order. To be categorized as well capitalized under the
prompt corrective action framework, Frontier must maintain minimum total
risk-based, Tier 1 risk-based, and Tier 1 leverage ratios as set forth in the
following table.
As of June 30, 2002 (unaudited) Frontier Minimum for capital To be well
(dollars in 000s) Actual adequacy purposes capitalized
---------------- ---------------- ----------------
Amount Ratio Amount Ratio Amount Ratio
------ ------ ------ ------ ------ ------
Total capital to risk-weighted assets ... $7,650 11.88% $5,150 8.00% $6,478 10.00%
Tier 1 capital to risk-weighted assets .. 6,792 10.55 2,575 4.00 3,863 6.00
Tier 1 capital to average assets ........ 6,792 6.94 2,936 3.00 4,893 5.00
ACCOUNTING TREATMENT
Zions will account for the merger as a purchase. Zions will record, at
fair value, the acquired assets and assumed liabilities of Frontier. To the
extent that the total purchase price exceeds the fair value of the assets
acquired and liabilities assumed, Zions may record goodwill. Zions will include
in its results of operations the results of Frontier's operations after the
merger.
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REGULATORY APPROVALS
National Bank of Arizona and Frontier have filed an application with
the Office of the Comptroller of the Currency (the "OCC") pursuant to the
federal Bank Merger Act requesting approval of the merger. Copies of this
application have been provided to the U.S. Department of Justice and other
governmental agencies. We are awaiting the action of the OCC on this
application. The application describes the terms of the merger, the parties
involved, and the activities to be conducted by the combined bank as a result of
the merger, and contains other financial and managerial information. In
evaluating the application, the OCC will consider the financial and managerial
resources and prospects of the existing and combined institutions and the
benefits that may be expected from the merger. Among other things, the OCC will
evaluate the capital adequacy of the combined bank after completion of the
merger. In addition, under the Community Reinvestment Act of 1977, the OCC will
take into account the record of performance of National Bank of Arizona and
Frontier in meeting the credit needs of their communities, including low- and
moderate-income neighborhoods.
The OCC may deny an application if it determines that the transaction
would result in a monopoly or be in furtherance of any combination or conspiracy
to monopolize or attempt to monopolize the business of banking in any part of
the United States. The OCC may also deny an application if it determines that
the transaction would substantially lessen competition or would tend to create a
monopoly in any section of the country, or would in any other manner result in a
restraint of trade, unless the OCC finds that the anti-competitive effects of
the transaction are clearly outweighed by the probable effects of the
transaction in providing benefits to the public.
Applicable federal law provides for the publication of notice and
public comment on the application to be filed by National Bank of Arizona and
Frontier with the OCC. Under current law, the merger may not be completed until
the OCC has approved the merger and a period of 30 days, or as few as 15 days if
prescribed by the OCC with the concurrence of the Attorney General of the United
States, following the date of approval of the merger by the OCC, has expired.
The commencement of an antitrust action by the U.S. Department of Justice would
stay the effectiveness of the approval of the OCC, unless a court specifically
orders otherwise.
National Bank of Arizona filed an application with the Arizona State
Banking Department under Title 6 of the Arizona Revised Statutes requesting
approval of the merger. The Arizona State Banking Department approved this
application on October 16, 2002.
REGULATORY APPROVAL DOES NOT CONSTITUTE AN ENDORSEMENT OR
RECOMMENDATION OF THE MERGER AS BEING IN THE INTEREST OF THE SHAREHOLDERS. The
approval of an application means only that the regulatory criteria for approval
have been satisfied or waived. It does not mean that the approving authority has
determined that what will be received by Frontier shareholders is fair or that
the merger is financially favorable to Frontier shareholders. In particular,
favorable action by the OCC reflects only its view that the merger does not
contravene applicable competitive standards imposed by law and is consistent
with regulatory policies related to safety and soundness.
Zions has received written confirmation by the Department of Financial
Institutions of the State of Utah that its approval will not be required to
consummate the proposed merger of Frontier into National Bank of Arizona.
Zions, National Bank of Arizona and Frontier are not aware of any
governmental approvals or requirements arising under banking laws and
regulations whose receipt or satisfaction is necessary for the merger to become
effective other than those described above. Zions, National Bank of Arizona and
Frontier intend to seek any other approval and to take any other action that may
be required to effect the merger.
The merger cannot be completed unless all necessary regulatory
approvals are granted and all statutory waiting periods thereafter have expired.
There can be no assurance that any required approval not already received can be
obtained either prior to or after the special meeting or, if obtained, there can
be no assurance as to the date of any of those approvals or the absence of any
litigation challenging those approvals. There can likewise be no assurance that
the U.S. Department of Justice, the Attorney General of the State of Arizona, or
private persons will not challenge the merger on antitrust grounds, or, if a
challenge is made, the result of the challenge.
32
FRONTIER BOARD OF DIRECTORS SUPPORT AGREEMENT
When the parties signed the merger agreement, the Frontier directors,
individually and as a group, agreed, subject to fulfilling their fiduciary duty
to Frontier and its shareholders, to support the merger agreement and to
recommend its adoption by the Frontier shareholders. The Frontier directors also
agreed, individually and as a group, not to solicit or, subject to their
fiduciary duty to Frontier and its shareholders, negotiate or accept any offer
of merger, consolidation, or acquisition of any of the shares or all or
substantially all of the assets of Frontier from any person other than Zions.
VOTING AGREEMENTS
At the same time that the merger agreement was signed, nineteen
shareholders of Frontier, eighteen of whom were directors, former directors
and/or officers of Frontier or their affiliates, or their relatives entered into
individual voting agreements with Zions. Under the voting agreements, these
individuals agreed, among other things:
o to vote in favor of the merger all shares of Frontier common
stock beneficially owned by them at any meeting of
shareholders of Frontier called to consider and vote on the
merger;
o not to vote in favor of any sale of control, merger,
consolidation, plan of liquidation, sale of assets or
reclassification of Frontier with any person other than Zions;
and
o not to sell or transfer any shares of Frontier common stock
held by them to any transferee, unless the transferee
expressly agrees in writing to be bound by the terms of the
voting agreement.
Nothing in their voting agreements, however, will limit or otherwise
interfere with their actions as directors of Frontier or will affect their
ability to vote or dispose of their shares if the merger agreement with Zions
has first been terminated in accordance with its terms.
As of the record date of the special meeting, these nineteen
shareholders beneficially owned a total of [633,711] shares of Frontier common
stock, representing approximately [69.5%] of the shares of Frontier common stock
entitled to vote at the special meeting and enough to approve the merger without
the concurrence of any other Frontier shareholders.
DISSENTERS' OR APPRAISAL RIGHTS
Under provisions of the National Bank Act which apply to the merger,
Frontier shareholders are entitled to exercise dissenters' rights in connection
with the merger. A Frontier shareholder who perfects his or her rights will be
entitled to receive the fair value in cash for his or her shares of Frontier
common stock. See "Rights of Dissenting Shareholders," beginning at page ___.
INCLUSION OF ZIONS' COMMON STOCK ON NASDAQ NATIONAL MARKET
A condition to the merger is that the Nasdaq shall have authorized the
shares of Zions common stock to be issued in the merger for inclusion on the
Nasdaq National Market. Zions' common stock is listed on the Nasdaq National
Market under the symbol "ZION." See "Price Range of Common Stock and Dividends,"
beginning on page ___.
DIVIDENDS
Zions expects that after the merger, subject to approval and
declaration by its board, it will continue its current dividend policy and
declare regularly scheduled quarterly cash dividends on the shares of its common
stock consistent with past practices. The current annualized rate of cash
dividends on the shares of Zions common stock is $0.80 per share. Zions is not
obligated to continue the payment of this dividend.
If Zions declares a dividend on its common stock after the merger
closes and before you exchange your Frontier stock certificates for Zions stock
33
certificates, your dividend will be paid to the exchange agent to be given to
you only after you exchange your stock certificates. See "Exchange of Frontier
Certificates," beginning at page ___.
The merger agreement provides that, until the merger closes, Frontier
will not declare, authorize, distribute or pay any cash dividends, property
dividends, stock dividends, stock splits or issuance of stock, with respect to
any class of the Frontier stock, except on the exercise of stock options,
without the prior written consent of Zions. See "Price Range of Common Stock and
Dividends," beginning at page ___.
EXCHANGE OF FRONTIER CERTIFICATES
Promptly after the effective time, Zions will deliver to the exchange
agent, Zions First National Bank, certificates representing the shares of Zions
common stock that are issuable in the merger for shares of Frontier common
stock. Zions will also deposit with the exchange agent an estimated amount of
cash payable instead of fractional shares. Promptly after the effective time,
Zions will cause the exchange agent to send to each holder of record of shares
of Frontier common stock at the effective time of the merger a notice specifying
the effective time and notifying the holder to surrender his, her or its
certificate or certificates to Zions First National Bank for exchange. Zions
First National Bank will deliver to holders of Frontier common stock who
surrender their certificates to the exchange agent, together with any other
required documentation, certificates representing the number of shares of Zions
common stock to which the surrendering holders are entitled.
CONSEQUENTLY, TO OBTAIN THE BENEFIT OF THE MERGER, YOU MUST DELIVER
YOUR FRONTIER STOCK CERTIFICATES TO THE EXCHANGE AGENT IN ORDER TO RECEIVE YOUR
ZIONS SHARES AND ANY DIVIDENDS THAT MAY BE PAID ON THESE SHARES IN THE FUTURE.
Zions will not issue any fractional shares in the merger. Instead,
Zions First National Bank will pay each holder of Frontier common stock who
would otherwise be entitled to a fractional share of Zions common stock an
amount in cash, without interest, calculated by multiplying that fraction by
$50.98.
HOLDERS OF FRONTIER COMMON STOCK SHOULD NOT SEND IN CERTIFICATES
REPRESENTING FRONTIER COMMON STOCK UNTIL THEY RECEIVE A NOTICE FROM ZIONS FIRST
NATIONAL BANK, THE EXCHANGE AGENT, TO SUBMIT THEIR FRONTIER SHARES FOR EXCHANGE.
If you have lost your stock certificate, you may submit an affidavit of
lost certificate, together with an agreement of indemnification, in a form
satisfactory to the exchange agent, together with any additional documentation
the exchange agent may require in order to obtain your Zions stock certificate.
IF YOU HAVE NOT SURRENDERED FOR EXCHANGE YOUR FRONTIER STOCK
CERTIFICATE (OR PROPERLY SUBMITTED AN AFFIDAVIT OF LOST CERTIFICATE AND RELATED
DOCUMENTS) BY THE THIRD ANNIVERSARY AFTER THE DATE THE MERGER IS COMPLETED, THE
ZIONS STOCK INTO WHICH YOUR FRONTIER STOCK IS CONVERTED WILL BE RETURNED TO
ZIONS, TOGETHER WITH ANY DIVIDENDS OR OTHER DISTRIBUTIONS ATTRIBUTABLE TO THOSE
SHARES, AND YOU WILL NOT BE ENTITLED TO RECEIVE ANY ZIONS STOCK, DIVIDENDS OR
OTHER MERGER CONSIDERATION. CONSEQUENTLY, ALL FRONTIER SHAREHOLDERS SHOULD
EXCHANGE THEIR OLD FRONTIER STOCK CERTIFICATES FOR ZIONS STOCK PROMPTLY AFTER
RECEIVING NOTICE FROM THE EXCHANGE AGENT, IN ORDER NOT TO LOSE THEIR RIGHTS.
Frontier shareholders who wish to exercise their dissenters' rights in
connection with the merger (see "Rights of Dissenting Shareholders," beginning
at page ___) should follow precisely the procedures set forth in the National
Bank Act (see Appendix B) in order to receive the cash value for those shares.
Dissenting shareholders should not follow the procedures for certificate
exchange that will be used by the non-dissenting shareholders.
FRONTIER STOCK OPTIONS
Options to purchase Frontier common stock, which their holders have not
exercised prior the effective time of the merger, will automatically be
cancelled and will cease to represent a purchase right of any nature. Zions will
not assume any options to purchase Frontier common stock, nor will Zions issue
any substitute options to the holders of those options. As of August 16, 2002,
34
eleven officers of Frontier held options to purchase a total of 32,482 shares of
Frontier common stock at a weighted average exercise price of $8.31 per share.
It is anticipated that all options will be exercised prior to completion of the
merger.
REPRESENTATIONS AND WARRANTIES
The merger agreement contains representations and warranties made by
Frontier, National Bank of Arizona and/or Zions relating to the following
matters:
o due organization, good standing and due registration as
corporation and business
o requisite corporate power and authority to enter into the
merger agreement and related transactions
o non-contravention of certain organizational documents, laws,
agreements or governmental orders
o valid, binding nature of the merger agreement
o compliance with the Bank Holding Company Act and certain other
regulatory requirements
o subsidiaries
o capital structure
o organizational documents and books and records
o financial statements
o regulatory approvals and filings, contracts and commitments
o call reports
o absence of undisclosed liabilities and other developments
o reserve for possible credit losses
o tax and accounting matters
o consolidated net worth
o regulatory examinations
o regulatory and governmental reports
o compliance with laws regarding transactions with insiders
o registration of securities
o litigation, regulatory action and governmental proceedings
o federal deposit insurance and other insurance
o labor matters
o employee benefit plans
o employee compensation
o fiduciary and insurance activities
o environmental liability
o intangible property
o real and personal property
o loans, leases and discounts
o material contracts
o employment and severance agreements
o capital expenditures
o repurchase agreements
o internal controls
o stock dividends
o brokerage and advisor fees and agreements
o interest rate risk management instruments
o COBRA matters
o proper disclosure
o regulatory and other approvals to consummate the merger
CONDUCT OF BUSINESS PENDING COMPLETION OF THE MERGER
35
The merger agreement contains various covenants and agreements that
govern Frontier's, National Bank of Arizona's, and Zions' actions prior to the
effective time of merger, including the following:
Conduct of Business. Frontier has agreed that it will conduct its
business diligently and substantially in the same manner as previously
conducted. Frontier has further agreed to use commercially reasonable efforts to
preserve intact its business organization, to keep available its present
employees, and to preserve its present relationships with customers and business
associates.
Capital Stock. Frontier has agreed to restrictions on its ability to
authorize, issue or make any distribution of its capital stock or any other
securities (except for issuances of Frontier stock upon exercise of stock
options outstanding on the date of the merger agreement), or grant any options
to acquire additional securities, or declare or distribute any stock dividend or
authorize a stock split. Frontier has agreed not to make any direct or indirect
redemption, purchase or other acquisition of its capital stock.
Dividends. Frontier has agreed not to declare or pay any cash dividends
or property dividends with respect to any class of its capital stock.
Compensation; Employment Agreements; Benefit Plans. Frontier has agreed
not to:
o increase the rate of compensation of any employee or enter
into any agreement to increase the rate of compensation of any
employee, except for increases in the ordinary course of
business, which together with all other compensation rate
increases do not exceed 4.5 percent per annum of the aggregate
payroll as of March 31, 2002; nor
o create or modify any pension or profit sharing plan, bonus,
deferred compensation, death benefit, or retirement plan, or
the level of benefits under any such plan, nor increase or
25
decrease any severance or termination pay benefit or any other
fringe benefit, except as otherwise required by law; nor
o enter into any employment or personal services contract with
any person or firm, except directly to facilitate the
transactions contemplated by the merger agreement.
Dispositions, Acquisitions and Capital Expenditures. Frontier has
agreed not to:
o either (i) merge into, consolidate with, or sell or otherwise
dispose of its assets to any other person, or enter into any
other transaction or agree to effect any other transaction not
in the ordinary course of its business or (ii) engage in any
discussions concerning such a possible transaction except as
explicitly contemplated in the merger agreement; nor
o incur any liability or obligation, make any commitment or
disbursement, acquire or dispose of any property or asset,
make any contract or agreement, pay or become obligated to pay
any legal, accounting, or miscellaneous other expense, or
engage in any transaction, except in the ordinary course of
its business or to accomplish the transactions contemplated by
the merger agreement; nor
o subject any of its properties or assets to any lien, claim,
charge, option, or encumbrance, other than in the ordinary
course of business; nor
o enter into or assume any commitment to make capital
expenditures, any of which individually exceeds $10,000 or
which in the aggregate exceed $25,000.
Amendments. The merger agreement provides that Frontier will not amend
its articles of incorporation or bylaws, nor convert its charter or form of
entity to any other charter or form of entity.
36
Preservation of Business. Frontier has agreed that it will:
o carry on its business and manage its assets and properties
diligently and substantially in the same manner as before the
execution of the merger agreement;
o maintain the ratio of its loans to its deposits at
approximately the same level as existed at August 16, 2002, as
adjusted to allow for seasonal fluctuations of loans and
deposits of a kind and amount experienced traditionally by it
and for the imposition of more stringent loan underwriting
criteria;
o except for transactions in the ordinary course of business and
investments in federal funds, manage its investment portfolio
in substantially the same manner and under substantially the
same investment policies as from January 1, 2002 to August 16,
2002, and take no action to change to any material extent the
percentage which its investment portfolio bears to its total
assets, or to lengthen to any material extent the average
maturity of its investment portfolio, or of any significant
category of its portfolio;
o use commercially reasonable efforts to continue in effect its
present insurance coverage on all properties, assets,
business, and personnel;
o use commercially reasonable efforts to preserve its business
organization intact, to keep available its present employees,
and to preserve its present relationships with customers and
others having business dealings with it;
o not do anything and not fail to do anything which will cause a
breach of or default in any contract, agreement, commitment,
or obligation to which it is a party or by which it may be
bound; and
o conduct its affairs so that at the effective time of the
merger none of its representations and warranties will be
inaccurate, none of its covenants and agreements will be
breached, and no condition in the merger agreement will remain
unfulfilled by reason of its actions or omissions.
Acquisition Proposals. Frontier has agreed that it will not:
o solicit or encourage any inquiries or proposals to acquire
more than one percent of Frontier common stock or any
significant portion of its assets;
o afford any third party which may be considering such a
transaction access to its properties, books or records except
as required by mandatory provisions of law;
o enter into any discussions or negotiations for, or enter into
any agreement or understanding which provides for such a
transaction; or
o authorize or permit any of its directors, officers, employees
or agents to do or permit any of the activities referred to in
this paragraph.
Frontier has agreed to keep Zions immediately informed of any offer or
proposed offer to acquire any shares of its stock capital stock or any
significant portion of its assets or of any other matter which could adversely
affect the merger agreement or the merger.
Employee Benefit Matters. Employees of Frontier who become participants
in any employment benefit plan of Zions will receive credit for prior service
with Frontier for purposes of eligibility and vesting, but not for benefit
accrual purposes, as long as such crediting of service does not result in
duplication of benefits.
Regulatory Applications and Filings. Zions and Frontier have agreed
that they will cooperate and use their commercially best efforts to effect all
filings and obtain all necessary government approvals to complete the merger.
37
Indemnification. After the merger, neither Zions nor National Bank of
Arizona will take any action to abrogate or diminish any right accorded under
Frontier's articles of incorporation or bylaws as they existed immediately prior
to the merger to any person who, on or prior to the merger, was a director or
officer of Frontier to indemnification from or against losses, expenses, claims,
demands, damages, liabilities, judgments, fines, penalties, costs, expenses, and
amounts paid in settlement pertaining to or incurred in connection with any
threatened or actual action, suit, claim, or proceeding (whether civil,
criminal, administrative, arbitration, or investigative) arising from events,
matters, actions, or omissions occurring on or prior to the merger. To the
extent permitted by law, all rights to such indemnification accorded under the
articles of incorporation and bylaws of Frontier to any person who, on or prior
to the merger, was a director or officer of Frontier will survive the merger
and, following the merger, to the extent permitted by law, Zions and National
Bank of Arizona will honor such obligations in accordance with their terms with
respect to events, acts, or omissions occurring prior to the merger.
Certain Other Covenants. The merger agreement contains other covenants
of the parties relating to:
o the preparation and distribution of this proxy
statement/prospectus;
o cooperation in issuing public announcements;
o confidentiality; and
o the delvery of financial statements of Frontier to Zions.
CONDITIONS TO COMPLETE THE MERGER
The obligations of Zions, National Bank of Arizona and Frontier to
complete the merger are subject to the satisfaction or waiver of conditions,
including:
o obtaining the approval of the shareholders of Frontier;
o obtaining all required governmental approvals;
o the absence of any law, regulation or other governmental
requirement enjoining, preventing or making illegal the
completion of the merger;
o the absence of any action, suit or proceeding, instituted or
threatened before or by any governmental authority, which
restrains, enjoins or prohibits the merger or which would
materially restrict the operation of the business of Frontier;
o the declaration of effectiveness of the registration statement
by the SEC and the absence of any stop order or proceedings
seeking a stop order;
o the delivery of an opinion to Zions and Frontier 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;
o the representations and warranties of the other party being
materially true and correct as of the effective time of the
merger, except for representations and warranties made as of a
specified date which will be materially true and correct as of
such specified date;
o all of the covenants and obligations of the other party to be
performed and met on or prior to the effective time of the
merger having been performed and met; and
38
o each of Zions and Frontier having received a certificate
signed by designated executive officers of the other party to
the effect that the above two conditions have been satisfied.
Zions and National Bank of Arizona will not be obligated to complete
the merger unless
o the consolidated net worth of Frontier is not less than the
sum of $6 million and the aggregate contributions to capital
caused by the payments accompanying the exercise of any stock
options on or after March 31, 2002; and
o Frontier's average closing deposits are not less than $80
million.
TERMINATION AND TERMINATION FEES
General Termination Rights. The parties may terminate the merger
agreement at any time prior to the effective time, whether before or after
approval by the Frontier shareholders:
o by mutual written consent of the parties;
o by either Zions or Frontier, as appropriate, if any of the
following occurs:
o the merger has not been completed by December 30,
2002, except to the extent that the failure to
complete the merger results from the failure of the
party seeking termination to perform or observe the
agreements and covenants of such party;
o the Frontier shareholders fail to approve the merger
agreement at the Frontier special meeting;
o any governmental entity has issued a final,
non-appealable order denying an approval or consent
that is required to complete the merger; or
o the board of directors of either Zions or Frontier
has determined in good faith after consultation with
counsel that the merger has become inadvisable or
impracticable because a governmental authority has
instituted litigation to restrain or invalidate the
merger.
o by Frontier if any of the following occur:
o the material incorrectness when made of any of Zions'
or National Bank of Arizona's representations and
warranties; or
o a material breach or a material failure by Zions or
National Bank of Arizona of its respective covenants,
and Zions or National Bank of Arizona, as
appropriate, has not cured the breach or failure.
o by Zions if either of the following occurs:
o the material incorrectness when made of any of
Frontier's representations and warranties; or
o a material breach or a material failure by Frontier
of its covenants, and Frontier has not cured the
breach or failure.
Termination and Damages for Breach of the Merger Agreement. If
termination of the merger agreement is the result of material incorrectness of
any representation or warranty (except for a good-faith, inadvertent omission
from a schedule or disclosure in an update to a schedule) or the material breach
39
or material failure of a covenant, the party whose representations or warranties
were materially incorrect or which materially breached the covenant will be
liable to the other party in the amount of $500,000.
If termination of the merger agreement is the result of material
incorrectness of any representation or warranty of Frontier due to a good-faith,
inadvertent omission from a schedule or disclosure in an update to a schedule,
Frontier will be liable to Zions in the amount of $250,000. Also, if termination
of the merger agreement is the result of material incorrectness of any
representation or warranty of Frontier due to a good-faith, inadvertent omission
from a schedule or disclosure in an update to a schedule and if within eighteen
months of such termination Frontier executes a definitive agreement with respect
to a proposal to obtain 25% or more of the stock or assets of Frontier, then
Frontier will be liable to Zions for an additional amount of $250,000.
AMENDMENT AND WAIVER
Subject to compliance with applicable law, the party benefited by a
particular provision of the merger agreement may, prior to the merger, waive
that provision. The parties may amend or modify any provision at any time by an
agreement in writing between them.
SURVIVAL OF CERTAIN PROVISIONS
If the Merger Agreement Becomes Effective. After the merger, various
provisions of the merger agreement regarding the following matters will remain
effective:
o confidentiality of information;
o information provided for applications and the registration
statement; and
o indemnification of Frontier directors and officers.
If the Merger Agreement Terminates before the Effective Time. If the
merger agreement terminates before the effective time, various provisions of the
merger agreement regarding the following matters will remain effective:
o confidentiality of information;
o information provided for applications and the registration
statement;
o liability of the companies to each other as a result of the
termination of the merger agreement; and
o allocation of expenses incurred.
RESTRICTIONS ON RESALES BY AFFILIATES
Zions has registered the shares of common stock to be issued to the
Frontier shareholders under the Securities Act. Holders of these securities who
are not deemed to be "affiliates," as defined in the rules under the Securities
Act, of Zions or Frontier may trade their shares freely without restriction.
Any subsequent transfer of shares by any person who is an affiliate of
Frontier at the time of submission of the merger agreement to the Frontier
shareholders for their vote will, under existing law, require either:
o the further registration under the Securities Act of the
shares of Zions common stock to be transferred;
o compliance with Rule 145 under the Securities Act, which
permits limited sales under certain circumstances; or
40
o the availability of another exemption from registration of the
shares.
An affiliate of Frontier is a person who directly, or indirectly
through one or more intermediaries, controls, is controlled by, or is under
common control with Frontier. We expect these restrictions to apply to the
directors and executive officers of Frontier and the holders of 10% or more of
the Frontier common stock. The same restrictions apply to certain relatives or
the spouses of those persons and any trusts, estates, corporations or other
entities in which those persons have a 10% or greater beneficial or equity
interest. Zions will give stop transfer instructions to the transfer agent with
respect to those shares of Zions common stock held by persons subject to these
restrictions, and Zions will place a legend on the certificates for their shares
accordingly.
Rule 145 under the Securities Act governs resales by recipients of
registered securities sold in certain transactions covered by Rule 145(a), such
as statutory mergers. Under Rule 145, an affiliate may be treated as engaged in
a distribution and, therefore, an underwriter under the Securities Act, unless
certain exemptions are available. Rule 145(d) provides an exemption if the
securities sold by an affiliate are sold in accordance with certain provisions
of Rule 144. In general, Frontier affiliates may sell their Zions stock received
in the merger in exchange for their Frontier stock so long as current public
information exists with respect to Zions; sales do not exceed 1% of all issued
and outstanding shares of Zions or an average weekly reported volume during the
four calendar weeks preceding the sale; and the sales are completed through
broker transactions.
Frontier has agreed to use commercially reasonable efforts to cause
each person who is an affiliate of Frontier for purposes of Rule 145 under the
Securities Act to deliver to Zions a written agreement intended to ensure
compliance with the Securities Act.
ALLOCATION OF COSTS AND EXPENSES
Each party to the merger agreement will be responsible for paying its
own costs and expenses, including the fees and expenses of its own counsel,
financial advisors, accountants and tax advisors. However, the merger agreement
expressly allocates certain specified expenses as follows:
o Frontier will pay the cost of printing and delivering the
proxy statement/prospectus to its shareholders; and
o Zions will pay the cost of registering under the federal and
state securities laws the shares of Zions common stock that
Zions will issue to the Frontier shareholders.
REGULATION AND SUPERVISION
The following discussion sets forth the material elements of the
regulatory framework applicable to bank holding companies and banks and their
non-bank affiliates and provides certain specific information relevant to Zions
and Frontier. This regulatory framework is primarily intended for the protection
of depositors and the deposit insurance funds that insure bank deposits, and not
for the protection of security holders. To the extent that the following
information describes statutory and regulatory provisions, it is qualified in
its entirety by reference to those provisions. A change in the statutes,
regulations, or regulatory policies applicable to Zions and its subsidiaries and
Frontier may have a material effect on the business of these entities.
As a bank holding company and a financial holding company under the
Bank Holding Company Act, Zions is supervised and regulated by the Board of
Governors of the Federal Reserve System, referred to in this document as the
Federal Reserve Board. For a discussion of the material elements of the
regulatory framework applicable to financial holding companies, bank holding
companies and their subsidiaries and specific information relevant to Zions,
please refer to Zions' annual report on Form 10-K for the fiscal year ended
December 31, 2001, and any subsequent reports Zions files with the SEC, which
are incorporated by reference in this prospectus/proxy statement. As a result of
this regulatory framework, Zions' earnings are affected by actions of
o the Federal Reserve Board;
41
o the OCC, which regulates some of our banking subsidiaries;
o the Federal Deposit Insurance Corporation, referred to in this
document as the FDIC, which regulates all our banking
subsidiaries to varying extents, and which insures the
deposits of our banking subsidiaries within certain limits;
and
o the SEC, which regulates the activities of certain of Zions'
subsidiaries engaged in the securities business.
Zions' earnings are also affected by general economic conditions,
regulatory policies and legislative action. A change in applicable statutes,
regulations or regulatory policy may have a material effect on Zions' business.
Depository institutions, including Zions' bank subsidiaries, are also affected
by various federal laws and regulatory policies, including those relating to
consumer protection and similar matters. Zions also has other financial services
subsidiaries that are regulated, supervised and examined by the regulatory
bodies named above, as well as other state and federal regulatory agencies and
self-regulatory organizations. Zions' non-bank subsidiaries may be subject to
other laws and regulations of the federal government or the various states in
which they are authorized to do business.
As a commercial bank organized under the laws of the State of Arizona
which is not a member of the Federal Reserve System, Frontier is subject to
supervision, regulation, and examination by the Arizona Superintendent of Banks
and the FDIC. Frontier is subject to extensive state and federal statutes and
regulations that significantly affect its business and activities. Frontier must
file reports with its regulators concerning its activities and financial
condition and obtain regulatory approval to enter into certain transactions.
Frontier is also subject to periodic examinations by the Arizona Superintendent
of Banks and the FDIC, to ascertain compliance with various regulatory
requirements. Regulatory authorities have broad flexibility to initiate
proceedings designed to prohibit banks from engaging in unlawful activities and
unsafe and unsound banking practices.
Zions and Frontier are also affected by various other governmental
requirements and regulations, general economic conditions, and the fiscal and
monetary policies of the federal government and the Federal Reserve Board. The
monetary policies of the Federal Reserve Board influence to a significant extent
the overall growth of loans, investments, deposits, interest rates charged on
loans, and interest rates paid on deposits. The nature and impact of future
changes in monetary policies are often not predictable.
SUPPORT OF SUBSIDIARY BANKS
Under current Federal Reserve Board policy, a bank holding company is
expected to act as a source of financial and managerial strength to each of its
subsidiary banks by standing ready to use available resources to provide
adequate capital funds to its subsidiary banks during periods of financial
adversity and by maintaining the financial flexibility and capital-raising
capacity to obtain additional resources for assisting its subsidiary banks. The
support expected by the Federal Reserve Board may be required at times when the
bank holding company may not have the resources or inclination to provide it.
The National Bank Act permits the OCC to order the pro-rata assessment
of shareholders of a national bank whose capital has become impaired. If a
shareholder fails, within three months, to pay that assessment, the OCC can
order the sale of the shareholder's stock to cover the deficiency. (The banking
statutes of Arizona do not confer similar authority upon the Arizona
Superintendent of Banks to assess the shareholders of Frontier for any capital
deficiency experienced by Frontier or to order the sale of their stock to cover
the deficiency.) In the event of a bank holding company's bankruptcy, any
commitment by the bank holding company to a federal bank regulatory agency to
maintain the capital of a subsidiary bank would be assumed by the bankruptcy
trustee and entitled to priority of payment.
If a default occurred with respect to a bank, any capital loans to the
bank from its parent holding company would be subordinate in right of payment to
payment of the bank's depositors and certain of its other obligations.
LIABILITY OF COMMONLY CONTROLLED BANKS
42
Any depository institution insured by the FDIC can be held liable for
any loss incurred, or reasonably expected to be incurred, by the FDIC in
connection with:
o the default of a commonly controlled FDIC-insured depository
institution; or
o any assistance provided by the FDIC to a commonly controlled
FDIC-insured depository institution in danger of default.
"Default" generally is defined as the appointment of a conservator or
receiver, and "in danger of default" generally is defined as the existence of
certain conditions indicating that a default is likely to occur in the absence
of regulatory assistance.
DEPOSITOR PREFERENCE STATUTE
In the "liquidation or other resolution" of an institution by any
receiver, federal legislation provides that deposits and certain claims for
administrative expenses and employee compensation against an insured bank are
afforded a priority over other general unsecured claims against that bank,
including federal funds and letters of credit.
CAPITAL REQUIREMENTS
Zions is subject to risk-based capital requirements and guidelines
imposed by the Federal Reserve Board. For a discussion of the material elements
of these requirements and guidelines, please refer to Zions' annual report on
Form 10-K for the fiscal year ended December 31, 2001, and any subsequent
reports that Zions files with the SEC, which are incorporated by reference into
this document. Frontier is subject to similar risk-based capital and leverage
requirements adopted by the FDIC. Zions was in compliance with the applicable
minimum capital requirements as of ____________, 2002. The Superintendent of
Banks of the State of Arizona and the Federal Deposit Insurance Corporation have
requested that Frontier increase its Tier 1 leverage capital ratio to 7.5%. As
of June 30, 2002, Frontier's Tier 1 leverage capital ratio was 6.94%. In
addition, as of June 30, 2002, Frontier was well-capitalized, based on the
prompt corrective action ratios and guidelines adopted under the Federal Deposit
Insurance Corporation Improvement Act of 1991 and described with reference to
their applicability to the bank subsidiaries of Zions in Zions' annual report on
Form 10-K for the fiscal year ended December 31, 2001. It should be noted,
however, that a bank's capital category is determined solely for the purpose of
applying prompt corrective action regulations of its primary federal banking
regulator, and that the capital category may not constitute an accurate
representation of the bank's overall financial condition or prospects.
DIVIDEND RESTRICTIONS
Zions is a legal entity separate and distinct from its subsidiaries. In
general, under the law of its state of incorporation, Zions cannot pay a cash
dividend if such payment would render it insolvent. The revenues of Zions
consist primarily of dividends paid by its bank subsidiaries. Various federal
and state statutory provisions limit the amount of dividends the bank
subsidiaries of Zions can pay to Zions and Frontier can pay to its shareholders
without regulatory approval. Dividend payments by national banks are limited to
the lesser of:
o the level of undivided profits; and
o absent regulatory approval, an amount not in excess of net
income for the current year combined with retained net income
for the preceding two years.
Arizona law establishes two limitations on the payment of dividends by
banks organized under it:
o a dividend may not be paid if it would render a bank
insolvent; and
43
o a dividend payable other than in a bank's own stock may not be
paid out of capital surplus without the approval of the
Arizona Superintendent of Banks.
At June 30, 2002, approximately $193.5 million was available for
payment of dividends to Zions by its bank subsidiaries without regulatory
approval.
In addition, federal bank regulatory authorities have authority to
prohibit banks from engaging in an unsafe or unsound practice in conducting
their business. Depending upon the financial condition of the bank in question,
the payment of dividends could be deemed to constitute an unsafe or unsound
practice. The ability of the bank subsidiaries of Zions and Frontier to pay
dividends in the future is currently influenced, and could be further
influenced, by bank regulatory policies and capital guidelines.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
We requested Duane Morris LLP, counsel to Zions, to deliver an opinion
as to the anticipated federal income tax consequences of the merger. In
rendering its opinion, Duane Morris LLP assumed, among other things, that the
merger and related transactions will take place as described in the merger
agreement. Consummation of the merger is conditioned upon the receipt of an
opinion that the merger will qualify as a reorganization under Section 368(a)(1)
of the Internal Revenue Code.
In the opinion of Duane Morris LLP, the material federal income tax
consequences of the merger are as follows:
o the merger will be treated for federal income tax purposes as
a reorganization within the meaning of Sections 368(a)(1)(A)
and 368(a)(2)(D) of the Internal Revenue Code;
o Zions, National Bank of Arizona, and Frontier will be parties
to the reorganization within the meaning of Section 368(b) of
the Internal Revenue Code;
o no gain or loss will be recognized by Zions, National Bank of
Arizona, or Frontier by virtue of being parties to the
reorganization;
o no gain or loss will be recognized by the shareholders of
Frontier upon their receipt of Zions common stock in exchange
for their Frontier common stock, except that a holder of
Frontier common stock who receives cash in lieu of a
fractional share of Zions common stock should recognize gain
or loss equal to the difference between the cash received and
the shareholder's basis in that fractional share, and the gain
or loss should be capital gain or loss if the fractional share
would have been a capital asset in the hands of the
shareholder;
o the tax basis of the shares of Zions common stock (including
fractional interests) received by the Frontier shareholders
will be the same as the tax basis of their Frontier common
stock exchanged for the Zions stock; and
o the holding period of the Zions common stock in the hands of
former Frontier shareholders will include the holding period
of their Frontier common stock exchanged for the Zions stock,
provided the Frontier common stock is held as a capital asset
at the effective date of the merger.
We include the above discussion for general information only. The
discussion does not address the state, local or foreign tax aspects of the
merger. The discussion is based on currently existing provisions of the Internal
Revenue Code, existing and proposed treasury regulations and current
administrative rulings and court decisions. All of the foregoing are subject to
change and any such change could affect the continuing validity of this
discussion. You should consult your own tax advisor with respect to the specific
tax consequences of the merger to you including the application and effect of
state, local and foreign tax laws.
44
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
Zions common stock trades on the Nasdaq National Market under the
symbol "ZION." Following the merger, the shares of Zions common stock will
continue to trade on the Nasdaq National Market under that symbol.
Frontier common stock is owned by [274] holders of record, as of the
record date. No established trading market for Frontier common stock exists, and
over the years little trading in Frontier common stock has occurred. Reliable
information concerning the prices at which Frontier common stock has traded in
private, negotiated transactions is not publicly available or generally known to
Frontier. On occasion, Frontier has become aware of the trading price of its
stock in private transactions. Information concerning those trading prices has
been omitted based on Frontier's belief that such prices are not necessarily
representative of a fair market price for Frontier common stock during any
particular period. Since August 16, 2002, the date of execution of the merger
agreement, there have been no trades of Frontier's common stock (excluding share
reissuances by Frontier at the request of shareholders) and stock options to
purchase 240 shares have been exercised at an average price of $8.42 per
share.
The following table sets forth for the periods indicated, the range of
high and low sales prices of the Zions common stock, and the amount of cash
dividends declared per share by Zions.
ZIONS
-----
SALES PRICES
------------
HIGH LOW DIVIDENDS
------ ------ ------
2000
First Quarter $59.75 $36.44 $ 0.29
Second Quarter 48.63 39.94 0.20
Third Quarter 51.75 41.06 0.20
Fourth Quarter 62.75 46.81 0.20
2001
First Quarter $61.94 $46.94 $ 0.20
Second Quarter 59.54 50.42 0.20
Third Quarter 59.76 51.62 0.20
Fourth Quarter 53.51 42.45 0.20
2002
First Quarter $59.27 $48.96 $0.20
Second Quarter 59.40 50.31 0.20
Third Quarter 55.34 42.30 0.20
Fourth Quarter (through 0.20
October___,2002
Frontier has paid no cash dividends with respect to the years ended
December 31, 1999, 2000, and 2001. Frontier paid a 2% stock dividend for the
year ending December 31, 2001.
The timing and amount of future Zions dividends will depend upon
earnings, cash requirements, the financial condition of Zions and its
subsidiaries, applicable government regulations, and other factors deemed
relevant by the Zions board. As described under "Regulation and Supervision -
Dividend Restrictions," beginning at page ___, various federal and state laws
limit the ability of affiliated banks to pay dividends to Zions. The merger
agreement restricts the cash dividends payable on Frontier common stock pending
completion of the merger. See "The Merger - Conduct of Business Pending
Completion the Merger," beginning at page ___.
On August 16, 2002, the last full trading day prior to the public
announcement of the proposed merger, the highest sales price of Zions common
stock was $53.64 per share, the lowest sales price of Zions common stock was
$52.52 per share and the last reported sales price of Zions common stock was
$53.34 per share. On October ____, 2002, the most recent practicable date prior
to the printing of this proxy statement/prospectus, the last reported sales
price of Zions common stock was $[_________] per share. We urge shareholders to
obtain current market quotations prior to making any decisions with respect to
the merger.
45
As of September 30, 2002, there were 6,729 holders of record of Zions
common stock and 274 holders of record of Frontier common stock.
DESCRIPTION OF ZIONS CAPITAL STOCK
Authorized Capital Stock
The following statements are brief summaries of the material provisions
of Zions' preferred stock and common stock and are qualified in their entirety
by the provisions of Zions' articles of incorporation.
PREFERRED STOCK. The articles of incorporation of Zions authorize the issuance
of 3,000,000 shares of preferred stock with no par value per share. There are no
shares of Zions preferred stock outstanding. Zions' articles of incorporation
authorize the Zions board to provide, without further shareholder action, for
the issuance of one or more series of preferred stock. The Zions board has the
power to fix various terms with respect to each series, including voting powers,
designations, preferences and relative, participating, optional and or other
special rights, qualifications, limitations, restrictions and redemption,
conversion or exchangeability provisions. Holders of preferred stock have no
preemptive rights.
COMMON STOCK. Zions is authorized to issue 350,000,000 shares of common stock
with no par value per share. There are approximately [91,708,110] shares of
common stock of Zions outstanding at ________, 2002. The holders of common stock
of Zions are entitled to voting rights for the election of directors and for
other purposes, subject to voting rights which may in the future be granted to
subsequently created series of preferred stock. Shares of Zions common stock do
not have cumulative voting rights. Holders of Zions common stock are entitled to
receive dividends when and if declared by the Zions board out of any funds
legally available therefor, and are entitled upon liquidation, after claims of
creditors and preferences of any series of preferred stock hereafter authorized,
to receive pro rata the net assets of Zions. Holders of Zions common stock have
no preemptive or conversion rights.
SHAREHOLDER RIGHTS PLAN. As of September 27, 1996, Zions adopted a Shareholder
Protection Rights Agreement (the "Rights Plan"). In connection with that plan,
the Zions board (1) declared a dividend of one right for each share of common
stock held of record as of the close of business on October 11, 1996 and (2)
authorized the issuance of one right to attach to each share of common stock
issued after October 11, 1996, and prior to the occurrence of certain events
described in the Rights Plan. The rights are attached to all common stock
certificates that were outstanding on October 25, 1996, or have been issued
since that date, and no separate rights certificates have been or will be
distributed until the occurrence of certain events described in the Rights Plan.
Until such separation, no right may be exercised or traded separately from the
common stock certificate to which it is attached. Following separation, the
rights may, depending upon the occurrence of certain events described in the
Rights Plan, entitle the holders thereof to either purchase or receive
additional shares of common stock. The rights will expire at the close of
business on October 11, 2006, unless earlier redeemed by Zions in accordance
with the terms of the Rights Plan.
The shareholder rights will cause substantial dilution to a person or
group that attempts to acquire Zions on terms not approved by the Zions board,
except by means of an offer conditioned on a substantial number of rights being
acquired. The rights should not interfere with any merger or other business
combination approved by the Zions board, as the rights may be redeemed by Zions
prior to the time that a person or group has acquired beneficial ownership of
10% or more of the shares of Zions common stock.
The Rights Plan is designed to protect the interests of Zions'
shareholders in the event of an unsolicited attempt to acquire Zions, including
a gradual accumulation of shares in the open market. Zions believes the plan
provides protection against a partial or two-tier tender offer that does not
treat all shareholders equally and against other coercive takeover tactics which
could impair the Zions board's ability to represent Zions' shareholders fully.
Management believes that the rights should also deter any attempt by a
controlling shareholder to take advantage of Zions through self-dealing
transactions. The Rights Plan is not intended to prevent a takeover of Zions.
Issuing the rights has no dilutive effect, does not affect reported earnings per
share and does not change the way in which Zions shares are traded. However, the
exercise of rights by some but not all of Zions' shareholders would have a
dilutive effect on non-exercising shareholders. Moreover, some may argue that
the Rights Plan has the potential for "entrenching" current management by
allowing current voting shareholders to increase their voting shares, thus
making a tender offer more difficult and costly.
46
REGISTRAR AND TRANSFER AGENT
Zions' registrar and transfer agent is Zions First National Bank.
COMPARISON OF SHAREHOLDERS' RIGHTS
Upon completion of the merger, the shareholders of Frontier will become
shareholders of Zions. Zions is incorporated under the laws of the State of Utah
and, accordingly, the rights of Zions shareholders are governed by the Zions
articles of incorporation, the Zions bylaws and the laws of the State of Utah,
including the Utah Revised Business Corporation Act ("UBCA"). Frontier is
incorporated under the laws of the State of Arizona, and accordingly, the rights
of Frontier shareholders are governed by the Frontier articles of incorporation,
the Frontier bylaws and the laws of the State of Arizona, including the Arizona
Business Corporation Act. As shareholders of Zions following the merger, the
rights of former Frontier shareholders will be governed by Utah law, including
the UBCA, the Zions articles of incorporation and the Zions bylaws. The
following chart summarizes the material differences between the rights of
holders of Frontier common stock as shareholders of Frontier prior to the merger
and as shareholders of Zions following the merger. You can obtain copies of the
governing corporate instruments of Zions and Frontier, without charge, by
following the instructions listed under "Where You Can Find More Information,"
beginning at page ___.
FRONTIER ZIONS
-------- -----
Authorized and Outstanding Authorized: 2,000,000 shares of common Authorized: 350,000,000 shares of common
Capital Stock stock, par value of $1.00 per share, and stock, no par value, and 3,000,000 shares
1,000,000 shares of preferred stock, no of preferred stock, no par value.
par value.
Outstanding: 911,764 shares of common Outstanding: [91,708,110] shares of
stock and no shares of preferred stock common stock and no shares of preferred
at the date of this document. stock at the date of this document.
Preemptive Rights Frontier's articles of incorporation do Under Zions' articles, preemptive rights
not provide for preemptive rights to to acquire unissued shares, treasury
acquire any shares of Frontier. shares or any other securities of Zions
are not permitted.
Quorum Requirements Under Arizona law, the holders The UBCA and Zions' bylaws require a majority of
of a majority of the issued outstanding shares entitled to be cast on a
and outstanding shares of the capital matter for a quorum to exist.
stock entitled to vote on a matter
constitutes a quorum.
Special Meeting of Under Frontier's bylaws, the board of Under Zions' bylaws, the board of
Shareholders directors, the president, or the holders directors or the president may call a
of at least 20% of all of the special meeting of shareholders; the UBCA
outstanding shares may call a special provides that holders of at least 10% of
meeting of the shareholders. all votes entitled to be cast on an issue
proposed have the right to call a special
meeting.
Shareholder Action by Arizona law provides that shareholder Utah law provides that action by Zions'
Written Consent action may be taken without a meeting by shareholders may be taken by written
all of the shareholders, if written consent if signed by all of the
consents are signed by all of the shareholders entitled to vote with respect
shareholders entitled to vote with to the subject matter of the vote.
respect to the subject matter of the
vote.
47
FRONTIER ZIONS
-------- -----
Inspection of Voting List Under Arizona law, any shareholder who Under Utah law, any shareholder is
of Shareholders has been a shareholder for at least six entitled to inspect and copy a
months, or who will be a shareholder corporation's organizational documents and
holding at least five percent of the certain other records of the corporation
outstanding stock of a corporation is during regular business hours at the
entitled to inspect and copy the corporation's principal office, if the
corporation's organizational documents shareholder gives the corporation at least
and certain other records of the five business days notice.
corporation during regular business
hours at the corporation's principal Zions' bylaws state that shareholders may
office, if the shareholder gives the inspect a list of shareholders at the time
corporation at least five business days and place of a meeting of shareholders and
notice. during the whole time of the meeting. The
UBCA requires the shareholders list to be
Also, under Arizona law, the available for inspection beginning on the
shareholders may inspect a list of earlier of ten days before the meeting or
shareholders at the time and place of a two business days after notice of the
meeting of shareholders and at any time meeting is given.
during the meeting or during any
adjournment of the meeting. Arizona law
also requires that the shareholders list
be made available for inspection by any
shareholder at the corporation's
principal office or another place
identified in the notice of the meeting,
beginning two business days after the
notice of the meeting is given.
Classification of the Frontier's articles divide the board of Zions' articles divide the board of
Board of Directors directors into three classes as nearly directors into three classes as nearly
equal in size as possible. equal in size as possible.
Election of the Board of Under Arizona law, directors are elected Under Utah law, directors are elected by a
Directors through cumulative voting. Directors plurality of the votes cast. This means
are elected by a plurality of the votes that the nominees who receive the most
cast. This means that the nominees who votes will be elected.
receive the most votes will be elected.
Cumulative Voting Under Frontier's bylaws, the Under Zions' articles, cumulative voting
shareholders are entitled to cumulate in the election of directors is not
their votes by multiplying the number of permitted.
votes they are entitled to cast by the
number of directors to be elected and to
cast the product for a single candidate
or to distribute the product among two
or more candidates.
Number of Directors The articles of incorporation of Zions' bylaws provide that the board will
Frontier require that the number of consist of between three and fifteen
directors be no less than five and no directors as determined by the board of
more than fifteen, with the exact number directors.
fixed by bylaw or the board of directors.
48
FRONTIER ZIONS
-------- -----
Removal of Directors Under Arizona law, the shareholders may Zions' articles provide that the
remove a director, with or without shareholders, by a vote of two-thirds of
cause, by a majority vote of the issued the outstanding shares, may remove a
and outstanding shares entitled to vote, director. Removal may be for or without
but if less than all of the directors cause.
are to be removed, no one director may be
removed if the votes cast against that
director's removal would be sufficient to
elect that director if then cumulatively
voted at an election of the entire board.
Vacancies on the Board of The articles of incorporation of Zions' bylaws state that a vacancy can be
Directors Frontier provide that a vacancy on the filled by the remaining directors, and
board of directors may be filled by the that director may serve for the remaining
board until an election by the term of the predecessor director; a
shareholders. Arizona law provides that director appointed by the board to fill
a the affirmative vote of a majority of vacancy created by reason of an increase
the directors present at a meeting at in the number of directors may serve only
which a quorum is present is required to until the next election of directors by
fill the vacancy. the shareholders.
Liability of Directors The articles of incorporation of Under Zions' articles, directors are not
Frontier do not limit its directors' personally liable to Zions or its
personal liability for breaches of shareholders for monetary damages for
fiduciary duty as directors. breaches of fiduciary duty as a director,
except (1) for breach of the director's
duty of loyalty, or (2) for acts and omissions
not in good faith or which involve intentional
misconduct or a knowing violation of law,
or for any transaction where the director
received an improper personal benefit.
Indemnification of Under Arizona law, a corporation may Under the UBCA, a corporation may
Directors, Officers, indemnify a director or officer if his indemnify a director, officer, employee or
Employees or Agents or her conduct was (i) in good faith and agent if he or she acted in good faith and
(ii) he or she reasonably believed that in a manner he or she reasonably believed
the conduct, in the case of conduct in to be in, or not opposed to, the best
his or her official capacity, was in the interest of Zions and, with respect to any
best interests of the corporation, or in criminal action or proceeding, had no
other cases, at least not opposed to the reasonable cause to believe his or
her best interests of the corporation. conduct was unlawful.
49
FRONTIER ZIONS
-------- -----
Restrictions upon Certain Under Arizona law, a transaction of a Zions' articles provide that certain
Business Transactions corporation in which a director has a business transactions with a person who
beneficial interest cannot be enjoined, owns, directly or indirectly, over 10% of
set aside or give rise to an award of outstanding stock must be approved by a
damages or other sanctions on the ground majority vote of the continuing directors
of a personal interest or conflict of or a shareholder vote of at least 80% of
interest of the director, so long as one outstanding voting shares. Such business
of the following conditions is transactions include mergers,
satisfied: (1) the transaction was consolidations, sales of all or more than
approved by a majority, but at least 20% of the corporation's assets, issuance
two, of the directors who are qualified of securities of the corporation,
as independent from the transaction and reclassifications that increase voting
the director involved in the power of the interested shareholder, or
transaction; or (2) the transaction was liquidations, spin-offs or dissolution of
approved by a majority of the votes the corporation. Zions is also subject to
entitled to be cast by the holders of the Utah Control Shares Acquisitions Act,
all shares which are qualified as being which limits the ability of persons
held independent of the director acquiring more than 20% of Zions' voting
involved in the transaction; or (3) the stock to vote those shares absent approval
transaction is established by a court to of voting rights by the holders of a
have been fair to the corporation, as majority of all shares entitled to be
judged according to the circumstances at cast, excluding all interested shares.
the time of the commitment. Other than
the above provision, Frontier is not
subject to the Arizona laws that limit
control share acquisitions and business
combinations. The articles and bylaws
of Frontier are silent regarding any
special restrictions on transactions
with affiliates and interested
directors, merger, consolidation,
liquidation or dissolution of Frontier.
Amendments to Articles of Arizona law provides that amendments Zions' articles provide that the articles
Incorporation require the affirmative vote of the of incorporation may be amended or
majority of shareholders entitled to repealed as permitted by Utah law. The
vote. UBCA permits an amendment of the articles
of incorporation by approval by a majority
of the board of directors and a majority
of the outstanding common stock entitled
to be cast. Zions' articles further provide
that amendment to Articles IX (regarding
the classified board), X (regarding quorum
requirements and management of Zions by the
board), and XVI (regarding amendment of
Zions' articles) requires approval by
two-thirds of the outstanding shares; and
amendment of Article XVII (regarding business
transactions with related persons) requires
approval by 80% of the outstanding shares.
50
FRONTIER ZIONS
-------- -----
Amendments to Bylaws Frontier's articles of incorporation Under Utah law, the board may amend, adopt
provide that the board may make, alter or repeal bylaws; however, the bylaws
or amend the bylaws, unless otherwise require a two-thirds vote of the
provided by the shareholders at any outstanding shares entitled to vote if the
general or special meeting called for amendment or repeal would, among other
that purpose; however, the bylaws things, restrict or limit the power or
require a two-thirds vote of the authority of the board or any officer of
outstanding shares entitled to vote if Zions; or would require the approval of
the amendment or repeal would, among the shareholders in order for the board or
other things, restrict or limit the any officer to take any action; or would
power or authority of the board or any change the number of directors or quorum
officer of Frontier; or would require requirements. Under Utah law, Zions'
the approval of the shareholders in shareholders also may amend the bylaws.
order for the board or any officer to
take any action; or would change the
number of directors or quorum
requirements. Under Arizona law,
Frontier's shareholders also may amend
or repeal the bylaws.
Appraisal/ Dissenters' Under Arizona law, a shareholder is Zions' shareholders do not have appraisal
Rights entitled to dissent from and obtain rights.
payment of the fair value of the
shareholder's shares in the event of a
plan of merger, a plan of share exchange
and a sale or exchange of all or
substantially all of the property of the
corporation.
RIGHTS OF DISSENTING SHAREHOLDERS
Frontier shareholders will have rights to dissent from the merger
agreement and obtain the fair value of their Frontier shares in cash in
accordance with the procedures established by the National Bank Act. Arizona law
provides that in connection with the merger of a state bank such as Frontier
with a national bank such as National Bank of Arizona, the action to be taken by
the merging bank and "its rights and liabilities and those of its shareholders
shall be as prescribed at the time of the action by the law of the United States
.. . . ." The following discussion is qualified in its entirety by reference to
Appendix B that presents the statutory provisions governing dissenters' rights
for each Frontier shareholder.
Any Frontier shareholder who contemplates exercising a holder's right
to dissent is urged to read carefully the provisions of the National Bank Act
attached to this proxy statement/prospectus as Appendix B. The following is a
summary of the steps to be taken if the right to dissent is to be exercised, and
should be read with the full text of the law found at Appendix B. A DISSENTING
SHAREHOLDER MUST TAKE EACH STEP IN THE INDICATED ORDER AND IN STRICT COMPLIANCE
WITH THE PROVISIONS OF THE LAW IN ORDER TO PERFECT DISSENTERS' RIGHTS. THE
FAILURE OF A FRONTIER SHAREHOLDER TO COMPLY PRECISELY WITH THESE PROCEDURAL
STEPS ON A TIMELY BASIS WILL RESULT IN A LOSS OF THAT SHAREHOLDER'S DISSENTERS'
RIGHTS.
Payment to dissenting shareholders of the fair value of their Frontier
shares will be made only if the merger is approved by the Frontier shareholders,
approved by the OCC, and completed.
Any shareholder of Frontier who desires to exercise his or her
dissenters' rights must do the following:
51
o vote against the merger agreement at the special meeting or
give written notice at or prior to the special meeting to the
presiding officer that he or she dissents from the plan of
merger;
o make written request for the cash value of his or her shares
to the surviving bank, National Bank of Arizona, at any time
before thirty days after the effective date of the merger; and
o accompany the above written request with the surrender of his
or her Frontier stock certificates.
After making request for payment, the dissenting shareholder will not
be entitled to vote or exercise any other rights of a shareholder. Dissenting
shareholders will be notified in writing of the effective date of the merger.
FAILURE TO VOTE AGAINST THE MERGER AGREEMENT WILL CONSTITUTE A WAIVER
OF A SHAREHOLDER'S APPRAISAL RIGHTS UNLESS HE OR SHE GIVES WRITTEN NOTICE PRIOR
TO OR AT THE SPECIAL MEETING TO THE PRESIDING OFFICER AT THE SPECIAL MEETING
THAT HE OR SHE DISSENTS FROM THE PLAN OF MERGER. HOWEVER, SIMPLY BECAUSE A
SHAREHOLDER VOTES AGAINST THE MERGER AGREEMENT AT THE SPECIAL MEETING OR GIVES
WRITTEN NOTICE PRIOR TO OR AT THE SPECIAL MEETING THAT HE OR SHE DISSENTS FROM
THE PLAN OF MERGER DOES NOT MEAN THAT HE OR SHE IS THEN ENTITLED TO RECEIVE THE
VALUE OF HIS OR HER SHARES. A FRONTIER SHAREHOLDER MUST ALSO MAKE A WRITTEN
REQUEST TO THE SURVIVING BANK (NATIONAL BANK OF ARIZONA) FOR PAYMENT OF THE
VALUE OF HIS OR HER SHARES AT ANY TIME BEFORE THIRTY DAYS AFTER THE EFFECTIVE
DATE OF THE MERGER AND MUST ACCOMPANY THAT REQUEST WITH A SURRENDER OF HIS OR
HER STOCK CERTIFICATES. MERE FAILURE TO VOTE OR MERELY VOTING AGAINST THE MERGER
OR MERELY FILING A NOTICE OF DISSENT WILL NOT SATISFY THE REQUIREMENT FOR A
WRITTEN DEMAND.
Unless the above procedure is followed precisely, a Frontier
shareholder will be presumed to have acquiesced in the approval of the merger
and waived his or her dissenters' rights. As noted above, failure to vote
against the merger agreement and the merger will not waive a shareholder's
dissenters' rights if the shareholder has filed a written notice prior to the
special meeting and has not voted in favor of the merger agreement. If a
Frontier shareholder abstains from voting on the merger agreement, this will not
waive dissenters' rights so long as the appropriate written notice is properly
and timely filed at or prior to the special meeting. Mere notice filed after the
special meeting, absent compliance with the other specific requirements, will
not preserve a shareholder's dissenters' rights.
In the event a shareholder does not in order to perfect his or her
dissenters' rights, that shareholder will be bound by the terms of the merger
agreement, including the requirement to exchange his or her shares of Frontier
common stock for his or her pro rata share of the Zions stock in the merger, and
will be entitled to receive his or her pro rata share of Zions' stock following
completion of the merger, in the same manner as those shareholders who have not
exercised their dissenters' rights.
The National Bank Act provides that the appraisal of the shares of any
dissenting shareholder will be ascertained according to the appraisal procedures
set forth in the applicable state law, if state law procedures exist. FRONTIER
SHAREHOLDERS CONSIDERING SEEKING APPRAISAL BY EXERCISING THEIR DISSENTERS'
RIGHTS SHOULD BE AWARE THAT THE FAIR VALUE OF THEIR FRONTIER COMMON STOCK
DETERMINED UNDER THE NATIONAL BANK ACT COULD BE MORE THAN, THE SAME AS, OR LESS
THAN THEIR PRO RATA SHARE OF ZIONS' STOCK THAT THEY ARE ENTITLED TO RECEIVE
UNDER THE MERGER AGREEMENT IF THEY DO NOT EXERCISE THEIR DISSENTERS' RIGHTS.
Because exercise of these rights requires strict adherence to the
relevant provisions of the National Bank Act, each shareholder desiring to
exercise his or her dissenters' rights is advised individually to consult the
law (as provided in Appendix B to this proxy statement/prospectus) and comply
with the relevant provisions of the law.
Frontier shareholders wishing to exercise their dissenters' rights
should consult their own counsel to ensure that they fully and properly comply
with applicable requirements.
OTHER MATTERS
As of the date of this document, the Frontier board knows of no matters
that will be presented for consideration at the Frontier special meeting other
than as described in this document. If any other matters shall properly come
52
before the Frontier special meeting and be voted upon, the enclosed proxies will
be deemed to confer discretionary authority on the individuals named as proxies
therein to vote the shares represented by such proxies as to any such matters.
The persons named as proxies intend to vote or not to vote in accordance with
the recommendation of the management of Frontier.
LEGAL MATTERS
Duane Morris LLP, Washington, D.C., counsel for Zions, will pass upon
the validity of the Zions common stock to be issued in connection with the
merger and certain federal income tax consequences of the merger.
EXPERTS
The consolidated financial statements for the years ended December 31,
2001 and 2000, of Zions Bancorporation incorporated by reference in the Zions
Bancorporation Annual Report (Form 10-K) for the year ended December 31, 2001,
have been audited by Ernst & Young LLP, independent auditors, as set forth in
their report thereon incorporated by reference therein and incorporated herein
by reference. Such consolidated financial statements are incorporated herein by
reference in reliance upon such report given on the authority of such firm as
experts in accounting and auditing.
The consolidated statements of income, changes in shareholders' equity
and comprehensive income, and cash flows for the year ended December 31, 1999 of
Zions Bancorporation and subsidiaries have been incorporated by reference herein
and in the registration statement in reliance upon the report of KPMG LLP,
independent auditors, appearing in Zions Bancorporation's Annual Report on
Form 10-K for the year ended December 31, 2001, incorporated by reference
herein, and upon the authority of said firm as experts in accounting and
auditing.
WHERE YOU CAN FIND MORE INFORMATION
Zions files annual, quarterly and special reports, proxy statements and
other information with the SEC. You may read and copy any reports, statements or
other information Zions files at the SEC's public reference room at 450 Fifth
Street, N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for
further information on the public reference rooms. Zions' SEC filings are also
available to the public from commercial document retrieval services and at the
web site maintained by the SEC at http://www.sec.gov. In addition, you may read
and copy Zions' SEC filings at the Nasdaq National Market, 1735 K Street, N.W.,
Washington, D.C. 20006-1500. Zions' Internet address is
www.zionsbancorporation.com.
Zions has filed a registration statement on Form S-4 to register with
the SEC the Zions common stock to be issued to the holders of Frontier common
stock in the merger. This proxy statement/prospectus is a part of that
registration statement and constitutes a prospectus of Zions in addition to
being a proxy statement of Frontier for the Frontier special meeting. As allowed
by SEC rules, this proxy statement/prospectus does not contain all the
information you can find in the registration statement or the exhibits to the
registration statement.
The SEC allows Zions to "incorporate by reference" information into
this proxy statement/prospectus, which means that Zions can disclose important
information to you by referring you to another document filed separately with
the SEC. The information incorporated by reference is deemed to be part of this
proxy statement/prospectus, except for any information superseded by information
in this proxy statement/prospectus. This proxy statement/prospectus incorporates
by reference the documents set forth below that Zions has previously filed with
the SEC. The following documents which Zions incorporates by reference into this
proxy statement/prospectus contain important information about Zions, Zions'
finances and Zions' common stock:
o Annual Report on Form 10-K for the year ended December 31,
2001;
o Quarterly Reports on Form 10-Q for the quarters ended March
31, 2002 and June 30, 2002;
53
o Current Reports on Form 8-K, filed with the SEC on April 23,
2002, July 23, 2002, August 6, 2002, August 15, 2002, August
21, 2002, September 10, 2002, October 4, 2002 and October 21,
2002;
o the description of Zions common stock and rights set forth in
Zions' registration statement on Form 10 and Form 8-A filed
pursuant to Section 12 of the Exchange Act, including any
amendment or report filed with the SEC for the purpose of
updating such descriptions; and
o the description of Zions' common stock as set forth above
under the caption "Description of Zions Capital Stock."
Zions incorporates by reference additional documents that it files with
the SEC pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act
between the date of this proxy statement/prospectus and the effective time of
the merger.
Zions has supplied all information contained or incorporated by
reference in this proxy statement/prospectus relating to Zions, and Frontier has
supplied all such information relating to Frontier.
If you are a shareholder, we may have sent you some of the documents
incorporated by reference, but you can obtain any of them through Zions or the
SEC. Frontier shareholders can obtain documents incorporated by reference from
Zions without charge, excluding all exhibits unless Zions has specifically
incorporated by reference an exhibit in this proxy statement/prospectus.
Shareholders may obtain documents incorporated by reference in this proxy
statement/prospectus by requesting them in writing or by telephone from Zions at
the following address:
Zions Bancorporation
One South Main, Suite 1134
Salt Lake City, Utah 84111
Attention: Ms. Jennifer R. Jolley
Assistant Secretary
Tel: (801) 524-4787
If you would like to request documents from Zions, please do so by
_____________, 2002 to receive them prior to the Frontier special meeting.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROXY STATEMENT/PROSPECTUS TO VOTE ON THE FRONTIER PROPOSAL.
WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT
FROM WHAT IS CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS. THIS PROXY
STATEMENT/PROSPECTUS IS DATED ____________, 2002. YOU SHOULD NOT ASSUME THAT THE
INFORMATION CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS IS ACCURATE AS OF ANY
DATE OTHER THAN SUCH DATE, AND NEITHER THE MAILING OF THIS PROXY
STATEMENT/PROSPECTUS TO SHAREHOLDERS NOR THE ISSUANCE OF SHARES OF ZIONS COMMON
STOCK IN THE MERGER SHALL CREATE ANY IMPLICATION TO THE CONTRARY.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Zions has used and incorporated by reference "forward-looking
statements" in this proxy statement/prospectus, including one or more of the
following:
o projections of revenues, income, earnings per share, capital
expenditures, dividends, capital structure or other financial
items;
o descriptions of plans or objectives of management for future
operations, products or services;
o forecasts of future economic performance; and
54
o descriptions of assumptions underlying or relating to any of
the foregoing.
Forward-looking statements can be identified by the fact that they do
not relate strictly to historical or current facts. They often include words
such as "will permit," "will afford," "believes," "expects," "may," "should,"
"projected," "contemplates," or "anticipates." These statements are within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934 and are subject to risks and uncertainties that
could cause actual results of Zions to differ materially. Zions has used these
statements to describe its expectations and estimates in various sections of
this proxy statement/prospectus.
Factors that might cause such differences include, but are not limited
to: the timing of closing the proposed merger being delayed; competitive
pressures among financial institutions increasing significantly; economic
conditions, either nationally or locally in areas in which Zions conducts its
operations, being less favorable than expected; the cost and effort required to
integrate aspects of the operations of Frontier being more difficult than
expected; expected cost savings from the proposed merger not being fully
realized or realized within the expected time frame; and legislation or
regulatory changes which adversely affect the ability of Zions to conduct its
current and future operations. Zions disclaims any obligation to update any such
factors or to publicly announce the result of any revisions to any of the
forward-looking statements included in this proxy statement/prospectus to
reflect future events or developments. Zions' actual results could differ
materially from those set forth in the forward-looking statements because of
many reasons, including the risk factors listed above. This list may not be
exhaustive.
55
APPENDIX A
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER made as of the sixteenth day of August,
2002, among NATIONAL BANK OF ARIZONA ("NBA"), a national banking association
having its principal office in Tucson, Arizona, FRONTIER STATE BANK
("Frontier"), an Arizona banking corporation having its principal office in Show
Low, Arizona, and ZIONS BANCORPORATION ("Zions"), a Utah corporation having its
principal office in Salt Lake City, Utah
WITNESSETH THAT:
WHEREAS, NBA and Frontier desire to affiliate with each other through the
merger of Frontier with and into NBA, with NBA to be the surviving corporation
(the "Merger");
WHEREAS, Zions is a bank holding company and the sole shareholder of NBA;
WHEREAS, the respective boards of directors of NBA, Frontier, and Zions
have determined that it would be in the best interests of NBA or Frontier, as
the case may be, its shareholders and customers, for NBA and Frontier to merge
with each other;
WHEREAS, the respective Boards of Directors of NBA and Frontier have agreed
to cause the Merger pursuant to the provisions of section 215a of the National
Bank Act and sections 6-212 and 10-1101 et seq. of the Arizona Revised Statutes;
WHEREAS, the board of directors of Zions has agreed that Zions should
become a party to this Agreement and Plan of Merger;
WHEREAS, the parties intend that the Merger qualify as a tax-free
reorganization under section 368(a) of the Code; and
WHEREAS, the parties desire to make certain representations, warranties,
and agreements in connection with the Merger and also to prescribe certain
conditions to the Merger;
NOW, THEREFORE, in consideration of these premises and the mutual
agreements hereinafter set forth, the parties agree as follows:
ARTICLE 1.
DEFINITIONS AND RULES OF INTERPRETATION
Section 1.01 CERTAIN DEFINITIONS. The terms set forth below are used in
this Agreement with the following meanings:
(a) "Affiliates Agreement" shall mean a written agreement
substantially in form and substance as that set forth as Exhibit IV.
(b) "Average Closing Deposits" shall mean the average of the total
deposits of Frontier as determined in accordance with GAAP over the
fifteen-business-day period ending on the Business Day before the Effective
Time.
(c) "BHC Act" shall mean the Bank Holding Company Act of 1956, as
amended.
(d) "BIF" shall mean the Bank Insurance Fund of the FDIC.
56
(e) "Business Day" shall mean any day that is not a Saturday, a
Sunday, or a day on which banks are required or authorized by law to be closed
in the State of Arizona.
(f) "Call Reports" shall mean FFIEC Consolidated Reports of Condition
and Income.
(g) "CERCLA" shall mean the Comprehensive Environmental Response,
Compensation and Liability Act of 1980.
(h) "Closing Net Worth" shall mean the consolidated net worth of
Frontier as of the close of business on the Business Day before the Effective
Time as determined in accordance with GAAP.
(i) "Collateral Real Estate" shall mean real property at any time held
as collateral for any outstanding loan by Frontier.
(j) "Commissioner" shall mean the Commissioner of Financial
Institutions of the State of Utah.
(k) "Consideration Number" shall mean 204,000 less the Reduction
Number.
(l) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(m) "Constituent Banks" shall mean NBA and Frontier.
(n) "CRA" shall mean the Community Reinvestment Act of 1977, as
amended.
(o) "Department" shall mean the Arizona State Banking Department.
(p) "E & Y" shall mean Ernst & Young LLP.
(q) "Effective Time" shall mean the date and time to be specified by
NBA to the Office of the Comptroller of the Currency as the effective time of
the Merger.
(r) "Environmental Laws" shall mean the Resource Conservation and
Recovery Act, CERCLA, the Superfund Amendments and Reauthorization Act of 1986,
the Federal Water Pollution Control Act, the Federal Clean Air Act, the Toxic
Substances Control Act or any state or local statute, regulation, ordinance,
order or decree relating to health, safety or the environment.
(s) "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
(t) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(u) "Exchange Ratio" shall mean the Consideration Number divided by
the number of shares of Frontier Stock that shall be issued and outstanding at
the Effective Time.
(v) "FDI Act" shall mean the Federal Deposit Insurance Act, as
amended.
(w) "FDIC" shall mean the Federal Deposit Insurance Corporation.
57
(x) "FFIEC" shall mean the Federal Financial Institutions Examination
Council.
(y) "Frontier" shall have the meaning set forth in the preamble.
(z) "Frontier Affiliate" shall mean:
(i) any executive officer of Frontier,
(ii) any director of Frontier,
(iii) any person who owns 10 percent or more of the
outstanding Frontier Stock, and
(iv) any other Person that possesses, directly or indirectly, the
power to direct or cause the direction of management and policies of Frontier,
whether through the ownership of voting securities, by contract, or otherwise.
(aa) "Frontier Option" shall mean a stock option to purchase Frontier
Stock not exercised prior to the Effective Time.
(bb) "Frontier Stock" shall mean the common stock, $1.00 par value, of
Frontier.
(cc) "Frontier Financial Statements" shall mean the audited
consolidated statement of condition of Frontier as of each of December 31, 1999,
December 31, 2000, and December 31, 2001, and the related audited consolidated
statement of income, consolidated statement of changes in financial position,
and consolidated statement of changes in stockholders' equity of Frontier for
each of the periods then ended, and the notes thereto, and the unaudited
consolidated statement of condition of Frontier as of March 31, 2002 and the
related unaudited consolidated statement of income, consolidated statement of
changes in financial position, and consolidated statement of changes in
stockholders' equity of Frontier for the period then ended, and the notes
thereto.
(dd) "Frontier Plans" shall mean all pension, retirement, stock
purchase, stock bonus, stock ownership, stock option, performance share, stock
appreciation right, phantom stock, savings, and profit-sharing plans, all
employment, deferred compensation, fringe benefit, consulting, bonus,
non-competition, and collective bargaining agreements, and group insurance
contracts and other incentive, welfare, life insurance, death or survivor's
benefit, health insurance, sickness, disability, medical, surgical, hospital,
severance, layoff and vacation plans, contracts, and arrangements and employee
benefit plans and agreements, whether or not subject to ERISA, whether formal or
informal, whether written or oral, whether legally binding or not, under which
any current or former employee of Frontier has any present right to future
benefits or payments or under which Frontier has any present or future
liability.
(ee) "Frontier Real Estate" shall mean any real property at any time
owned or leased by Frontier.
(ff) "GAAP" shall mean generally accepted accounting principles in the
United States.
(gg) "Governmental Authority" shall mean any government or any agency,
bureau, board, commission, court, department, official, political subdivision,
tribunal, or other instrumentality of any government having authority in the
United States, whether federal, state, or local.
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(hh) "Hazardous Substance" shall mean any hazardous waste, as defined
by 42 U.S.C. ss. 6903(5), any hazardous substances, as defined by 42 U.S.C. ss.
9601(14), any "pollutant or contaminant," as defined by 42 U.S.C. ss. 9601(33),
or any toxic substance, hazardous materials, oil, or other chemicals or
substances regulated by any Environmental Laws.
(ii) "Insider" shall mean any Frontier Affiliate, any other officer or
beneficial holder of 5 percent or more of the common stock of Frontier, and any
Person "controlled" (as that term is defined in the Financial Institutions
Regulatory and Interest Rate Control Act of 1978) by any of them.
(jj) "IRS" shall mean the Internal Revenue Service within the United
States Department of the Treasury.
(kk) "Losses" shall mean losses, expenses, claims, demands, damages,
liabilities, judgments, fines, penalties, costs, expenses (including reasonable
attorneys fees) and amounts paid in settlement.
(ll) "Material" and its variants shall:
(i) when used in section 1.1(nn) and in articles 5, 7, and 8 with
reference to items normally expressed in dollars, be deemed to refer to amounts
individually and in the aggregate in excess of 3 percent of the shareholders'
equity of Frontier as of March 31, 2002, as determined in accordance with GAAP;
(ii) when used in articles 6 and 9 with reference to items
normally expressed in dollars, be deemed to refer to amounts individually and in
the aggregate in excess of 3 percent of the shareholders' equity of Zions as of
March 31, 2002, as determined in accordance with GAAP; and
(iii) otherwise and, notwithstanding subsections (i) and (ii) of
this section 1.01(ll), when used anywhere in this Agreement with explicit
reference to any of the federal securities laws or to the Registration Statement
or when used within the definition given to the term "Material Adverse Effect,"
be construed and understood in accordance with standards of materiality as
judicially determined under the federal securities laws.
(mm) "Material Adverse Effect" shall mean, with respect to a Person, a
Material adverse effect on the business, results of operations, financial
condition, or prospects of such Person and its subsidiaries taken as a whole or
a Material adverse effect on such Person's ability to consummate the
transactions contemplated hereby on a timely basis; provided, that, in
determining whether a Material Adverse Effect has occurred, there shall be
excluded any effect on the referenced Person the cause of which is (i) any
change in banking laws, rules or regulations of general applicability or
interpretations thereof by Governmental Authorities, (ii) any change in GAAP or
regulatory accounting requirements applicable to banks or their holding
companies generally, (iii) any action or omission of Frontier taken with the
prior written consent of Zions, or of Zions or any of its subsidiaries taken
with the prior written consent of Frontier, or (iv) any changes in general
economic conditions affecting banks or their holding companies.
(nn) "Material Adverse Environmental Condition" shall mean any
contamination or other condition caused by or related to a Hazardous Substance
in violation of any applicable Environmental Law which contamination would be
reasonably expected to result in Material liabilities or remediation costs in
excess of $25,000.
(oo) "Merger" shall have the meaning set forth in the recitals.
(pp) "NBA" shall have the meaning set forth in the preamble.
(qq) "NBA Common Stock" shall have the meaning set forth in section
2.02(h).
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(rr) "New Certificate" shall have the meaning set forth in section
2.06(b).
(ss) "OCC" shall mean the Office of the Comptroller of the Currency
within the United States Department of the Treasury.
(tt) "Old Certificate" shall have the meaning set forth in section
2.06(c).
(uu) "Ordinary Course of Business" shall mean an action taken by a
Person only if:
(i) such action is consistent with the past practices of such
Person and is taken in the ordinary course of the normal day-to-day operations
of such Person;
(ii) such action is not required to be authorized by the board of
directors of such Person; and
(iii) such action is similar in nature and magnitude to actions
customarily taken, without any authorization by the board of directors (or by
any Person or group of Persons exercising similar authority), in the ordinary
course of the normal day-to-day operations of other Persons that are in the same
line of business as such Person.
(vv) "Organizational Documents" shall mean:
(i) the articles or certificate of incorporation and the bylaws
of a corporation;
(ii) the partnership agreement and any statement of partnership
of a general partnership;
(iii) the limited partnership agreement and the certificate of
limited partnership of a limited partnership;
(iv) any charter or similar document adopted or filed in
connection with the creation, formation, or organization of a Person; and
(v) any amendment to any of the foregoing.
(ww) "PBGC" shall mean the Pension Benefit Guaranty Corporation.
(xx) "Person" shall mean an individual, firm, corporation,
partnership, trust, Governmental Authority, association, unincorporated
organization, or any other entity.
(yy) "Proxy Statement" shall mean the proxy statement that shall be a
part of the Registration Statement.
(zz) "Qualifying Event" shall mean a qualifying event as defined in
section 603 of ERISA.
(aaa) "Reduction Number" shall mean the number reached by summing the
following items, dividing the total thereby reached by $50.98, and rounding the
result to the nearest whole number:
(i) if the Average Closing Deposits are less than $85,000,000,
8.5 percent of the difference between $85,000,000 and the Average Closing
Deposits; and
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(ii) if the Closing Net Worth is less than $6,500,000, 100
percent of the difference between $6,500,000 and the Closing Net Worth.
(bbb) "Registration Statement" shall mean the registration statement
to be filed by Zions with the SEC pursuant to the Securities Act in connection
with the registration of the shares of Zions Stock to be used as consideration
in connection with the Merger.
(ccc) "Release" shall mean releasing, spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, leaching,
disposing, or dumping.
(ddd) "Riegle Act" shall mean the Riegle Community Development and
Regulatory Improvement Act of 1994.
(eee) "SAIF" shall mean the Savings Association Insurance Fund of the
FDIC.
(fff) "SEC" shall mean the United States Securities and Exchange
Commission.
(ggg) "Securities Act" shall mean the Securities Act of 1933, as
amended.
(hhh) "Surviving Bank" shall have the meaning set forth in section
2.02(a).
(iii) "Taxes" shall mean federal, state, local, and foreign income,
payroll, withholding, excise, sales, use, personal property, use and occupancy,
business and occupation, mercantile, real estate, gross receipts, license,
employment, severance, stamp, premium, windfall profits, social security (or
similar unemployment), disability, transfer, registration, value added,
alternative, or add-on minimum, estimated, or capital stock and franchise tax
and other tax of any kind whatsoever, including any interest, penalty or
addition thereto, whether disputed or not.
(jjj) "Zions" shall have the meaning set forth in the preamble.
(kkk) "Zions Bank" shall mean Zions First National Bank, a national
banking association with its head office located in Salt Lake City, Utah.
(lll) "Zions Financial Statements" shall mean the audited consolidated
statement of condition of Zions as of each of December 31, 1999, December 31,
2000, and December 31, 2001, and the related audited consolidated statement of
income, consolidated statement of changes in financial position, and
consolidated statement of changes in stockholders' equity of Zions for each of
the periods then ended, and the notes thereto, and the unaudited consolidated
statement of condition of Zions as of March 31, 2002, and the related unaudited
consolidated statement of income, consolidated statement of changes in financial
position, and consolidated statement of changes in stockholders' equity of Zions
for the period then ended, and the notes thereto, each as filed with the SEC.
(mmm) "Zions Stock" shall mean the common stock of Zions, no par
value.
Section 1.02 INTERPRETATION. Article titles, headings to sections and any
table of contents are inserted for convenience of reference only and are not
intended to be a part of or to affect the meaning or interpretation of this
Agreement. The Schedules and Exhibits referred to in this Agreement shall be
construed with and as an integral part of this Agreement to the same extent as
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if they were set forth verbatim in this Agreement. As used in this Agreement,
"include," "includes" and "including" are deemed to be followed by "without
limitation" whether or not they are in fact followed by such words or words of
like import; "writing," "written" and comparable terms refer to printing,
typing, lithography and other means of reproducing words in a visible form;
references to a Person are also to its successors and assigns; except as the
context may otherwise require, "hereof," "herein," "hereunder" and comparable
terms refer to the entirety of this Agreement and not to any particular article,
section, or other subdivision of this Agreement or attachment to this Agreement;
references to any gender include the other; except as the context may otherwise
require, the singular includes the plural and vice versa; references to any
agreement or other document are to such agreement or document as amended and
supplemented from time to time; references to "article," "section," or another
subdivision or to an "Exhibit" or "Schedule" are to an article, section, or
subdivision of this Agreement or an "Exhibit" or "Schedule" to this Agreement.
The parties acknowledge that each party and its counsel have reviewed and
revised this Agreement and that the normal rule of construction to the effect
that any ambiguities are to be resolved against the drafting party shall not be
employed in the interpretation, construction, and enforcement of this Agreement
or any amendment, schedule or exhibit to this Agreement.
ARTICLE 2.
COMBINATION
Section 2.01 MERGER OF NBA AND FRONTIER. Subject to the provisions of this
Agreement, at the Effective Time Frontier will be merged with and into NBA.
Section 2.02 EFFECT OF THE MERGER. At the Effective Time:
(a) The Constituent Banks shall be a single entity, which shall be a
national banking association and shall be NBA. NBA is hereby designated as the
surviving entity in the Merger and is hereinafter sometimes called the
"Surviving Bank."
(b) The separate existence of Frontier shall cease, its corporate
existence shall be merged into and continued in the Surviving Bank, and the
Surviving Bank shall be deemed to be the same corporation as each of the
Constituent Banks.
(c) The Surviving Bank shall have all the rights, privileges,
immunities, and powers and shall assume and be subject to all the duties and
liabilities of a national banking association organized under the National Bank
Act.
(d) The Surviving Bank shall thereupon and thereafter possess all of
the rights, interests, privileges, immunities, and franchises, of a public as
well as of a private nature, of each of the Constituent Banks; and all property,
real, personal and mixed, and all choses in action and debts due on whatever
account, including subscriptions for shares and all other choses in action, and
all and every other interest of and belonging to or due to each of the
Constituent Banks shall be taken and deemed to be transferred to and vested in
the Surviving Bank without further action, act, deed, or other transfer; and the
title to any real estate, or any interest therein, vested in either of the
Constituent Banks shall not revert or be in any way impaired by reason of the
Merger. The Surviving Bank, upon the Merger and without any order or other
action on the part of any court or otherwise, shall hold and enjoy all rights of
property, franchises, and interests, including appointments, designations, and
nominations, and all other rights and interests as trustee, executor,
administrator, registrar of stocks and bonds, guardian of estates, assignee,
receiver, and committee of estates of lunatics, and in every other fiduciary
capacity, in the same manner and to the same extent as such rights, franchises,
and interests were held or enjoyed by either of the Constituent Banks at the
Effective Time, subject to removal by a court of competent jurisdiction in the
same manner and to the same extent as was such Constituent Bank prior to the
Effective Time.
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(e) The Surviving Bank shall thenceforth be responsible and liable for
all the liabilities and obligations of each of the Constituent Banks; and any
claim existing or action or proceeding pending by or against either of the
Constituent Banks may be prosecuted to judgment as if the Merger had not taken
place, or the Surviving Bank may be proceeded against or substituted in its
place. The Surviving Bank expressly assumes and agrees to perform all of
Frontier's liabilities and obligations. Neither the rights of creditors nor any
liens upon the property of either of the Constituent Banks shall be impaired by
the Merger.
(f) The Articles of Association of NBA as they exist immediately prior
to the Effective Time shall be the Articles of Association of the Surviving Bank
until later amended pursuant to federal law.
(g) The Bylaws of NBA as they exist immediately prior to the Effective
Time shall be the Bylaws of NBA until later amended pursuant to federal law.
(h) The authorized shares of capital stock of NBA as of the Effective
Time shall be 200,000 shares of Common Stock, $30.00 par value (the "NBA Common
Stock").
(i) Subject to the terms, conditions, and limitations set forth
herein, at the Effective Time and until surrendered for exchange and payment,
each outstanding stock certificate which, prior to the Effective Time,
represented shares of the Frontier Stock, other than any shares of Frontier
Stock held by NBA (other than in a fiduciary, representative, or custodial
capacity), which shall be canceled without any payment therefor, shall, by
virtue of this Agreement and without any action on the part of the holder or
holders thereof, cease to represent an issued and existing share and shall be
converted into a right to receive from Zions, and shall for all purposes
represent the right to receive, upon surrender of the certificate formerly
representing such shares, a certificate representing the number of shares of
Zions Stock specified in section 2.03(a) of this Agreement; provided that, with
respect to any matters relating to stock certificates representing Frontier
Stock, NBA and Zions may rely conclusively upon the record of shareholders
maintained by Frontier containing the names and addresses of the holders of
record of Frontier Stock at the Effective Time.
Section 2.03 CONSIDERATION FOR MERGER.
(a) Subject to the terms, conditions, and limitations set forth
herein, upon surrender of his, her or its certificate or certificates in
accordance with Section 2.02(i), each holder of shares of Frontier Stock as of
the Effective Time shall be entitled to receive, in exchange for the shares of
Frontier Stock held of record by such shareholder as of the Effective Time and
represented by such certificate or certificates, the product of the number of
shares of Frontier Stock so represented and the Exchange Ratio.
(b) Notwithstanding anything to the contrary herein, no shares of
Zions Stock shall be issued in respect of any shares of Frontier Stock the
holders of which shall object to the Merger in writing and demand payment of the
value of their shares pursuant to chapter 13 of title 10 of the Arizona Revised
Statutes and section 215a(b) of title 12, United States Code, and as a result
payment therefor is made, such holders to have only the rights provided by
chapter 13 of title 10 of the Arizona Revised Statutes and section 215a of title
12, United States Code.
Section 2.04 NO FRACTIONAL SHARES. Zions will not issue fractional shares
of its stock. In lieu of fractional shares of Zions Stock, if any, each
shareholder of Frontier who is entitled to a fractional share of Zions Stock
shall receive an amount of cash equal to the product of such fraction times
$50.98. Such fractional share interest shall not include the right to vote or to
receive dividends or any interest thereon.
Section 2.05 DIVIDENDS; INTEREST. No shareholder of Frontier will be
entitled to receive dividends on his, her or its Zions Stock until he, she or it
exchanges his, her or its certificates representing Frontier Stock for Zions
Stock. Any dividends declared on Zions Stock to holders of record at or after
the Effective Time shall, with respect to stock to be delivered pursuant to this
Agreement to shareholders of Frontier who have not exchanged their certificates
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representing Frontier Stock for Zions Stock, be paid to the Exchange Agent (as
designated in section 2.06 of this Agreement) and, upon receipt from a former
shareholder of Frontier of certificates representing shares of Frontier Stock,
the Exchange Agent shall in accordance with the other provisions of this article
2 forward to such former shareholder of Frontier (i) certificates representing
his, her or its shares of Zions Stock, (ii) dividends declared thereon
subsequent to the Effective Time (without interest) and (iii) the cash value of
any fractional shares determined in accordance with section 2.04.
Section 2.06 DESIGNATION OF EXCHANGE AGENT.
(a) The parties to this Agreement hereby designate Zions Bank as
Exchange Agent to effect the exchanges contemplated hereby.
(b) Zions will, promptly after the Effective Time, issue and deliver
to Zions Bank the share certificates representing shares of Zions Stock (each a
"New Certificate") and the cash to be paid to holders of Frontier Stock in
accordance with this Agreement.
(c) If any New Certificate is to be issued in a name other than that
in which the certificate formerly representing Frontier Stock (an "Old
Certificate") and surrendered for exchange was issued, the Old Certificate so
surrendered shall be properly endorsed and otherwise in proper form for transfer
and the Person requesting such exchange shall pay to Zions Bank any transfer or
other taxes required by reason of the issuance of the New Certificate in any
name other than that of the registered holder of the Old Certificate
surrendered, or establish to the satisfaction of Zions Bank that such tax has
been paid or is not payable.
(d) Any holder of Frontier Stock whose Old Certificate has been lost
and who submits to the Exchange Agent with respect to the Old Certificate an
affidavit of lost certificate together with an agreement of indemnification, in
each case in a form reasonably satisfactory to the Exchange Agent, and together
with such other documentation as the Exchange Agent customarily requires in
cases of lost stock certificates, will be treated as if he, she, or it had
surrendered the lost Old Certificate to the Exchange Agent.
(e) If Old Certificates are not surrendered and exchanged for New
Certificates prior to three years after the Effective Time (or, in any
particular case, prior to the date before the third anniversary of the Effective
Time on which the whole shares of Frontier Stock, the dividends and other
distributions, if any, and cash in lieu of fractional shares described below
would otherwise escheat to or become the property of any Governmental
Authority), (i) the number of whole shares of Zions Stock into and for which the
shares of Frontier Stock theretofore represented by such Old Certificates shall
have been converted, (ii) the amount of dividends and other distributions, if
any, which theretofore have become payable to holders of record at or after the
Effective Time with respect to such number of whole shares of Zions Stock, (iii)
the amount of dividends and other distributions, if any, declared by Frontier
payable to holders of record of shares of Frontier Stock at a time prior to the
Effective Time but payable subsequent to the Effective Time, (iv) the amount of
dividends and other distributions, if any, which subsequently become payable
with respect to such number of whole shares of Zions Stock, and (v) the amount
of cash in lieu of fractional shares which would have been payable with respect
to the shares of Frontier Stock theretofore represented by such Old
Certificates, shall become the property of Zions (and, to the extent not in its
possession, shall be paid over to it), free and clear of all claims or interest
of any other Person previously entitled thereto.
Section 2.07 NOTICE OF EXCHANGE. Promptly after the Effective Time, Zions
Bank shall mail to each holder of one or more certificates formerly representing
Frontier Stock a notice specifying the Effective Time and notifying such holder
to surrender his, her or its certificate or certificates to Zions Bank for
exchange. Such notice shall be mailed to holders by regular mail at their
addresses on the records of Frontier.
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Section 2.08 ACTS TO CARRY OUT THIS MERGER PLAN.
(a) Frontier and its proper officers and directors shall do all such
acts and things as may be necessary or proper to vest, perfect, or confirm in
NBA title to such property or rights as are specified in sections 2.02(c) and
2.02(d) of this Agreement and otherwise to carry out the purposes of this
Agreement.
(b) If, at any time after the Effective Time, NBA shall consider or be
advised that any further assignments or assurances in law or any other acts are
necessary or desirable to (i) vest, perfect, or confirm, of record or otherwise,
in NBA its right, title, or interest in or under any of the rights, properties,
or assets of Frontier acquired or to be acquired by NBA as a result of, or in
connection with, the Merger, or (ii) otherwise carry out the purposes of this
Agreement, Frontier and its proper officers and directors shall be deemed to
have granted to NBA an irrevocable power of attorney to execute and deliver all
such proper deeds, assignments, and assurances in law and to do all acts
necessary or proper to vest, perfect, or confirm title to and possession of such
rights, properties, or assets in NBA and otherwise to carry out the purposes of
this Agreement; and the proper officers and directors of NBA are fully
authorized in the name of Frontier or otherwise to take any and all such action.
Section 2.09 TREATMENT OF STOCK OPTIONS. At the Effective Time, each
Frontier Option, whether vested or unvested, shall automatically be cancelled
and shall cease to represent a purchase right of any nature. Zions hereby
expressly declines to assume the Frontier Options, to substitute options to
purchase Zions Stock in place of the Frontier Options, or to assume any
obligations under any stock plans under which Frontier Options have been or may
be issued. Prior to their cancellation, nothing in this Agreement shall prohibit
the exercise of options to purchase Frontier Stock that are outstanding as of
the date of this Agreement.
Section 2.10 VOTING AGREEMENTS. Simultaneously herewith, each shareholder
of Frontier who is listed on Schedule 2.10 shall each enter into an agreement
with Zions, substantially in form and substance as that set forth as Exhibit I,
in which he or she agrees to vote all shares of Frontier Stock which may be
voted, or whose vote may be directed, by him or her, in favor of the
transactions contemplated by this Agreement at the meeting of shareholders at
which such transactions shall be considered.
Section 2.11 EMPLOYEE BENEFITS. If any employee of Frontier becomes a
participant in any employment benefit plan, practice, or policy of Zions, such
employee shall be given credit under such plan, practice, or policy for all
service prior to the Effective Time with Frontier for purposes of eligibility
and vesting, but not for benefit accrual purposes, for which such service is
taken into account or recognized, provided that there be no duplication of such
benefits as are provided under any employee benefit plans, practices, or
policies of Frontier that continue in effect following the Effective Time.
Section 2.12 ENVIRONMENTAL INVESTIGATION. Prior to the Effective Time,
Zions shall have the right, but not the obligation, at its sole cost and
expense, to cause such investigations and tests to be made as it reasonably
deems necessary to determine whether there has been any soil, surface water,
groundwater or building space contamination on or under the Frontier Real
Estate. Frontier shall cooperate with Zions and its agents or contractors in
their evaluation and testing of the Frontier Real Estate, including by providing
Zions and its agents or contractors reasonable access to pertinent records and
documents in Frontier's possession. Any investigations or tests performed by
Zions shall be conducted in a manner so as not to damage in any material respect
the Frontier Real Estate and so as not to interfere in any material respect with
the business or operations conducted at the Frontier Real Estate. Zions shall
give Frontier reasonable prior notice of its intention to conduct any
investigation or test under this section. Zions shall furnish Frontier with a
copy of each report or investigation setting forth the results of any test
performed by Zions as soon as reasonably practicable after receipt.
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ARTICLE 3.
EFFECTIVE TIME
The Effective Time shall be the date and time specified by NBA to the
Office of the Comptroller of the Currency, which shall be the latest of: Section
3.01 SHAREHOLDER APPROVAL. The day upon which the shareholders of Frontier
approve, ratify, and confirm the Merger; or
Section 3.02 OCC APPROVAL. The first to occur of (a) the date thirty days
following the date of the order of the OCC approving the Merger, or (b) if,
pursuant to section 321(b) of the Riegle Act, the OCC shall have prescribed a
shorter period of time with the concurrence of the Attorney General of the
United States, the date on which such shorter period of time shall elapse; or
Section 3.03 UTAH COMMISSIONER APPROVAL. If such an order shall be required
by law, the date five Business Days following the date of the order of the
Commissioner approving the transactions contemplated by this Agreement; or
Section 3.04 ARIZONA STATE BANKING DEPARTMENT APPROVAL. If such an order
shall be required by law, the date five Business Days following the date of the
order of the Department approving the transactions contemplated by this
Agreement; or
Section 3.05 OTHER REGULATORY APPROVALS. The date upon which any other
Material order, approval, or consent of a federal or state regulator of
financial institutions or financial institution holding companies authorizing
consummation of the transactions contemplated by this Agreement is obtained or
any waiting period mandated by such order, approval, or consent has run; or
Section 3.06 EXPIRATION OF STAYS. Five Business Days after any stay of the
approvals of any of the OCC, the Commissioner, or the Department of the
transactions contemplated by this Agreement or any injunction against closing of
said transactions is lifted, discharged, or dismissed; or
Section 3.07 MUTUAL AGREEMENT. Such other date as shall be mutually agreed
to in writing by Zions and Frontier.
ARTICLE 4.
CONDITIONS PRECEDENT TO PERFORMANCE OF OBLIGATIONS OF THE PARTIES
The obligations of Zions, NBA, and Frontier to consummate the Merger
and the issuance of stock incident thereto shall be subject to the conditions
that at or before the Effective Time:
Section 4.01 REGULATORY APPROVALS. Orders, consents, and approvals required
to consummate the Merger shall have been entered by the requisite Governmental
Authorities, and all statutory waiting periods in respect thereof shall have
expired.
Section 4.02 REGISTRATION STATEMENT.
(a) Effectiveness. The Registration Statement shall have become
effective under the Securities Act, and Zions shall have received all required
state securities laws or "blue sky" permits and other required authorizations or
confirmations of the availability of exemptions from registration requirements
necessary to issue Zions Stock in the Merger.
(b) Absence of Stop-Order. Neither the Registration Statement nor any
such required permit, authorization, or confirmation shall be subject to a
stop-order or threatened stop-order by the SEC or any state securities
authority.
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Section 4.03 APPROVAL BY SHAREHOLDERS OF FRONTIER. The shareholders of
Frontier shall have authorized, ratified, and confirmed the Merger by not less
than the requisite percentage of the outstanding voting stock of each class of
Frontier, in accordance with the applicable laws of the State of Arizona and the
National Bank Act.
Section 4.04 FEDERAL INCOME TAXATION. Zions and Frontier shall have
received a written opinion of Duane Morris LLP, or of another firm mutually
agreeable to Zions and Frontier, applying existing law, that the Merger shall
qualify as a reorganization under section 368(a)(1) of the Code and the
regulations and rulings promulgated thereunder. In rendering such opinion,
counsel may require and rely upon representations contained in certificates of
officers of Zions, NBA, Frontier, and others.
Section 4.05 ADVERSE LEGISLATION. Subsequent to the date of this Agreement
no legislation shall have been enacted and no regulation or other governmental
requirement shall have been adopted or imposed that renders or will render
consummation of the Merger impossible or illegal.
Section 4.06 ABSENCE OF LITIGATION. No action, suit, or proceeding shall
have been instituted or shall have been threatened before or by any Governmental
Authority to restrain, enjoin, or prohibit the Merger, or which would reasonably
be expected to restrict Materially the operation of the business of Frontier or
the exercise of any rights with respect thereto or to subject any of the parties
hereto or any of their subsidiaries, directors, or officers to any liability,
fine, forfeiture, divestiture, or penalty on the ground that the transactions
contemplated hereby, the parties hereto, or their subsidiaries, directors, or
officers have breached or will breach any applicable law or regulation or have
otherwise acted improperly in connection with the transactions contemplated
hereby and with respect to which the parties hereto have been advised by counsel
that, in the opinion of such counsel, such action, suit, or proceeding raises
substantial questions of law or fact which could reasonably be decided
Materially adversely to any party hereto or its subsidiaries, directors, or
officers.
ARTICLE 5.
CONDITIONS PRECEDENT TO PERFORMANCE OF THE OBLIGATIONS
OF ZIONS AND NBA
The obligations of Zions and NBA to consummate the Merger and the
issuance of stock incident thereto are subject to the satisfaction, at or prior
to the Effective Time, of all the following conditions, compliance with which or
the occurrence of which may be waived in whole or in part by Zions in writing
unless not so permitted by law:
Section 5.01 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS.
All representations and warranties of Frontier contained in this Agreement that
are qualified as to Materiality or Material Adverse Effect shall be true and
correct as of the Effective Time, and all representations and warranties of
Frontier contained in this Agreement that are not so qualified shall be true and
correct in all Material respects as of the Effective Time, in either case with
the same effect as if such representations and warranties had been made or given
at and as of such date, except that representations and warranties of Frontier
contained in this Agreement which specifically relate to an earlier date shall
be true and correct in all Material respects as of such earlier date. All
covenants and obligations to be performed or met by Frontier at or prior to the
Effective Time shall have been so performed or met. On the date of the Effective
Time, the president and chief executive officer and the cashier of Frontier
shall deliver to Zions a certificate to that effect. The delivery of such
officers' certificate shall in no way diminish the warranties, representations,
covenants, and obligations of Frontier made in this Agreement.
Section 5.02 OPINION OF FRONTIER COUNSEL. Zions shall have received a
favorable opinion from Ryley Carlock & Applewhite, a professional association,
dated the date of the Effective Time, substantially in form and substance as
Exhibit II.
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Section 5.03 OPINION OF FRONTIER LITIGATION COUNSEL. Zions shall have
received a favorable opinion from legal counsel handling litigation matters for
Frontier, dated the date of the Effective Time, substantially in form and
substance as Exhibit III.
Section 5.04 NO ADVERSE DEVELOPMENTS.
(a) During the period from March 31, 2002 to the Effective Time, (i)
there shall not have been any Material Adverse Effect with respect to Frontier;
and (ii) none of the events described in clauses (a) through (f) of section 7.16
of this Agreement shall have occurred, and each of the practices and conditions
described in clauses (x) through (z) of that section shall have been maintained.
(b) As of the Effective Time, the capital structure of Frontier, as
adjusted to account for the issuance of shares of Frontier Stock incident to the
exercise of options to purchase Frontier Stock that are outstanding as of the
date of this Agreement, shall be as stated in section 7.09.
(c) As of the Effective Time, other than liabilities incurred in the
Ordinary Course of Business subsequent to March 31, 2002, there shall be no
liabilities of Frontier which are Material to Frontier on a consolidated basis
which were not reflected on the consolidated statement of condition of Frontier
as of March 31, 2002 or in the related notes to the consolidated statement of
condition of Frontier as of March 31, 2002.
(d) No adverse action shall have been instituted or, except as set
forth on Schedule 5.04(d), threatened against Frontier by any Governmental
Authority, or referred by a Governmental Authority to another Governmental
Authority, for the enforcement or assessment of penalties for the violation of
any laws or regulations relating to equal credit opportunity, fair housing, fair
lending, or truth in lending.
(e) Zions shall have received a certificate dated the date of the
Effective Time, signed by the president and chief executive officer and the
cashier of Frontier, certifying to the matters set forth in paragraphs (a), (b),
(c), and (d) of this section 5.04. The delivery of such officers' certificate
shall in no way diminish the warranties and representations of Frontier made in
this Agreement.
Section 5.05 CONSOLIDATED NET WORTH. At and as of the Effective Time, the
consolidated net worth of Frontier as determined in accordance with GAAP shall
not be less than the sum of (a) $6,000,000, (b) the proceeds to Frontier of the
sale of any treasury stock since March 31, 2002, and (c) the aggregate
contributions to capital caused by the payments accompanying the exercise of any
stock options on or after March 31, 2002.
Section 5.06 LOAN LOSS RESERVE. At and as of the Effective Time, the
aggregate reserve for loan losses of Frontier as determined in accordance with
GAAP shall not be less than $1,000,000.
Section 5.07 DEPOSITS. The Average Closing Deposits shall not be less than
$80,000,000.
Section 5.08 CERTAIN LOAN SALES. The loan sales required by section 8.08
shall have been consummated in accordance with the requirements of that section.
Section 5.09 AFFILIATES' AGREEMENTS. Zions shall have received an
Affiliates Agreement:
(a) on or before the date of this Agreement, from each Person other
than Elizabeth McCarty who, on the date of this Agreement, is a Frontier
Affiliate,
(b) within twenty days of the date of this Agreement, from Elizabeth
McCarty, and
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(c) not later than ten days after any other Person becomes a Frontier
Affiliate, from such Person.
Section 5.10 MATERIAL ADVERSE ENVIRONMENTAL CONDITION. If, within sixty
days of the date of this Agreement, Zions has provided to Frontier a written
objection to a Material Adverse Environmental Condition at any Frontier Real
Estate, Frontier shall have cured such Material Adverse Environmental Condition
in a manner reasonably satisfactory to Zions.
Section 5.11 LITIGATION. If the litigation set forth on Schedule 5.11 shall
not have been settled or otherwise finally resolved, then after consultation
with NBA Frontier shall have made adequate provision on its books for the loss
it might reasonably suffer in the event that that litigation is determined
adversely to Frontier.
ARTICLE 6.
CONDITIONS PRECEDENT TO PERFORMANCE OF OBLIGATIONS OF FRONTIER
The obligations of Frontier hereunder are subject to the satisfaction, at
or prior to the Effective Time, of all the following conditions, compliance with
which or the occurrence of which may be waived in whole or in part by Frontier
in writing unless not so permitted by law:
Section 6.01 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS.
All representations and warranties of Zions and NBA contained in this Agreement
that are qualified as to Materiality or Material Adverse Effect shall be true
and correct as of the Effective Time, and all representations and warranties of
Zions and NBA contained in this Agreement that are not so qualified shall be
true and correct in all Material respects as of the Effective Time, in either
case with the same effect as if such representations and warranties had been
made or given at and as of such date, except that representations and warranties
of Zions and NBA contained in this Agreement which specifically relate to an
earlier date shall be true and correct in all Material respects as of such
earlier date. All covenants and obligations to be performed or met by Zions or
NBA at or prior to the Effective Time shall have been so performed or met. On
the date of the Effective Time, either the president or an executive vice
president of Zions and either the chairman, the president, or an executive vice
president of NBA shall deliver to Frontier a certificate to that effect. The
delivery of such officers' certificate shall in no way diminish the warranties,
representations, covenants, and obligations of Zions and NBA made in this
Agreement.
Section 6.02 OPINION OF ZIONS COUNSEL. Frontier shall have received a
favorable opinion from Duane Morris LLP, dated the date of the Effective Time,
substantially in form and substance as Exhibit V.
Section 6.03 NO ADVERSE DEVELOPMENTS. During the period from March 31, 2002
to the Effective Time, there shall not have been any Material Adverse Effect
with respect to Zions, and Frontier shall have received a certificate dated the
date of the Effective Time signed by either the president of Zions or an
executive vice president of Zions to the foregoing effect. The delivery of such
officer's certificate shall in no way diminish the warranties and
representations of Zions made in this Agreement.
Section 6.04 STATUS OF ZIONS STOCK. The shares of Zions Stock to be issued
to the shareholders of Frontier upon consummation of the Merger shall have been
authorized for inclusion on the Nasdaq National Market (or another national
securities exchange) subject to official notice of issuance.
ARTICLE 7.
REPRESENTATIONS AND WARRANTIES OF FRONTIER
Frontier represents and warrants to Zions and NBA as follows:
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Section 7.01 ORGANIZATION, POWERS, AND QUALIFICATION. Frontier is a
corporation which is duly organized, validly existing, and in good standing
under the laws of the State of Arizona and has all requisite corporate power and
authority to own and operate its properties and assets, to lease properties used
in its business, and to carry on its business as now conducted. Frontier owns or
possesses in the operation of its business all franchises, licenses, permits,
branch certificates, consents, approvals, waivers, and other authorizations,
governmental or otherwise, which are necessary for it to conduct its business as
now conducted, except for those where the failure of such ownership or
possession would not have a Material Adverse Effect on Frontier. Frontier is
duly qualified and licensed to do business and is in good standing in every
jurisdiction with respect to which the failure to be so qualified or licensed
could result in a Material Adverse Effect on Frontier.
Section 7.02 EXECUTION AND PERFORMANCE OF AGREEMENT. Frontier has all
requisite corporate power and authority to execute and deliver this Agreement
and to perform its terms.
Section 7.03 ABSENCE OF VIOLATIONS. Except as set forth on Schedule 7.03:
(a) Frontier is not (i) in violation of its Organizational Documents,
(ii) in violation of any applicable federal, state, or local law or ordinance or
any order, rule, or regulation of any Governmental Authority, or (iii) in
violation of or in default with respect to any order, writ, injunction, decree,
license, regulation, or demand of any Governmental Authority, except, in the
case of (ii) or (iii), for such violations or defaults which in the aggregate
could not reasonably be expected to have a Material Adverse Effect on Frontier;
and Frontier has not received any claim or notice of violation with respect
thereto;
(b) neither Frontier nor any member of its management is a party to
any assistance agreement, supervisory agreement, memorandum of understanding,
consent order, cease and desist order or condition of any regulatory order or
decree with or by the FDIC, the Department, any other banking or securities
authority of the United States or the State of Arizona, or any other
Governmental Authority that relates to the conduct of the business of Frontier
or its assets; and no such agreement, memorandum, order, condition, or decree is
pending or threatened;
(c) Frontier has established policies and procedures to provide
reasonable assurance of compliance in a safe and sound manner with the federal
banking, credit, housing, consumer protection, and civil rights laws and the
regulations adopted under each of those laws, so that transactions be executed
and assets be maintained in accordance with such laws and regulations; and the
policies and practices of Frontier with respect to all such laws and regulations
reasonably limit noncompliance and detect and report noncompliance to its
management; and
(d) Frontier has established a CRA policy which provides for (i) goals
and objectives consistent with CRA; (ii) a methodology for self-assessment by
the board of directors of Frontier; (iii) ongoing CRA training of all personnel
of Frontier, including the members of its board of directors; and (iv)
procedures whereby all significant CRA-related activity is documented; and
Frontier has officially designated a CRA officer who reports directly to the
board of directors and is responsible for the CRA program of Frontier.
Section 7.04 COMPLIANCE WITH AGREEMENTS. Frontier is not in violation of
any term of any security agreement, mortgage, indenture, or any other contract,
agreement, instrument, lease, or certificate, except for such violations which
in the aggregate could not reasonably be expected to have a Material Adverse
Effect on Frontier.
Section 7.05 BINDING OBLIGATIONS. Subject to the approval of its
shareholders, this Agreement constitutes the valid, legal, and binding
obligation of Frontier, enforceable against it in accordance with its terms,
except as enforcement may be limited by applicable bankruptcy, insolvency,
moratorium or similar laws, or by general principles of equity. The execution,
delivery, and performance of this Agreement and the transactions contemplated
thereby have been duly and validly authorized by the board of directors of
Frontier.
Section 7.06 ABSENCE OF DEFAULT; DUE AUTHORIZATION.
(a) None of the execution or the delivery of this Agreement, the
consummation of the transactions contemplated hereby, or the compliance with or
fulfillment of the terms hereof will conflict with, or result in a breach of any
of the terms, conditions, or provisions of, or constitute a default under the
Organizational Documents of Frontier. Such execution, consummation, and
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fulfillment will not (i) conflict with, or result in a breach of the terms,
conditions, or provisions of, or constitute a violation, conflict, or default
under, or, except as set forth on Schedule 7.06, give rise to any right of
termination, cancellation, or acceleration with respect to, or result in the
creation of any lien, charge, or encumbrance upon, any property or assets of
Frontier pursuant to any agreement or instrument under which Frontier is
obligated or by which any of its properties or assets may be bound, including
any lease, contract, mortgage, promissory note, deed of trust, loan, credit
arrangement, or other commitment or arrangement of Frontier in respect of which
it is an obligor, except for such conflicts, breaches, violations, defaults,
rights of termination, cancellation, or acceleration, or results which in the
aggregate could not reasonably be expected to have a Material Adverse Effect on
Frontier; (ii) if the Merger is approved by the OCC, the Commissioner, and the
Department, violate any law, statute, rule, or regulation of any Governmental
Authority to which Frontier is subject and which is Material to its operations;
or (iii) violate any judgment, order, writ, injunction, decree, or ruling to
which Frontier or any of its properties or assets is subject or bound. None of
the execution or delivery of this Agreement, the consummation of the
transactions contemplated hereby, or the compliance with or fulfillment of the
terms hereof will require any authorization, consent, approval, or exemption by
any Person which has not been obtained, or any notice or filing which has not
been given or done, other than approval of or waiver of jurisdiction over the
transactions contemplated by this Agreement by, notices to, or filings with the
OCC, the Commissioner, the Department, the SEC, state securities commissions,
and the Secretary of State of the State of Arizona.
(b) Except for approval of this Agreement by the affirmative vote of
not less than the requisite percentage of the outstanding voting stock of each
class of Frontier, in accordance with the applicable laws of the State of
Arizona, no other corporate proceedings on the part of Frontier are necessary to
approve or authorize this Agreement, the Merger, or the other transactions
contemplated by this Agreement or the carrying out of the transactions
contemplated hereby.
(c) Frontier has made no election to be subject to any of the
provisions of chapter 23, title 10 of the Arizona Revised Statutes. The board of
directors of Frontier has taken all necessary action so that any applicable
provisions of the takeover laws of any other state and any comparable provisions
of the Organizational Documents of Frontier do not and will not apply to this
Agreement, the Merger, or the transactions contemplated hereby.
(d) Frontier has not adopted any shareholder rights plan, "poison
pill" or similar plan, or any other plan which could result in the grant of any
rights to any Person, or which could enable or require any rights to be
exercised, distributed or triggered, in the event of the execution, delivery, or
announcement of this Agreement, or in the event of the consummation of the
Merger or any of the transactions contemplated by this Agreement.
Section 7.07 COMPLIANCE WITH BHC ACT; CERTAIN BANK REGULATORY MATTERS.
(a) No corporation or other entity is registered or is required to be
registered as a bank holding company under the BHC Act by virtue of its control
over Frontier or over any company that directly or indirectly has control over
Frontier.
(b) Except as set forth on Schedule 7.07(b), as of March 31, 2002, the
capital ratios of Frontier comply fully with all terms of all currently
outstanding supervisory and regulatory requirements and with the conditions of
all regulatory orders and decrees.
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Section 7.08 SUBSIDIARIES.
(a) Except as set forth on Schedule 7.08, Frontier does not have any
direct or indirect subsidiaries and does not directly or indirectly own,
control, or hold with the power to vote any shares of the capital stock of any
company (except shares held by Frontier for the account of others in a fiduciary
or custodial capacity in the Ordinary Course of Business and shares of any
Federal Reserve Bank or any Federal Home Loan Bank).
(b) Frontier does not have any direct or indirect equity or ownership
interest, which represents 5 percent or more of the aggregate equity or
ownership interest of any entity (including corporations, partnerships, and
joint ventures).
Section 7.09 CAPITAL STRUCTURE.
(a) The authorized capital stock of Frontier consists of (i) 2,000,000
shares of Frontier Stock, of which, as of the date of this Agreement, 911,517
shares have been duly issued and are validly outstanding, fully paid, and
nonassessable, and held by approximately 274 shareholders of record, and (ii)
1,000,000 shares of preferred stock, no par value, the designations,
preferences, privileges, and voting powers of which are to be determined upon
issuance, none of which are issued or outstanding as of the date of this
Agreement. The aforementioned shares of Frontier Stock are the only voting
securities of Frontier authorized, issued, or outstanding as of such date; and
except as set forth on Schedule 7.09, there are no outstanding subscriptions,
options, warrants, convertible securities, calls, commitments, or agreements
calling for or requiring the issuance, transfer, sale, or other disposition of
any shares of the capital stock of Frontier, or calling for or requiring the
issuance of any securities or rights convertible into or exchangeable for shares
of capital stock of Frontier. No shares of Frontier Stock are held by Frontier
as treasury shares. None of the Frontier Stock is subject to any restrictions
upon the transfer thereof under the terms of the Organizational Documents of
Frontier.
(b) Schedule 7.09 lists all options to purchase Frontier securities
currently outstanding and, for each such option, the date of issuance, date of
exercisability, exercise price, type of security for which exercisable, and date
of expiration. Schedule 7.09 further lists all shares of Frontier Stock reserved
for issuance pursuant to stock option plans, agreements, or arrangements but not
yet issued and all options upon shares of Frontier Stock designated or made
available for grant but not yet granted.
(c) None of the shares of Frontier Stock has been issued in violation
of the preemptive rights, if any, of any shareholder.
(d) To the knowledge of Frontier, and except for this Agreement, there
are no shareholder agreements, or other agreements, understandings, or
commitments relating to the right of any holder or beneficial owner of more than
1 percent of the issued and outstanding shares of any class of the capital stock
of Frontier to vote or to dispose of his, her, or its shares of capital stock of
that entity.
(e) Frontier has not granted any shareholders' rights to dissent from
any merger.
Section 7.10 ORGANIZATIONAL DOCUMENTS AND MINUTE BOOKS. The copies of the
Organizational Documents of Frontier that have been provided to Zions are true,
correct, and complete copies thereof. The minute books of Frontier which have
been made available to Zions contain accurate minutes of all meetings and
accurate consents in lieu of meetings of the board of directors (and any
committee thereof) and of the shareholders of Frontier since its inception.
These minute books accurately reflect all transactions referred to in such
minutes and consents in lieu of meetings and disclose all Material corporate
actions of the shareholders and board of directors of Frontier and all
committees thereof. Except as reflected in such minute books, there are no
minutes of meetings or consents in lieu of meetings of the board of directors
(or any committee thereof) or of shareholders of Frontier.
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Section 7.11 BOOKS AND RECORDS. The books and records of Frontier fairly
reflect the transactions to which it is a party or by which its properties are
subject or bound. Such books and records have been properly kept and maintained
and are in compliance in all Material respects with all applicable accounting
and legal requirements. Frontier follows GAAP applied on a consistent basis in
the preparation and maintenance of its books of account and financial
statements.
Section 7.12 REGULATORY APPROVALS AND FILINGS, CONTRACTS, COMMITMENTS, ETC.
Frontier has made available to Zions:
(a) All regulatory approvals received since January 1, 1994, of
Frontier relating to all bank and nonbank acquisitions or the establishment of
de novo operations;
(b) All Frontier Plans, accompanied by any agreements, including trust
agreements, embodying such contracts, plans, or arrangements, and all employee
manuals and memoranda relating to employment and benefit policies and practices
of any nature whatsoever (whether or not distributed to employees or any of
them), and any actuarial reports and audits relating to such Frontier Plans;
(c) All Material contracts, agreements, leases, mortgages, and
commitments to which Frontier is a party or may be bound; or, if any of the same
be oral, true, accurate, and complete written summaries of all such oral
contracts, agreements, leases, mortgages, and commitments;
(d) All contracts, agreements, leases, mortgages, and commitments,
whether or not Material, to which Frontier is a party or may be bound and which
require the consent or approval of third parties to the execution and delivery
of this Agreement or to the consummation or performance of any of the
transactions contemplated thereby or, if any of the same be oral, true,
accurate, and complete written summaries of all such oral contracts, agreements,
leases, mortgages, and commitments;
(e) All deeds, leases, contracts, agreements, mortgages, and
commitments, whether or not Material, to which Frontier is a party or may be
bound and which relate to land, buildings, fixtures, or other real property upon
or within which Frontier operates its businesses or is authorized to operate its
businesses, or with respect to which Frontier has any application pending for
authorization to operate its businesses;
(f) Any pending application, including any documents or materials
related thereto, which has been filed by Frontier with any Governmental
Authority with respect to the establishment of a new office or the acquisition
or establishment of any additional banking or nonbanking subsidiary;
(g) A written description of the legal structure and business methods
employed by Frontier in making investment securities, other investment products,
and insurance available to its customers; and
(h) All federal, state, and local tax returns, including any amended
returns, filed by Frontier for the years 1994 through 2002, a copy of the most
recent audit examination of Frontier by the IRS, and a copy of all substantive
correspondence or other documents with respect to any examination that has not
yet been resolved, a copy of the most recent examination from each state or
local tax agency if any, for Frontier, and a copy of all substantive
correspondence or other documents with respect to any examination that has not
yet been resolved, and all tax rulings, closing agreements, settlement
agreements, or similar documents with respect to Frontier received from or
entered into with the IRS or any other taxing authority since January 1, 1990 or
that would have continuing effect after the Effective Time.
Section 7.13 FINANCIAL STATEMENTS. Frontier has furnished to Zions the
Frontier Financial Statements. All of the Frontier Financial Statements,
including the related notes, (a) except as indicated in the notes thereto, were
prepared in
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accordance with GAAP consistently applied in all Material respects (subject, in
the case of unaudited statements, to recurring audit adjustments normal in
nature and amount), and (b) are in accordance with the books and records of
Frontier, and (c) fairly reflect the consolidated financial position of Frontier
as of such dates, and the consolidated results of operations of Frontier for the
periods ended on such dates, and do not fail to disclose any Material
extraordinary or out-of-period items, and (d) reflect, in accordance with GAAP
consistently applied in all Material respects, adequate provision for, or
reserves against, the possible consolidated loan losses of Frontier as of such
dates.
Section 7.14 CALL REPORTS.
(a) Frontier has made available to Zions its Call Reports for the
calendar quarter dated March 31, 2000 and each calendar quarter thereafter. All
of such Call Reports, including the related schedules and memorandum items, were
prepared in accordance with GAAP consistently applied in all Material respects
or, to the extent different from GAAP, accounting principles mandated by the
applicable instructions to such Call Reports.
(b) No adjustments are required to be made to the equity capital
account of Frontier as reported on any of the Call Reports referred to in
subsection 7.14(a), in any Material amount, in order to conform such equity
capital account to equity capital as would be determined in accordance with GAAP
as of such date.
Section 7.15 ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth on
Schedule 7.15, at March 31, 2002, Frontier had no obligation or liability of any
nature (whether absolute, accrued, contingent, or otherwise, and whether due or
to become due) which was Material, or which when combined with all similar
obligations or liabilities would have been Material, to Frontier, except (a) as
disclosed in the Frontier Financial Statements, or (b) as set forth on Schedule
7.15, or (c) for unfunded loan commitments made by Frontier in the Ordinary
Course of Business. The amounts set up as current liabilities for taxes in the
Frontier Financial Statements are sufficient for the payment of all Taxes
accrued in accordance with GAAP and unpaid at March 31, 2002. Since March 31,
2002, Frontier has not incurred or paid any obligation or liability that would
be Material (on a consolidated basis) to Frontier, except (x) for obligations
incurred or paid in connection with transactions by it in the Ordinary Course of
Business, or (y) as set forth on Schedule 7.15, or (z) as expressly contemplated
herein.
Section 7.16 ABSENCE OF CERTAIN DEVELOPMENTS. Since March 31, 2002, except
as set forth on Schedule 7.16, there has been (a) no Material Adverse Effect
with respect to Frontier, (b) no Material deterioration in the quality of the
consolidated loan portfolio of Frontier, and no Material increase in the
consolidated level of nonperforming assets or nonaccrual loans at Frontier or in
the level of its consolidated provision for credit losses or its consolidated
reserve for possible credit losses; (c) no declaration, setting aside, or
payment by Frontier of any regular dividend, special dividend, or other
distribution with respect to any class of capital stock of Frontier; (d) no
repurchase by Frontier of any of its capital stock; (e) no Material loss,
destruction, or damage to any Material property of Frontier, which loss,
destruction, or damage is not covered by insurance; and (f) no Material
acquisition or disposition of any asset, nor any Material contract outside the
Ordinary Course of Business entered into by Frontier nor any substantial
amendment or termination of any Material contract outside the Ordinary Course of
Business to which Frontier is a party, nor any other transaction by Frontier
involving an amount in excess of $25,000 other than for fair value in the
Ordinary Course of Business. Since March 31, 2002, except as set forth on
Schedule 7.16, (x) Frontier has conducted its business only in the Ordinary
Course of Business; (y) Frontier, on a consolidated basis, has maintained the
quality of its loan portfolio and that of each of its major components at
approximately the same level as existed at March 31, 2002; and (z) Frontier, on
a consolidated basis, has administered its investment portfolio pursuant to
essentially the same policies and procedures as existed during 2001 and the
first three months of 2002, and has taken no action to lengthen the average
maturity of the investment portfolio, or of any significant category thereof, to
any Material extent.
Section 7.17 RESERVE FOR POSSIBLE CREDIT LOSSEs. The most recent of the
Frontier Financial Statements reflect a consolidated reserve for possible credit
losses that is adequate in accordance with GAAP to absorb reasonably anticipated
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losses in the consolidated loan and lease portfolios of Frontier, in view of the
size and character of such portfolios, current economic conditions, and other
pertinent factors. Management reevaluates the adequacy of such reserve each
month based on portfolio performance, current economic conditions, and other
factors.
Section 7.18 TAX MATTERS.
(a) Except as set forth on Schedule 7.18, all Tax returns and reports
required to be filed by or on behalf of Frontier have been timely filed with the
appropriate Governmental Authorities in all jurisdictions in which such returns
and reports are required to be filed, or requests for extensions have been
timely filed, granted, and have not expired for periods ending on or before
December 31, 2001, and all returns filed are complete and accurate and properly
reflect its Taxes for the periods covered thereby. All Taxes shown or required
to be shown on filed returns have been paid except for any not yet due and
payable. As of the date of this Agreement, there is no audit examination,
deficiency, or refund litigation or tax claim or any notice of assessment or
proposed assessment by the IRS or any other taxing authority, or any other
matter in controversy with respect to any Taxes that might result in a
determination adverse to Frontier, except as reserved against in the Frontier
Financial Statements. All Taxes due with respect to completed and settled
examinations or concluded litigation have been properly accrued or paid.
(b) Frontier has not executed an extension or waiver of any statute of
limitations on the assessment or collection of any Tax due that is currently in
effect.
(c) To the extent any Taxes are due from, but have not yet been paid
by, Frontier for the period or periods beginning January 1, 2002 or thereafter
through and including the date of the Effective Time, adequate provision on an
estimated basis has been made for the payment of such taxes by establishment of
appropriate tax liability accounts on the monthly financial statements of
Frontier.
(d) Deferred Taxes of Frontier have been provided for in accordance
with GAAP as in effect on the date of this Agreement.
(e) The deductions of Frontier for bad debts taken and the reserve of
Frontier for loan losses for federal income tax purposes at December 31, 2001,
were not greater than the maximum amount permitted under the provisions of
section 585 of the Code.
(f) Other than liens arising under the laws of the State of Arizona
with respect to Taxes assessed and not yet due and payable, there are no tax
liens on any of the properties or assets of Frontier.
(g) Frontier (i) has timely filed all information returns or reports
required to be filed with respect to Taxes, including those required by sections
6041, 6041A, 6042, 6045, 6049, 6050H, and 6050J of the Code, (ii) has properly
and timely provided to all Persons, other than taxing authorities, all
information reports or other documents (for example, Form 1099s, Form W-2s, and
so forth) required to be provided to such Persons under applicable law, and
(iii) has exercised due diligence in obtaining certified taxpayer identification
numbers as required under applicable law.
(h) The taxable year end of Frontier for federal income tax purposes
is, and since the inception of Frontier has continuously been, December 31.
(i) Frontier has in all Material respects satisfied all federal,
state, local, and foreign withholding tax requirements including income, social
security, and employment tax withholding.
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(j) Frontier (i) is not, and has not been a member of a group filing a
consolidated, combined, or unitary tax return, other than a group the common
parent of which is or was Frontier, and (ii) has no liability for the Taxes of
any Person (other than Frontier) under Treas. Reg. ss. 1.1502-6 (or any similar
provision of state, local, or foreign law), as a transferee or successor, by
contract, or otherwise.
(k) At no time has Frontier made an election to be taxed under
Subchapter S of the Code and corresponding provisions under any applicable state
and local laws.
Section 7.19 CONSOLIDATED NET WORTH. The consolidated net worth of Frontier
on the date of this Agreement, as determined in accordance with GAAP, is not
less than the sum of (a) $6,876,000, (b) the proceeds to Frontier of the sale of
treasury stock since March 31, 2002, and (c) the proceeds to Frontier of the
exercise of stock options to purchase shares of Frontier Stock since March 31,
2002.
Section 7.20 EXAMINATIONS. To the extent consistent with law, Frontier has
heretofore disclosed to Zions relevant information contained in the most recent
safety-and-soundness, compliance, CRA, and other Reports of Examination with
respect to Frontier issued by each of the Department and the FDIC. Such
information so disclosed consists of all Material information with respect to
the financial, operational, and legal condition of Frontier which is included in
such reports, and does not omit or will not omit any information necessary to
make the information disclosed not misleading.
Section 7.21 REPORTS. Since January 1, 1999, Frontier has effected all
registrations and filed all reports and statements, together with any amendments
required to be made with respect thereto, which it was required to effect or
file with (a) the FDIC, (b) the United States Department of the Treasury, (c)
the Department, (d) the SEC, and (e) any other Governmental Authority having
jurisdiction over its operations. Each of such registrations, reports, and
documents, including the financial statements, exhibits, and schedules thereto,
does not contain any statement which, at the time and in the light of the
circumstances under which it was made, is false or misleading with respect to
any Material fact or which omits to state any Material fact necessary in order
to make the statements contained therein not false or misleading.
Section 7.22 FIRA COMPLIANCE AND OTHER TRANSACTIONS WITH INSIDERS. Except
as set forth on Schedule 7.22, (a) no Insider has any ongoing Material
transaction with Frontier on the date of this Agreement; (b) no Insider has any
ownership interest in any business, corporate or otherwise, which is a party to,
or in any property which is the subject of, business arrangements or
relationships of any kind with Frontier not in the Ordinary Course of Business;
and (c) all other extensions of credit by Frontier to any Insider have
heretofore been disclosed in writing by Frontier to Zions.
Section 7.23 SEC REGISTERED SECURITIES. No equity or debt securities of
Frontier are registered or required to be registered under the Securities Act or
the Exchange Act.
Section 7.24 LEGAL PROCEEDINGS. Except as disclosed in the Frontier
Financial Statements or as set forth on Schedule 7.24, there is no claim,
action, suit, arbitration, investigation, or other proceeding pending against
Frontier before any Governmental Authority, arbitrator, or "impartial mediator"
or, to the knowledge of Frontier, threatened or contemplated against or
affecting it or its property, assets, interests, or rights, or any basis
therefor of which notice has been given, which, if adversely determined, would
have a Material Adverse Effect on Frontier or which otherwise could prevent,
hinder, or delay consummation of the transactions contemplated by this
Agreement.
Section 7.25 ABSENCE OF GOVERNMENTAL PROCEEDINGS. Except as set forth on
Schedule 7.25, Frontier is not a party defendant or respondent to any pending
legal, equitable, or other proceeding commenced by any Governmental Authority
and, to the knowledge of Frontier, no such proceeding is threatened.
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Section 7.26 FEDERAL DEPOSIT INSURANCE.
(a) The deposits held by Frontier are insured within statutory limits
by the BIF pursuant to the provisions of the FDI Act, and Frontier has paid all
regular premiums and special assessments and filed all related reports and
statements required of it under the FDI Act.
(b) Frontier is a member of and pays insurance assessments to the BIF.
None of the deposits of Frontier are insured by the SAIF, and Frontier pays no
insurance assessments to the SAIF.
Section 7.27 OTHER INSURANCE. Frontier carries insurance with reputable
insurers, including blanket bond coverage, in such amounts as are reasonable to
cover such risks as are customary in relation to the character and location of
its properties and the nature of its businesses. All such policies of insurance
are in full force and effect, and no notice of cancellation has been received.
All premiums to date have been paid in full. Frontier is not in default with
respect to any such policy which is Material to it.
Section 7.28 LABOR MATTERS.
(a) Frontier is not a party to or bound by any collective bargaining
contracts with respect to any employees of Frontier. Since its inception there
has not been, nor to the knowledge of Frontier was there or is there threatened,
any strike, slowdown, picketing, or work stoppage by any union or other group of
employees against Frontier or any of its premises, or any other labor trouble or
other occurrence, event, or condition of a similar character. Frontier is not
aware of any attempts to organize a collective bargaining unit to represent any
of its employee groups.
(b) Except as set forth on Schedule 7.28, Frontier is, to its
knowledge, in compliance in all Material respects with all federal and state
laws, regulations, and orders respecting employment and employment practices
(including Title VII of the Civil Rights Act of 1964), terms and conditions of
employment, and wages and hours; and Frontier is not engaged in any unfair labor
practice. Except as set forth on Schedule 7.28, no dispute exists between
Frontier and any of its employee groups regarding any employee organization,
wages, hours, or conditions of employment which would Materially interfere with
the business or operations of Frontier.
Section 7.29 EMPLOYEE BENEFIT PLANS.
(a) Schedule 7.29 contains a complete list of all the Frontier Plans.
(b) As to each of the Frontier Plans, Frontier has made available to
Zions until the Effective Time true, complete, current, and accurate copies of
(i) the executed document or documents governing the plan, including the related
trust agreement, insurance policy, and summary plan description (or other
description in the case of an unwritten plan); (ii) the most recent and prior
two years' actuarial and financial report prepared with respect to the plan if
it constitutes a "qualified plan" under section 401(a) of the Code; (iii) the
Forms 5500 with all schedules for the last three years; (iv) all IRS rulings,
determination letters, and any open requests for such rulings and letters that
pertain to the plan; and (v) to the extent they pertain to the plan, attorneys'
responses to auditors' requests for information for the last three years.
(c) Except for funding obligations and liabilities to the PBGC
pursuant to section 4007 of ERISA, all of which have been fully paid, Frontier
does not have any tax, penalty, or liability with respect to any Frontier Plan
under ERISA, the Code, or any other applicable law, regulation, or ruling. As to
each Frontier Plan with respect to which a Form 5500 has been filed, no Material
change has occurred with respect to the matters covered by the most recent Form
5500 since the date thereof, other than regular accruals and contributions.
(d) Each Frontier Plan intended to be a "qualified plan" under the
Code complies in all Material respects with ERISA and applicable provisions of
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the Code. Frontier has no Material liability under any Frontier Plan which is
not reflected on the Frontier Financial Statements (other than such normally
unrecorded liabilities under the Plans for sick leave, holiday, education,
bonus, vacation, incentive compensation, anniversary awards and the like,
provided that such liabilities are not in any event Material). There have not
been any "prohibited transactions" with respect to any Frontier Plan within the
meaning of section 406 of ERISA or, where applicable, section 4975 of the Code,
nor have there been any "reportable events" within section 4043 of ERISA nor any
accumulated funding deficiency within section 302 of ERISA or section 402 of the
Code. Neither Frontier nor any entity under common control under section 414(b),
(c), or (m) of the Code has or had any obligation to contribute to any
multiemployer plan. As to each Frontier Plan that is subject to Title IV of
ERISA, the value of assets of such Frontier Plan is at least equal to the
present value of the vested and unvested accrued benefits in such Frontier Plan
on a termination and ongoing basis, based upon applicable PBGC regulations and
the actuarial methods and assumptions used in the most recent actuarial report.
Frontier has no obligation to provide retiree welfare benefits.
(e) No action, claim, or demand of any kind has been brought or
threatened by any potential claimant or representative of such a claimant under
any plan, contract, or arrangement referred to in subsection (a) of this section
7.29, other than routine claims for benefits in the ordinary course, where
Frontier may be either (i) liable directly on such action, claim, or demand; or
(ii) obligated to indemnify any Person or group of Persons with respect to such
action, claim, or demand which is not fully covered by insurance maintained with
reputable, responsible financial insurers or by a self-insured plan.
Section 7.30 COMPENSATION. Schedule 7.30 contains a true and correct
statement of the names, relationships with Frontier, present rates of
compensation (whether in the form of salary, bonuses, commissions, or other
supplemental compensation now or hereafter payable), and aggregate compensation
for the fiscal year ended December 31, 2001 of each director, officer, or other
employee of Frontier whose aggregate compensation for the fiscal year ended
December 31, 2001 exceeded $60,000 or whose aggregate compensation at present
exceeds the rate of $60,000 per annum. Except as set forth on Schedule 7.30,
since December 31, 2001 Frontier has not changed the rate of compensation of any
of its directors, officers, employees, agents, dealers, or distributors, nor has
any Frontier Plan or program been instituted or amended to increase benefits
thereunder. There is no contract, agreement, plan, arrangement, or understanding
covering any individual that, individually or collectively, could give rise to
the payment of any amount that would not be deductible by Frontier by reason of
section 280G of the Code.
Section 7.31 FIDUCIARY AND INSURANCE ACTIVITIES.
(a) Frontier is duly qualified and registered and in good standing in
accordance with the laws of each jurisdiction in which it is required to so
qualify or register as a result of or in connection with its fiduciary or
custodial activities as conducted. Frontier is duly registered under and in
compliance with all requirements of the federal Investment Advisers Act of 1940
as amended, or is exempt from registration thereunder and from compliance with
the requirements thereof. Since January 1, 1995, Frontier has conducted, and
currently is conducting, all fiduciary and custodial activities in all Material
respects in accordance with all applicable law.
(b) Schedule 7.31(b) sets forth (i) a description of each type of
insurance activity in which Frontier engages or has present plans to engage and
(ii) for each state of the United States, the line or lines of business for
which Frontier or any subsidiary of Frontier holds an insurance license,
indicating the state in which Frontier or such subsidiary holds a resident
license or charter, as applicable.
Section 7.32 ENVIRONMENTAL LIABILITY.
(a) Except as set forth on Schedule 7.32, Frontier has no knowledge as
of the date of this Agreement, nor has it been notified by any Governmental
Authority, that it is in violation of any judgment, decree, order, law, license,
rule or regulation pertaining to environmental matters, including those arising
under the Environmental Laws.
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(b) Except as set forth on Schedule 7.32, neither Frontier, nor, to
the knowledge of Frontier, any borrower of Frontier has received notice that it
has been identified by the United States Environmental Protection Agency as a
potentially responsible party under CERCLA with respect to a site listed on the
National Priorities List, 40 C.F.R. Part 300 Appendix B, nor has Frontier or, to
the knowledge of Frontier, any borrower of Frontier received any notification
that any Hazardous Substance that it has disposed of in violation of an
Environmental Law has been found at any site at which a Governmental Authority
is conducting a remedial investigation or other action pursuant to any
Environmental Law.
(c) No portion of the Frontier Real Estate has been used by Frontier
for the handling, processing, storage or disposal of Hazardous Substances in a
manner that violates any Environmental Laws and, to the knowledge of Frontier,
except as set forth on Schedule 7.32 no underground tank or other underground
storage receptacle for Hazardous Substances is located on any of the Frontier
Real Estate. In the course of its activities, Frontier has not generated and is
not generating any hazardous waste on any of the Frontier Real Estate in a
manner, which violates any Environmental Laws. There has been no past or present
Release of Hazardous Substances by Frontier in violation of an Environmental Law
on, upon, or into any of the Frontier Real Estate. In addition, to the knowledge
of Frontier, except as set forth on Schedule 7.32, there have been no such
Releases on, upon, or into any real property in the vicinity of any of the
Frontier Real Estate that, through soil or groundwater contamination, may be
located on any of such Frontier Real Estate.
(d) With respect to any Collateral Real Estate, except as set forth on
Schedule 7.32, Frontier has not since January 1, 1999 received notice from any
Frontier borrower or third party, and has no knowledge of the receipt of any
such notice since January 1, 1990, and has no knowledge that any Frontier
borrower has generated or is generating any hazardous waste on any of the
Collateral Real Estate in a manner which violates any Environmental Laws or that
there has been any Release of Hazardous Substances by any such borrower on,
upon, or into any of the Collateral Real Estate in violation of an Environmental
Law, or that there has been any Release in violation of an Environmental Law on,
upon, or into any real property in the vicinity of any of the Collateral Real
Estate that, through soil or groundwater contamination, may be located on any of
such Collateral Real Estate.
(e) As used in this section 7.32 only, the term "Frontier" includes
Frontier and any partnership or joint venture in which it has an interest.
Section 7.33 INTANGIBLE PROPERTY. To its knowledge, Frontier owns or
possesses the right, free of the claims of any third party, to use all Material
trademarks, service marks, trade names, copyrights, patents, and licenses
currently used by it in the conduct of its business. To the knowledge of
Frontier, no Material product or service offered and no Material trademark,
service mark, or similar right used by Frontier infringes any rights of any
other Person, and Frontier has not received any written or oral notice of any
claim of such infringement.
Section 7.34 REAL AND PERSONAL PROPERTY. Except for property and assets
disposed of in the Ordinary Course of Business, Frontier possesses good and
marketable title to and owns, free and clear of any mortgage, pledge, lien,
charge, or other encumbrance or other third party interest of any nature
whatsoever which would Materially interfere with the business or operations of
Frontier, its real and personal property and other assets (other than leased
real or personal property), including those properties and assets reflected in
the Frontier Financial Statements as of March 31, 2002, or acquired by Frontier
subsequent to that date. The leases pursuant to which Frontier leases real or
personal property as lessee are valid and effective in accordance with their
respective terms; and there is not, under any such lease, any Material existing
default by Frontier or any event which, with the giving of notice or lapse of
time or otherwise, would constitute a Material default by Frontier. The real and
personal property leased by Frontier as lessee is free from any adverse claim,
which would Materially interfere with its business or operation taken as a
whole. The Material properties and equipment owned or leased as lessee by
Frontier are in normal operating condition, free from any known defects, except
such minor defects as do not Materially interfere with the continued use thereof
in the conduct of its normal operations.
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Section 7.35 LOANS, LEASES, AND DISCOUNTS.
(a) Except as set forth on Schedule 7.35(a), to the knowledge of
Frontier each loan, lease, and discount reflected as an asset of Frontier in the
Frontier Financial Statements as of March 31, 2002, or acquired since that date,
is the legal, valid, and binding obligation of the obligor named therein,
enforceable in accordance with its terms; and no loan, lease, or discount having
an unpaid balance (principal and accrued interest) in excess of $25,000, and no
outstanding letter of credit or commitment to extend credit having a notional
amount in excess of $25,000, is subject to any asserted defense, offset, or
counterclaim known to Frontier.
(b) Except as set forth on Schedule 7.35(b), Frontier does not hold
any loans or loan-participation interests purchased from, or participate in any
loans originated by, any Person.
Section 7.36 MATERIAL CONTRACTS. Neither Frontier nor any of its assets,
businesses, or operations is a party to, or is bound or affected by, or receives
benefits under any Material agreement, arrangement, or commitment not cancelable
by it without penalty, other than (a) the agreements set forth on Schedule 7.36,
and (b) agreements, arrangements, or commitments entered into in the Ordinary
Course of Business consistent with prudent banking practices.
Section 7.37 EMPLOYMENT AND SEVERANCE ARRANGEMENTS. Schedule 7.37 sets
forth
(a) all employment contracts granted by Frontier to any of its
officers, directors, shareholders, consultants, or other management officials
and any officer, director, shareholder, consultant, or management official of
any affiliate providing for increased or accelerated compensation in the event
of a change of control with respect to Frontier or any other event affecting the
ownership, control, or management of Frontier; and
(b) all employment and severance contracts, agreements, and
arrangements between Frontier and any officer, director, consultant, or other
management official of Frontier.
Section 7.38 MATERIAL CONTRACT DEFAULTS. All contracts, agreements, leases,
mortgages, or commitments referred to in section 7.12(c) are valid and in full
force and effect on the date of this Agreement. As of the date of this Agreement
and as of the Effective Time, Frontier is not and will not be in default in any
Material respect under any Material contract, agreement, commitment,
arrangement, lease, insurance policy, or other instrument to which it is a party
or by which its assets, business, or operations may be bound or affected or
under which it or its assets, business, or operations receive benefits; and
there has not occurred any event that with the lapse of time or the giving of
notice or both would constitute such a default.
Section 7.39 CAPITAL EXPENDITURES. Except as set forth on Schedule 7.39,
Frontier has no outstanding commitments to make capital expenditures which in
the aggregate exceed $25,000.
Section 7.40 REPURCHASE AGREEMENTS. With respect to all agreements pursuant
to which Frontier has purchased securities subject to an agreement to resell, it
has a valid, perfected first lien or security interest in the securities
securing the agreement, and the value of the collateral securing each such
agreement equals or exceeds the amount of the debt secured by such collateral
under such agreement.
Section 7.41 INTERNAL CONTROLS. Except as set forth on Schedule 7.41,
Frontier maintains internal controls to provide reasonable assurance to its
board of directors and officers that its assets are safeguarded, its records and
reports are prepared in compliance with all applicable legal and accounting
requirements and with its internal policies and practices, and applicable
federal, state, and local laws and regulations are complied with. These controls
extend to the preparation of its financial statements to provide reasonable
assurance that the statements are presented fairly in conformity with GAAP or,
and to the extent different from GAAP, accounting principles mandated by the
FDIC. The controls contain self-monitoring mechanisms, and appropriate actions
are taken on significant deficiencies as they are identified.
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Section 7.42 DIVIDENDS. Frontier has not paid any dividend to its
shareholders that caused its regulatory capital to be less than the amount then
required by applicable law, or that exceeded any other limitation on the payment
of dividends imposed by law, agreement, or regulatory policy.
Section 7.43 BROKERS AND ADVISERS. Except as set forth on Schedule 7.43,
(a) there are no claims for brokerage commissions, finder's fees, or similar
compensation arising out of or due to any act of Frontier in connection with the
transactions contemplated by this Agreement or based upon any agreement or
arrangement made by or on behalf of Frontier, and (b) Frontier has not entered
into any agreement or understanding with any party relating to financial
advisory services provided or to be provided with respect to the transactions
contemplated by this Agreement.
Section 7.44 INTEREST RATE RISK MANAGEMENT INSTRUMENTS.
(a) Schedule 7.44 contains a true, correct, and complete list of all
interest-rate swaps, caps, floors, and options agreements and other
interest-rate risk management arrangements to which Frontier is a party or by
which any of its properties or assets may be bound.
(b) All interest-rate swaps, caps, floors, and option agreements and
other interest rate risk management arrangements to which Frontier is a party or
by which any of its properties or assets may be bound were entered into in the
Ordinary Course of Business and, to its knowledge, in accordance with prudent
banking practice and applicable rules, regulations, and regulatory policies and
with counterparties believed to be financially responsible at the time and are
legal, valid, and binding obligations enforceable in accordance with their terms
(except as may be limited by bankruptcy, insolvency, moratorium, reorganization,
or similar laws affecting the rights of creditors generally and the availability
of equitable remedies), and are in full force and effect. Frontier has duly
performed in all Material respects of all of its obligations thereunder to the
extent that such obligations to perform have accrued; and to the knowledge of
Frontier, there are no breaches, violations or defaults or allegations or
assertions of such by any party thereunder.
Section 7.45 COBRA MATTERS. Schedule 7.45 sets forth the name, address,
telephone number, social security number, and date of Qualifying Event of each
individual covered under a group health plan that is subject to section 601 of
ERISA and sponsored by Frontier who have experienced a Qualifying Event since
January 1, 2001, together with documentation of compliance by Frontier with
applicable notice requirements.
Section 7.46 DISCLOSURE. No representation or warranty hereunder and no
certificate, statement, or other document delivered by Frontier hereunder or in
connection with this Agreement or any of the transactions contemplated
thereunder contains any untrue statement of a Material fact or omits to state a
Material fact necessary in order to make the statements contained herein, in
light of the circumstances under which they were made, not misleading. There is
no fact known to Frontier which reasonably might have a Material Adverse Effect
on Frontier which has not been disclosed in the Frontier Financial Statements or
a certificate or other document delivered to Zions by Frontier. All copies of
documents delivered to Zions by Frontier under this Agreement are true, correct,
and complete copies thereof and include all amendments, supplements, and
modifications thereto and all waivers thereunder.
Section 7.47 REGULATORY AND OTHER APPROVALS.
(a) As of the date of this Agreement, except as set forth on Schedule
7.47, Frontier is not aware of any reason why all Material consents and
approvals shall not be procured from all regulatory agencies having jurisdiction
over the transactions contemplated by this Agreement, as shall be necessary for
(i) consummation of the transactions contemplated by this Agreement, and (ii)
the
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continuation after the Effective Time of the business of Frontier as such
business is carried on immediately prior to the Effective Time, free of any
conditions or requirements which, in the reasonable opinion of Frontier, could
have a Material Adverse Effect on Frontier.
(b) As of the date of this Agreement, Frontier is not aware of any
reason why all Material consents and approvals shall not be procured from all
other Persons and entities whose consent or approval shall be necessary for (i)
consummation of the transactions contemplated by this Agreement, or (ii) the
continuation after the Effective Time of the business of Frontier as such
business is carried on immediately prior to the Effective Time.
ARTICLE 8.
COVENANTS OF FRONTIER
Frontier hereby covenants and agrees as follows:
Section 8.01 RIGHTS OF ACCESS. In addition to any other rights of access
provided to Zions and NBA herein, until the Effective Time Frontier will give to
Zions and NBA and to their representatives, including their certified public
accountants, E & Y, full access during normal business hours to all of the
property, documents, contracts, books, and records of Frontier, and such
information with respect to their business affairs and properties as Zions or
NBA from time to time may reasonably request.
Section 8.02 SHAREHOLDERS' MEETING. Frontier shall hold a meeting of its
shareholders in accordance with section 10-1103 of the Arizona Revised Statutes
and section 215a(a)(2) of title 12, United States Code, as promptly as possible
after the effectiveness of the Registration Statement, after at least ten days'
prior written notice thereof to the shareholders of Frontier, to consider and
vote upon the adoption of this Agreement, the Merger, and the other transactions
contemplated hereby. Subject to its fiduciary duty to shareholders, the board of
directors of Frontier shall approve this Agreement, the Merger, and the other
transactions contemplated hereby and recommend to its shareholders that each of
the foregoing be adopted.
Section 8.03 MONTHLY AND QUARTERLY FINANCIAL STATEMENTS; MINUTES OF
MEETINGS AND OTHER MATERIALS.
(a) Frontier will continue to prepare all of the monthly and quarterly
financial statements and financial reports to regulatory authorities for the
months and quarterly periods ending between March 31, 2002 and the date of the
Effective Time which it customarily prepared during the period between January
1, 2000 and March 31, 2002 and shall promptly provide Zions with copies of all
such financial statements and reports. All of such financial statements and
reports, including the related notes, schedules, and memorandum items, will have
been prepared in accordance with GAAP consistently applied in all Material
respects (except that Call Reports may be prepared in accordance with the
official instructions applicable thereto at the time of filing).
(b) Frontier shall promptly provide Zions with (i) copies of all of
its periodic reports to directors and to shareholders, whether or not such
reports were prepared or distributed in connection with a meeting of the board
of directors or a meeting of the shareholders, prepared or distributed between
the date of this Agreement and the Effective Time, and (ii) complete copies of
all minutes of meetings of its board of directors and shareholders which
meetings take place between the date of this Agreement and the Effective Time,
certified by the secretary or cashier or an assistant secretary or assistant
cashier of Frontier, as the case may be.
Section 8.04 EXTRAORDINARY TRANSACTIONS. Without the prior written consent
of Zions, Frontier will not, on or after the date of this Agreement:
(a) declare or pay any cash dividends or property dividends with
respect to any class of its capital stock;
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(b) declare or distribute any stock dividend, authorize a stock split,
or authorize, issue or make any distribution of its capital stock or any other
securities (except for issuances of Frontier Stock upon exercise of stock
options outstanding on the date of this Agreement), or grant any options to
acquire such additional securities;
(c) either (i) merge into, consolidate with, or sell or otherwise
dispose of its assets to any other Person, or enter into any other transaction
or agree to effect any other transaction not in the Ordinary Course of Business
except as explicitly contemplated herein, or (ii) engage in any discussions
concerning such a possible transaction except as explicitly contemplated herein;
(d) convert the charter or form of entity of Frontier from that in
existence on the date of this Agreement to any other charter or form of entity;
(e) make any direct or indirect redemption, purchase, or other
acquisition of any of its capital stock;
(f) except in the Ordinary Course of Business or to accomplish the
transactions contemplated by this Agreement, incur any liability or obligation,
make any commitment or disbursement, acquire or dispose of any property or
asset, make any contract or agreement, pay or become obligated to pay any legal,
accounting, or miscellaneous other expense, or engage in any transaction;
(g) other than in the Ordinary Course of Business, subject any of its
properties or assets to any lien, claim, charge, option, or encumbrance;
(h) enter into or assume any one or more commitments to make capital
expenditures, any of which individually exceeds $10,000 or which in the
aggregate exceed $25,000;
(i) price its deposits such that its rates for any category of deposit
account exceed the average of the rates being paid by Bank of America National
Association, Bank One National Association, National Bank of Arizona, and Wells
Fargo Bank Arizona, National Association in eastern Arizona;
(j) solicit or accept any deposit that, under 12 C.F.R. ss.
337.6(a)(2), would constitute a "brokered deposit";
(k) except for increases in the Ordinary Course of Business, which
together with all other compensation rate increases do not exceed 4.5 percent
per annum of the aggregate payroll as of March 31, 2002, increase the rate of
compensation of any employee or enter into any agreement to increase the rate of
compensation of any employee;
(l) except as otherwise required by law, create or modify any pension
or profit sharing plan, bonus, deferred compensation, death benefit, or
retirement plan, or the level of benefits under any such plan, nor increase or
decrease any severance or termination pay benefit or any other fringe benefit;
(m) enter into any employment or personal services contract with any
Person, including any contract, agreement, or arrangement described in section
7.37(a), except directly to facilitate the transactions contemplated by this
Agreement;
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(n) purchase any loans or loan-participation interests from, or
participate in any loans originated by, any Person; nor
(o) acquire or establish any subsidiary.
Section 8.05 Preservation of Business. Frontier will:
(a) carry on its business and manage its assets and properties
diligently and substantially in the same manner as heretofore;
(b) maintain the ratio of its loans to its deposits at approximately
the same level as existed as of the date of this Agreement, as adjusted to allow
for seasonal fluctuations of loans and deposits of a kind and amount experienced
traditionally by it and for the imposition of more stringent loan underwriting
criteria;
(c) except for transactions undertaken in the Ordinary Course of
Business, manage its investment portfolio in substantially the same manner and
pursuant to substantially the same investment policies as from January 1, 2002
to the date of this Agreement, and will take no action to change to any Material
extent the percentage which its investment portfolio bears to its total assets,
or to lengthen to any Material extent the average maturity of its investment
portfolio, or of any significant category thereof, provided that nothing in this
paragraph shall prohibit investments in federal funds;
(d) use commercially reasonable efforts to continue in effect its
present insurance coverage on all properties, assets, business, and personnel;
(e) use commercially reasonable efforts to preserve its business
organization intact, to keep available its present employees, and to preserve
its present relationships with customers and others having business dealings
with it;
(f) not do anything and not fail to do anything which will cause a
breach of or default in any contract, agreement, commitment, or obligation to
which it is a party or by which it may be bound;
(g) conduct its affairs so that at the Effective Time none of its
representations and warranties will be inaccurate, none of its covenants and
agreements will be breached, and no condition in this Agreement will remain
unfulfilled by reason of its actions or omissions;
(h) not amend its Organizational Documents; and
(i) not grant or expand any shareholders' rights to dissent from any
merger.
Section 8.06 COMFORT LETTER. At the time of the effectiveness of the
Registration Statement, but prior to the mailing of the Proxy Statement, and on
the date of the Effective Time, Frontier shall furnish Zions with a letter from
Vavrinek, Trine, Day & Co., LLP, its independent auditors, in form and substance
acceptable to Zions, stating that (a) they are independent accountants with
respect to Frontier within the meaning of the Securities Act and the published
rules and regulations thereunder, (b) in their opinion the consolidated
financial statements of Frontier included in the Registration Statement comply
as to form in all Material respects with the applicable accounting requirements
of the Securities Act and the published rules and regulations thereunder, and
(c) a reading of the latest available unaudited consolidated financial
statements of Frontier and inquiries of certain officials of Frontier
responsible for financial and accounting matters as to transactions and events
since the date of the most recent consolidated statement of condition included
in their most recent audit report with respect to Frontier did not cause them to
believe that (i) such latest available unaudited consolidated financial
statements are not stated on a basis consistent with that followed in Frontier's
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audited consolidated financial statements; or (ii) except as disclosed in the
letter, at a specified date not more than five Business Days prior to the date
of such letter, there was any change in Frontier's capital stock or any change
in consolidated long-term debt or any decrease in the consolidated net assets of
Frontier or the consolidated allowance for loan and lease losses of Frontier as
compared with the respective amounts shown in the most recent Frontier audited
consolidated financial statements. The letter shall also cover such other
matters pertaining to Frontier's financial data and statistical information
included in the Registration Statement as may reasonably be requested by Zions.
Section 8.07 AFFILIATES' AGREEMENTS.
(a) Frontier will furnish to Zions (i) a list of all individuals known
to Frontier who as of the date of execution of this Agreement may be deemed to
be a Frontier Affiliate and (ii) if different from the list required by section
8.07(a)(i), a list of all individuals known to Frontier who at the date of
Frontier's special meeting of shareholders to vote upon the transactions
contemplated by this Agreement may be deemed to be a Frontier Affiliate.
(b) Frontier will use commercially reasonable efforts to cause each
such Frontier Affiliate, except Elizabeth McCarty, to deliver to Zions on or
before the date of this Agreement (or, in the case of any individual who becomes
a Frontier Affiliate after the date of this Agreement, not later than ten days
after such individual becomes a Frontier Affiliate) an Affiliates Agreement.
(c) Frontier will use commercially reasonable efforts to cause
Elizabeth McCarty to deliver an Affiliates Agreement to Zions within twenty days
of the date of this Agreement.
Section 8.08 LOAN SALES. Frontier shall cause all of the loans listed on
Schedule 8.08 to be sold to one or more Persons (other than a subsidiary of
Frontier), in one or more transactions, each of which qualifies for sale
treatment under GAAP and in the case of each of which, following its
consummation:
(a) Frontier retains no risk of loss from the sold loan resulting from
any cause, and
(b) Frontier has no obligation to any Person for the payment of
principal or interest on the sold loan resulting from --
(i) default on principal or interest by the obligor of the sold
loan or from any other deficiencies in the performance of the obligor,
(ii) changes in the market value of the sold loans after they
have been sold,
(iii) any contractual relationship between Frontier and the
purchaser of the sold loan incident to the transfer that, by its terms, could
continue even after final payment, default, or other termination of the sold
loan, or
(iv) any other cause.
Section 8.09 UPDATES TO SCHEDULES. Not less than fifteen Business Days
prior to the Effective Time and as of the Effective Time, Frontier will deliver
to Zions any updates to the schedules to its representations which may be
required to disclose events or circumstances arising after the date of this
Agreement. Such schedules shall be updated only for the purpose of making the
representations and warranties contained in this Agreement to which such part of
such schedules relate true and correct in all Material respects as of the date
such schedule is updated, and the update to a schedule shall not have the effect
of making any representation or warranty contained in this Agreement true and
correct in all Material respects as of a date prior to the date of such update
to a schedule. For purposes of determining whether the condition set forth in
section 5.01 to obligations of Zions have been met, any such updates to
schedules delivered to Zions shall be disregarded unless Zions shall have agreed
to accept any changes reflected in such updates to schedules.
Section 8.10 SUBSEQUENT EVENTS. Until the Effective Time, Frontier will
immediately advise Zions in a detailed written notice of any fact or occurrence
or any pending or threatened occurrence of which it obtains knowledge and which
(if existing and known at the date of the execution of this Agreement) would
have been required to be set forth or disclosed by Frontier in or pursuant to
this Agreement which (if existing and known at any time prior to or at the
Effective Time) would make the performance by Frontier of a covenant contained
in this Agreement impossible or make such performance Materially more difficult
than in the absence of such fact or occurrence, or which (if existing and known
at the time of the Effective Time) would cause a condition to any party's
obligations under this Agreement not to be fully satisfied.
Section 8.11 INCONSISTENT ACTIVITIES. Unless and until the Merger has been
consummated or this Agreement has been terminated in accordance with its terms,
Frontier will not (a) solicit or encourage, directly or indirectly, any
inquiries or proposals to acquire more than 1 percent of the Frontier Stock or
any significant portion of the assets of Frontier (whether by tender offer,
merger, purchase of assets, or other transactions of any type); (b) afford any
third party which may be considering any such transaction access to its
properties, books or records except as required by mandatory provisions of law;
(c) enter into any discussions or negotiations for, or enter into any agreement
or understanding which provides for, any such transaction, or (d) authorize or
permit any of its directors, officers, employees or agents to do or permit any
of the foregoing. If Frontier becomes aware of any offer or proposed offer to
acquire any shares of its capital stock or any significant portion of its assets
(regardless of the form of the proposed transaction) or of any other matter
which could adversely affect this Agreement or the Merger, Frontier shall
immediately give notice thereof to Zions.
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Section 8.12 COBRA OBLIGATIONS. For all individuals covered under a group
health plan that is subject to section 601 of ERISA and sponsored by Frontier,
and who experience a "qualifying event" (as defined in section 603 of ERISA)
within thirty days of the date of this Agreement, Frontier shall remain
responsible for providing all notices and election forms necessary to comply
with ERISA and the Code and will take all steps necessary to implement elections
pursuant to such notices.
Section 8.13 STOCK OPTION PLAN TERMINATION. Not later than thirty days
after the date of this Agreement, the board of directors of Frontier shall
approve the termination of the Frontier State Bank 2000 Stock Option Plan in
accordance with its terms, with a date of termination that shall be no later
than the close of business on the Business Day prior to the date of the
Effective Time.
ARTICLE 9.
REPRESENTATIONS AND WARRANTIES OF ZIONS AND NBA
Zions (with respect to itself and NBA), and NBA (solely with respect to
itself) each represent and warrant to Frontier as follows:
Section 9.01 ORGANIZATION, POWERS, AND QUALIFICATION. Each of Zions and NBA
is a corporation which is duly organized, validly existing, and in good standing
under the laws of its jurisdiction of incorporation and has all requisite
corporate power and authority to own and operate its properties and assets, to
lease properties used in its business, and to carry on its business as now
conducted. Each of Zions and NBA owns or possesses in the operation of its
business all franchises, licenses, permits, branch certificates, consents,
approvals, waivers, and other authorizations, governmental or otherwise, which
are necessary for it to conduct its business as now conducted, except for those
where the failure of such ownership or possession would not have a Material
Adverse Effect on Zions. Zions is duly qualified and licensed to do business and
is in good standing in every jurisdiction with respect to which the failure to
be so qualified or licensed could result in a Material Adverse Effect on Zions.
Section 9.02 EXECUTION AND PERFORMANCE OF AGREEMENT. Each of Zions and NBA
has all requisite corporate power and authority to execute and deliver this
Agreement and to perform its terms.
Section 9.03 BINDING OBLIGATIONS; DUE AUTHORIZATION. This Agreement
constitutes the valid, legal, and binding obligations of each of Zions and NBA
enforceable against each of them in accordance with its terms, except as
enforcement may be limited by applicable bankruptcy, insolvency, moratorium or
similar law, or by general principles of equity. The execution, delivery, and
performance of this Agreement and the transactions contemplated thereby have
been duly and validly authorized by the board of directors of each of Zions and
NBA. No other corporate proceedings on the part of either of them are necessary
to authorize this Agreement or the carrying out of the transactions contemplated
hereby.
Section 9.04 ABSENCE OF DEFAULT. None of the execution or the delivery of
this Agreement, the consummation of the transactions contemplated hereby, or the
compliance with or fulfillment of the terms hereof will conflict with, or result
in a breach of any of the terms, conditions, or provisions of, or constitute a
default under the Organizational Documents of Zions or NBA. None of such
execution, consummation, or fulfillment will (a) conflict with, or result in a
breach of the terms, conditions, or provisions of, or constitute a violation,
conflict, or default under, or give rise to any right of termination,
cancellation, or acceleration with respect to, or result in the creation of any
lien, charge, or encumbrance upon, any of the property or assets of Zions or NBA
pursuant to any agreement or instrument under which it is obligated or by which
any of its properties or assets may be bound, including any lease, contract,
mortgage, promissory note, deed of trust, loan, credit arrangement or other
commitment or arrangement of it in respect of which it is an obligor, except for
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such conflicts, breaches, violations, defaults, rights of termination,
cancellation, or acceleration, or results which in the aggregate could not
reasonably be expected to have a Material Adverse Effect on Zions, or (b) if the
Merger is approved by the OCC, the Commissioner, and the Department, violate any
law, statute, rule, or regulation of any Governmental Authority to which Zions
or NBA is subject and which is Material to its operations, or (c) violate any
judgment, order, writ, injunction, decree, or ruling to which it or any of its
properties or assets is subject or bound. None of the execution or delivery of
this Agreement, the consummation of the transactions contemplated hereby, or the
compliance with or fulfillment of the terms hereof will require any
authorization, consent, approval, or exemption by any Person which has not been
obtained, or any notice or filing which has not been given or done, other than
approval of or waiver of jurisdiction over the transactions contemplated by this
Agreement by, notices to, or filings with the OCC, the Commissioner, the
Department, the SEC, state securities commissions, and the Secretary of State of
the State of Arizona.
Section 9.05 BROKERS AND ADVISERS.
(a) There are no claims for brokerage commissions, finder's fees, or
similar compensation arising out of or due to any act of Zions or NBA in
connection with the transactions contemplated by this Agreement or based upon
any agreement or arrangement made by or on behalf of either of them.
(b) Neither Zions nor NBA has entered into any agreement or
understanding with any party relating to financial advisory services provided or
to be provided with respect to the transactions contemplated by this Agreement.
Section 9.06 BOOKS AND RECORDS. The books and records of each of Zions and
NBA fairly reflect the transactions to which it is a party or by which its
properties are subject or bound. Such books and records have been properly kept
and maintained and are in compliance in all Material respects with all
applicable legal and accounting requirements. Each of Zions and NBA follows GAAP
applied on a consistent basis in the preparation and maintenance of its books of
account and financial statements.
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Section 9.07 FINANCIAL STATEMENTS. Zions has furnished to Frontier the
Zions Financial Statements. All of the Zions Financial Statements, including the
related notes, (a) except as indicated in the notes thereto, were prepared in
accordance with GAAP consistently applied in all Material respects (subject, in
the case of unaudited statements, to recurring audit adjustments normal in
nature and amount), and (b) are in accordance with the books and records of
Zions, (c) fairly reflect the consolidated financial position of Zions as of
such dates, and the consolidated results of operations of Zions for the periods
ended on such dates, and do not fail to disclose any Material extraordinary or
out-of-period items, and (d) reflect, in accordance with GAAP, consistently
applied in all Material respects, adequate provision for, or reserves against,
the possible consolidated loan losses of Zions as of such dates.
Section 9.08 ABSENCE OF CERTAIN DEVELOPMENTS. Since March 31, 2002, there
has been (a) no Material Adverse Effect with respect to Zions, and (b) no
Material deterioration in the quality of the consolidated loan portfolio of
Zions, and no Material increase in the consolidated level of nonperforming
assets or nonaccrual loans at Zions or in the level of its consolidated
provision for credit losses or its consolidated reserve for possible credit
losses.
Section 9.09 DISCLOSURE. No representation or warranty hereunder and no
certificate, statement, or other document delivered by Zions or NBA hereunder or
in connection with this Agreement or any of the transactions contemplated
thereunder contains any untrue statement of a Material fact or omits to state a
Material fact necessary in order to make the statements contained herein, in
light of the circumstances under which they were made, not misleading. There is
no fact known to Zions or NBA which might have a Material Adverse Effect on
Zions which has not been disclosed in the Zions Financial Statements or a
certificate or other document delivered by Zions to Frontier. All copies of all
documents delivered to Frontier by Zions under this Agreement are true, correct,
and complete copies thereof and include all amendments, supplements, and
modifications thereto and all waivers thereunder.
Section 9.10 REGULATORY AND OTHER APPROVALS.
(a) As of the date of this Agreement, Zions and NBA are not aware of
any reason why all Material consents and approvals shall not be procured from
all regulatory agencies having jurisdiction over the transactions contemplated
by this Agreement, as shall be necessary for (i) consummation of the
transactions contemplated by this Agreement, and (ii) the continuation after the
Effective Time of the business of Frontier as such business is carried on
immediately prior to the Effective Time, free of any conditions or requirements
which, in the reasonable opinion of Zions and NBA, could have a Material Adverse
Effect on Zions.
(b) As of the date of this Agreement, Zions and NBA are not aware of
any reason why all Material consents and approvals shall not be procured from
all other Persons and entities whose consent or approval shall be necessary for
(i) consummation of the transactions contemplated by this Agreement, or (ii) the
continuation after the Effective Time of the business of Frontier as such
business is carried on immediately prior to the Effective Time.
ARTICLE 10.
CLOSING
Section 10.01 PLACE AND TIME OF CLOSING. Closing shall take place at the
offices of Ryley Carlock & Applewhite, One North Central Avenue, Suite 1200,
Phoenix, Arizona, or such other place as the parties choose, commencing at 10:00
a.m., local time, on the date of the Effective Time, provided that all
conditions precedent to the obligations of the parties hereto to close have then
been met or waived.
Section 10.02 EVENTS TO TAKE PLACE AT CLOSING. At the Closing, the
following actions will be taken:
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(a) Such certificates and other documents as are required by this
Agreement to be executed and delivered at or prior to the Effective Time and
have not been so executed and delivered, and such other certificates and
documents as are mutually deemed by the parties to be otherwise desirable for
the effectuation of the Closing, will be so executed and delivered; and then
(b) the Merger and the issuance of shares incident thereto shall be
effected; provided, however, that the administrative and ministerial aspects of
the issuance of shares incident to the Merger will be settled as soon thereafter
as shall be reasonable under the circumstances.
ARTICLE 11.
TERMINATION, DAMAGES FOR BREACH, WAIVER, AND AMENDMENT
Section 11.01 TERMINATION BY REASON OF LAPSE OF TIME. Notwithstanding the
provisions of section 11.02, this Agreement may be terminated by any party on or
after December 30, 2002, by instrument duly authorized and executed and
delivered to the other parties, unless (a) the Effective Time shall have
occurred on or before such date or (b) the failure of the Effective Time to have
occurred on or before such date has been due to the failure of the party seeking
to terminate this Agreement to perform or observe its covenants and agreements
as set forth herein.
Section 11.02 GROUNDS FOR TERMINATION. This Agreement may be terminated by
written notice of termination at any time before the Effective Time (whether
before or after action by shareholders of Frontier):
(a) by mutual consent of the parties hereto;
(b) by Zions, upon written notice to Frontier given at any time (i) if
any of the representations and warranties of Frontier contained in article 7 was
Materially incorrect when made, or (ii) in the event of a Material breach or
Material failure by Frontier of any covenant or agreement of Frontier contained
in this Agreement which has not been, or cannot be, cured within thirty days
after written notice of such breach or failure is given to Frontier and which
Material inaccuracy, breach, or failure, if continued to the Effective Time,
would result in any condition set forth in article 4 or article 5 not being
satisfied;
(c) by Frontier, upon written notice to Zions given at any time (i) if
any of the representations and warranties of Zions or NBA contained in article 9
was Materially incorrect when made, or (ii) in the event of a Material breach or
Material failure by Zions or NBA of any covenant or agreement of Zions or NBA
contained in this Agreement which has not been, or cannot be, cured within
thirty days after written notice of such breach or failure is given to Zions or
NBA, as the case may be, and which inaccuracy, breach, or failure, if continued
to the Effective Time, would result in any condition set forth in article 4 or
article 6 not being satisfied;
(d) by either Zions or Frontier upon written notice given to the other
if the board of directors of either Zions or Frontier shall have determined in
its sole judgment made in good faith, after due consideration and consultation
with counsel, that the Merger has become inadvisable or impracticable by reason
of the institution of litigation by a Governmental Authority to restrain or
invalidate the transactions contemplated by this Agreement;
(e) by either Zions or Frontier upon written notice given to the other
if any of the approvals referred to in section 3.02, 3.03, 3.04, or 3.05 are
denied and such denial has become final and nonappealable; or
(f) by either Zions or Frontier upon written notice given to the other
if the shareholders of Frontier shall have voted on and failed to adopt this
Agreement, at the meeting of such shareholders called for such purpose.
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Section 11.03 EFFECT OF TERMINATION. In the event of the termination and
abandonment of this Agreement pursuant to the provisions of section 11.01 or
section 11.02, this Agreement shall become void and have no force or effect,
without any liability on the part of Zions, NBA, Frontier, or their respective
directors or officers or shareholders, in respect of this Agreement.
Notwithstanding the foregoing:
(a) the provisions of sections 11.03(a), 11.03(b), 12.01, 12.04,
12.06, and 12.12 shall survive such termination;
(b) if such termination is a result of any of the representations and
warranties of Frontier being Materially incorrect when made (other than due to
(i) a good-faith, inadvertent omission from a schedule to its representations or
(ii) a disclosure in an update to a schedule to its representations delivered
pursuant to section 8.09 which disclosure had not been made in a schedule to its
representations and was not required to be made to a schedule to its
representations as of the date of this Agreement to make such schedule true and
correct in all Material respects or, if required to be so made, had not been
made due to a good-faith, inadvertent omission) or a result of the Material
breach or Material failure by Frontier of a covenant or agreement hereunder,
Frontier shall be liable in the amount of $500,000 to Zions;
(c) if such termination is a result of any of the representations and
warranties of Frontier being Materially incorrect when made due to (i) a
good-faith, inadvertent omission from a schedule to its representations or (ii)
a disclosure in an update to a schedule to its representations delivered
pursuant to section 8.09 which disclosure had not been made in a schedule to its
representations and was not required to be made to a schedule to its
representations as of the date of this Agreement to make such schedule true and
correct in all Material respects or, if required to be so made, had not been
made due to a good-faith, inadvertent omission, Frontier shall be liable in the
amount of $250,000 to Zions;
(d) if such termination is a result of any of the representations and
warranties of Zions or NBA being Materially incorrect when made or a result of
the Material breach or Material failure by Zions or NBA of a covenant or
agreement hereunder, Zions or NBA, as applicable, shall be liable in the amount
of $500,000 to Frontier; and
(e) if such termination is a result of any of the representations and
warranties of Frontier being Materially incorrect when made due to (i) a
good-faith, inadvertent omission from a schedule to its representations or (ii)
a disclosure in an update to a schedule to its representations delivered
pursuant to section 8.09 which disclosure had not been made in a schedule to its
representations and was not required to be made to a schedule to its
representations as of the date of this Agreement to make such schedule true and
correct in all Material respects or, if required to be so made, had not been
made due to a good-faith, inadvertent omission, and if within eighteen months of
such termination Frontier shall execute a definitive agreement with respect to a
proposal to acquire 25 percent or more of the Frontier Stock or 25 percent or
more of the assets of Frontier (whether by tender offer, merger, purchase of
assets, or other transactions of any type), then in addition to any amount
payable or paid under subsection (c) of this section 11.03, Frontier shall be
liable to Zions in the further amount of $250,000.
Section 11.04 WAIVER OF TERMS OR CONDITIONS. Any of the terms or conditions
of this Agreement, to the extent legally permitted, may be waived at any time
prior to the Effective Time by the party which is, or whose shareholders are,
entitled to the benefit thereof, and the other parties hereto may rely on the
delivery of such a waiver as conclusive evidence of such judgment and the
validity of the waiver.
Section 11.05 AMENDMENT. Anything herein or elsewhere to the contrary
notwithstanding, to the extent permitted by law, this Agreement and the exhibits
hereto may be amended, supplemented, or interpreted at any time prior to the
Effective Time by written instrument duly authorized and executed by each of the
parties hereto; provided, however, that (except as specifically provided herein
or as may be approved by such shareholders) this Agreement may not be amended
after the action by shareholders of Frontier in any respect that would prejudice
the economic interests of such Frontier shareholders, or any of them.
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ARTICLE 12.
GENERAL PROVISIONS
Section 12.01 ALLOCATION OF COSTS AND EXPENSES. Except as provided in this
section, each party hereto shall pay its own fees and expenses, including the
fees and expenses of its own counsel and its own accountants and tax advisors,
incurred in connection with this Agreement and the transactions contemplated
thereby. For purposes of this section, the cost of printing and delivering the
Proxy Statement and other material to be transmitted to shareholders of Frontier
shall be deemed to be incurred on behalf of Frontier, and the cost of
registering under federal and state securities laws the stock of Zions to be
received by the shareholders of Frontier shall be deemed to be incurred on
behalf of Zions.
Section 12.02 MUTUAL COOPERATION.
(a) Subject to the terms and conditions herein provided, each party
shall use its commercially reasonable best efforts, and shall cooperate fully
with the other party, in expeditiously carrying out the provisions of this
Agreement, in expeditiously making all filings, and in obtaining all necessary
governmental approvals, and as soon as practicable shall execute and deliver, or
cause to be executed and delivered, such governmental notifications and
additional documents and instruments and do or cause to be done all additional
things necessary, proper, or advisable under applicable law to consummate and
make effective on the earliest practicable date the transactions contemplated
hereby.
(b) Zions shall promptly prepare and file with the SEC the
Registration Statement. Zions and Frontier shall use all reasonable efforts to
have the Registration Statement declared effective under the Securities Act as
promptly as practicable after such filing. Each party will supply in a timely
fashion such information concerning such party as shall be necessary or
appropriate for inclusion in the Registration Statement.
(c) Prior to the Effective Time, the parties shall cooperate, and
shall make all reasonable efforts to cause their respective data processing
service providers to cooperate, to complete all reasonable steps for an orderly
transfer of all applicable data tapes and processing information, and to
facilitate an electronic and systematic conversion of all applicable data
regarding Frontier to NBA's own system of electronic data processing within a
reasonable period following the Effective Time. Each party shall bear its own
costs associated with the transfer of tapes and information and the conversion
of data. Frontier will provide, in an industry standard format, all test tapes
and reports necessary to complete the transfer and will provide a test
conversion tape (including detailed information on all Frontier systems) and set
of deconversion reports on or before October 1, 2002, a preliminary tape and set
of deconversion reports six weeks prior to the Effective Time, and an updated
preliminary tape and set of deconversion reports no more than two weeks prior to
the Effective Time.
Section 12.03 FORM OF PUBLIC DISCLOSURES. Zions and Frontier shall mutually
agree in advance upon the form and substance of all public disclosures
concerning this Agreement and the transactions contemplated hereby.
Section 12.04 CONFIDENTIALITY. Zions, NBA, Frontier, and their respective
subsidiaries shall use all information that each obtains from the other 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. Neither Zions, NBA, Frontier, nor their respective subsidiaries shall
use any of such information for any other purpose, including the competitive
detriment of any other party. Zions and NBA, on the one hand, and Frontier, on
the other hand, shall maintain as strictly confidential all information each of
them learns from the other and shall, at any time after termination of this
Agreement in accordance with the terms thereof, upon the request of the other,
return promptly to it all documentation provided by it or made available to
third parties. Each of the parties may disclose such information to its
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respective affiliates, counsel, accountants, tax advisors, and consultants,
provided that such parties are advised of the confidential nature of such
information and agree to be bound by the terms of this section 12.04. The
confidentiality agreement contained in this section 12.04 shall remain operative
and in full force and effect, and shall survive the termination of this
Agreement.
Section 12.05 CLAIMS OF BROKERS.
(a) Frontier shall indemnify, defend, and hold Zions and NBA harmless
for, from, and against any claim, suit, liability, fees, or expenses (including
attorneys' fees and costs of court) arising out of any claim for brokerage
commissions, finder's fees, or similar compensation arising out of or due to any
of its acts in connection with the transactions contemplated by this Agreement
or based upon any agreement or arrangement made by it or on its behalf with
respect to Zions or NBA.
(b) Each of Zions and NBA shall indemnify, defend, and hold Frontier
harmless for, from, and against any claim, suit, liability, fees, or expenses
(including attorneys' fees and costs of court) arising out of any claim for
brokerage commissions, finder's fees, or similar compensation arising out of or
due to any of its acts in connection with any of the transactions contemplated
by this Agreement or based upon any agreement or arrangement made by it or on
its behalf with respect to Frontier.
Section 12.06 INFORMATION FOR APPLICATIONS AND REGISTRATION STATEMENT.
(a) Each party represents and warrants that all information concerning
it which is included in any statement and application (including the
Registration Statement) made to any Governmental Authority in connection with
the transactions contemplated by this Agreement shall not, with respect to such
party, contain an untrue statement of a Material fact or omit any Material fact
required to be stated therein or necessary to make the statements made, in light
of the circumstances under which they were made, not misleading. The party so
representing and warranting will indemnify, defend, and hold harmless the other,
each of its directors and officers, each underwriter and each Person, if any,
who controls the other within the meaning of the Securities Act, for, from and
against any and all losses, claims, suits, damages, expenses, or liabilities to
which any of them may become subject under applicable laws (including the
Securities Act and the Exchange Act) and rules and regulations thereunder and
will reimburse them for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any actions whether or not
resulting in liability, insofar as such losses, claims, damages, expenses,
liabilities, or actions arise out of or are based upon any untrue statement or
alleged untrue statement of a Material fact contained in any such application or
statement or arise out of or are based upon the omission or alleged omission to
state therein a Material fact required to be stated therein, or necessary in
order to make the statements therein not misleading, but only insofar as any
such statement or omission was made in reliance upon and in conformity with
information furnished in writing by the representing and warranting party
expressly for use therein. Each party agrees at any time upon the request of the
other to furnish to the other a written letter or statement confirming the
accuracy of the information contained in any proxy statement, registration
statement, report, or other application or statement, and confirming that the
information contained in such document was furnished expressly for use therein
or, if such is not the case, indicating the inaccuracies contained in such
document or draft or indicating the information not furnished expressly for use
therein. The indemnity agreement contained in this section 12.06(a) shall remain
operative and in full force and effect, regardless of any investigation made by
or on behalf of any of the other parties, and shall survive the termination of
this Agreement or the consummation of the transactions contemplated thereby.
(b) In order to provide for just and equitable contribution in
circumstances in which the indemnity agreement contained in section 12.06(a) of
this Agreement is for any reason held by a court of competent jurisdiction to be
unenforceable as to any or every party, then the parties in such circumstances
shall contribute to the aggregate losses, claims, damages and liabilities
(including any investigation, legal and other expenses incurred in connection
with, and any amounts paid in settlement of, any action, suit or proceeding or
any claims asserted) to which any party may be subject in such proportion as the
court of law determines based on the relative fault of the parties.
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Section 12.07 COVENANTS OF ZIONS.
(a) From the date of this Agreement to the Effective Time, Zions
shall, contemporaneously with the filing with the SEC of any periodic or current
report pursuant to section 13 of the Exchange Act, deliver a copy of such report
to Frontier.
(b) Subject to section 5.10, following the Effective Time neither
Zions nor NBA will take any action to abrogate or diminish any right accorded
under the Organizational Documents of Frontier as they existed immediately prior
to the Effective Time to any individual who, at or prior to the Effective Time,
was a director or officer of Frontier to indemnification from or against Losses
pertaining to or incurred in connection with any threatened or actual action,
suit, claim, or proceeding (whether civil, criminal, administrative,
arbitration, or investigative) arising out of events, matters, actions, or
omissions occurring at or prior to the Effective Time. To the extent not
provided by the foregoing, following the Effective Time and to the extent
permitted by law, all rights to such indemnification accorded under the
Organizational Documents of Frontier to any individual who, at or prior to the
Effective Time, was a director or officer of Frontier shall survive the
Effective Time and, following the Merger, to the extent permitted by law, Zions
and NBA will honor such obligations in accordance with their terms with respect
to events, acts, or omissions occurring prior to the Effective Time.
Section 12.08 ADJUSTMENTS FOR CERTAIN EVENTS. Anything in this Agreement to
the contrary notwithstanding, all prices per share, share amounts, per-share
amounts, and exchange ratios referred to in this Agreement shall be
appropriately adjusted to account for stock dividends, for split-ups, and for
reclassifications that are caused by mergers, recapitalizations, combinations,
conversions, exchanges of shares or the like, but not for issuances of stock
other than in connection with the foregoing and not for normal and recurring
cash dividends declared or paid in a manner consistent with the established
practice of the payer.
Section 12.09 STOCK REPURCHASES. Frontier acknowledges that from time to
time Zions repurchases shares of its common stock in the open market in
accordance with market conditions. Nothing in this Agreement shall be construed
to abridge the right of Zions to continue to do so in compliance with Exchange
Act rules and regulations and pursuant to advice of independent securities
counsel for Zions.
Section 12.10 COUNTERPARTS. This Agreement may be executed in two or more
counterparts each of which shall be deemed to constitute an original, but such
counterparts together shall be deemed to be one and the same instrument and to
become effective when one or more counterparts have been signed by each of the
parties hereto. It shall not be necessary in making proof of this Agreement or
any counterpart hereof to produce or account for the other counterpart or
counterparts.
Section 12.11 ENTIRE AGREEMENT. This Agreement sets forth the entire
understanding of the parties hereto with respect to their commitments to one
another and their undertakings vis-a-vis one another on the subject matter
hereof. Any previous agreements or understandings among the parties regarding
the subject matter hereof are merged into and superseded by this Agreement.
Nothing in this Agreement express or implied is intended or shall be construed
to confer upon or to give any Person, other than Zions, NBA, Frontier, and their
respective shareholders, any rights or remedies under or by reason of this
Agreement.
Section 12.12 SURVIVAL OF REPRESENTATIONS, WARRANTIES, AND COVENANTS. None
of the representations, warranties, covenants, and agreements in this Agreement
or in any instrument delivered pursuant to this Agreement shall survive the
Effective Time, except for sections 12.04, 12.06, 12.07(b), and those other
covenants and agreements contained herein which by their terms apply in whole or
in part after the Effective Time.
93
Section 12.13 NOTICES. All notices, consents, waivers, or other
communications which are required or permitted hereunder shall be in writing and
deemed to have been duly given if delivered personally or by messenger,
transmitted by telex or telegram, by express courier, or sent by registered or
certified mail, return receipt requested, postage prepaid. All communications
shall be addressed to the appropriate address of each party as follows:
If to Zions or NBA:
Zions Bancorporation
One South Main, Suite 1380
Salt Lake City, Utah 84111
Attention: Mr. Doyle L. Arnold
Executive Vice President, Chief Financial Officer and
Secretary
With a required copy to:
Brian D. Alprin, Esq.
Duane Morris LLP
1667 K Street, N.W., Suite 700
Washington, D.C. 20006
If to Frontier:
Frontier State Bank
550 North Ninth Place
Show Low, Arizona 85902
Attention: Tony J. Swartz
President and Chief Executive Officer
With a required copy to:
James Brophy, Esq.
Ryley Carlock & Applewhite
One North Central Avenue, Suite 1200
Phoenix, Arizona 85004-4417
All such notices shall be deemed to have been given on the date delivered,
transmitted, or mailed in the manner provided above.
Section 12.14 CHOICE OF LAW AND VENUE. This Agreement shall be governed by,
construed, and enforced in accordance with the laws of the State of Utah,
without giving effect to the principles of conflict of law thereof. The parties
hereby designate Salt Lake County, Utah to be the proper jurisdiction and venue
for any suit or action arising out of this Agreement. Each of the parties
consents to personal jurisdiction in such venue for such a proceeding and agrees
that it may be served with process in any action with respect to this Agreement
or the transactions contemplated thereby by certified or registered mail, return
receipt requested, or to its registered agent for service of process in the
state of Utah. Each of the parties irrevocably and unconditionally waives and
agrees, to the fullest extent permitted by law, not to plead any objection that
it may now or hereafter have to the laying of venue or the convenience of the
forum of any action or claim with respect to this Agreement or the transactions
contemplated thereby brought in the courts aforesaid.
94
Section 12.15 KNOWLEDGE OF A PARTY. References in this Agreement to the
knowledge of a party shall mean the actual knowledge possessed by the present
executive officers of such party.
Section 12.16 BINDING AGREEMENT. This Agreement shall be binding upon the
parties and their respective successors and assigns.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
NATIONAL BANK OF ARIZONA
By: /s/John J. Gisi
-------------------------------------
John J. Gisi
Chairman and Chief Executive Officer
FRONTIER STATE BANK
By: /s/Tony J. Swartz
-------------------------------------
Tony J. Swartz
President and Chief Executive Officer
ZIONS BANCORPORATION
By: /s/Doyle L. Arnold
-------------------------------------
Doyle L. Arnold
Executive Vice President,
Chief Financial Officer and Secretary
95
Directors' Agreement
The undersigned members of the Board of Directors of Frontier State Bank
("Frontier"), acknowledging that Zions Bancorporation ("Zions") has relied upon
the action heretofore taken by the board of directors in entering into the
Agreement, and has required the same as a prerequisite to Zions' execution of
the Agreement, do individually and as a group agree, subject to (and limited by)
any fiduciary duty the directors (individually or as a group) owe to Frontier or
to its shareholders, to support the Agreement and to recommend its adoption by
the other shareholders of Frontier.
The undersigned do hereby, individually and as a group, until the Effective
Time or termination of the Agreement, further agree to refrain from soliciting
or, subject to (and limited by) any fiduciary duty the directors (individually
or as a group) owe to Frontier or its shareholders, negotiating or accepting any
offer of merger, consolidation, or acquisition of any of the shares or all or
substantially all of the assets of Frontier.
/s/Greg Butler /s/Imogene Brazieal
------------------------- -------------------------
Greg Butler Imogene Brazieal
/s/Tony J. Swartz /s/Mark Wirth
------------------------- -------------------------
Tony Swartz Mark Wirth
/s/Elizabeth McCarty /s/Roy Hatch
------------------------- -------------------------
Elizabeth McCarty Roy Hatch
/s/Ray Roles /s/Neal Thompson
------------------------- -------------------------
Ray Roles Neal Thompson
96
EXHIBIT I
VOTING AGREEMENT
----------------
97
August 16, 2002
Zions Bancorporation
One South Main, Suite 1380
Salt Lake City, Utah 84111
Mesdames and Gentlemen:
The undersigned understands that Zions Bancorporation and its affiliate,
National Bank of Arizona, are about to enter into an Agreement and Plan of
Merger (the "Plan") with Frontier State Bank. The Plan provides for the merger
of Frontier with and into NBA and the conversion of outstanding shares of
Frontier Stock into Zions Stock and cash in lieu of fractional shares in
accordance with the formula set forth in the Plan.
In order to induce Zions to enter into the Plan, and intending to be
legally bound hereby, the undersigned, subject to the conditions hereinafter
stated, represents, warrants, and agrees that at the meeting of the shareholders
of Frontier contemplated by section 8.02 of the Plan (the "Meeting"), and any
adjournment thereof, the undersigned will, in person or by proxy, vote or cause
to be voted in favor of the Plan and the Merger the shares of the capital stock
of Frontier beneficially owned by the undersigned individually or, to the extent
of the undersigned's proportionate voting interest, jointly with other Persons,
as well as, to the extent of the undersigned's proportionate voting interest,
any other shares Frontier Stock over which the undersigned may hereafter acquire
beneficial ownership in such capacities (collectively, the "Shares"). Subject to
the final paragraph of this agreement, the undersigned further agrees that he or
she will use his or her best efforts to cause any other shares of Frontier Stock
over which he or she has or shares voting power to be voted in favor of the Plan
and the Merger.
The undersigned further represents, warrants, and agrees that beginning
upon the authorization and execution of the Plan by Frontier until the earlier
of (i) the consummation of the Merger or (ii) the termination of the Plan in
accordance with its terms, the undersigned will not, directly or indirectly:
(a) vote any of the Shares, or cause or permit any of the Shares to be
voted, in favor of any other sale of control, merger, consolidation, plan of
liquidation, sale of assets, reclassification, or other transaction involving
Frontier which would have the effect of assisting or facilitating the
acquisition of control by any Person other than Zions or an affiliate of Zions
over Frontier or any substantial portion of its assets or assisting or
facilitating the acquisition of control by any Person other than Zions or an
affiliate of Zions or Frontier or a wholly-owned subsidiary of Frontier, of any
subsidiary of Frontier or any substantial portion of its assets. As used herein,
the term "control" means (I) the ability to direct the voting of 10 percent or
more of the outstanding voting securities of a Person having ordinary voting
power in the election of directors or in the election of any other body having
similar functions or (II) the ability to direct the management and policies of a
Person, whether through ownership of securities, through any contract,
arrangement, or understanding or otherwise.
(b) voluntarily sell or otherwise transfer any of the Shares, or cause
or permit any of the Shares to be sold or otherwise transferred (I) pursuant to
any tender offer, exchange offer, or similar proposal made by any Person other
than Zions or an affiliate of Zions, (II) to any Person seeking to obtain
control (as the term "control" is defined in paragraph (a), above) of Frontier,
any of its subsidiaries or any substantial portion of the assets of Frontier or
any subsidiary thereof or to any other Person (other than Zions or an affiliate
thereof) under circumstances where such sale or transfer may reasonably be
expected to assist a Person seeking to obtain such control, (iii) for the
purpose of
98
Zions Bancorporation
August 16, 2002
Page 2
avoiding the obligations of the undersigned under this agreement, or (iv) to any
transferee unless such transferee expressly agrees in writing to be bound by the
terms of this agreement in all events.
This agreement does not prohibit the undersigned, if a member of the Board
of Directors of Frontier, from acting, in his or her capacity as a director, as
the undersigned may determine to be appropriate in light of the obligations of
the undersigned as a director, and nothing in this agreement shall restrict the
right of a shareholder who is also a director from fulfilling his or her
fiduciary duty to Frontier, as a director, or to its shareholders, as a
director, including without limitation any obligation to consider or recommend
to the shareholders of Frontier an offer from a competing purchaser, if such an
offer should be made and if the fiduciary duty of the director should require
him or her to do so. It is further understood and agreed that the term "Shares"
shall not include any securities beneficially owned by the undersigned as a
trustee or fiduciary for another (unless such other Person is affiliated with
the undersigned or is bound by an agreement with Zions substantially similar to
this agreement), and that this agreement is not in any way intended to affect
the exercise by the undersigned of the undersigned's fiduciary responsibility in
respect of any such securities.
Capitalized terms used in this agreement and not defined in this agreement
are used with the meaning given to them in the Plan.
Very truly yours,
-------------------------
Accepted and Agreed to:
ZIONS BANCORPORATION
By:
-------------------------
Title:
----------------------
99
Zions Bancorporation
August 16, 2002
Page 3
Name of Shareholder:
Shares of Common Stock of Frontier State Bank
Beneficially Owned
As of August 16, 2002
Name(s) of Number of
Record Owner(s) Beneficial Ownership * Shares
(*) For purposes of this Agreement, shares are beneficially owned by the
shareholder named above if held in any capacity if the shareholder named above
has the power (alone or, in the case of shares held jointly with his or her
spouse, together with his or her spouse) to direct the voting of such shares or
if issuable upon exercise of options or warrants that are exercisable within
sixty days of the date of this agreement.
100
EXHIBIT IV
----------
AFFILIATES AGREEMENTS
---------------------
101
AFFILIATE'S AGREEMENT
---------------------
THIS AGREEMENT (the "Agreement") dated as of [ ], 2002 between Zions
Bancorporation, a Utah corporation ("Zions"), and the undersigned shareholder
(the "Shareholder") of Frontier State Bank, an Arizona banking corporation
("Frontier").
W I T N E S S E T H:
WHEREAS, pursuant to the Agreement and Plan of Merger dated August 16,
2002, among Zions, National Bank of Arizona, a national banking association, and
Frontier (the "Plan"), each share of the common stock of Frontier ("Frontier
Stock") held by the Shareholder will be canceled and converted into the right to
receive shares of common stock of Zions ("Zions Stock") as determined pursuant
to the Plan upon consummation and as a result of the merger of Frontier into
Zions as contemplated by such Agreement (the "Merger"); and
WHEREAS, the Shareholder understands that the shares of Zions Stock into
which his or her shares of Frontier Stock will be converted in the Merger are
being issued in a transaction subject to Rule 145 ("Rule 145") of the General
Rules and Regulations promulgated under the Securities Act of 1933, as amended
("Securities Act"); and whereas the Shareholder further understands that,
pursuant to the provisions of section 8.07 of the Plan, he or she has been
designated as a holder of Frontier Stock who may be deemed to be an "affiliate"
of Frontier as that term is defined in paragraph (c) of Rule 145 and, in view of
such designation, may be subject to certain restrictions under the Securities
Act and the General Rules and Regulations thereunder with respect to the sale,
transfer, assignment, pledge, or other disposition of any shares of Zions Stock
issued to him or her in the Merger, including the requirement that such shares
may not be offered for sale or sold except (1) pursuant to an effective
Registration Statement under the Securities Act or (2) in accordance with the
requirements of paragraph (d) of Rule 145 or another applicable exemption from
registration under the Securities Act.
NOW, THEREFORE, Zions and the Shareholder, intending to be legally bound
hereby, agree as follows:
1. The Shareholder hereby represents and warrants to Zions that set forth
below the Shareholder's signature hereto are the exact number of shares of
Frontier Stock which the Shareholder owns of record only, beneficially only, and
of record and beneficially.
2. The Shareholder hereby represents, warrants and agrees that he or she
will not, directly or indirectly, offer for sale, sell, transfer or otherwise
dispose of, or cause to be offered for sale, sold, transferred or otherwise
disposed of, any shares of Zions Stock to be acquired in the Merger except in
accordance with (1) the provisions of the Securities Act and the General Rules
and Regulations thereunder, including, but not limited to, Rule 145(d), (2) any
applicable requirements of the Securities Exchange Act of 1934, as amended, and
(3) any other similar federal and state requirement then in force.
The Shareholder agrees to and does hereby indemnify and hold harmless
Zions, the officers and directors of Zions, and each other Person who controls
Zions within the meaning of the Securities Act against any and all losses,
claims, damages, liabilities, and expenses which Zions or any such officers,
directors, or other Persons may incur arising out of any offer or disposition of
shares of Zions Stock by or on behalf of the Shareholder in violation of section
2 above.
All notices and other communications under this Agreement shall be in
writing and shall be deemed to have been duly given at the time delivered
personally or mailed, first class, postage prepaid, addressed:
102
(a) if to Zions:
Zions Bancorporation
One South Main, Suite 1380
Salt Lake City, Utah 84111
Attention: Mr. Doyle L. Arnold
Executive Vice President, Chief Financial Officer and
Secretary
With a required copy to:
Brian D. Alprin, Esq.
Duane Morris LLP
1667 K Street, N.W., Suite 700
Washington, D.C. 20006
(b) if to the Shareholder, at the address set forth after the Shareholder's
signature below or to such other address as either party may from time to time
designate to the other in writing.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
ZIONS BANCORPORATION SHAREHOLDER
By:_____________________________________ _________________________________
Doyle L. Arnold
Executive Vice President, Address: ________________________
Chief Financial Officer and Secretary ________________________
________________________
JOINT OWNER (if any)
________________________
103
FRONTIER STATE BANK COMMON STOCK
Record Owner Number of Shares* Type of Ownership**
------------ ----------------- -------------------
* Present separately the number of shares owned of record only, beneficially
only, or of record and beneficially.
** Indicate whether ownership of shares is of record only, beneficially only,
or of record and beneficially.
104
APPENDIX B
DISSENTERS' RIGHTS UNDER THE NATIONAL BANK ACT
12 U.S.C. SS. 215A
(b) DISSENTING SHAREHOLDERS
If a merger shall be voted for at the called meetings by the necessary
majorities of the shareholders of each association or State bank participating
in the plan of merger, and thereafter the merger shall be approved by the
Comptroller [of the Currency], any shareholder of any association or State bank
to be merged into the receiving association who has voted against such merger at
the meeting of the association or bank of which he is a stockholder, or has
given notice in writing at or prior to such meeting to the presiding officer
that he dissents from the plan of merger, shall be entitled to receive the value
of the shares so held by him when such merger shall be approved by the
Comptroller upon written request made to the receiving association at any time
before thirty days after the date of consummation of the merger, accompanied by
the surrender of his stock certificates.
(c) VALUATION OF SHARES
The value of the shares of any dissenting shareholder shall be
ascertained, as of the effective date of the merger, by an appraisal made by a
committee of three persons, composed of (1) one selected by the vote of the
holders of the majority of the stock, the owners of which are entitled to
payment in cash; (2) one selected by the directors of the receiving association;
and (3) one selected by the two so selected. The valuation agreed upon by any
two of the three appraisers shall govern. If the value so fixed shall not be
satisfactory to any dissenting shareholder who has requested payment, that
shareholder may, within five days after being notified of the appraised value of
his shares, appeal to the Comptroller, who shall cause a reappraisal to be made
which shall be final and binding as to the value of the shares of the appellant.
(d) APPLICATION TO SHAREHOLDERS OF MERGING ASSOCIATIONS: APPRAISALS BY
COMPTROLLER; EXPENSES OF RECEIVING ASSOCIATION; SALE AND RESALE OF
SHARES; STATE APPRAISAL AND MERGER LAW
If, within ninety days from the date of consummation of the merger, for
any reason one or more of the appraisers is not selected as herein provided, or
the appraisers fail to determine the value of such shares, the Comptroller shall
upon written request of any interested party cause an appraisal to be made which
shall be final and binding on all parties. The expenses of the Comptroller in
making the reappraisal or the appraisal, as the case may be, shall be paid by
the receiving association. The value of the shares ascertained shall be promptly
paid to the dissenting shareholders by the receiving association. The shares of
stock of the receiving association which would have been delivered to such
dissenting shareholders had they not requested payment shall be sold by the
receiving association at an advertised public auction, and the receiving
association shall have the right to purchase any of such shares at such public
auction, if it is the highest bidder therefor, for the purpose of reselling such
shares within thirty days thereafter to such person or persons and at such price
not less than par as its board of directors by resolution may determine. If the
shares are sold at public auction at a price greater than the amount paid to the
dissenting shareholders, the excess in such sale price shall be paid to such
dissenting shareholders. The appraisal of such shares of stock in any State bank
shall be determined in the manner prescribed by the law of the State in such
cases, rather than as provided in this section, if such provision is made in the
State law; and no such merger shall be in contravention of the law of the State
under which such bank is incorporated. The provisions of this subsection shall
apply only to shareholders of (and stock owned by them in) a bank or association
being merged into the receiving association.
105
PART II: INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 16-10a-901 et seq. of the Utah Business Corporation Act
authorizes indemnification of directors and officers of a Utah corporation under
certain circumstances against expenses, judgments, and the like in connection
with an action, suit or proceeding.
Article VI of Zions Bancorporation's bylaws, which we incorporate by
reference to Exhibit 3 to Zions Bancorporation's Form 10-Q Quarterly Report for
the quarter ended September 30, 1998, SEC File No. 0-2610, provides, in part, as
follows:
Section 6.01 Indemnification of Directors.
(a) Permitted Indemnification. Pursuant to Section 16-10a-902 of the
[Utah Business Corporation] Act, unless otherwise provided in the Articles of
Incorporation as permitted by Section 16-10a-909 of the Act,
the Corporation may indemnify any individual, made a party to a proceeding
because such individual is or was a director of the Corporation, against
liability incurred in the proceeding if the Corporation has authorized the
payment in accordance with Section 16-10a-906 of the Act and a determination has
been made in accordance with the procedures set forth in Section 16-10a-906(2)
of the Act that the director has met the applicable standards of conduct as set
forth below and in Section 16-10a-902 of the Act:
(i) the individual's conduct was in good faith;
(ii) the individual reasonably believed that his or her
conduct was in, or not opposed to, the Corporation's best interests; and
(iii) in the case of any criminal proceeding, the individual
had no cause to believe his or her conduct was unlawful.
Section 6.03 Indemnification of Officers, Employees, Fiduciaries, and
Agents. Unless otherwise provided in the Articles of Incorporation, and pursuant
to Section 16-10a-907 of the Act:
(i) an officer of the Corporation is entitled to mandatory
indemnification under Section 16-10a-903 of the Act, and is entitled to apply
for court-ordered indemnification under Section 16-10a-905 of the Act, in each
case to the same extent as a director;
(ii) the Corporation may indemnify and advance expenses to an
officer, employee, fiduciary, or agent of the Corporation to the same extent as
a director; and
(iii) the Corporation may also indemnify and advance expenses
to an officer, employee, fiduciary or agent who is not a director to a greater
extent, if not inconsistent with public policy, and if provided for by the
Articles of Incorporation, these Bylaws, action of the Board of Directors, or
contract.
Section 6.06 Other Rights and Remedies. The rights to indemnification
and advancement of expenses provided in this Article shall be in addition to any
other rights which a party may have or hereafter acquire under any applicable
law, contract, order, or otherwise.
Article XVIII of Zions Bancorporation's articles of incorporation
provides as follows:
No director of the corporation shall be personally liable to the
corporation or its shareholders for monetary damages for any breach of fiduciary
duty by such director as a director, except for liability (1) for any breach of
the director's duty of loyalty to the corporation or its shareholders; (2) for
acts or omissions not in good faith or which involve intentional misconduct or
106
knowing violation of law; or (3) for any transaction from which the director
derived an improper personal benefit. Any repeal or modification of this
paragraph by the shareholders of the corporation shall be prospective only, and
shall not adversely affect any limitation on the personal liability of a
director of the corporation for acts or omissions occurring prior to the
effective date of such repeal or modification.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) EXHIBITS. An Exhibit Index, containing a list of all exhibits filed
with this Registration Statement, is included beginning on page II-5.
(b) FINANCIAL STATEMENT SCHEDULES. Not applicable.
(c) REPORT, OPINION OR APPRAISAL. Not applicable.
ITEM 22. UNDERTAKINGS.
The undersigned registrant hereby undertakes as follows:
(1) that, for purposes of determining any liability under the
Securities Act of 1933, each filing of the registrant's annual report pursuant
to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(2) to deliver or cause to be delivered with the prospectus, to each
person to whom the prospectus is sent or given, the latest annual report to
security holders that is incorporated by reference in the prospectus and
furnished pursuant to and meeting the requirements of Rule 14a-3 or Rule 14c-3
under the Securities Exchange Act of 1934; and, where interim financial
information required to be presented by Article 3 of Regulation S-X is not set
forth in the prospectus, to deliver, or cause to be delivered to each person to
whom the prospectus is sent or given, the latest quarterly report that is
specifically incorporated by reference in the prospectus to provide such interim
financial information.
(3) that prior to any public reoffering of the securities registered
hereunder through the use of a prospectus which is a part of this registration
statement, by any person or party who is deemed to be an underwriter within the
meaning of Rule 145(c), such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
(4) that every prospectus (i) that is filed pursuant to paragraph (3)
immediately preceding, or (ii) that purports to meet the requirements of Section
10(a)(3) of the Securities Act of 1933 and is used in connection with an
offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial BONA FIDE offering thereof.
(5) that insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the provisions described under Item 20
above, or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
107
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(6) to respond to requests for information that is incorporated by
reference into the Proxy Statement/Prospectus pursuant to Items 4, 10(b), 11 or
13 of Form S-4, within one business day of receipt of such request, and to send
the incorporated documents by first class mail or other equally prompt means.
This includes information contained in documents filed subsequent to the
Effective Date of the registration statement through the date of responding to
the request.
(7) to supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein, that
was not the subject of and included in the registration statement when it became
effective.
(8) 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 of 1933;
(ii) to reflect in the prospectus any facts or events arising
after the effective date 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.
(9) that, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(10) 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.
108
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 22nd day of October 2002.
ZIONS BANCORPORATION
By: /s/ Doyle L. Arnold
---------------------
Doyle L. Arnold, Executive Vice
President and Chief Financial Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Harris H. Simmons and Doyle L. Arnold,
and each of them, his true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this registration statement, and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents or either of them, or their or his
substitutes, may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Capacity Date
--------- -------- ----
/s/ Harris H. Simmons *
---------------------------
Harris H. Simmons Chairman, President, October 22, 2002
Chief Executive Officer and
Director (Principal Executive
Officer)
/s/ Doyle L. Arnold
---------------------------
Doyle L. Arnold Secretary, Executive Vice October 22, 2002
President and Chief Financial
Officer (Principal Financial
Officer)
/s/ Nolan Bellon *
---------------------------
Nolan Bellon Controller (Principal October 22, 2002
Accounting Officer)
/s/ Jerry C. Atkin *
---------------------------
Jerry C. Atkin Director October 22, 2002
/s/ Stephen D. Quinn *
---------------------------
Stephen D. Quinn Director October 22, 2002
/s/ L. E. Simmons *
---------------------------
L. E. Simmons Director October 22, 2002
109
/s/ R. D. Cash *
---------------------------
R. D. Cash Director October 22, 2002
/s/ Shelley Thomas Williams *
---------------------------
Shelley Thomas Williams Director October 22, 2002
/s/ Richard H. Madsen *
---------------------------
Richard H. Madsen Director October 22, 2002
/s/ I. J. Wagner *
---------------------------
I. J. Wagner Director October 22, 2002
/s/ Roger B. Porter *
---------------------------
Roger B. Porter Director October 22, 2002
* Pursuant to Power of Attorney
By: /s/Doyle L. Arnold
----------------------
Doyle L. Arnold, Attorney-in-Fact
110
EXHIBIT INDEX
Page Number
in Sequential
Exhibit
Exhibit Numbering
No Description and Method of Filing System
------- -------------------------------- -------------
2.1 Agreement and Plan of Merger dated as of August 16, 2002,
among National Bank of Arizona, Frontier State Bank and
Zions Bancorporation (included in the proxy
statement/prospectus as Appendix A).
3.1 Restated Articles of Incorporation of Zions Bancorporation dated
November 8, 1993, incorporated by reference to Exhibit 3.1 of Form S-4
filed on November 22, 1993, SEC File No. 0-2610.
3.2 Articles of Amendment to the Restated Articles of
Incorporation of Zions Bancorporation dated April 30, 1997,
incorporated by reference to Exhibit 3.1 of Form 10-Q for
the quarter ended June 30, 1997, SEC File No. 0-2610.
3.3 Articles of Amendment to the Restated Articles of Incorporation of
Zions Bancorporation dated April 24, 1998, incorporated by reference to
Exhibit 3 of Form 10-Q for the quarter ended June 30, 1998, SEC File
No. 0-2610.
3.4 Restated Bylaws of Zions Bancorporation, dated September 18, 1998,
incorporated by reference to Exhibit 3 of Form 10-Q for the quarter
ended September 30, 1998, SEC File No. 0-2610.
4 Shareholder Protection Rights Agreement, dated September 27, 1996, of
Zions Bancorporation, incorporated by reference to Exhibit 1 of Form
8-K filed October 12, 1996, SEC File No. 0-2610.
5 Opinion of Duane Morris LLP regarding the legality of the
shares of Common Stock being registered (previously filed).
8 Opinion of Duane Morris LLP regarding tax matters (previously filed).
10.1 Voting Agreements dated August 16, 2002 between Zions Bancorporation
and various shareholders of Frontier (incorporated by reference as
Exhibit I to Exhibit 2.1 above).
10.2 Directors' Agreement dated August 16, 2002 by the directors
of Frontier State Bank (incorporated by reference to
Exhibit 2.1 above).
23.1 Consent of Ernst & Young LLP, independent auditors for Zions
Bancorporation (filed herewith).
23.2 Consent of KPMG LLP, independent auditors for Zions Bancorporation
(filed herewith).
111
23.3 Consent of Duane Morris LLP (contained in their opinion filed as
Exhibit 5).
23.4 Consent of Duane Morris LLP (contained in their opinion filed as
Exhibit 8).
24.1 Power of Attorney (set forth beginning on page II-___ of the
Registration Statement).
99.1 Form of Proxy of Frontier State Bank (filed herewith)
(b) No financial statement schedules are required to be filed
herewith pursuant to Item 21(b) of this Form.
112