Zions Bancorporation - 424B3 Prospectus/Proxy Statement
STOCKMEN'S
BANCORP
PROXY
STATEMENT/PROSPECTUS
MERGER
PROPOSED -- YOUR VOTE IS VERY IMPORTANT
Dear
Stockmen's Bancorp Shareholder:
The
board of
directors of The Stockmen's Bancorp, Inc., which we refer to in this document
as
"Stockmen's," has unanimously approved the sale of Stockmen's to Zions
Bancorporation. In this document, we refer to the agreement and plan of
reorganization among Zions, National Bank of Arizona, Stockmen's and The
Stockmen's Bank, our wholly-owned subsidiary, as the "merger agreement." Under
the merger agreement, Stockmen's will merge with and into Zions, and The
Stockmen's Bank will merge with and into National Bank of Arizona, Zions'
wholly-owned subsidiary. Following the merger, Zions will be the surviving
corporation; and following the bank merger, National Bank of Arizona will be
the
surviving bank. We refer to the two mergers herein collectively as the "merger."
We believe that the merger is in the best interests of our shareholders and
unanimously recommend that our shareholders vote to approve the merger
agreement. We will hold a special meeting for our shareholders to consider
and
vote upon the merger agreement. Throughout this proxy statement/prospectus,
we
use the words "we," "our, and "us"; these words refer to Stockmen's, its board
or directors and/or management, as the context demands.
After
completion of the merger, Zions will issue the merger consideration, which
shall
consist solely of shares of Zions common stock (and cash in lieu of fractional
shares), to the former Stockmen's shareholders. In exchange for his, her or
its
shares of Stockmen's common stock, each former Stockmen's shareholder will
receive approximately 7.46 shares of Zions common stock for each share of our
common stock. See "Approval of the Merger Agreement - The Merger
Consideration."
Under
the
merger agreement and based on the number of shares of Stockmen's common stock
on
the record date for our special meeting, Zions expects to issue approximately
2,600,237 shares of Zions common stock to former Stockmen's shareholders upon
completion of the merger. Immediately after the merger, former Stockmen's
shareholders would own approximately 2.4% of the then-outstanding shares of
Zions common stock (without giving effect to shares of Zions common stock held
by Stockmen's shareholders prior to the merger).
Zions
common
stock trades under the symbol "ZION" on the
Nasdaq Global Select Market. On December 5,
2006,
the closing price per share of Zions common stock as reported on the Nasdaq
Global Select Market was $79.02.
Stockmen's common stock is held by approximately 215 shareholders of record
and
there is no public market for our shares.
We
cannot
complete the merger unless the holders of a majority of the outstanding shares
of Stockmen's common stock vote at our special meeting of shareholders to
approve the merger agreement. Please
complete, sign, date and promptly return the enclosed proxy card in the enclosed
postage-paid envelope. Various
of our executive officers and directors and their affiliates, including William
W. Becker, our chairman of the board, Tod W. Becker, our vice chairman of the
board, and Farrel Holyoak, our president and chief operating officer and
president and chief executive officer of The Stockmen's Bank, own approximately
46.72% of the outstanding Stockmen's common stock. These persons have agreed
with Zions that they will vote the Stockmen's common stock they own in favor
of
the merger agreement. No vote of Zions' shareholders is required to approve
the
transaction.
This
proxy
statement/prospectus provides you with detailed information about the merger
of
Zions and Stockmen's. You are encouraged to read this entire document carefully.
Please
pay particular attention to "Risk Factors" beginning on page 13 for a
discussion of the risks related to the merger and owning Zions common stock
after the merger. This
document incorporates important business and financial information about Zions.
See "Where You Can Find More Information" and "Documents Incorporated by
Reference," below.
Our
special shareholders'
meeting will be held at The Stockmen's Bank, 3825 Stockton Hill Road, Kingman,
Arizona on January
12,
2007 at
10:00 a.m. local time.
Farrel
Holyoak
President
and
Chief Operating Officer
The
Stockmen's Bancorp, Inc.
Neither
the
Securities and Exchange Commission nor any state securities commission has
approved or disapproved of the Zions common stock to be issued in the merger
under this document or passed upon the adequacy or accuracy of this document.
Any representation to the contrary is a criminal offense.
The
shares of
Zions common stock offered by this document 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 December 7, 2006, and first mailed to shareholders
on
or about December 11, 2006.
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 100 F Street,
N.E., 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 Stock Market, 1735 K Street, N.W., Washington,
D.C. 20006-1500. Zions' Internet address is www.zionsbancorporation.com. Zions'
website does not form a part of this proxy statement/prospectus.
This
proxy statement/prospectus incorporates important business and financial
information about Zions that is not included in or delivered with this document.
See "Documents Incorporated by Reference" on page 54. This information is
available to you without charge if you contact Clark B. Hinckley, Senior Vice
President - Investor Relations and Communications of Zions Bancorporation,
One
South Main, Suite 1134, Salt Lake City, Utah 84111, telephone (801) 524-4787.
In
order to ensure timely delivery of documents, you should request information
as
soon as possible, but no later than January 5, 2007.
In
"Questions and Answers About the Merger and the Special Meeting" and in the
"Summary" below, we highlight selected information from this proxy
statement/prospectus. However, we may not have included all of the information
that may be important to you. To better understand the merger agreement and
the
merger, and for a description of the legal terms and conditions governing the
merger, you should carefully read this entire proxy statement/prospectus,
including the appendices, as well as the documents that Zions has incorporated
by reference into this document. See "Documents Incorporated by Reference"
on
page 54.
The
Stockmen's Bancorp, Inc.
3825
Stockton Hill Road
Kingman,
Arizona 86402-3879
NOTICE
OF SPECIAL MEETING OF SHAREHOLDERS
NOTICE
IS HEREBY GIVEN
that The
Stockmen's Bancorp, Inc. ("Stockmen's") will hold a special meeting of
shareholders at the Main Office of The Stockmen's Bank ("Stockmen's Bank" or
the
"Bank"), 3825 Stockton Hill Road, Kingman, Arizona on January 12,
2007 at
10:00 a. m. local time to:
1. Consider
and vote upon the Agreement and Plan of Reorganization by and among Stockmen's,
the Bank, Zions Bancorporation ("Zions"), a Utah corporation, and National
Bank
of Arizona ("NBA"), dated as of September 8, 2006, and amended as of September
25, 2006, a favorable vote upon which will approve the following actions
described in the merger agreement:
· Stockmen's
will merge with Zions, with Zions being the surviving corporation;
· Stockmen's
Bank, a wholly-owned subsidiary of Stockmen's, will merge with and into NBA,
a
wholly-owned subsidiary of Zions, with NBA being the surviving bank;
and
· Zions
will issue an aggregate of approximately 2,600,237 shares of its common stock
to
the former Stockmen's shareholders in exchange for their shares of Stockmen's
common stock upon completion of the merger, or approximately 7.46 shares of
Zions common stock for each outstanding share of Stockmen's common
stock.
2. Consider
and vote upon the adjournment of our special meeting, if necessary, to permit
further solicitation of proxies if there are not sufficient votes at the time
of
our special meeting to approve the merger agreement.
3. Transact
such other business as may properly come before our special meeting and any
adjournments or postponements of our meeting.
We
describe
the merger agreement and the merger more fully in the attached proxy
statement/prospectus, which includes a copy of the merger agreement as Appendix
A. Stockmen's has fixed the close of business on November 27,
2006 as
the record date for determining the shareholders of Stockmen's entitled to
vote
at our special meeting and any adjournments or postponements of the meeting.
Only holders of record of Stockmen's common stock at the close of business
on
the record date are entitled to notice of and to vote at our special
meeting.
The
board of
directors of Stockmen's unanimously recommends that you vote "FOR"
approval of the merger agreement. The affirmative vote of the holders of a
majority of the outstanding shares of Stockmen's common stock is required to
approve the merger agreement. Various directors and executive officers of
Stockmen's and their affiliates who own in the aggregate approximately 46.72%
of
the outstanding stock of Stockmen's have agreed with Zions to vote their shares
in favor of the merger agreement. Abstentions and broker non-votes will have
the
same effect as votes against approval of the merger agreement. If you wish
to
attend the special meeting and your shares are held in the name of a broker,
trust, bank or other nominee, you must bring with you a proxy or letter from
the
broker, trustee, bank or nominee to confirm your beneficial ownership of the
shares. Stockmen's
shareholders are entitled to assert dissenters' rights and have the right to
dissent to the merger agreement under Chapter 13 of the Arizona Business
Corporation Act and thereby to receive a payment solely in cash for the fair
value of their Stockmen's shares. A
summary
of the relevant provisions of Chapter 13 is included in the accompanying proxy
statement/prospectus in the section entitled "Rights of Dissenting
Shareholders." A copy of Chapter 13 is annexed to the proxy statement/prospectus
as Appendix C.
Your
vote is
important regardless of the number of shares you own. The
Stockmen's board requests that you complete and sign the enclosed proxy card
and
mail it promptly in the accompanying postage-prepaid envelope. You may revoke
any proxy that you have previously delivered prior to our special meeting by
delivering a written notice to Stockmen's stating that you have revoked your
earlier proxy or by delivering a later-dated proxy at any time prior to our
special meeting. Shareholders of record of Stockmen's common stock who attend
our special meeting may vote in person, even if they have previously delivered
a
signed proxy.
By
Order
of the Board of Directors of
The
Stockmen's Bancorp, Inc.
Farrel
Holyoak
President
and Chief Operating Officer
Kingman,
Arizona
December
11, 2006
QUESTIONS
AND ANSWERS ABOUT THE MERGER AND THE SPECIAL MEETING
This
proxy statement/prospectus, which we sometimes refer to as "this document,"
provides you with detailed information about the merger agreement, the merger
and related matters that we will submit for approval at the Stockmen's special
meeting of shareholders. We encourage you to read this entire document
carefully. This document incorporates important business and financial
information about Zions that is not included in or delivered with this document.
See "Documents Incorporated by Reference" on page 54. Stockmen's shareholders
may obtain this information without charge by requesting in writing, by
telephone or e-mail as follows:
For
information regarding Zions, please contact:
Zions
Bancorporation
One
South
Main, Suite 1134
Salt
Lake
City, Utah 84111
Attention:
Mr. Clark B. Hinckley, Senior
Vice
President - Investor Relations and
Communications
Tel:
(801) 524-4787
e-mail
at: clark.hinckley@zionsbancorp.com
If
you
would like to request documents from Zions or us, please do so by January
5,
2007 to
receive them prior to the Stockmen's special meeting. See "Where You Can Find
More Information" above at the beginning of this document.
Q:
WHAT IS THE PURPOSE OF THIS DOCUMENT?
A:
This
document serves as both a proxy statement of Stockmen's and a prospectus of
Zions. As a proxy
statement,
it's
being provided to you because Stockmen's board of directors is soliciting your
proxy for use at our special meeting of shareholders called to consider and
vote
on the proposed merger of Stockmen's and Zions. As a prospectus,
it's
being provided to you because Zions is offering to exchange shares of its common
stock for your shares of Stockmen's common stock if the merger is
completed.
Q:
WHAT AM I VOTING ON?
A:
Zions
and
Stockmen's have entered into an agreement and plan of reorganization under
which
Zions has agreed to acquire Stockmen's. You are being asked to vote to approve
the merger agreement under which Stockmen's will merge with and into Zions,
and
Stockmen's Bank will merge with and into NBA; and an adjournment of our special
meeting to
permit
further solicitation of proxies if there are not sufficient votes at the time
of
our special meeting to approve the merger agreement.
Q:
WHAT WILL HAPPEN IN THE PROPOSED TRANSACTION?
A:
Stockmen's
will merge with and into Zions, with Zions being the surviving corporation.
Upon
completion of this merger, the corporate existence of Stockmen's will cease.
Immediately following that merger, Stockmen's Bank, Stockmen's wholly-owned
subsidiary, will merge with and into NBA, Zions' wholly-owned subsidiary, and
NBA will be the surviving bank, and the corporate existence of Stockmen's Bank
will cease.
Q:
WHY IS STOCKMEN'S PROPOSING TO MERGE?
A: Stockmen's
believes that the merger with Zions presents the best opportunity for maximizing
shareholder value, giving Stockmen's shareholders the opportunity to continue
to
participate in the growth of the combined company and to benefit from the
significantly greater liquidity of the trading market for Zions' common
stock.
Q:
WHAT WILL I RECEIVE IN EXCHANGE FOR MY STOCKMEN'S SHARES?
A:
As a
shareholder of Stockmen's, you will receive approximately 7.46 shares of Zions
common stock for each share of Stockmen's common stock that you own at the
effective time of the merger. You will receive cash in lieu of any fraction
of a
share of Zions stock. See "Approval of the Merger Agreement - The Merger
Consideration" on page 19 below.
Q:
WILL I BE TAXED ON THE ZIONS STOCK THAT I RECEIVE IN EXCHANGE FOR MY STOCKMEN'S
SHARES?
A:
The
transaction is intended to be tax-free to Stockmen's shareholders for U.S.
federal income tax purposes, except with respect to any cash you receive in
lieu
of fractional shares of Zions stock. Tax
matters are very complicated and the federal, state and local tax consequences
of the merger to you will depend on your particular facts and circumstances.
We
urge you to consult your tax advisor to fully understand the tax consequences
of
the merger to you. See
"Material Federal Income Tax Consequences" beginning on page 43 of this
proxy statement/prospectus.
Q:
WHAT IS THE REQUIRED VOTE TO APPROVE THE MERGER AGREEMENT?
A:
The
holders of a majority of the outstanding shares of Stockmen's common stock
as of
the close of business on November 27, 2006, the record date for our special
meeting, must vote to approve the merger agreement in order for the merger
to be
completed. Abstentions from voting and "broker non-votes" are not considered
affirmative votes and, therefore, will have the same practical effect as a
vote
against the merger agreement. No vote of the shareholders of Zions is required
to complete the merger.
Q:
WHAT DOES THE STOCKMEN'S BOARD OF DIRECTORS RECOMMEND?
A:
The
board of directors of Stockmen's unanimously recommends that Stockmen's
shareholders vote in favor of the merger agreement, and in favor of an
adjournment of our special meeting to
permit
further solicitation of proxies if there are not sufficient votes at the time
of
our special meeting to approve the merger agreement.
Q:
WHEN AND WHERE WILL THE SPECIAL MEETING TAKE PLACE?
A:
Our
special meeting is scheduled to take place on January 12,
2007,
at the time and place indicated in our notice of special meeting of shareholders
at the beginning of this document. Please refer to the notice for the relevant
information regarding our special meeting.
Q:
WHO IS ENTITLED TO VOTE AT THE SPECIAL MEETING?
A:
Holders
of record of Stockmen's common stock at the close of business on November 27,
2006, which is the date our board of directors has fixed as the record date
for
our special meeting, are entitled to vote at our special meeting and any
adjournments or postponements of our meeting.
Q:
HOW DO I VOTE? WHAT DO I NEED TO DO NOW?
A:
After
you have carefully read this document, please 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 our special meeting. In addition, you may attend our
special meeting in person and vote, whether or not you have already signed
and
mailed your proxy card. If you sign and return your proxy but do not indicate
how you want to vote, we will count your proxy as a vote in favor of the
proposal. If you abstain from voting or do not vote, that will have the effect
of a vote against the proposal.
Q:
IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE MY
SHARES FOR ME?
A:
Your
broker will vote your shares on the merger proposal only
if you
provide your broker instructions on how you would like to vote. Your broker
cannot vote your shares without receiving voting instructions from you. Your
broker will send you directions on how you can instruct your broker to vote.
You
should follow the directions provided by your broker. If you fail to instruct
your broker how to vote your shares, your shares will not be voted and the
effect will be the same as a vote against the merger agreement.
Q:
MAY I CHANGE MY VOTE AFTER I HAVE MAILED MY SIGNED PROXY
CARD?
A:
Yes. You
may change your vote at any time before your proxy is voted at our special
meeting. If your shares are held in your own name, there are three ways for
you
to revoke your proxy and change your vote:
· You
may
send a later-dated, signed proxy card before our special meeting;
· You
may
attend our special meeting in person and vote at our special meeting; merely
attending our special meeting, however, will not revoke your proxy; you will
need to complete a ballot in order to vote in person at our special meeting;
we
will provide ballots for those of our shareholders who wish to vote at our
special meeting; and
· You
may
revoke any proxy by written notice to our president, Farrel Holyoak, given
prior
to our special meeting.
You
should send any written notice of revocation or subsequent proxy to Farrel
Holyoak, President, The Stockmen's Bancorp, Inc., 3825 Stockton Hill Road,
Kingman, Arizona 86402-3879, or hand deliver the notice of revocation or
subsequent proxy to the president at or before the taking of the vote at our
special meeting.
If
you
have instructed a broker to vote your shares, you must follow directions
received from your broker to change your vote.
Q:
DO I HAVE DISSENTERS' RIGHTS?
A:
Yes.
Under Arizona law, you have the right to dissent from the merger and thereby
to
receive solely a cash payment for your shares of Stockmen's common stock. The
Arizona statutory scheme is very complicated. Failure to follow the statutory
provisions precisely may result in your loss of your dissenters' rights under
Arizona law. See "Rights of Dissenting Shareholders," below. We present the
Arizona statutory provisions in their entirety in Appendix C to this document.
Please read this document and Appendix C carefully.
Q:
WHEN DO YOU EXPECT TO MERGE?
A:
We and
Zions hope to complete the merger as quickly as possible after receipt of
shareholder and regulatory approvals. We and Zions expect to complete the merger
during the first quarter of 2007, shortly after receipt of shareholder
approval,
the
expiration of applicable regulatory waiting periods and the satisfaction or
waiver of all other conditions to the merger.
Q:
WHY IS IT IMPORTANT FOR ME TO VOTE?
A:
We and
Zions cannot complete the merger without the holders of a majority of the
outstanding shares of Stockmen's common stock as of the record date voting
to
approve the merger agreement. If you do not vote or do not give instructions
to
your broker or bank to vote on your behalf, it will have the same effect as
a
vote against the merger agreement.
Q:
SHOULD I SEND IN MY STOCK CERTIFICATES WITH MY PROXY CARD?
A:
No.
Please do not send your stock certificates with your proxy card. After our
special meeting, together with the transmittal materials which Zions will send
to Stockmen's shareholders after our special meeting, you should send your
Stockmen's common stock certificates (or a properly completed notice of
guaranteed delivery) to the exchange agent, Zions First National Bank, or,
if
your shares are held in "street name," according to your broker's
instructions.
Q:
IS THERE OTHER INFORMATION I SHOULD CONSIDER?
A:
Yes.
Much of the business and financial information about Zions that may be important
to you is not included in this document. Instead, this information is
incorporated by reference to documents separately filed by Zions with the
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 "Documents Incorporated by Reference"
on page 54 for a list of documents that Zions has incorporated by reference
into this document and for instructions on how to obtain copies of these
documents. The documents are available to you without charge.
Q:
WHAT IF THERE IS A CONFLICT BETWEEN DOCUMENTS?
A:
You
should rely on the later
filed document.
Information in this document 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 document may update
information contained in this document or information contained in previously
filed documents.
This
summary
highlights selected information from this proxy statement/prospectus and may
not
contain all of the information that is important to you. To understand the
merger fully and for a more complete description of the legal terms and
conditions of the merger agreement and the merger, you should carefully read
this entire document, including the appendices attached to this document, and
the documents referred to in "Where You Can Find More Information" above and
"Documents Incorporated by Reference," below.
The
Companies
Zions
Bancorporation
One
South
Main, Suite 1134
Salt
Lake
City, Utah 84111
(801)
524-4787
Zions
Bancorporation is a financial holding company organized under the laws of Utah
in 1955, and registered under the Bank Holding Company Act of 1956, as amended.
Zions and its subsidiaries own and operate eight commercial banks with a total
of 473 offices as of December 31, 2005. Zions provides a full range of banking
and related services through its banking and other subsidiaries, primarily
in
Utah, California, Texas, Arizona, Nevada, Colorado, New Mexico, Idaho,
Washington and Oregon. On December 31, 2005, Zions had total assets of
approximately $42.8 billion, loans of approximately $30.1 billion, deposits
of
approximately $32.6 billion and shareholders' equity of approximately $4.2
billion. On September 30, 2006, Zions had total assets of approximately $45.8
billion, loans of approximately $33.7 billion, deposits of approximately $33.6
billion and shareholders' equity of approximately $4.6 billion. Active full-time
equivalent employees totaled 10,102 at year end 2005.
Zions
focuses on maintaining community-minded banking services by continuously
strengthening its core business lines of retail banking, small and medium-sized
business lending, residential mortgage, and investment activities. Zions
operates eight different banks in ten Western states with each bank operating
under a different name and each having its own chief executive officer and
management team. The banks provide a wide variety of commercial and retail
banking and mortgage lending products and services. Zions provides commercial
loans, lease financing, cash management, electronic check clearing, lockbox,
customized draft processing, and other special financial services for business
and other commercial banking customers. Zions also provides a wide range of
personal banking services to individuals, including home mortgages, bankcard,
student and other installment loans, 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.
In addition, certain banking subsidiaries provide services to key market
segments through their Women’s Financial, Private Client Services, and Executive
Banking Groups. Zions also offers wealth management services through a
subsidiary, Contango Capital Advisors, Inc., that was launched in
2004.
In
addition to these core businesses, Zions has built specialized lines of business
in capital markets and public finance and is also a leader in U.S. Small
Business Administration lending. Through its eight banking subsidiaries, the
Company provides Small Business Administration ("SBA") 7(a) loans to small
businesses throughout the United States and is also one of the largest providers
of SBA 504 financing in the nation. Zions owns an equity interest in the Federal
Agricultural Mortgage Corporation ("Farmer Mac") and is the nation's top
originator of secondary market agricultural real estate mortgage loans through
Farmer Mac. Zions is a leader in municipal finance advisory and underwriting
services. Zions also controls four venture capital companies that provide
early-stage capital, primarily for start-up companies located in the Western
United States.
National
Bank of Arizona
6001
N.
24th
Street
Phoenix,
Arizona 85016
(602)
235-6000
NBA
is
responsible for Zions' primary Arizona operations. National Bank of Arizona
is a
wholly-owned subsidiary of Zions. NBA, organized in 1984, is incorporated under
the National Bank Act as a national bank and is a member bank of the Federal
Reserve System. Through its 53 offices in 36 communities throughout Arizona,
NBA
provides commercial banking services throughout the state of Arizona. As
of September 30, 2006, NBA had assets of approximately $4.5 billion,
deposits of approximately $3.5 billion, loans of approximately $4.0 billion
and
shareholders' equity of approximately $351 million and is the fourth largest
financial institution in Arizona as measured by Arizona deposits.
The
Stockmen's Bancorp, Inc.
3825
Stockton Hill Road
Kingman,
Arizona 86402-3879
(928)
757-7171
The
Stockmen's Bancorp, Inc. is a bank holding company organized under the laws
of
Arizona and registered under the Bank Holding Company Act of 1956. As of
December 31, 2005, Stockmen's had total assets of approximately $1.2 billion,
loans of approximately $597 million, deposits of approximately $1.0 billion,
and
shareholders' equity of approximately $58 million.
The
Stockmen's Bank
3825
Stockton Hill Road
Kingman,
Arizona 86402-3879
(928)
757-7171
Stockmen's
Bank is a wholly-owned subsidiary of Stockmen's Bancorp. Stockmen's Bank was
chartered under Arizona law on February 28, 1979. The Bank is an FDIC-insured
commercial bank serving the states of Arizona and California out of 43 branches
by providing traditional banking services, including lending and deposit taking
and card processing. As of September 30, 2006, Stockmen's Bank had assets
of approximately $1.2 billion, loans of approximately $710 million, deposits
of
approximately $1.1 billion and shareholders' equity of approximately $86.0
million. As of June 30, 2006, Stockmen's Bank was the twelfth largest
financial institution in Arizona as measured by Arizona deposits. Stockmen's
Bank's primary federal bank regulator is the FDIC.
Stockmen's
Board Recommends that You Vote "FOR" Approval of the Plan of Merger; Stockmen's
Reasons for the Merger (see page 23)
Our
board
has determined that the merger is advisable and in your best interests and
unanimously recommends that you vote FOR
the
approval of the merger agreement, and, if necessary, any adjournments of our
special meeting.
Stockmen's
believes that the merger with Zions presents the best opportunity for maximizing
shareholder value, giving Stockmen's shareholders the opportunity to continue
to
participate in the growth of the combined company and to benefit from the
significantly greater liquidity of the trading market for Zions' common
stock.
You
should refer to the factors considered by our board of directors in making
its
decision to approve the merger agreement and recommend approval of the merger
agreement to our shareholders.
Stockmen's
Shareholder Vote Required to Approve the Merger (see page 17)
Approval
of the merger agreement requires the affirmative vote of the holders of a
majority of the shares of our common stock outstanding as of the close of
business on November 27, 2006, the record date for our special meeting of
shareholders. At the close of business on the record date, there were 348,713
shares of our common stock outstanding held by approximately 215 holders of
record. Each holder of record of our common stock on the record date will be
entitled to one vote for each share held on all matters to be voted upon at
our
special meeting and any adjournments or postponements of our
meeting.
As
of the
record date, various of our executive officers and directors and their
affiliates, in the aggregate, beneficially owned approximately 46.72% of our
outstanding shares of common stock. Zions has entered into agreements with
these
individuals and entities under which they have agreed to vote their shares
in
favor of approval of the merger agreement.
Nature
of the Merger (see page 20)
The
merger will combine Zions and Stockmen's. Zions will be the surviving
corporation. After the merger, Zions will issue the merger consideration
consisting of shares of Zions common stock to the former shareholders of
Stockmen's in exchange for their shares of Stockmen's common stock.
Immediately
following the merger of Zions and Stockmen's, their banking subsidiaries, NBA
and Stockmen's Bank will merge. The merger of these banks will be accomplished
through the merger of Stockmen's Bank into NBA. NBA will be the surviving
bank.
What
Stockmen's Shareholders Will Receive as a Result of the Merger; What Is the
Merger Consideration? (see page 20)
The
Stockmen's shareholders will receive the merger consideration upon completion
of
the merger. The sole merger consideration shall be shares of Zions common stock,
plus cash in lieu of any fractional shares. Zions will issue approximately
2,600,237 shares of its common stock to the former Stockmen's shareholders
upon
completion of the merger. Each shareholder of Stockmen's will receive
approximately 7.46 shares of Zions common stock in exchange for each share
of
Stockmen's common stock.
Zions
may
terminate the merger agreement under certain circumstances if the average
closing price of Zions stock during the pricing period, as defined in the merger
agreement, is more than $93.24, unless Stockmen's agrees to accept fewer shares
in the merger, and Stockmen's may terminate the merger agreement if the average
closing price of Zions stock during the pricing period, as defined in the merger
agreement, is less than $68.92, unless Zions agrees to issue additional shares
of its common stock to the Stockmen's shareholders in the merger.
Cash
Dividends after the Merger (see page 34)
The
current
annualized rate of cash dividends on the shares of Zions common stock is $1.56
per share. For illustrative purposes only, if one assumes that Zions will issue
7.46 shares of its common stock for each share of Stockmen's common stock and
if
one further assumes a Zions annualized dividend rate of $1.56 per share of
Zions
common stock, then in these circumstances a former Stockmen's shareholder would
receive as a Zions shareholder following the merger an equivalent annualized
dividend of $11.64 (7.46 Zions shares times $1.56 dividend per share) with
respect to each share of Stockmen's common stock surrendered in the merger.
The
current annualized rate of regular cash dividends on Stockmen's common stock
is
$6.50 per share. The payment of cash dividends by Zions in the future will
depend on its financial condition, earnings, business conditions and other
factors.
Material
Federal Tax Consequences of the Merger (see page 43)
The
merger
has been structured to qualify as a reorganization within the meaning of Section
368(a)(1) of the Internal Revenue Code. We and Zions will have no obligation
to
complete the merger unless we and Zions receive a legal opinion that the merger
will qualify as a reorganization for federal income tax purposes. The legal
opinion will not bind the Internal Revenue Service, which, however, could take
a
different view. Assuming the merger qualifies as a reorganization, then you
generally will not recognize any gain or loss, except with respect to cash
you
receive in lieu of fractional shares of Zions common stock. You should read
"Material Federal Income Tax Consequences" beginning on page 43 for a more
complete discussion of the United States federal income tax consequences of
the
merger. We urge you to consult with your tax advisor for a full understanding
of
the tax consequences of the merger to you.
What
We Need to Do Before the Merger is Complete (see page
38)
Completion
of the merger depends on a number of conditions being met, including the
following:
· approval
of the merger agreement by the required majority vote of our
shareholders;
· approval
by or waiver from the Board of Governors of the Federal Reserve System, the
Office of the Comptroller of the Currency, the Commissioner of Financial
Institutions of Utah, and the Arizona Superintendent of Financial Institutions.
While we do not know of any reason why Zions would be unable to obtain these
approvals or waivers in a timely manner, we cannot be certain when or if Zions
will get these approvals or waivers; and
· receipt
by us of an opinion from the law firm of Duane Morris LLP, counsel to Zions,
to
the effect that the U.S. federal income tax treatment of the merger to
Stockmen's shareholders, Stockmen's and Zions will generally be as described
in
this document.
Generally,
Zions and Stockmen's can waive conditions to completion of the merger. Some
of
these conditions, however, cannot be waived, including shareholder and
regulatory approvals. We expect to complete the merger during the first quarter
of 2007.
Terminating
the Merger Agreement (see page 40)
Zions
or
Stockmen's may terminate the merger agreement without completing the merger
by
mutual consent, or if any of the following occurs:
· if
any of
the representations or warranties of the other party was incorrect when made,
subject to the material adverse effect requirement, or in the event of a breach
or failure in any material respect by the other party of any of that party's
covenants or obligations and that breached covenant or obligation has not been
or cannot be cured within thirty days, and which inaccuracy, breach, or failure,
if continued to the effective date of the merger, would result in any condition
precedent to completion of the merger not being satisfied;
· either
Zions or Stockmen's shall have determined in good faith that the merger has
become inadvisable or impracticable by reason of the institution of litigation
by the federal government or the government of Arizona or Utah to restrain
or
invalidate the transactions contemplated by the merger agreement;
· if
any
required approvals of governmental authorities are denied, and such denial
has
become final and non-appealable;
· the
shareholders of Stockmen's fail to approve the merger;
· the
average closing price of Zions common stock during a defined period prior to
the
effective time of the merger is above or below specified prices, the party
that
is adversely affected by the price change elects to terminate the merger
agreement, and the other party does not elect to change the exchange ratio
in
accordance with a formula to avoid the termination of the merger
agreement;
· Stockmen's,
following receipt of advice from its counsel, shall have determined that it
must
terminate the merger to comply with its fiduciary duties to the Stockmen's
shareholders imposed by law by reason of its having received an alternative
proposal, as defined in the merger agreement, provided that Zions shall have
been paid the amount of liquidated damages specified in the merger agreement;
or
· the
merger is not completed by May 31, 2007.
The
merger agreement provides for the payment of damages under certain circumstances
if the merger agreement is terminated; depending upon the circumstances, these
damages can range from $2,250,000 to $9,750,000. The circumstances of the
termination as presented in the merger agreement will determine which party,
if
any, is liable for damages resulting from termination of the merger agreement.
We encourage you to review the discussion of termination fees under "Approval
of
the Merger Agreement - Termination and Termination Fees" on page 40 below
and the specific provisions of §13.03 of the merger agreement for a more
comprehensive understanding of the effects of termination of the merger
agreement.
Amending
the Agreement
Zions
and
Stockmen's may amend the merger agreement at any time by mutual written
agreement, except that after approval by our shareholders, no waiver or
amendment is permitted which would adversely change the amount and kind of
consideration or prejudice the economic interests of our
shareholders.
Stockmen's
Shareholders Will Have the Right to Dissent to the Merger Agreement and the
Merger (see page 46)
Under
Arizona law, our shareholders will have dissenters' rights in connection with
the merger. By following the Arizona statutory scheme, you may dissent to the
merger agreement and the merger and thereby receive solely a cash payment for
your shares of our common stock if the merger occurs. To assert your rights
successfully, you will need to follow the statutory requirements precisely.
Failure
to follow the precise requirements of Arizona law may result in the loss of
your
dissenters' rights. In order to exercise your dissenters' rights, you must
refrain from voting "FOR" the merger. For more information regarding your right
to dissent from the merger and the procedures and requirements to exercise
appraisal rights, please see "Rights of Dissenting Shareholders" beginning
on
page 46. We also have attached a copy of the relevant provisions of Arizona
law
as Appendix C to this proxy statement/prospectus.
Our
Financial Advisor Believes the Merger Consideration is Fair to Our Shareholders
from a Financial Point of View (see page 25)
We
have
received a written opinion from our financial advisor, Hovde Financial, Inc.
to
the effect that, as of September 7, 2006, the merger consideration was fair
to
our shareholders from a financial point of view. We recommend that each of
our
shareholders carefully read the discussion of Hovde's financial analysis of
the
merger under the heading "Approval of the Merger Agreement - Opinion of
Stockmen's Financial Advisor" beginning on page 25, as well as Hovde's opinion
in its entirety to understand the assumptions made, matters considered, and
limitations on the review undertaken by our financial advisor. The full text
of
Hovde's opinion is attached as Appendix B to this proxy statement/prospectus.
The opinion outlines the procedures followed, assumptions made, matters
considered and qualifications and limitations on the review undertaken by Hovde
in rendering its opinion. The description of the opinion set forth herein is
qualified in its entirety by reference to the opinion. Hovde urges Stockmen's
shareholders to read the entire opinion carefully in connection with their
consideration of the proposed merger. Hovde's opinion speaks only as of
September 7, 2006. The opinion was directed to our board of directors and is
directed only to the fairness of the merger consideration to our shareholders
as
of September 7, 2006 from a financial point of view. It does not address the
relative merits of the merger as compared to any other alternative business
strategies that might exist for Stockmen's or the effect of any other
transaction in which Stockmen's might engage. It is not a recommendation to
any
Stockmen's shareholder as to how such shareholder should vote at our special
meeting with respect to the merger or any other matter.
Accounting
Treatment of the Merger (page 34)
The
combination of the two companies will be accounted for as an acquisition of
Stockmen's by Zions using the purchase method of accounting.
When
We Expect the Merger to Close (see page 20)
We
expect
completion of the merger as soon as practicable following receipt of all
necessary regulatory approvals and following approval of the merger agreement
by
our shareholders at our special shareholders meeting and satisfaction of all
other conditions to the merger. We expect that the merger will close during
the
first quarter of 2007.
We
Unanimously Recommend That Our Shareholders Approve the Merger Agreement (see
page 23)
Our
board
of directors 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.
Interests
of Stockmen's Officers and Directors in the
Merger That Are Different from Your Interests (see page
30)
You
should be aware that some of our officers and directors have interests in the
merger that are different from, or in addition to, the interests that they
have
or would have as shareholders of Stockmen's. The members of our board of
directors knew about these additional interests, and considered them, when
they
approved the merger agreement. These interests include, among other things,
an
employment agreement and non-competition agreements entered into (or that will
be entered into) with our executive officers that take effect upon completion
of
the merger, and enhanced and additional payments under the Supplemental
Executive Retirement Plan and certain change-in-control agreements upon a change
in control of Stockmen's. The aggregate amount that may be payable under these
agreements with the various officers and directors is approximately $6.2
million. Of this amount, $3,412,373 is attributable to SERP payments; $1,407,192
is attributable to change in control payments; and $1,342,444 is attributable
to
payments under non-competition agreements (that are currently being discussed).
The following represent the more salient of interests involved in the merger.
For a more expansive discussion, see "Approval of the Merger Agreement -
Interests of Officers and Directors in the Merger That Are Different from Your
Interests," below.
Farrel
Holyoak, our president and chief operating officer and who is president and
CEO
of Stockmen's Bank, will enter into an employment agreement with NBA effective
as of the effective date of the merger. For a period of one year following
the
effective date of the merger, extendable by mutual agreement for an additional
year, Mr. Holyoak will serve as a Regional President of NBA. In exchange for
his
performance under this agreement, NBA will agree to pay Mr. Holyoak a salary
at
an annual rate of $250,000. After the first anniversary of his commencing
employment with NBA, if Mr. Holyoak continues in NBA's employ through that
date,
he shall be entitled to a one-time bonus of $50,000, which will be payable
on or
before the first March 15 following the first anniversary of his employment
with
NBA. Mr. Holyoak will also receive additional benefits to which an officer
of
NBA would be entitled.
Additional
officers of Stockmen's Bank may become officers of NBA following the merger
and,
whether or not they become officers of NBA, it is expected that they will sign
non-competition agreements with NBA for which they will be compensated. These
non-competition agreements are currently being discussed, and the terms and
conditions of these agreements have not yet been finalized. Mr. Holyoak will
also be subject to a non-competition agreement.
Stockmen's
is expected to enter into Change in Control Agreements with Messrs. Farrel
Holyoak, James Walker, Jeff Duncan, William Kitchen and Gary Jay, all executives
of Stockmen's Bank, under which those executives will receive payments in the
event of a change of control of Stockmen's. Upon completion of the merger,
it is
expected that Stockmen's will be required to make change in control payments
to
those five executive officers of Stockmen's Bank in the aggregate amount of
$1,407,192. In addition, ten directors and executive officers of Stockmen's
Bank
will receive payments under The Stockmen's Bank Supplemental Executive
Retirement Plan upon a change of control and following completion of the merger.
Those ten individuals will receive a total of $3,412,373 in payments under
the
SERP following completion of the merger.
We
Have Not Yet Received the Required Regulatory Approvals (see page
45)
The
merger and the bank merger have not yet received the required approvals from
the
Board of Governors of the Federal Reserve, the Comptroller of the Currency
and
the Arizona Superintendent of Financial Institutions. Zions and Stockmen's
have
either filed or intend to complete the filing promptly after the date of this
proxy statement/prospectus of all required applications and notices with
applicable regulatory authorities in connection with the merger. There can
be no
assurance that all requisite approvals will be obtained or that such approvals
will be received on a timely basis. The U.S. Department of Justice has not
yet
completed its review of the effect the transaction could have on
competition.
Our
Shareholders' Meeting
We
will
hold our special meeting of shareholders at the Main Office of Stockmen's Bank,
3825 Stockton Hill Road, Kingman, Arizona on January 12,
2007 at
10:00 a. m. local time.
The
following table sets forth certain historical financial information for Zions.
This information is based on the historical financial statements of Zions
incorporated into this proxy statement/prospectus by reference. Our shareholders
should read the financial statements and the related notes with respect to
Zions.
|
|
|
Nine
Months
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ended September
30,
|
|
Years
Ended December 31,
|
| |
|
2006
|
|
2005
|
|
2005
|
|
2004
|
|
2003
|
|
2002
|
|
2001
|
|
|
|
|
(Unaudited)
|
|
(In
Millions, Except Per Share Amounts)
|
|
Zions
Earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
interest income
|
|
$
|
1,305.7
|
|
$
|
986.5
|
|
$
|
1,361.4
|
|
$
|
1,160.8
|
|
$
|
1,084.9
|
|
$
|
1,025.7
|
|
$
|
942.8
|
|
|
Provision
for loan losses
|
|
|
45.9
|
|
|
32.9
|
|
|
43.0
|
|
|
44.1
|
|
|
69.9
|
|
|
71.9
|
|
|
73.2
|
|
|
Net
income
|
|
|
436.6
|
|
|
352.0
|
|
|
480.1
|
|
|
406.0
|
|
|
337.8
|
|
|
256.3
|
|
|
283.0
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per
Share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income basic
|
|
$
|
4.12
|
|
$
|
3.92
|
|
$
|
5.27
|
|
$
|
4.53
|
|
$
|
3.75
|
|
$
|
2.80
|
|
$
|
3.10
|
|
|
Net
income diluted
|
|
|
4.04
|
|
|
3.84
|
|
|
5.16
|
|
|
4.47
|
|
|
3.72
|
|
|
2.78
|
|
|
3.07
|
|
|
Cash
dividends
|
|
|
1.08
|
|
|
1.08
|
|
|
1.44
|
|
|
1.26
|
|
|
1.02
|
|
|
0.80
|
|
|
0.80
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statement
of Condition at
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period
End
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
$
|
45,778
|
|
$
|
33,423
|
|
$
|
42,780
|
|
$
|
31,470
|
|
$
|
28,558
|
|
$
|
26,566
|
|
$
|
24,304
|
|
|
Deposits
|
|
|
33,641
|
|
|
25,400
|
|
|
32,642
|
|
|
23,292
|
|
|
20,897
|
|
|
20,132
|
|
|
17,842
|
|
|
Long-term
borrowings
|
|
|
2,767
|
|
|
1,912
|
|
|
2,746
|
|
|
1,919
|
|
|
1,843
|
|
|
1,310
|
|
|
1,022
|
|
|
Shareholders'
equity
|
|
|
4,643
|
|
|
2,999
|
|
|
4,237
|
|
|
2,790
|
|
|
2,540
|
|
|
2,374
|
|
|
2,281
|
|
In
addition to the other information included or incorporated by reference into
this proxy statement/prospectus, you should carefully read and consider the
following factors in evaluating the proposals to be voted on at our special
meeting of Stockmen's shareholders. Please also refer to the additional risk
factors identified in the periodic reports and other documents of Zions
incorporated by reference into this proxy statement/prospectus and listed in
"Documents Incorporated by Reference."
We
may fail to realize the anticipated benefits of the
merger.
The
success of the merger will depend, in part, on the parties' ability to realize
the anticipated cost savings from combining certain aspects of the businesses
of
Zions and Stockmen's. However, to realize the anticipated benefits from the
merger, Zions must successfully combine the businesses of Zions and Stockmen's
in a manner that permits those cost savings to be realized. The anticipated
benefits of the merger also depend on the continued operating performance of
Stockmen's business following the merger. If Zions is not able to combine the
businesses of Zions and Stockmen's in a manner that permits the anticipated
cost
savings to be realized, or if the business of Stockmen's does not perform as
anticipated following the merger, the anticipated benefits of the merger may
not
be realized fully or at all or may take longer to realize than
expected.
Zions
and
Stockmen's have operated and, until the completion of the merger, will continue
to operate, independently. It is possible that the integration process could
result in the loss of key employees, the disruption of each company's ongoing
businesses or inconsistencies in standards, controls, procedures and policies
that adversely affect each company's ability to maintain relationships with
clients, customers, depositors and employees or to achieve the anticipated
benefits of the merger.
The
market price of the shares of Zions common stock after the merger may be
affected by factors different from those affecting the shares of Zions
currently.
Zions'
current businesses and geographic markets differ in some respects from those
of
Stockmen's, and, accordingly, the results of operations of the combined company
and the market price of the combined company's shares of common stock will
be
affected by factors different from those currently affecting the independent
results of operations of each company and the market price of Zions. For a
discussion of the businesses of Zions and of certain factors to consider in
connection with those businesses, see the documents incorporated by reference
in
this proxy statement/prospectus and referred to under "Documents Incorporated
by
Reference" beginning on page 54.
Because
the market price of Zions common stock will fluctuate, the shareholders of
Stockmen's cannot be sure of the value of the merger consideration they will
receive.
Although
it is anticipated that our shareholders will receive approximately 7.46 shares
of Zions common stock for each share of Stockmen's common stock exchanged in
the
merger, Stockmen's shareholders cannot be sure of the precise value of the
Zions
common stock they will receive upon completion of the merger, because the market
price of Zions common stock will fluctuate. The price of Zions common stock
on
the Nasdaq Global Select Market may vary from the closing price of Zions common
stock on the date we and Zions announced the merger, on the date that this
proxy
statement/prospectus is being mailed to our shareholders, and on the date of
our
special meeting of Stockmen's shareholders. Any change in the market price
of
Zions common stock will affect the value of the Zions common stock in the hands
of our shareholders following completion of the merger. Stock
price changes may result from a variety of factors, including general market
and
economic conditions, changes in our respective businesses, operations and
prospects, and regulatory considerations. Many of these factors are beyond
the
companies' control.
Additionally,
the date that you will receive your shares of Zions common stock following
completion of the merger depends on the completion date of the merger, which
is
uncertain. The completion date of the merger might be later than expected due
to
unforeseen events, such as delays in obtaining regulatory
approvals.
Stockmen's
will be subject to business uncertainties and contractual restrictions while
the
merger is pending.
Uncertainty
about the effect of the merger on employees and customers may have an adverse
effect on Stockmen's and consequently on Zions. These uncertainties may impair
Stockmen's ability to attract, retain and motivate key personnel until the
merger is completed, and could cause customers and others that deal with
Stockmen's to seek to change existing business relationships with Stockmen's.
Retention of certain employees may be challenging during the pendency of the
merger, because certain employees may experience uncertainty about their future
roles with Zions. If key employees depart because of issues relating to the
uncertainty and difficulty of integration or a desire not to remain with Zions,
Zions' business following the merger could be harmed. In addition, the merger
agreement restricts Stockmen's from making certain acquisitions and taking
other
specified actions until the merger occurs. These restrictions may prevent
Stockmen's from pursuing attractive business opportunities that may arise prior
to the completion of the merger. Please see the section entitled "Approval
of
the Merger Agreement - Conduct of Business Pending Completion of the Merger"
beginning on page 36 of this proxy statement/prospectus for a description
of some of the restrictive covenants to which Stockmen's is
subject.
Some
of the directors and executive officers of Stockmen's have interests and
arrangements that may have influenced their decisions to support or recommend
that you approve the merger.
The
interests of some of our directors and executive officers may be different
from
those of our shareholders, and our directors and officers may be participants
in
arrangements that are different from, or in addition to, those of our
shareholders. These interests are described in more detail in the section of
this proxy statement/prospectus entitled "Approval of the Merger Agreement
-
Interests of Officers and Directors in the Merger That Are Different from Your
Interests" beginning on page 30.
The
merger agreement limits Stockmen's ability to pursue alternatives to the
merger.
The
merger agreement contains provisions that make it more difficult for Stockmen's
to sell its business to a party other than Zions. These provisions include
(1)
the general prohibition on Stockmen's soliciting any acquisition proposal or
offer for a competing transaction and (2) the requirement that Stockmen's pay
termination fees of up to $9.75 million in the aggregate if the merger agreement
is terminated in specified circumstances. See "Approval of the Merger Agreement
- Conduct of Business Pending Completion of the Merger" and "Approval of the
Merger Agreement - Termination and Termination Fees" beginning on pages 36
and 40, respectively, of this proxy statement/prospectus.
Zions
required Stockmen's to agree to these provisions as a condition to Zions'
willingness to enter into the merger agreement. These provisions, however,
might
discourage a third party that might have an interest in acquiring all of or
a
significant part of Stockmen's from considering or proposing that acquisition,
even if that party were prepared to pay consideration with a higher per share
market price than the current proposed merger consideration. Furthermore, the
termination fee may result in a potential competing acquiror proposing to pay
a
lower per share price to acquire Stockmen's than it might otherwise have
proposed to pay.
The
shares of Zions common stock to be received by Stockmen's shareholders as a
result of the merger will have different rights from the shares of Stockmen's
common stock.
The
rights associated with our common stock are different from the rights associated
with Zions common stock. See the section of this proxy statement/prospectus
entitled "Comparison of Shareholders' Rights" on page 49 for a discussion
of the different rights associated with Zions common stock.
If
the merger is not consummated by May 31, 2007, either Zions or Stockmen's may
choose not to proceed with the merger.
Either
Zions or Stockmen's may terminate the merger agreement if the merger has not
been completed by May 31, 2007, 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 "Approval of the Merger
Agreement - Termination and Termination Fees," beginning at page 40 of this
proxy statement/prospectus.
This
proxy
statement/prospectus and the SEC filings that are incorporated by reference
into
this proxy statement/prospectus contain or incorporate by reference
forward-looking statements that have been made pursuant to the provisions of,
and in reliance on the safe harbor under, the Private Securities Litigation
Reform Act of 1995. These forward-looking statements are not historical facts,
but rather are based on current expectations, estimates and projections. Words
such as "anticipates," "expects," "intends," "plans," "believes," "seeks,"
"could," "should," "will," "projects," "estimates" and similar expressions
are
intended to identify forward-looking statements. These statements include
statements with respect to the expected timing, completion and effects of the
proposed merger. These statements are not guarantees of future performance
and
are subject to risks, uncertainties and other factors, some of which are beyond
the companies' control, are difficult to predict and could cause actual results
to differ materially from those expressed or forecasted in the forward-looking
statements. In that event, Stockmen's or Zions' business, financial condition
or
results of operations could be materially adversely affected, and investors
in
Stockmen's or Zions' securities could lose part or all of their investment.
You
should not place undue reliance on these forward-looking statements, which
speak
only as of the date of this proxy statement/prospectus or, in the case of
documents incorporated by reference, the date referenced in those documents.
Except as required by the federal securities laws, we and Zions are not
obligated to update these statements or publicly release the result of any
revision to them to reflect events or circumstances after the date of this
proxy
statement/prospectus or, in the case of documents incorporated by reference,
the
date referenced in those documents, or to reflect the occurrence of
unanticipated events.
You
should
understand that the following important factors, in addition to those discussed
elsewhere in this document (including the risks described above) and in the
documents which are incorporated by reference, could affect the future results
of Zions and Stockmen's, and of the combined company after the merger, and
could
cause those results or other outcomes to differ materially from those expressed
in the forward-looking statements:
| · |
the
businesses of Zions and Stockmen's may not be combined successfully,
or
such combination may take longer, be more difficult, time-consuming
or
costly to accomplish than expected, in particular with respect to
the
integration of information technology
systems;
|
| · |
the
expected growth opportunities and cost savings from the merger may
not be
fully realized or may take longer to realize than
expected;
|
| · |
operating
costs, customer losses and business disruption prior to or following
the
merger, including adverse effects on relationships with employees,
may be
greater than expected;
|
| ·
|
governmental
approvals of the merger may not be obtained, or adverse regulatory
conditions may be imposed in connection with governmental approvals
of the
merger;
|
| · |
the
shareholders of Stockmen's may fail to approve the
merger;
|
| · |
Zions'
and Stockmen's may not be able to successfully execute their business
plans and achieve their objectives;
|
| · |
changes
may occur in political and general economic conditions, including
the
economic effects of terrorist attacks against the United States and
elsewhere and related events;
|
| · |
changes
may occur in financial market conditions, either nationally or locally
in
areas in which Zions or Stockmen's conduct their operations, including
without limitation, reduced rates of business formation and growth,
commercial real estate development and real estate
prices;
|
| · |
fluctuations
may occur in the equity and fixed-income
markets;
|
| · |
changes
may occur in interest rates, the quality and composition of the loan
or
securities portfolios, demand for loan products, deposit flows and
competition;
|
| · |
acquisitions
and integration of acquired businesses may not be as successful as
anticipated;
|
| · |
increases
may occur in the levels of losses, customer bankruptcies, claims
and
assessments;
|
| · |
changes
may occur in fiscal, monetary, regulatory, trade and tax policies
and
laws, including policies of the U.S. Treasury and the Federal Reserve
Board;
|
| · |
there
may be continuing consolidation in the financial services
industry;
|
| · |
there
may be new litigation or changes in existing
litigation;
|
| · |
there
may not be success in gaining regulatory approvals, when
required;
|
| · |
changes
may occur in consumer spending and savings
habits;
|
| · |
there
may be increased competitive challenges and expanding product and
pricing
pressures among financial
institutions;
|
| · |
there
may be demand for financial services in Zions' or Stockmen's market
areas;
|
| · |
inflation
and deflation may occur;
|
| · |
technological
changes may occur and Zions' and Stockmen's implementation of new
technologies might not be
successful;
|
| · |
Zions'
and Stockmen's may not be able to develop and maintain secure and
reliable
information technology systems;
|
| · |
legislation
or regulatory changes may occur, which adversely affect the ability
of
Zions or Stockmen's to conduct the businesses in which they are
engaged;
|
| · |
Zions'
and Stockmen's may not be able to comply with applicable laws and
regulations; and
|
| · |
changes
may occur in accounting policies, procedures or guidelines as may
be
required by the Financial Accounting Standards Board or regulatory
agencies.
|
Zions
disclaims any obligation to update any of these factors or to publicly announce
the result of any revisions to any of the forward-looking statements included
in
this document to reflect future events or developments, except as required
by
the federal securities laws. Zions' actual results could differ materially
from
those set forth in the forward-looking statements because of many reasons,
including the factors listed in this section of this document. This list may
not
be exhaustive.
The
Stockmen's Special Meeting
We
will
hold a special meeting of our shareholders at the Main Office of The Stockmen's
Bank, 3825 Stockton Hill Road, Kingman, Arizona on January 12,
2007 at
10:00 a.m.. local time.
What
Will Be Voted on at the Stockmen's Special Meeting
Our
shareholders will consider and vote upon a proposal to approve the agreement
and
plan of reorganization, dated as of September 8, 2006, as amended as of
September 25, 2006, among Zions, NBA, Stockmen's and Stockmen's Bank, under
which, among other things:
| · |
Stockmen's
will merge with Zions, with Zions being the surviving
corporation;
|
| · |
Zions
will issue approximately 2,600,237 shares of its common stock to
the
former Stockmen's shareholders upon completion of the merger in exchange
for all of their shares of Stockmen's common stock, or approximately
7.46
shares for each share of Stockmen's common stock;
and
|
| · |
Stockmen's
Bank, our wholly-owned subsidiary, will merge with and into NBA,
Zions'
wholly-owned subsidiary, with NBA being the surviving
bank.
|
In
addition, you are being asked to vote to approve a proposal to adjourn our
special meeting, if necessary, to solicit additional proxies if there are not
sufficient votes at the time of our special meeting to approve the merger
agreement.
We
may
take action on the above matters at our special meeting, or on any later date
to
which our special meeting is postponed or adjourned.
We
are
unaware of other matters to be voted on at our special meeting. If other matters
do properly come before our special meeting, we intend that the persons named
in
the proxies will vote, or not vote, in their discretion the shares represented
by proxies in the accompanying proxy card.
Shareholders
Entitled to Vote
We
have
set the close of business on November 27,
2006 as
the record date to determine which Stockmen's shareholders will be entitled
to
receive notice of and to vote at our special meeting. Only those of our
shareholders who held their shares of record as of the close of business on
the
record date will be entitled to receive notice of and to vote at our special
meeting. As of the record date, there were 348,713 outstanding shares of our
common stock. Each Stockmen's shareholder on the record date is entitled to
one
vote per share. You may cast your vote either in person or by properly executed
proxy. As of the same date, various of our directors, executive officers and
their affiliates owned a total of 162,919 shares of our common stock,
representing approximately 46.72% of the shares of our common stock then issued
and outstanding. Each of those directors, executive officers and affiliated
persons has agreed to vote his, her or its shares in favor of the merger
agreement.
Vote
Required to Approve the Merger Agreement and to Approve the Adjournment
Proposal
The
affirmative vote, either in person or by proxy, of the holders of a majority
of
the outstanding shares of our common stock entitled to vote at our special
meeting is required to approve the merger agreement.
The
affirmative vote, either in person or by proxy, of the holders of a majority
of
the shares of our common stock entitled to vote on the adjournment proposal
and
represented at our special meeting, either in person or by proxy, is required
to
approve the adjournment proposal.
Stock
exchange rules prohibit brokers who hold shares of Stockmen's common stock
in
nominee or "street name" from giving a proxy without specific instructions
from
the beneficial owners of the shares. We will count these so-called "broker
non-votes," which we receive, for purposes of determining whether a quorum
exists; we will not vote these shares in connection with the merger or any
adjournment proposal.
Abstentions
and broker non-votes on the proposal to approve the merger agreement will
effectively count as votes against that proposal. Abstentions will effectively
count as votes against, and broker non-votes will not count with respect to,
the
adjournment proposal.
Voting
Your Shares
Our
board
is soliciting proxies from our shareholders. This will give you an opportunity
to vote at our special meeting. Our board urges you to complete, date and sign
the accompanying proxy card and return it promptly in the enclosed postage-paid
envelope. 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 either vote by proxy or attend the special meeting and vote in person,
your
vote will be counted as not present for quorum purposes and will effectively
count as a vote against the proposal to approve the merger agreement, but will
be neutral regarding the adjournment proposal. If you vote by proxy, but make
no
specification on your proxy that you have otherwise properly executed, the
named
agent will vote "FOR"
approval of the merger agreement and approval of the adjournment
proposal.
You
may grant
a proxy by dating, signing and mailing your proxy card. You may also attend
the
special meeting and cast your vote in person at the
meeting.
Mail.
To grant
your proxy by mail, please complete your proxy card and sign, date and return
it
in the enclosed envelope. To be valid, a returned proxy card must be signed
and
dated.
In
person.
If you
attend our special meeting in person, you may vote your shares by completing
a
ballot at the meeting. Attendance at our special meeting will not by itself
be
sufficient to vote your shares; you still must complete and submit a ballot
at
our special meeting to vote your shares.
DO
NOT SEND IN YOUR STOCKMEN'S STOCK CERTIFICATES WITH YOUR PROXY
CARD.
After
our special meeting, you will receive from Zions a transmittal form and other
materials relating to the exchange of your Stockmen's shares for Zions shares,
and you will be requested at that time to send in your Stockmen's stock
certificates (or follow the procedures for guaranteed delivery) together with
the properly completed transmittal form.
Establishing
a Quorum of Shareholders
If
a
majority of the total number of issued and outstanding shares of Stockmen's
common stock entitled to vote at our special meeting are present at the meeting,
either in person or by proxy, our special meeting will have the quorum of
shareholders required for us to transact business. Abstentions and broker
non-votes (which are executed proxies returned by a broker that indicate that
the broker has not received voting instructions from the beneficial owner of
the
shares and does not have discretionary authority to vote the shares) will be
counted for purposes of determining whether a quorum exists.
Changing
Your Vote
Any
of
our shareholders giving a proxy may revoke the proxy at any time before the
vote
at our special meeting in one or more of the following ways:
| · |
delivering
a written notice to our president, Farrel Holyoak, ,bearing a later
date
than the proxy previously
submitted;
|
| · |
giving
a later-dated proxy by mail; or
|
| · |
appearing
in person and voting at our special meeting. Attendance at our special
meeting will not by itself constitute a revocation of a proxy; to
revoke
your proxy, you must complete and submit a ballot at our special
meeting.
|
You
should send any written notice of revocation or subsequent proxy to Farrel
Holyoak, President, The Stockmen's Bancorp, Inc., 3825 Stockton Hill Road,
Kingman, Arizona 86402-3879, Attention: President, or hand deliver the notice
of
revocation or subsequent proxy to the president at or before the taking of
the
vote at our special meeting.
Solicitation
of Proxies and Costs
We
will bear
our own costs of solicitation of proxies. We will reimburse brokerage houses,
fiduciaries, nominees and others for their out-of-pocket expenses in forwarding
proxy materials to owners of shares of our common stock held in their names.
In
addition to the solicitation of proxies by use of the mails, our directors,
officers and employees may solicit proxies from our shareholders. We will not
pay any additional compensation, except for reimbursement of reasonable
out-of-pocket expenses, to our directors, officers and employees in connection
with the solicitation. You may direct any questions or requests for assistance
regarding this document and related proxy materials to Farrel Holyoak,
President, by telephone at (928) 757-7171.
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.
Recommendation
of the Stockmen's Board
Our
board of
directors has unanimously approved the merger agreement, the merger and the
related matters. Our board considered the fairness opinion of Hovde Financial,
Inc., our financial advisor, when our board unanimously approved the merger
agreement. We believe that the merger agreement, the merger and the related
matters are in the best interests of Stockmen's and our shareholders, and we
recommend that our shareholders vote "FOR"
approval of the merger agreement and "FOR" the approval of the adjournment
proposal. See "Proposal 1 - Approval of the Merger Agreement - Recommendation
of
the Stockmen's Board and Stockmen's Reasons for the Merger."
Adjournment
and Postponement
Any
adjournment or postponement may be made from time to time by approval of the
holders of common stock representing a majority of the votes present in person
or represented by proxy at our special meeting, whether or not a quorum exists,
without further notice other than by an announcement made at our special
meeting. If a quorum is not present at our special meeting, our shareholders
may
be asked to vote on a proposal to adjourn or postpone our special meeting to
solicit additional proxies. If a quorum is present at our special meeting,
but
there are not sufficient votes at the time of the special meeting to approve
the
merger agreement, our shareholders may also be asked to vote on a proposal
to
approve the adjournment or postponement of our special meeting to permit further
solicitation of proxies.
The
following
summary describes the material terms and provisions of the merger agreement
and
the merger. We have attached a copy of the merger agreement to this document
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.
The
affirmative vote, either in person or by proxy, of the holders of a majority
of
the outstanding shares of Stockmen's common stock entitled to vote at our
special meeting is required to approve the merger agreement.
Under
the
merger agreement,
· Stockmen's
will merge with and into Zions, with Zions being the surviving corporation,
and
the separate corporate existence of Stockmen's will cease.
· Zions
will survive and will continue its corporate existence under the laws of the
State of Utah under its existing charter and bylaws. Subject to the satisfaction
or waiver of conditions set forth in the merger agreement and described in
"Approval of the Merger Agreement - Conditions to Complete the Merger," the
merger of Stockmen's with and into Zions will become effective on the date
and
at the time specified in the certificate of merger to be filed with the
Secretary of State of the State of Utah and the Secretary of State of the State
of Arizona.
· Immediately
following the completion of the Zions and Stockmen's merger,
· Stockmen's
Bank will merge with and into NBA;
· the
separate corporate existence of Stockmen's Bank will cease; and
· NBA
will
be the surviving bank in the bank merger and will continue its existence as
a
national bank under the laws of the United States under its current name,
charter and bylaws.
· Each
share of Stockmen's common stock issued and outstanding at the effective time
of
the merger will be converted into the right to receive a pro rata portion of
the
merger consideration, consisting of approximately 7.46 shares of Zions common
stock.
· Zions
will issue an aggregate of approximately 2,600,237 shares of its common stock
to
the former Stockmen's shareholders at the effective time of the
merger.
· We
expect
to complete the merger in the first quarter of 2007.
The
Merger Consideration
Upon
completion of the merger, each former Stockmen's shareholder will receive
approximately 7.46 shares of Zions common stock in exchange for each of your
shares of Stockmen's common stock.
Zions
will
not issue fractional shares of its common stock in the merger. Rather, each
of
our shareholders who would be entitled to a fractional share of Zions common
stock will receive an amount of cash equal to the product of the fraction times
the average of the last sales price of Zions common stock as reported in the
Wall
Street Journal
during
the twenty consecutive trading days ending on and including the trading day
that
is the eighth business day preceding the effective time of the
merger.
Zions
may
terminate the merger agreement under certain circumstances if the average
closing price of Zions stock during the pricing period, as defined in the merger
agreement, is more than $93.24, unless Stockmen's agrees to accept fewer shares
in the merger; and Stockmen's may terminate the merger agreement if the average
closing price of Zions stock during the pricing period, as defined in the merger
agreement, is less than $68.92, unless Zions agrees to issue additional shares
of its common stock to the Stockmen's shareholders in the merger. See
"Termination and Termination Fee" below.
During
the
normal course of its business, the management and board of directors of
Stockmen's periodically reviewed and assessed the strategic options of the
Company. Consistent with its fiduciary obligations to its shareholders, the
board of directors of Stockmen's periodically considered strategic options
including strategies to grow and enhance Stockmen's business through internal
and external means. Those discussions included analyses of the financial
institution merger market on a national and regional basis, the liquidity needs
of Stockmen's shareholders, the potential value of the Stockmen's franchise
based on current merger market fundamentals, and the potential market value
of
the Stockmen's stock assuming the execution of its current business plan under
various scenarios. The board of directors and management of Stockmen's also
routinely discussed the increasing level of competition, continuing
consolidation, regulatory burden and related costs and other developments in
the
financial services industry.
In
February
2005, Farrel Holyoak, President of Stockmen's Bank, met twice with John Gisi,
Chairman of the Board of NBA, to informally discuss the prospect of a merger
between the two banks. After those discussions and later in the spring of 2005,
Harris Simmons, Chief Executive Officer and Chairman of Zions, met with Mr.
Holyoak to further express Zions' interest in acquiring Stockmen's and submit
a
verbal offer. Mr. Holyoak then informed the Stockmen's board of directors of
the
occurrence and the specifics of the offer. After considering terms of the
proposed transaction and the level of consideration offered (which was
substantially less than the amount ultimately agreed upon in the merger
agreement), the Stockmen's board of directors determined that it was in the
best
interests of Stockmen's and its shareholders to remain independent at that
time.
Although Stockmen's board of directors then elected not pursue a partnership,
Mr. Holyoak informally maintained his existing relationships with executives
from NBA and continued to be familiar with the bank's operating style, culture,
and reputation in the Arizona marketplace.
In
light of
the growing liquidity needs of Stockmen's shareholders, on April 20, 2006
Stockmen's board of directors met to discuss the increasingly attractive pricing
multiples characterizing bank mergers and acquisitions and the projected growth
in the Bank's operating markets. After discussion, the board of directors
determined that it was in the best interests of Stockmen's and its shareholders
to explore the prospect of a combination with a partner. The board of directors
concluded that a partnership could provide increased liquidity to Stockmen's
shareholders and provide the Bank with access to additional capital to promote
future expansion efforts.
In
considering a possible business combination, Stockmen's board of directors
decided to retain the investment banking firm Hovde Financial to assist and
advise it in exploring such a transaction and if Stockmen’s located a suitable
acquirer to issue a fairness opinion with respect to such a transaction.
Stockmen's entered into an engagement agreement with Hovde Financial on May
23,
2006.
Hovde
Financial evaluated the merger market available to Stockmen's and identified
other institutions besides Zions that might be interested in pursuing a business
combination with Stockmen's. Hovde Financial informed the Board of their views
of the different levels of pricing that could be offered for Stockmen's by
potential interested parties. After considering all the information presented,
it was determined by the Board that it was in the best interest of Stockmen's
and its shareholders to authorize Hovde Financial to approach various potential
acquirers to determine the level of interest there may be in acquiring
Stockmen's.
During
June
2006, representatives from Hovde Financial worked with Stockmen's management
to
prepare marketing materials to provide to parties interested in evaluating
the
benefits of a partnership with Stockmen's. The marketing presentations, along
with select Stockmen's public and private financial information, were sent
out
to thirteen interested parties who had previously signed Confidentiality
Agreements. Hovde Financial had extensive conversations with the potential
acquirers over the next several weeks and advised all potential acquirers to
submit non-binding expressions of interest. Three companies, not including
Zions, submitted written non-binding expressions of interest conditioned on
a
number of factors, including the ability to conduct due diligence. An additional
company submitted a verbal indication of interest with similar
conditions.
Concurrent
to
the process mentioned above during June 2006, Zions, which had not signed a
Confidentiality Agreement, continuously reviewed the Stockmen's acquisition
opportunity predominantly based on public information. On June 5, 2006, Mr.
Simmons of Zions once again met with Mr. Holyoak in Kingman, Arizona to
readdress the prospect of a partnership between the two organizations. During
the meeting, the two parties discussed integration issues and Mr. Simmons
extended a verbal offer in the amount of $205.0 million.
Hovde
Financial held extensive conversations with representatives from Zions during
this period of time and requested that Zions submit a written non-binding
indication of interest in order to pursue the acquisition. Zions then submitted
a non-binding indication of interest on June 29, 2006, executed by Mr. Simmons
with an aggregate purchase price of $210.0 million in the form of Zions shares
(subject to certain adjustments), conditioned upon approval by Zions' board
of
directors, regulatory approval, the negotiation of a binding definitive
agreement, employment agreements for key personnel, and the completion of due
diligence.
At
a meeting
held on July 7, 2006, Hovde Financial presented to Mr. Holyoak the five offers
(four written and one verbal) submitted by the interested parties to Stockmen's.
Keeping in mind the viable option of remaining independent, the presentation
included an analysis of the amount and form of consideration offered,
integration plans for the acquisition, price protection instruments proposed,
board of directors representation, and an evaluation of the reinvestment
opportunity for Stockmen’s shareholders related to each of the proposals. The
analysis also compared the offers to multiples received on comparable bank
transactions. Furthermore, Hovde Financial provided additional feedback received
from parties that reviewed the acquisition opportunity on topics including
Stockmen's strategic value to a partner and issues limiting franchise value
in a
strategic partnership. On July 10, 2006, Mr. Holyoak met with Stockmen's board
of directors to discuss the offers and Hovde's presentation, and after
considering the information provided in the presentation, the board of directors
decided to begin the due diligence process and the negotiation of an agreement
exclusively with Zions.
Zions
executed a Confidentiality Agreement on the afternoon of July 10, 2006 and
was
provided marketing material prepared by Hovde Financial which contained certain
non-public information. Over the following weeks, Zions reviewed public and
private information on Stockmen's, including an onsite review of the Bank's
loan
portfolio while Stockmen's reviewed public information available on Zions to
gain comfort on the reinvestment opportunity in Zions common stock. During
this
period, Zions expressed a desire to retain Mr. Holyoak as a Regional President
of NBA after the merger.
Stockmen's
retained the law firm of Stinson Morrison Hecker LLP as legal counsel in
connection with the negotiations with Zions. On August 10, 2006, Duane Morris
LLP, special counsel to Zions, provided to Stockmen's and its representatives
an
initial draft of the merger agreement. During the following weeks, the parties
and their representatives continued due diligence and negotiated the terms
of
the merger agreement and ancillary agreements. The terms of Mr. Holyoak’s
employment agreement and non-competition agreement were negotiated;
additionally, the parties agreed upon the terms of the change of control
agreements and structured a general framework for non-competition agreements
with other officers of Stockmen's and Stockmen's Bank during this
period.
On
September 7, 2006,
the board of directors of Stockmen's met to consider the proposed merger with
Zions. Representatives of Stinson Morrison Hecker LLP and Hovde Financial
participated in the meeting by telephone. Stinson Morrison Hecker LLP provided
a
review of its memorandum previously distributed to the directors regarding
the
directors' fiduciary duties in connection with a possible transaction with
Zions. Stinson Morrison Hecker LLP also reviewed the proposed merger agreement
and ancillary agreements with the directors, which included review of a written
summary of the merger agreement previously provided to the directors. Hovde
Financial presented a summary of its financial analyses relating to the proposed
merger and responded to questions posed by the board of directors. Hovde
Financial provided its written opinion that, as of the date of the opinion
and
based upon and subject to the considerations described in the opinion, the
consideration to be received by the holders of common stock in the proposed
merger was fair, from a financial point of view, to such holders. The board
meeting included, among other things, discussions of the form of consideration
to be received by the shareholders of Stockmen's, the termination fee, potential
price adjustments, caps and collars, the current stock price of Zions and its
dividend history, and the implications to Stockmen’s shareholders, employees and
customers. Stockmen's evaluated the information provided in the presentation
made by Hovde Financial and its fairness opinion that was presented and approved
by the board of directors as written. After due deliberations, the board of
directors unanimously determined that the merger agreement and the transactions
contemplated thereby, including the merger, were advisable to, fair to and
in
the best interests of Stockmen's and its shareholders and voted unanimously
to
approve the terms of the merger agreement and the merger.
The
proposed merger was approved by the board of directors of Zions on July 22,
2006.
The
parties entered into the agreement and plan or reorganization on September
8,
2006.
On
September 11, 2006, a joint press release was issued before the open of trading
of Zions’ stock announcing the transaction.
On
September 25, 2006, the parties entered into an amendment to the
agreement and plan of reorganization to address the sale by Stockmen's Bank
of
much of its securities portfolio and to clarify certain matters in the
agreement.
Recommendation
of the Stockmen's Board and
Stockmen's Reasons for the Merger
Our
board
believes that the merger is fair to, and in the best interests of, Stockmen's
and our shareholders. Accordingly, our board has unanimously approved the merger
agreement and recommends that Stockmen's shareholders vote FOR
the
approval of the merger agreement.
At
a special
meeting held on September 7, 2006, our board of directors determined that the
terms of the merger agreement were in the best interests of Stockmen's and
its
shareholders and that ample consideration was to be received such that the
merger was fair to Stockmen's shareholders. In the course of reaching its
decision to approve the merger agreement, our board of directors consulted
with
Hovde Financial, our financial advisor, and Stinson Morrison Hecker LLP, our
legal counsel. In
reaching our determination, our board of directors considered a number of
factors, including, without limitation, the following:
· the
total
dollar amount of the consideration being paid and the terms of the
consideration, including the form of the consideration and the ability of our
shareholders to reinvest in Zions common stock;
· the
potential adjustments to the aggregate purchase price in connection with changes
in Stockmen's investment portfolio and capital levels as well as positive or
negative changes in Zions' stock price;
· the
likelihood of the merger being approved by applicable regulatory authorities
without undue conditions or delay;
· the
opinion of Hovde Financial, Inc. that the consideration to be received by
Stockmen's shareholders in the merger is fair from a financial point of
view;
· the
financial terms of recent business combinations in the financial services
industry and a comparison of the multiples of selected combinations with the
terms of the proposed acquisition by Zions;
· the
consideration offered by Zions compared to the standalone present value of
Stockmen's using forecasted earnings growth and other market
assumptions;
· the
alternatives of Stockmen's continuing as an independent community bank or
combining with other potential merger partners versus the determination that
the
merger with Zions presented the best opportunity for maximizing shareholder
value;
· information
concerning Zions' financial condition, results of operations and business
prospects as well as Zions' demonstrated ability of completing bank acquisitions
on the terms and within the timeframes initially agreed upon by the
parties;
· the
expectation that Stockmen's shareholders would have the opportunity to continue
to participate in the growth of the combined company and would also greatly
benefit from the significantly greater liquidity of the trading market for
Zions' common stock;
· that
Zions has historically paid cash dividends on its common stock;
· Zions'
operating philosophy as a community-oriented bank holding company operating
in
similar and nearby geographic markets, with a customer service focus that is
consistent with Stockmen's philosophy;
· the
potential balance sheet and earnings growth of the combined company due to
Zions' successful history as a growth oriented organization with a focused
presence in markets with favorable demographics;
· the
opportunity to realize savings in expenses through the combination of
overlapping and redundant processes through the combination of the two entities
and the benefits of economies of scale realized with regard to regulatory and
market pressures;
· the
determination that a business combination with Zions would extend Stockmen's
lending capabilities and increase the range of financial products and services
available to Stockmen's customers;
· the
terms
and conditions of the merger agreement, including the parties' representations,
warranties and covenants, the conditions to their respective obligations and
the
limited ability of the parties to terminate the merger agreement;
· the
work
that Hovde Financial had done to entertain offers from potential
acquirers;
· provisions
in the merger agreement permitting Stockmen's board of directors, in the
exercise of its fiduciary duties to Stockmen's and its shareholders under
applicable Arizona law, to furnish information, and enter into discussions,
in
connection with an alternative proposal that constitutes a superior proposal,
subject to conditions specified in the merger agreement;
· provisions
in the merger agreement permitting Stockmen’s board of directors, in the
exercise of its fiduciary duties to Stockmen's and its shareholders under
applicable Arizona law, to terminate the merger agreement in favor of an
alternative proposal, taking into account that Stockmen's would be required
to
pay Zions liquidated damages as a termination fee;
· the
fact
that the merger agreement would be subject to approval by the holders of a
majority of Stockmen's issued and outstanding common stock; and
· the
ability of shareholders who may not support the merger to obtain "fair value"
for their shares if they properly perfect and exercise their dissenters' rights
under Chapter 13 of the Arizona Business Corporation Act.
In
the
course of its deliberations, our board of directors also considered a variety
of
potentially countervailing factors in its deliberations concerning the merger,
including the following:
· the
fact
that Stockmen's will no longer continue as an independent company owned by
the
shareholders;
· the
risks
and contingencies related to the announcement and pendency of the merger,
including the impact of the merger on Stockmen's employees, customers and
relationships with third parties;
· the
conditions to Zions' obligation to complete the merger and the right of Zions
to
terminate the merger agreement in certain circumstances;
· the
risk
that the merger might not receive all necessary regulatory approvals and
clearances to complete the merger;
· that
the
termination fee provisions in the merger agreement could have the effect of
discouraging superior proposals for a business combination between Stockmen's
and third parties;
and
· the
fact
that, pursuant to the merger agreement, Stockmen's is subject to a number of
restrictions on the conduct of its business prior to consummation of the
merger.
The
foregoing
discussion in this section of the information and factors considered by our
board of directors is not intended to be exhaustive but is believed to include
all material factors that our board considered. In reaching its determination
to
approve and recommend the transaction, our board based its recommendation on
the
totality of the information presented to it, and did not assign any relative
or
specific weights to the factors considered. In reaching that determination,
individual directors may have given differing weights to different
factors. After
deliberating with respect to the merger transaction with Zions, considering,
among other things, the matters discussed above and the opinion of Hovde
Financial referred to above, our board of directors unanimously approved and
adopted the merger agreement and the merger with Zions as being in the best
interests of Stockmen's and its shareholders.
For
the
reasons cited above, our board of directors unanimously approved the merger
agreement and believes the merger is fair to, and is in the best interests
of,
our shareholders. Accordingly, our board unanimously recommends that our
shareholders vote "FOR"
approval of the merger agreement.
Zions
considers the merger with Stockmen's to be advantageous to it for a number
of
reasons. The merger with Stockmen's allows Zions and NBA to expand their
operations into new and developing community markets within Arizona and
California. Also, the composition of Stockmen's statement of condition blends
well with that of NBA because Stockmen's has more deposits than loans and NBA
has more loans than deposits. Combining these balance sheets permits the surplus
deposits at Stockmen's to be deployed to fund higher-earning assets, and allows
NBA access to additional lower-cost deposits to fund its loan pipeline.
Additionally, with the enhanced technologies and services offered through Zions
and its affiliates, customers of Stockmen's will be afforded a wider variety
of
products and services, which Zions expects to lead to profitable opportunities
for NBA. Stockmen's was built on a platform of long-term customer relationships,
and the introduction of Zions' products and services is expected to help to
reinforce these relationships.
Hovde
Financial
has delivered to the Board of Directors of Stockmen's its opinion that, based
upon and subject to the various considerations set forth in its written opinion
dated September 7, 2006, the total transaction consideration to be paid to
the
shareholders of Stockmen's is fair
from a
financial point of view as of that date. In
requesting Hovde's advice and opinion, no limitations were imposed by Stockmen's
upon Hovde with respect to the investigations made or procedures followed by
it
in rendering its opinion. The
full
text of Hovde's opinion, dated September 7, 2006, which
describes the procedures followed, assumptions made,
matters
considered and limitations on the review undertaken, is attached to this
document as Appendix B. Stockmen's shareholders should read this opinion in
its
entirety.
Hovde
Financial is a nationally recognized investment banking firm and, as part of
its
investment banking business, is continually engaged in the valuation of
financial institutions in connection with mergers and acquisitions, private
placements and valuations for other purposes. As a specialist in securities
of
financial institutions, Hovde has experience in, and knowledge of, banks,
thrifts and bank and thrift holding companies. Stockmen's board of directors
selected Hovde Financial to act as its financial advisor in connection with
the
merger on the basis of the firm's reputation and expertise in transactions
such
as the merger.
Hovde
will
receive a fee from Stockmen's for performing a financial analysis of the merger
and rendering a written opinion to the Board of Directors of Stockmen's as
to
the fairness, from a financial point of view, of the merger to Stockmen's
shareholders.
Hovde
Financial's opinion is directed only to the fairness, from a financial point
of
view, of the total transaction consideration, and, as such, does not constitute
a recommendation to any Stockmen's shareholder as to how the shareholder should
vote at the Stockmen's shareholder meeting. The
summary of the opinion is qualified in its entirety by reference to the full
text of the opinion.
The
following
is a summary of the analyses performed by Hovde in connection with its fairness
opinion. Certain of these analyses were confirmed in a presentation to the
Stockmen's board by Hovde Financial. The summary set forth below does not
purport to be a complete description of either the analyses performed by Hovde
in rendering its opinion or the presentation delivered by Hovde to the
Stockmen's board, but it does summarize all of the material analyses performed
and presented by Hovde.
The
preparation of a fairness opinion involves various determinations as to the
most
appropriate and relevant methods of financial analyses and the application
of
those methods to the particular circumstances. In arriving at its opinion,
Hovde
Financial did not attribute any particular weight to any analysis and factor
considered by it, but rather made qualitative judgments as to the significance
and relevance of each analysis and factor. Hovde Financial may have given
various analyses more or less weight than other analyses. Accordingly, Hovde
Financial believes that its analyses and the following summary must be
considered as a whole and that selecting portions of its analyses, without
considering all factors and analyses, could create an incomplete view of the
process underlying the analyses set forth in its report to the Stockmen's board
and its fairness opinion.
In
performing
its analyses, Hovde Financial made numerous assumptions with respect to industry
performance, general business and economic conditions and other matters, many
of
which are beyond the control of Stockmen's and Zions. The analyses performed
by
Hovde Financial are not necessarily indicative of actual value or actual future
results, which may be significantly more or less favorable than suggested by
such analyses. Such analyses were prepared solely as part of Hovde Financial's
analysis of the fairness of the transaction consideration, from a financial
point of view, to Stockmen's shareholders. The analyses do not purport to be
an
appraisal or to reflect the prices at which a company might actually be sold
or
the prices at which any securities may trade at the present time or at any
time
in the future. Hovde Financial's opinion does not address the relative merits
of
the merger as compared to any other business combination in which Stockmen's
might engage. In addition, as described above, Hovde Financial's opinion to
the
Stockmen's board was one of many factors taken into consideration by the
Stockmen's board in making its determination to approve the merger
agreement.
During
the
course of its engagement, and as a basis for arriving at its opinion, Hovde
Financial reviewed and analyzed material bearing upon the financial and
operating conditions of Stockmen's and Zions and material prepared in connection
with the merger, including, among other things, the following:
| · |
certain historical
publicly available information concerning Stockmen's and
Zions;
|
| · |
the
nature and terms of recent merger transactions;
and
|
|
·
|
financial
and other information provided to Hovde Financial by the management
of
Stockmen's
|
Hovde
Financial conducted meetings and had discussions with members of senior
management of Stockmen's for purposes of reviewing the future prospects of
Stockmen's. Hovde Financial also took into account its experience in other
transactions, as well as its knowledge of the commercial banking industry and
its general experience in securities valuations.
In
rendering
its opinion, Hovde Financial assumed, without independent verification, the
accuracy and completeness of the financial and other information and relied
upon
the accuracy of the representations of the parties contained in the merger
agreement. Hovde Financial also assumed that the financial forecasts furnished
to or discussed with Hovde Financial by Stockmen's were reasonably prepared
and
reflected the best currently available estimates and judgments of senior
management of Stockmen's as to the future financial performance of Stockmen's.
Hovde Financial has not made any independent evaluation or appraisal of any
properties, assets or liabilities of Stockmen's. Hovde Financial assumed and
relied upon the accuracy and completeness of the public and non-public financial
information provided to it by Stockmen's and Zions, relied upon the
representations and warranties of Stockmen's and Zions made pursuant to the
merger agreement, and did not independently attempt to verify any of such
information.
Analysis
of
Selected Mergers.
As part
of its analysis, Hovde reviewed three groups of comparable merger transactions.
The first peer group included transactions, which have occurred since January
1,
2000, that involved banks
in
the United States that had total assets between $700.0 million and $2.5 billion
where the consideration was in the form of stock (the "United States Merger
Group").
This
United States Merger Group consisted of the following 22
transactions:
|
Buyer
|
Seller
|
|
Umpqua
Holdings Corp. (OR)
|
Western
Sierra Bancorp (CA)
|
|
BB&T
Corp. (NC)
|
Main
Street Banks Inc. (GA)
|
|
Community
Banks Inc. (PA)
|
PennRock
Financial Services (PA)
|
|
Umpqua
Holdings Corp. (OR)
|
Humboldt
Bancorp (CA)
|
|
Sky
Financial Group Inc. (OH)
|
Second
Bancorp Inc. (OH)
|
|
Banknorth
Group Inc. (ME)
|
CCBT
Financial Cos. (MA)
|
|
Fulton
Financial Corp. (PA)
|
Resource
Bankshares Corp. (VA)
|
|
South
Financial Group Inc. (SC)
|
MountainBank
Financial Corp. (NC)
|
|
NBT
Bancorp Inc. (NY)
|
CNB
Financial Corp. (NY)
|
|
F.N.B.
Corp. (FL)
|
Promistar
Financial Corp. (PA)
|
|
WesBanco
Inc. (WV)
|
American
Bancorp. (WV)
|
|
Fulton
Financial Corp. (PA)
|
Drovers
Bancshares Corp. (PA)
|
|
Zions
Bancorp. (UT)
|
Eldorado
Bancshares (CA)
|
|
BB&T
Corp. (NC)
|
Century
South Banks Inc. (GA)
|
|
Park
National Corp. (OH)
|
Security
Banc Corp. (OH)
|
|
Fifth
Third Bancorp (OH)
|
Capital
Holdings Inc. (OH)
|
|
Valley
National Bancorp (NJ)
|
Merchants
New York Bancorp (NY)
|
|
Compass
Bancshares Inc. (AL)
|
FirsTier
Corporation (CO)
|
|
BB&T
Corp. (NC)
|
BankFirst
Corp. (TN)
|
|
BB&T
Corp. (NC)
|
FCNB
Corp. (MD)
|
|
Wells
Fargo & Co. (CA)
|
Brenton
Banks Inc. (IA)
|
|
Carolina
First Corp. (SC)
|
Anchor
Financial Corp. (SC)
|
Hovde
also reviewed comparable mergers involving banks in the Western United States
in
all stock transactions that had total assets between $500.0 million and $3.5
billion which have occurred since January 1, 2000 (the "Western U.S. Merger
Group"). This Western U.S. Merger Group consisted of the following 7
transactions:
|
Buyer
|
Seller
|
|
Placer
Sierra Bancshares (CA)
|
Southwest
Community Bancorp (CA)
|
|
Umpqua
Holdings Corp. (OR)
|
Western
Sierra Bancorp (CA)
|
|
Umpqua
Holdings Corp. (OR)
|
Humboldt
Bancorp (CA)
|
|
Wells
Fargo & Co. (CA)
|
Pacific
Northwest Bancorp (WA)
|
|
Greater
Bay Bancorp (CA)
|
SJNB
Financial Corp. (CA)
|
|
Zions
Bancorp. (UT)
|
Eldorado
Bancshares (CA)
|
|
U.S.
Bancorp (MN)
|
Scripps
Financial Corp. (CA)
|
In
addition, Hovde also reviewed the complete transaction history of comparable
mergers involving banks headquartered in the state of Arizona (the "Arizona
Merger Group") with total assets greater than $100.0 million, which have
occurred since January 1, 1982. This Arizona Merger Group consisted of the
following 9 transactions:
|
Buyer
|
Seller
|
|
BOK
Financial Corp. (OK)
|
Valley
Commerce Bancorp (AZ)
|
|
Compass
Bancshares Inc. (AL)
|
Founders
Bank of Arizona (AZ)
|
|
Zions
Bancorp. (UT)
|
County
Bank (AZ)
|
|
Compass
Bancshares Inc. (AL)
|
Arizona
Bank (AZ)
|
|
Zions
Bancorp. (UT)
|
Southern
Arizona Bancorp, Inc. (AZ)
|
|
First
Interstate Bancorp (CA)
|
Chase
Bank of Arizona (AZ)
|
|
Zions
Bancorp. (UT)
|
Rio
Salado Bancorp, Inc. (AZ)
|
|
Zions
Bancorp. (UT)
|
National
Bncp of Arizona Inc. (AZ)
|
|
Bank
One Corp. (IL)
|
Valley
National Corporation (AZ)
|
Hovde
Financial calculated the medians and averages of the following relevant
transaction ratios in the United States Merger Group, the Western U.S. Merger
Group and the Arizona Merger Group: the multiple of the offer value to the
acquired company's earnings for the twelve months preceding the announcement
date of the transaction; the tangible book value premium to core deposits;
the
multiple of the offer value to the acquired company's tangible book value;
and
the multiple of the offer value to the acquired company's book value. Hovde
Financial compared these multiples with the corresponding multiples for the
merger, valuing the total consideration that would be received pursuant to
the
merger agreement at approximately $208.5 million, or $598.62 per Stockmen's
fully diluted common share, based on Zions' trading price of $81.08, the twenty
day average price per share as of August 30, 2006. In calculating the multiples
for the merger, Hovde used Stockmen's earnings for the twelve months ended
June
30, 2006, and Stockmen's balance sheet information as of June 30, 2006. The
results of this analysis are as follows:
Offer
Value to:
| |
|
|
Ratio
of Tangible
|
|
|
|
|
| |
|
|
Book
Value
|
|
|
|
|
| |
|
12
months
|
Premium
to
|
|
|
Tangible
|
|
| |
|
Preceding
Earnings
|
|
Core
Deposits
|
|
Book
Value
|
|
Book
Value
|
|
| |
|
(x)
|
|
(%)
|
|
(%)
|
|
(%)
|
|
| |
|
|
|
|
|
|
|
|
|
|
Stockmen's
Bancorp, Inc.
|
17.5
|
|
15.5
|
|
331.4
|
|
345.8
|
| |
|
|
|
|
|
|
|
|
|
|
United
States Merger Group median
|
19.9
|
|
19.1
|
|
243.8
|
|
277.0
|
|
United
States Merger Group average
|
19.9
|
|
21.4
|
|
257.4
|
|
294.3
|
| |
|
|
|
|
|
|
|
|
|
|
Western
U.S. Merger Group median
|
18.3
|
|
20.8
|
|
245.6
|
|
311.8
|
|
Western
U.S. Merger Group average
|
17.9
|
|
20.5
|
|
246.6
|
|
315.7
|
| |
|
|
|
|
|
|
|
|
|
|
Arizona
Merger Group median
|
17.5
|
|
16.2
|
|
285.6
|
|
285.6
|
|
Arizona
Merger Group average
|
19.2
|
|
17.0
|
|
310.7
|
|
311.5
|
Discounted
Cash Flow Analysis. Hovde
Financial estimated the present value of all shares of Stockmen's common stock
by estimating the value of Stockmen's estimated future earnings stream beginning
in 2006. Reflecting Stockmen's internal projections and Hovde Financial
estimates, Hovde Financial assumed net income in 2006, 2007, 2008, 2009 and
2010
of $13.5 million, $16.0 million, $17.6 million, $19.3 million, and $21.3
million, respectively. The present value of these earnings was calculated based
on a range of discount rates between 13.0% and 16.0%. In order to derive the
terminal value of Stockmen's earnings stream beyond 2010, Hovde assumed a
terminal value based on a multiple of between 13.5x and 17.5x applied to free
cash flows in 2010. The present value of this terminal amount was then
calculated based on the range of discount rates mentioned above. These rates
and
values were chosen to reflect different assumptions regarding the required
rates
of return of holders or prospective buyers of Stockmen's common stock. This
analysis and its underlying assumptions yielded a range of value for all the
shares of Stockmen's stock of approximately $147.0 million (at a 16.0% discount
rate and a 13.5x terminal multiple) to $213.9 million (at a 13.0% discount
rate
and a 17.5x terminal multiple) with a midpoint of $178.6 million (using a 14.5%
discount rate and a 15.5x terminal multiple), compared to total merger
consideration of approximately $208.5 million.
Contribution
Analysis.
Hovde
Financial prepared a contribution analysis showing percentages of total assets,
total net loans, total deposits, total common equity, and total tangible equity
at June 30, 2006 for Stockmen's and for Zions, and actual twelve months
preceding earnings that would be contributed to the combined company on a
pro-forma basis by Stockmen's and Zions. The offer analysis indicated that
holders of Stockmen's common stock would own approximately 2.40% of the pro
forma common shares outstanding of Zions, while contributing a median of 2.32%
of the financial components listed above.
| |
|
Stockmen's
|
| |
|
Contribution
|
| |
|
To
Zions
|
| |
|
|
|
Total
assets
|
|
2.61%
|
|
Total
net loans
|
|
2.01%
|
|
Total
deposits
|
|
3.17%
|
|
Total
equity
|
|
1.40%
|
|
Total
tangible equity
|
|
2.46%
|
|
Net
income - LTM
|
|
2.18%
|
| |
|
|
|
Median
Stockmen's Contribution Percentage
|
|
2.32%
|
|
Actual
Stockmen's Pro Forma Ownership
|
|
2.40%
|
Comparable
Company Analysis.
Using
publicly available information, Hovde Financial compared the financial
performance and stock market valuation of Zions with the following publicly
traded peers with comparable market values with assets as of June 30,
2006:
|
Company
Name (Ticker)
|
Assets
($mm)
|
|
City
National Corporation (CYN)
|
14,477
|
|
Colonial
BancGroup, Inc. (CNB)
|
23,011
|
|
Comerica
Incorporated (CMA)
|
57,080
|
|
Commerce
Bancorp, Inc. (CBH)
|
43,436
|
|
Compass
Bancshares, Inc. (CBSS)
|
33,613
|
|
Huntington
Bancshares Incorporated (HBAN)
|
36,266
|
|
M&T
Bank Corporation (MTB)
|
56,507
|
|
Marshall
& Ilsley Corporation (MI)
|
54,419
|
|
Regions
Financial Corporation (RF)
|
86,063
|
|
Synovus
Financial Corp. (SNV)
|
30,527
|
|
UnionBanCal
Corporation (UB)
|
50,800
|
Indications
of such financial performance and stock market valuation included profitability
measures, earnings composition, operating and performance metrics, loan
portfolio compositions, deposit compositions, yield and cost analysis, capital
adequacy, asset quality, and reserve adequacy, all based on financial
information as of June 30, 2006 and, where relevant, closing stock market
information as of September 5, 2006. Selected market information for Zions
and
the group of comparable companies that was analyzed is provided
below.
| |
Stock
Price
|
Price/
TBV (%)
|
Price/
Book (%)
|
Price/
LTM EPS (x)
|
Div.
Yield
(%)
|
Mkt.
Cap ($mm)
|
Inside
Ownership (%)
|
|
Zions
|
$79.28
|
353.9
|
190.0
|
15.0
|
1.820
|
8,457.4
|
4.27
|
|
Comparable
Company Average
|
|
317.4
|
217.2
|
15.2
|
2.871
|
8,705.0
|
6.17
|
| |
ROAE
(%)
|
ROAA
(%)
|
Tangible
Equity Ratio (%)
|
Net
Interest Margin (%)
|
Efficiency
Ratio (%)
|
NPAs/
Average Assets (%)
|
Reserves/NPAs
(%)
|
|
Zions
|
13.17
|
1.33
|
5.54
|
4.63
|
54.36
|
0.23
|
338.62
|
|
Comparable
Company Average
|
15.16
|
1.44
|
6.75
|
3.88
|
59.26
|
0.29
|
332.68
|
Based
upon
the foregoing analyses and other investigations and assumptions set forth in
its
opinion, without giving specific weightings to any one factor or comparison,
Hovde determined that the transaction consideration was fair from a financial
point of view to Stockmen's shareholders.
Stockmen's
and Hovde Financial have entered into an agreement relating to the services
to
be provided by Hovde Financial in connection with the merger. Stockmen's agreed
to pay Hovde Financial fees as follows: a cash fee of $200,000 for evaluating
the transaction and performing a financial analysis of the merger and rendering
a written opinion to the board of directors of Stockmen's as to the fairness
of
the consideration to be paid in the merger to Stockmen's shareholders, from
a
financial point of view, and, at the time of closing, a cash fee of
approximately $2.4 million. Pursuant to the Hovde Financial engagement
agreement, Stockmen's has also agreed to reimburse Hovde Financial for
reasonable out-of-pocket expenses and disbursements incurred in connection
with
its retention and to indemnify it against certain liabilities, including
liabilities under the federal securities laws.
In
considering the recommendations of our board with respect to the merger, our
shareholders should be aware that our officers and directors have interests
in
the merger that are different from, or in addition to, the interests of our
shareholders generally. As described below, Mr. Farrel Holyoak, our President,
will enter into an agreement relating to his employment with NBA that will
provide employment for him following the merger. Our board was aware of these
interests and considered them, among many other matters, in approving the merger
agreement and the matters contemplated by the merger agreement, including the
merger.
As
of the
record date, various of our directors, executive officers and their affiliates
owned an aggregate of approximately 162,919 shares or approximately 46.72%
of
our outstanding common stock. Under the terms of the merger agreement, our
directors, executive officers and their affiliates will receive the same
consideration for their shares of our common stock as our other shareholders
will receive in the merger for their shares of common stock.
Stockmen's
Shareholder Voting Agreements.
When the
parties signed the merger agreement, eleven shareholders of Stockmen's who
hold
in the aggregate approximately 46.72% of our issued and outstanding common
stock
entered into voting agreements with Zions. Of these eleven shareholders of
Stockmen's, four are members of or associated with the Becker family, four
are
associated with the Lingenfelter family, and two are a member of or associated
with the Holyoak family. Under the voting agreements, these shareholders
agreed:
| · |
to
vote all of the shares of Stockmen's common stock they own beneficially,
and over which they control the voting power, in favor of the merger
agreement and the merger at any meeting of our shareholders called
to
consider and vote on the merger;
|
| · |
not
to vote in favor of any transaction or agreement that would assist
or
facilitate the acquisition of control of Stockmen's or its subsidiaries
or
any substantial portion of its or its subsidiaries' assets by any
person
other than Zions;
|
| · |
not
to sell or otherwise transfer any of their shares of our common stock
to
any person seeking to obtain control of Stockmen's other than to
Zions or
to any other transferee unless the transferee agrees to be bound
by the
voting agreement; and
|
| · |
to
refrain from soliciting or, subject to any fiduciary duty owed by
these
shareholders to Stockmen's 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 Stockmen's or Stockmen's
Bank.
|
The
voting agreements, however, will not prohibit or otherwise interfere with the
actions of any of the signing shareholders in their capacity as directors of
Stockmen's or Stockmen's Bank.
Farrel
Holyoak Employment Agreement.
Under
the terms of the merger agreement, Farrel Holyoak, our president and chief
operating officer and the president and CEO of Stockmen's Bank, will enter
into
an employment agreement with NBA effective at the effective time of the merger.
Under his employment agreement, Mr. Holyoak will serve as a Regional President
of NBA for a term ending on the first anniversary of the effective time of
the
merger, unless extended for an additional year by written agreement of Mr.
Holyoak and NBA. Mr. Holyoak will receive a salary at an annualized rate of
$250,000 and will also receive other benefits including reimbursement for travel
and other expenses, and will participate in NBA's various employee benefits
plans such as medical insurance plans, disability insurance plans, accidental
death or dismemberment insurance plans, life insurance plans and retirement
plans.
After
the
first anniversary of his commencing employment with NBA, if Mr. Holyoak
continues in NBA's employ through that date, he shall be entitled to a one-time
bonus of $50,000, which will be payable on or before the first March 15
following the first anniversary of his employment with NBA.
If
Mr.
Holyoak's employment is terminated by NBA without cause, as that term is defined
in the employment agreement, Mr. Holyoak would be entitled to continue to
receive his salary at an annualized rate of $250,000 until the first anniversary
of the commencement of his employment with NBA.
Non-Competition
Agreements.
Mr.
Holyoak, our President, will enter into a non-competition agreement with NBA
at
the effective time of the merger. The terms and conditions of the
non-competition agreement with Mr. Holyoak have not yet been finalized, and
therefore remain subject to change. However, the compensation payable to Mr.
Holyoak under his non-competition agreement will not be greater than the amount
disclosed below. In connection with his agreement, Mr. Holyoak will agree,
for a
period beginning with the termination of his employment with NBA and ending
on
the third anniversary following the date when Mr. Holyoak ceases to be employed
by NBA for any reason, that he will be subject to a non-competition
covenant:
| · |
not
to engage in the banking business within the market area, as defined in
these agreements, other than for Zions, NBA or their
affiliates;
|
| · |
not
to directly or indirectly own, manage, operate, control, be employed
by,
or provide management or consulting services in any capacity to any
entity
engaged in the banking, lending or financing business within the
market
area other than Zions, NBA or their affiliates;
and
|
| · |
not
to directly or indirectly solicit or hire or intentionally cause
any
employee, officer or director of NBA or its affiliates to engage
in any of
the above actions that these officers are prohibited from
doing.
|
The
non-competition agreement defines "market area" as anywhere within ten miles
of
any existing office or branch of Stockmen's Bank or NBA in Arizona.
The
proposed non-competition agreement with Mr. Holyoak provides that if Mr. Holyoak
performs his duties in conformance with the non-competition agreement, including
the confidentiality provisions, then within 20 business days following each
anniversary of the termination of his employment with NBA, NBA will pay Mr.
Holyoak additional compensation, as established in his non-competition
agreement. Under his proposed non-competition agreement, Mr. Holyoak would
receive, assuming his compliance with the agreement, $622,437.
NBA
is
also in discussions with five other officers of Stockmen's Bank regarding
non-competition agreements. Involved in the discussions are James Walker, Senior
Credit Officer of Stockmen's Bank, Jeff Duncan, Chief Financial Officer of
Stockmen's, William Kitchen, a regional manager of Stockmen's Bank, Vance
Miller, a regional manager of Stockmen's Bank and Gary Jay, a regional manager
of Stockmen's Bank. The terms and conditions of these non-competition agreements
have not yet been finalized; however, the compensation which may be payable
to
each of these Stockmen's officers following termination of their respective
employment, and assuming full compliance with the requirements of the
agreements, will not be greater, and may be less, than the respective amounts
presented below. As the discussions currently stand, the
non-competition agreements provide that if they perform their respective duties
under their respective agreements, Mr.
Walker will be entitled to receive $159,740 following the termination of his
employment; Mr. Duncan will be entitled to receive $198,633 following the
termination of his employment; Mr. Kitchen will be entitled to receive $154,997
following the termination of his employment; Mr. Miller will be entitled to
receive $164,636 following the termination of his employment; and Mr. Jay will
be entitled to receive $42,000 following the termination of his
employment.
Change
in
Control Agreements.
Stockmen's is expected to enter into Change in Control Agreements with Farrel
Holyoak, Director and President and Chief Operating Officer of Stockmen's,
James
Walker, Senior Credit Officer of Stockmen's Bank, Jeff Duncan, Chief Financial
Officer of Stockmen's, William Kitchen, regional manager of Stockmen's Bank,
and
Gary Jay, a regional manager of Stockmen's Bank, under which those executives
will receive payments in the event of a change of control of Stockmen's or
Stockmen's Bank. Upon completion of the merger, it is expected that Stockmen's
will be required to make change in control payments to those five executive
officers of Stockmen's Bank in the aggregate amount of $1,407,192. It is
expected that Mr. Holyoak will receive a payment under his Change in Control
Agreement of $829,563; Mr. Walker will receive a payment of $197,260; Mr. Duncan
will receive a payment of $105,367; Mr. Kitchen will receive a payment of
$200,003; and Mr. Jay will receive a payment of $75,000.
Supplemental
Executive Retirement Plan.
Completion of the merger, which will constitute a change in control of
Stockmen's under The Stockmen's Bank Supplemental Executive Retirement Plan,
will trigger an acceleration and enhancement of benefits and vesting schedules
for ten officers and directors of Stockmen's under the SERP. These officers
and
directors, Farrel Holyoak, Tod Becker, William Becker, Jeff Duncan, Tom Dobbins,
Gary Jay, Colleen Kirby, William Kitchen, Vance Miller and James Walker, will
receive payments under the SERP upon a change of control. Following completion
of the merger, these officers of Stockmen's will receive a total of $2,303,519
in additional payments under the SERP. All ten officers and directors will
receive following completion of the merger SERP benefits totaling $3,412,373
(including the $2,303,519 referenced in the previous sentence), which reflect
enhanced benefits because of the change in control and amounts they would
otherwise be entitled to under the SERP without a change of control. The ten
individuals receiving these payments under the SERP following completion of
the
merger are as follows:
|
Individual
and Title
|
|
SERP
Benefit Prior to Change in Control
|
|
Additional
Payment under SERP After Change in Control
|
|
Total
SERP Payment
|
|
|
Farrel
Holyoak, Director, President and Chief Operating Officer of
Stockmen's
|
|
$
|
340,767
|
|
$
|
587,174
|
|
$
|
927,941
|
|
|
Tod
Becker, Director of Stockmen's
|
|
$
|
126,328
|
|
$
|
281,860
|
|
$
|
408,188
|
|
|
William
Becker, Director of Stockmen's
|
|
$
|
129,730
|
|
$
|
158,685
|
|
$
|
288,415
|
|
|
Jeff
Duncan, Chief Financial Officer of Stockmen's
|
|
$
|
40,420
|
|
$
|
198,893
|
|
$
|
239,313
|
|
|
Tom
Dobbins, Human Resources Director of Stockmen's Bank
|
|
$
|
79,676
|
|
$
|
79,676
|
|
$
|
159,352
|
|
|
Gary
Jay, a Regional Manager of Stockmen's Bank
|
|
$
|
148,915
|
|
$
|
148,915
|
|
$
|
297,830
|
|
|
Colleen
Kirby, Director of Stockmen's
|
|
$
|
67,988
|
|
$
|
125,251
|
|
$
|
193,239
|
|
|
William
Kitchen, a Regional Manager of Stockmen's Bank
|
|
$
|
84,970
|
|
$
|
260,089
|
|
$
|
345,059
|
|
|
Vance
Miller, a Regional Manager of Stockmen's Bank
|
|
$
|
-0-
|
|
$
|
196,425
|
|
$
|
196,425
|
|
|
James
Walker, Senior Credit Officer of Stockmen's Bank
|
|
$
|
90,060
|
|
$
|
266,551
|
|
$
|
356,611
|
|
|
Total
|
|
$
|
1,108,854
|
|
$
|
2,303,519
|
|
$
|
3,412,373
|
|
1997
Stock
Option Plan.
The
merger agreement provides that within 60 days after the date of the merger
agreement the Compensation Committee of our board of directors shall cancel,
as
of the day before the effective time of the merger, all of the stock options
that are then outstanding under the 1997 Plan and permit each holder of stock
options granted under the 1997 Plan to exercise the stock options that he or
she
holds for a reasonable period prior to the effective date of the cancellation.
Stock options not exercised prior to the effective time of the merger will
be
canceled. Because all stock options under the 1997 Plan have been exercised,
there are no stock options outstanding as of the date of this proxy
statement/prospectus.
Indemnification
of
Our Officers and Directors.
The
merger agreement provides that, after the effective time of the merger, Zions
will defend and hold harmless the present and former directors and officers
of
Stockmen's and Stockmen's Bank against all costs or expenses, judgments, fines,
losses, claims, damages or liabilities as incurred, in connection with any
claim, action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, arising out of actions or omissions by the
director or officer that occurred prior to the merger, to the same extent that
these persons are indemnified or have the right to advancement of expenses
under
the organizational documents and indemnification agreements with Stockmen's
and
Stockmen's Bank that are in effect on the date of the merger
agreement.
Under
the
terms of the merger agreement, Mr. Holyoak, our president and chief operating
officer and president and CEO of Stockmen's Bank, will enter into an employment
agreement with NBA Bank. See "Interests of Officers and Directors in the Merger
That Are Different from Your Interests," above. Following the merger, Mr.
Holyoak will serve as a Regional President of NBA.
Zions
will account for the merger as a purchase. Zions will make a determination
of
the fair value of Stockmen's assets and assumed liabilities in order to allocate
the purchase price of the assets acquired and liabilities assumed. To the extent
that the total purchase price exceeds the fair value of the assets acquired
and
liabilities assumed, Zions may record goodwill. After the merger, Zions will
include the results of Stockmen's operations in its consolidated results of
operations.
Under
Arizona
law, our shareholders are entitled to assert their dissenters' rights in
connection with the merger. The Arizona Business Corporation Act permits a
shareholder to dissent to a merger and to receive cash equal to the fair value
for that shareholder's shares in accordance with the procedures established
by
Arizona law. Our shareholders will be entitled under Arizona law to exercise
their dissenters' rights with respect to the merger agreement. Because exercise
and preservation of dissenters' rights are conditioned on strict observance
of
the applicable section of the Arizona Business Corporation Act, each of our
shareholders who might wish to exercise his or her dissenters' rights should
consult and strictly observe the Arizona statute, a copy of which we attach
as
Appendix C to this document. Failure
by a shareholder to follow the statutory provisions precisely may result in
loss
of that shareholder's dissenters' rights under Arizona law.
See
"Rights of Dissenting Shareholders" and Appendix C to this document, where
we
set forth the statutory provisions.
A
condition
to completing the merger requires that the Nasdaq shall have authorized the
shares of Zions common stock to be issued in the merger to the former Stockmen's
shareholders for inclusion on the Nasdaq Global Select Market. Zions has agreed
to use its commercially reasonable efforts to cause the subject shares to be
listed on the Nasdaq Global Select Market.
After
the
merger, Zions, subject to approval and declaration by the Zions board, plans
to
continue its current cash dividend policy and declare regularly scheduled
quarterly cash dividends on the shares of its common stock consistent with
Zions' past practices. The current annualized rate of cash dividends on the
shares of Zions common stock is $1.44 per share.
We
have
agreed not to declare or pay any cash or property dividends except for customary
periodic cash dividends in accordance with our past practice and in per share
amounts not in excess of the rate paid during the fiscal quarter immediately
preceding the date of the merger agreement and at intervals that are not more
frequent than past practice. The right of the holders of our common stock to
receive dividends from us will end upon the completion of the merger when our
separate corporate existence will cease. See "Price Range of Common Stock and
Dividends."
The
merger
agreement provides that, beginning with the first quarter of 2007, Stockmen's
will coordinate its dividend payments with those of Zions so that none of our
shareholders receives more or less than one dividend payment in any quarter
with
respect to any shares of our common stock and shares of Zions common stock
into
which our shares are converted.
Additionally,
under the merger agreement, if the effective time of the merger is after March
1, 2007, then Stockmen's may declare a special cash dividend in the aggregate
amount of (1) the actual consolidated undistributed after-tax earnings of
Stockmen's, determined in accordance with GAAP, for each whole calendar month
between March 1, 2007 and the business day before the effective time, using
an
assumed effective tax rate of 33.23 percent and (2) for the period between
the
last whole calendar month before the effective time of the merger and the
business day before the effective time, the product of such number of days
in
that period and 1/365th
of the
consolidated after-tax earnings of Stockmen's in 2006, determined in accordance
with GAAP. Payment of this special dividend is not permitted under the merger
agreement if the failure of the merger to occur on or before March 1, 2007
is
due to delay by Stockmen's or any subsidiary of Stockmen's.
As
of 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 connection with the merger in exchange for shares of Stockmen's
common stock. At the closing of the merger, the exchange agent will deliver
shares of Zions common stock to those former shareholders of Stockmen's or
their
agents who duly surrender their shares of Stockmen's common stock and other
transmittal materials to the exchange agent pursuant to applicable
instructions.
Zions
will cause the exchange agent to send transmittal materials to all other former
shareholders of Stockmen's. The transmittal materials will inform these former
Stockmen's shareholders of the procedures for them to exchange their
certificates representing Stockmen's common stock for certificates representing
shares of Zions common stock due to them in the merger. The exchange agent
will
deliver to the holders of Stockmen's common stock who surrender their
certificates to the exchange agent, together with properly executed transmittal
materials and any other required documentation, certificates representing the
number of shares of Zions common stock to which these shareholders are
entitled.
Zions
will
not issue any fractional shares. Instead, Zions will pay each holder of
Stockmen's common stock who would otherwise be entitled to a fractional share
of
Zions common stock an amount in cash, without interest, calculated by
multiplying such fraction by the average of the last sales price of Zions common
stock as reported in the Wall
Street Journal
during
the twenty consecutive trading days on which shares of Zions are actually traded
on the Nasdaq Global Select Market ending on and including the trading day
that
is the eighth business day preceding the effective time of the
merger.
Until
properly surrendering their certificates, holders of unexchanged shares of
our
common stock will not be entitled to receive any dividends or distributions
with
respect to Zions common stock. After surrender of the certificates representing
our common stock, the record holder of those shares will be entitled to receive
any dividends or other distributions, without interest, which had previously
become payable with respect to shares of Zions common stock represented by
that
certificate.
The
merger agreement contains representations and warranties made by Zions and/or
Stockmen's relating to the following matters:
| · |
due
organization, corporate power, good standing and due registration
of Zions
and Stockmen's as a bank holding
company;
|
| · |
due
organization, corporate power and good standing of NBA and Stockmen's
Bank;
|
| · |
corporate
power and authority to conduct business, own or lease properties
and
assets and enter into the merger agreement and related
transactions;
|
| · |
non-contravention
of certain organizational documents, agreements or governmental
orders;
|
| · |
reports
and other documents filed with the SEC and certain bank holding company
and bank regulatory authorities, and the accuracy of the information
contained in the documents;
|
| · |
consolidated
financial statements;
|
| · |
consolidated
net worth;
|
| · |
examinations
by bank regulatory agencies;
|
| · |
undisclosed
liabilities;
|
| · |
litigation
and regulatory action;
|
| · |
brokers
and financial advisers;
|
| · |
tax
and accounting matters;
|
| · |
absence
of certain material changes and
events;
|
| · |
required
regulatory approvals;
|
| · |
employee
benefit plans; and
|
The
representations and warranties described above and included in the merger
agreement were made by each of Zions and Stockmen's to the other. These
representations and warranties were made as of specific dates, may be subject
to
important qualifications and limitations agreed to by Zions and Stockmen's
in
connection with negotiating the terms of the merger agreement, may be subject
to
contractual standards of materiality different from what may be viewed as
material to shareholders, and may have been included in the merger agreement
for
the purpose of allocating risk between Zions and Stockmen's rather than to
establish matters as facts. The merger agreement is described in, and included
as an annex to, this proxy statement/prospectus only to provide you with
information regarding its terms and conditions, and not to provide any other
factual information regarding Stockmen's, Zions or their respective businesses.
Accordingly, the representations and warranties and other provisions of the
merger agreement should not be read alone, but instead should be read only
in
conjunction with the information provided elsewhere in this proxy
statement/prospectus and in the documents incorporated by reference into this
proxy statement/prospectus. See "Documents Incorporated by Reference" on page
54.
The
merger agreement contains various covenants and agreements that govern Zions'
and Stockmen's actions prior to the effective time of merger. However, the
following covenants and agreements may be waived by the party or parties
entitled to the benefit of the particular covenant or agreement:
Conduct
of Business.
We have
agreed that we and Stockmen's Bank will
carry
on
our business and manage our assets and properties diligently and substantially
in the same manner as prior to entering into the merger agreement and
use
our respective commercially reasonable efforts to preserve intact our respective
business organizations, to keep available the services of our respective
employees, and to preserve our present relationships with customers and others
having business dealings with us.
Capital
Stock.
We have
agreed to restrictions on our ability to authorize, issue or make any
distribution of our capital stock, or grant any options to acquire additional
securities, or declare or distribute any stock dividend or authorize a stock
split. We have agreed not to make any direct or indirect redemption, purchase
or
other acquisition of our capital stock.
Dividends.
We have
agreed not to declare or pay any dividend except for customary periodic cash
dividends in amounts not exceeding the rate paid during the fiscal quarter
immediately preceding the date of the merger agreement and at intervals not
more
frequent than past practice. In addition, we have agreed that we will coordinate
with Zions the declaration of any cash dividends with respect to our common
stock and the record dates and payment dates of those dividends (except for
a
special dividend if closing of the merger is after March 1, 2007).
Compensation;
Employment Agreements; Benefit Plans.
We have
agreed not to:
| · |
increase
in any manner the compensation or fringe benefits of any employee
or enter
into any agreement to increase in any manner the compensation or
fringe
benefits of any employee, except for increases in the ordinary course
of
business, which together with all other compensation rate increases
do not
exceed 4½% of the aggregate payroll as of June 30,
2006;
|
| · |
pay
or
obligate ourselves to pay any bonus to any officer, director, consultant,
other management official, or employee which, when combined with
other
bonuses paid or obligated to be paid by us on or after January 1,
2006,
would exceed 220 percent of the amount accrued on our books as of
June 30,
2006 for the payment of 2006 bonuses;
or
|
| · |
except
as otherwise required by law, create or modify any pension, or profit
sharing plan, bonus, deferred compensation, death benefit or retirement
plan, the
level of benefits under any such plan, or increase or decrease any
severance or termination pay benefit or any other fringe
benefit.
|
Material
Contracts.
We have
agreed not to make any material contract or agreement, voluntarily incur or
agree to incur any material liability or obligation, or make any material
commitment or disbursement, acquire or dispose of any material property or
asset, or pay or voluntarily become obligated to pay any material expense or
engage in any material transaction, except in the ordinary course of our
business or to accomplish the transactions contemplated by the merger agreement
and except that Stockmen's Bank may sell assets held in its securities
portfolio.
Amendment
of Charter.
We and
Stockmen's Bank have agreed not to amend our respective articles of
incorporation or bylaws, except as provided in the merger
agreement.
Acquisition
Proposals.
We have
agreed not to:
| · |
solicit
or encourage any inquiries or proposals to acquire more than one
percent
of our common stock or any significant portion of our
assets;
|
| · |
afford
any third party that may be considering such a transaction access
to our
properties, books or records;
|
| · |
enter
into any discussions or negotiations for any such transaction;
or
|
| · |
authorize
or permit any of our directors, officers, employees or agents to
do or
permit any of the foregoing.
|
However,
if
we receive an unsolicited bona fide alternative proposal, and our board
concludes in good faith that the alternative proposal constitutes a superior
proposal to the Zions proposal (that is the subject of our special meeting)
we
may participate in discussions and negotiations regarding the alternative
proposal if our board concludes reasonably and in good faith after having
received written advice from our counsel that failure to take such actions
would
result in a violation of our fiduciary duties under applicable law.
Regulatory
Applications and Filings.
We and
Zions have each agreed to cooperate and use our reasonable best efforts to
effect all filings and obtain all necessary government approvals to complete
the
transactions contemplated by the merger agreement.
Certain
Other Covenants.
The
merger agreement contains other covenants of the parties relating
to:
| · |
the
preparation and distribution of this
document;
|
| · |
our
special shareholders' meeting and our reasonable best efforts to
solicit
from our shareholders proxies in favor of the merger agreement and
to take
all other action necessary or advisable to secure the vote of our
shareholders to approve the merger;
|
| · |
cooperation
in issuing public announcements;
|
| · |
inclusion
of the Zions common stock issuable to our shareholders upon completion
of
the merger for trading on the Nasdaq Global Select
Market.
|
The
obligations of Zions or Stockmen's to complete the merger are subject to the
satisfaction or waiver, subject to compliance with applicable law, of
conditions, including:
| · |
obtaining
the vote of approval from our shareholders at our special shareholders'
meeting;
|
| · |
obtaining
all governmental approvals required to complete the
merger;
|
| · |
on
the effective date of the merger, our consolidated net worth, as
determined in accordance with GAAP, shall not be less than the sum
of
|
· $62,925,000
and
· the
capital paid in upon the exercise of Stockmen's stock options outstanding as
of
the date of the merger agreement and
· the
proceeds to Stockmen's of the sale of any treasury stock since June 30, 2006;
minus
| · |
the
lesser of $4.9 million or the net after-tax losses, using an assumed
effective tax rate of 33.23 percent, realized by Stockmen's and Stockmen's
Bank on the sale of held-to-maturity securities
between July 1, 2006 and the business day before the effective time
of the
merger and
|
| · |
the
lesser of $1.5 million or the tax-effected excess of the value
of
liabilities and obligations of Stockmen's and Stockmen's Bank at
the
effective time of the merger to make future payments in connection
with Stockmen's Bank's Supplemental Executive Retirement Plan and
related
agreements over the expense accrual on the books of Stockmen's
and
Stockmen's Bank as of June 30, 2006 for such liabilities and
obligations.
|
| · |
our
loan loss reserve on the effective date of the merger, as determined
in
accordance with GAAP, being not less than
$6,236,000;
|
| · |
the
absence of injunctions, decrees, orders, laws, statutes or regulations
enjoining, preventing or making illegal the completion of the
merger;
|
| · |
the
absence of certain types of pending or threatened proceedings against
Stockmen's or relating to the transactions contemplated by the merger
agreement;
|
| · |
the absence of a material adverse effect, as defined
below, on the other party; |
| · |
the
absence of any adverse environmental condition or adverse structural
condition, in each case as defined in the merger agreement, at any
Stockmen's property that has not been cured to the reasonable satisfaction
of Zions;
|
| · |
the
declaration of effectiveness of Zions' registration statement by
the SEC
and the absence of any stop order or proceedings seeking a stop
order;
|
| · |
the
delivery of an opinion of Duane Morris LLP to Zions to the effect
that the
merger will be treated for federal income tax purposes as a reorganization
within the meaning of Section 368(a)(1) of the Internal Revenue
Code;
|
| · |
the
shares of Zions common stock issuable to the former Stockmen's
shareholders upon completion of the merger shall be listed on the
Nasdaq
Global Select Market;
|
| · |
shares
as to which their holders have properly demanded appraisal in accordance
with Arizona law shall constitute not more than six percent of the
outstanding Stockmen's stock; and
|
| · |
the
execution of the employment agreement by Mr.
Holyoak.
|
The
obligations of each of Zions and Stockmen's to complete the merger are further
subject to satisfaction or waiver of the following conditions:
| · |
the
representations and warranties of the other party in the merger agreement
are to be true and correct, as of the closing date of the merger,
except
for representations and warranties made as of an earlier date which
will
be true and correct as of that earlier date; subject in each case
to the
material adverse effect requirement, defined below, and the other
party
has provided a certificate to that
effect;
|
| · |
all
of the covenants and obligations of the other party to be performed
and
complied with on or prior to the effective time of the merger are
to have
been performed and complied with in all material respects and the
other
party has provided a certificate to that effect;
and
|
| · |
all
other required consents, waivers, approvals, authorizations or orders
have
been obtained and all required filings have been made to complete
the
merger.
|
The
merger
agreement defines "material adverse effect" to mean, with respect to a person,
a
material adverse effect on the business, results of operations, financial
condition, or prospects of that person and its subsidiaries taken as a whole
or
which materially impairs or delays that person's ability to complete the
transactions contemplated by the merger agreement. The
definition excludes any effect from certain causes, including, (i) to the extent
the effect is not materially disproportionate to the person, any change in
applicable law, any change in GAAP that is generally applicable to the banking
industry, any change affecting the banking industry generally or any changes
in
general economic conditions affecting banks or their holding companies; (ii)
any
action or omission of us taken with the prior written consent of Zions, or
of
Zions or any of its subsidiaries taken with the prior written consent of us,
(iii) expenses and costs reasonably incurred in connection with the transactions
contemplated by the merger agreement; (iv) the announcement of the merger
agreement or the transactions contemplated by the merger agreement; or (v)
any
action taken or not taken by the person if required to be taken or not taken,
as
applicable, by the merger agreement. Additionally,
solely for the purpose of determining whether a material adverse effect has
occurred, all representations, warranties, and covenants that are qualified
by
the term "material" (as a capitalized term) and its variants will be read and
interpreted as if no such qualification with respect to materiality were
included therein. Moreover, in the case of Stockmen's entities, any such adverse
changes or effects, individually or in the aggregate, having a dollar value
in
excess of $5 million shall be a material adverse effect.
The
parties may terminate the merger agreement at any time prior to the effective
time, whether before or after approval by our shareholders:
| · |
by
mutual written consent of the
parties;
|
| · |
by
either Zions or Stockmen's if any of the following
occurs:
|
| · |
the
merger has not occurred by May 31, 2007, unless the failure of the
merger
to have occurred by that date has been due to the failure of the
party
seeking to terminate the merger agreement to perform or observe its
covenants or agreements in the merger agreement;
or
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| · |
the
party seeking to terminate the merger agreement determines in good
faith
that the merger has become inadvisable or impracticable because certain
governmental litigation has been instituted to restrain or invalidate
the
transactions contemplated by the merger
agreement;
|
| · |
the
denial of any of the government approvals required to complete the
merger,
and the denial has become final and
nonappealable;
|
| · |
the
failure of the Stockmen's shareholders to approve the merger agreement,
following their vote at our special
meeting;
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| · |
by
Stockmen's if any representation or warranty of Zions or NBA was
incorrect
when made, subject to the material adverse effect requirement, or
if a
breach or failure by Zions or NBA to perform in all material respects
any
covenant or obligation of Zions or NBA has not been, or cannot be,
cured
within thirty days after written notice of the breach or failure
shall
have been given to Zions or NBA, and which inaccuracy, breach, or
failure,
if continued to the effective date of the merger, would result in
any
condition precedent to completion of the merger not being satisfied;
or
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| · |
by
Zions if any representation or warranty of Stockmen's or Stockmen's
Bank
was inaccurate when made, subject to the material adverse effect
requirement, or if a breach or failure by Stockmen's or Stockmen's
Bank to
perform in all material respects any covenant or agreement of Stockmen's
or Stockmen's Bank has not been, or cannot be, cured within thirty
days
after written notice of the breach or failure shall have been given
to
Stockmen's or Stockmen's Bank, and which inaccuracy, breach, or failure,
if continued to the effective date of the merger, would result in
any
condition precedent to completion of the merger not being
satisfied.
|
The
merger agreement affords each party the ability to terminate the merger
agreement unless the other party agrees to reprice the merger consideration
to
be paid upon completion of the merger:
| · |
Zions
may terminate the merger agreement, at any time during the three-business
day period beginning on the seventh business day preceding the effective
time of the merger, if the average closing price of Zions stock
during
the pricing period, as defined in the merger agreement, is more than
$93.24, provided that Zions may not terminate the merger agreement
under
this provision if Zions is acquired by any other person not affiliated
with it or has announced an acquisition by any other person not affiliated
with it. If Zions
chooses to terminate the merger agreement under these circumstances,
it
must furnish Stockmen's written notice of its decision; during the
three
business-day period commencing with its receipt of the written notice,
Stockmen's will have the option to prevent the termination by accepting
by
formula fewer Zions shares in exchange for the outstanding Stockmen's
shares upon completion of the merger. For example, under the merger
agreement Zions would currently issue 2,600,237 shares as the merger
consideration upon completion of the merger. If, for
example
during the pricing period referenced above in this paragraph, the
price of
Zions is either $95 or $100, then in those circumstances (assuming
that
Stockmen's exercises its rights to proceed with the merger under
these
revised circumstances) Zions would issue 2,552,116 Zions shares
(approximately 7.32 Zions shares for each share of Stockmen's) or
2,424,511 Zions shares (approximately 6.95 Zions shares for each
share of
Stockmen's), respectively, to the former Stockmen's shareholders
upon
completion of the merger. In all cases, only the number of Zions
shares
issuable to our shareholders upon completion of the merger would
change in
these circumstances. At the current time, neither Zions nor Stockmen's
can
predict the market price of Zions during the subject pricing
period.
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| · |
Stockmen's
may terminate the merger agreement, at any time during the three-business
day period beginning on the seventh business day preceding the effective
time of the merger, the average closing price of Zions stock during
the
pricing period, as defined in the merger agreement, is less than
$68.92.
If Stockmen's chooses to terminate the merger agreement under these
circumstances, it must furnish Zions written notice of its decision;
during the three business-day period commencing with its receipt
of the
written notice, Zions will have the option to prevent the termination
by
agreeing to issue by formula more Zions shares in exchange for the
outstanding Stockmen's shares upon completion of the merger. For
example,
under the merger agreement Zions would currently issue 2,600,237
shares as
the merger consideration upon completion of the merger. If, for
example
during the pricing period referenced above in this paragraph, the
price of
Zions is either $65 or $60, then in those circumstances (assuming
that
Zions exercises its rights to proceed with the merger under these
revised
circumstances) Zions would issue 2,756,968 Zions shares (approximately
7.91 Zions shares for each share of Stockmen's) or 2,986,716 Zions
shares
(approximately 8.56 Zions shares for each share of Stockmen's),
respectively, to the former Stockmen's shareholders upon completion
of the
merger. In all cases, only the number of Zions shares issuable to
our
shareholders upon completion of the merger would change in these
circumstances. At the current time, neither Zions nor Stockmen's
can
predict the market price of Zions during the subject pricing
period.
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Stockmen's
may terminate the merger agreement if our board, based upon the written advice
of our counsel and taking into consideration the written advice of our financial
advisors, determines in good faith that termination of the merger agreement
is
required for our board to comply with its fiduciary duties to our shareholders
imposed by law by reason of Stockmen's having received an alternative proposal,
as defined in the merger agreement.
If
the merger
agreement is terminated as a result of any representation or warranty of a
party
being incorrect when made, subject to the material adverse effect requirement,
or as a result of the breach or the failure by a party to perform in all
material respects a covenant or obligation under the merger agreement, then
the
party whose representations and warranties were incorrect or which breached
or
failed to perform its covenant or agreement shall be liable to the other party
in the amount of $2,250,000.
If
the
merger agreement is terminated because of Stockmen's receipt of an alternative
proposal, as discussed above, then Stockmen's would be liable to Zions for
liquidated damages of $7,500,000. If the merger agreement is terminated by
Zions
because any representation or warranty of Stockmen's was incorrect when made,
subject to the material adverse effect requirement, or because of a breach
or
failure by Stockmen's to perform in all material respects any covenant or
obligation contained in the merger agreement and Stockmen's or Stockmen's Bank
executes a definitive agreement respecting an alternative proposal, as defined
in the merger agreement, within one year after termination of the merger
agreement, then Stockmen's would be liable to Zions for liquidated damages
of
$7,500,000 plus $2,250,000 for incorrectness of one or more Stockmen's
representations or warranties or the breach of any covenant or
obligation.
If
the Merger
Becomes Effective.
After
the effective time of the merger, various provisions of the merger agreement
regarding the following matters, among others, will survive and remain
effective:
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procedures
for the issuance of Zions common stock in exchange for our common
stock;
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| · |
indemnification
of our directors and officers; and
|
| · |
the
employment agreement with Mr. Holyoak and the non-competition agreements
with various of our executives.
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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, among others, will survive
and
remain effective:
| · |
confidentiality
of information obtained in connection with the merger
agreement;
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| · |
indemnification
for information provided by each party in statements and applications
to
governmental authorities in connection with the merger, including
this
proxy statement/prospectus;
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| · |
expenses
incurred in connection with the proposed merger;
and
|
Zions
has
registered under the Securities Act the shares of its common stock issuable
in
the merger to the former Stockmen's shareholders. Holders of these securities
who are not deemed to be "affiliates," as defined in the rules promulgated
under
the Securities Act, of Zions or Stockmen's may trade the shares of Zions common
stock that they receive in the merger freely without restriction.
Following
the merger and the issuance of shares of Zions common stock, any subsequent
transfer of shares acquired in the merger by any person who was an affiliate
of
Stockmen's at the time of submission of the merger agreement to the Stockmen's
shareholders for their consideration and vote or by a person who is an affiliate
of Zions following the merger will, under existing law, require:
| · |
the
further registration under the Securities Act of the shares of Zions
common stock that the affiliate wishes to
transfer;
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| · |
compliance
with Rule 145 promulgated under the Securities Act, which permits
limited
sales under certain circumstances;
or
|
| · |
the
availability of another exemption from registration of the shares
under
the Securities Act.
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An
"affiliate" of a person is defined as a person who directly, or indirectly
through one or more intermediaries, controls, is controlled by, or is under
common control with that person. We expect these restrictions to apply to the
directors and executive officers of Stockmen's and to the holders of 10% or
more
of the Stockmen's common stock. The same restrictions apply to certain relatives
or the spouse 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 its transfer agent
with
respect to those shares of Zions common stock held by persons subject to these
restrictions. Zions will place a legend on the certificates that it issues
in
the merger for those shares which will be held by former affiliates of
Stockmen's or affiliates of Zions. Zions will use commercially reasonable
efforts to cause its legal counsel to deliver opinions of counsel with respect
to the resale ability of shares held by former affiliates of Stockmen's within
one business day of receipt by Zions of notice that an affiliate wishes to
sell
his or her shares of Zions common stock.
The
merger
agreement provides that each party to the merger agreement will be responsible
for paying its own expenses incurred in connection with the merger, including
the fees and expenses of counsel, accountants, investment bankers, experts
and
consultants. Nevertheless, the merger agreement expressly allocates certain
specified expenses as follows:
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the
cost of printing and delivery of this proxy statement/prospectus
will be
deemed to be incurred by Stockmen's;
and
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the
cost of registering the shares of Zions common stock issuable in
the
merger will be deemed to be incurred by
Zions.
|
The
following
discussion is a summary description of the material United States federal income
tax consequences of the merger applicable to Stockmen's shareholders. This
discussion does not purport to consider all aspects of United States federal
income taxation that may be relevant to a Stockmen's shareholder. This
discussion is based upon the provisions of the Code, existing regulations and
administrative and judicial interpretations of the Code, all of which are as
in
effect as of the date of this proxy statement/prospectus and are subject to
change, possibly with retroactive effect. This discussion applies only to
Stockmen's shareholders who hold their shares of Stockmen's common stock as
capital assets within the meaning of Section 1221 of the Code and does not
apply
to the following:
| · |
shareholders
who received their shares of Stockmen's stock from the exercise of
employee stock options or similar securities or otherwise as
compensation;
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| · |
shareholders
who hold their shares of Stockmen's stock as part of a "straddle,"
"hedge," "conversion transaction," "synthetic security" or other
integrated investment;
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| · |
shareholders,
including, without limitation, financial institutions, insurance
companies, tax-exempt organizations, dealers or traders in securities
and
shareholders subject to the alternative minimum tax, who may be subject
to
special rules;
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| · |
shareholders
whose functional currency is not the United States dollar;
or
|
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shareholders
who, for United States federal income tax purposes, are non-resident
alien
individuals, foreign corporations, foreign partnerships, foreign
estates
or foreign trusts.
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This
discussion also does not consider the effect of any foreign, state or local
laws
or any United States federal laws other than those pertaining to the income
tax.
Accordingly,
you should consult your tax advisor to determine the tax effect to you of the
merger, including the application and effect of foreign or United States
federal, state, local or other tax laws.
Tax
Opinion and Merger
Completion
of
the merger is contingent upon the receipt by Zions and Stockmen's of an opinion
from Zions' outside counsel to the effect that the merger will be treated as
a
reorganization within the meaning of Section 368(a) of the Code. The tax opinion
of Duane Morris LLP, counsel for Zions, is included as exhibit 8 to the
registration statement filed with the SEC of which this proxy
statement/prospectus is a part. These opinions are based upon, among other
things, representations of fact contained in certificates of officers of Zions
and Stockmen's. Zions will not seek any ruling from the Internal Revenue Service
as to the United States federal income tax consequences of the merger, and
the
opinion of counsel is not binding upon the Internal Revenue Service or any
court. Accordingly, Zions can give no assurance that the Internal Revenue
Service will not contest the conclusions expressed in the opinions or that
a
court will not sustain that contest.
Assuming
the
merger is completed in the manner described in this proxy statement/prospectus
and in accordance with the merger agreement, the merger will qualify as a
"reorganization" within the meaning of Section 368(a) of the Code. The following
discussion sets forth the United States federal income tax consequences to
Stockmen's shareholders of the qualification of the merger as a "reorganization"
within the meaning of Section 368(a) of the Code.
A
Stockmen's
shareholder who exchanges shares of Stockmen's common stock solely for Zions
common stock will not recognize any gain or loss on that exchange, except to
the
extent the shareholder receives cash in lieu of a fractional share of Zions
common stock, as discussed below. The aggregate adjusted tax basis of Zions
common stock received will equal the Stockmen's shareholder's aggregate adjusted
tax basis in the shares of Stockmen's common stock surrendered in the merger,
decreased by the amount of any tax basis allocable to any fractional share
of
Zions common stock for which cash is received. The holding period of the Zions
common stock received in the merger will include the holding period of the
Stockmen's common stock surrendered in the merger. If a Stockmen's shareholder
has differing tax bases and/or holding periods in respect of the shareholder's
shares of Stockmen's common stock, the shareholder should consult with a tax
advisor in order to identify the tax bases and/or holding periods of the
particular shares of Zions common stock that the shareholder
receives.
A
Stockmen's shareholder who receives cash in lieu of a fractional share of Zions
common stock will be treated as having first received the fractional share
of
Zions common stock in the merger and then as having received cash in exchange
for the fractional share interest. A Stockmen's shareholder generally will
recognize gain or loss in an amount equal to the difference between the amount
of cash received in lieu of the fractional share of Zions common stock and
the
portion of the basis in the shares of Stockmen's common stock allocable to
that
fractional interest.
Neither
Zions nor Stockmen's will recognize gain or loss as a result of the
merger.
Tax
Consequences If the Merger Does Not Qualify as a Reorganization under Section
368(a)
If
the
Internal Revenue Service determines that the merger of Stockmen's with and
into
Zions does not qualify as a reorganization within the meaning of Section 368(a)
of the Code, the Stockmen's shareholders would be required to recognize gain
or
loss with respect to each share of Stockmen's common stock surrendered in the
merger in an amount equal to the difference between (a) the sum of the fair
market value of any Zions common stock and cash received in the merger and
(b)
the tax basis of the shares of Stockmen's common stock surrendered in exchange
therefor. Such gain or loss will be long-term capital gain or loss if such
shareholder held the Stockmen's common stock for more than one year, and will
be
short-term capital gain or loss if such shareholder held the Stockmen's common
stock for less than one year. The amount and character of gain or loss will
be
computed separately for each block of Stockmen's common stock that was purchased
by the holder in the same transaction. A Stockmen's shareholder's aggregate
tax
basis in the Zions common stock received in the merger would in this case be
equal to its fair market value at the time of the closing of the merger, and
the
holding period for the Zions common stock would begin the day after the closing
of the merger.
Backup
Withholding
Payments
of
cash (e.g., cash in lieu of fractional shares) in connection with the merger
may
be subject to "backup withholding" at a rate of 28%, unless a Stockmen's
shareholder, (1) provides a correct taxpayer identification number (which,
for
an individual stockholder, is the shareholder's social security number) and
any
required information to the exchange agent, (2) provides a certification of
foreign status on Form W-8 , or successor form, or (3) is a corporation or
comes
within certain exempt categories and otherwise complies with applicable
requirements of the backup withholding rules. A Stockmen's shareholder who
does
not provide a correct taxpayer identification number may be subject to penalties
imposed by the Internal Revenue Service. Any amount paid as backup withholding
does not constitute an additional tax and will be creditable against the
shareholder's United States federal income tax liability. Each Stockmen's
shareholder should consult with his own tax advisor as to his qualification
for
exemption from backup withholding and the procedure for obtaining this
exemption. You may prevent backup withholding by completing a substitute form
W-9 (contained with the election form to be forwarded to you) and submitting
it
to the exchange agent for the merger when you submit your Stockmen’s share
certificates for exchange.
Cash
Received by Dissenters
Cash
received by a Stockmen's shareholder who has perfected dissenters' rights as
to
his or her Stockmen's common stock will be treated as a distribution in
redemption of such shares, subject to the provision of section 302 of the
Internal Revenue Code.
Each
shareholder of Stockmen's is urged to consult his or her tax advisor as to
the
particular tax consequences to the shareholder of the merger, including the
applicability and effect of any state, local or foreign tax laws, and of changes
in applicable tax laws.
Because
Zions and Stockmen's are bank holding companies registered under the Bank
Holding Company Act, the merger is subject to the application and approval
requirements of the Bank Holding Company Act. Because, however, the merger
is
part of a virtually simultaneous transaction in which NBA and Stockmen's Bank
are merging, and because the merger of the banks requires the prior approval
of
the Comptroller of the Currency under the Bank Merger Act and certain other
requirements set forth in regulations of the Board of Governors of the Federal
Reserve System are met, the application and approval requirements of the Bank
Holding Company Act are subject to waiver by the Board of Governors. Zions
intends to request such a waiver.
NBA
and
Stockmen's Bank have filed an application with the Comptroller of the Currency
requesting approval of the bank merger. Copies of this application have been
provided to the U.S. Department of Justice and other governmental agencies.
The
application describes the terms of the merger, the parties involved, the
activities to be conducted by the combined bank as a result of the merger,
and
provides other financial and managerial information. In evaluating the
application, the Comptroller of the Currency will consider the financial and
managerial resources and prospects of the existing and combined institutions
and
the benefits that may be expected from the bank merger. Among other things,
the
Comptroller of the Currency will evaluate the capital adequacy of the combined
bank after completion of the bank merger. In addition, under the Community
Reinvestment Act of 1977, the Comptroller of the Currency will take into account
the record of performance of NBA and Stockmen's Bank in meeting the credit
needs
of their communities, including low- and moderate-income
neighborhoods.
The
Comptroller of the Currency may deny an application if he 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 Comptroller of the Currency may also deny
an
application if he 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 Comptroller
of the Currency finds that the anticompetitive 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 NBA and Stockmen's Bank with the Comptroller of
the
Currency. Under current law, the merger may not be completed until the
Comptroller of the Currency has approved the merger and a period of 30 days,
or
fewer if prescribed by the Comptroller of the Currency with the concurrence
of
the Attorney General of the United States, following the date of approval of
the
merger by the Comptroller of the Currency, has expired. The commencement of
an
antitrust action by the U.S. Department of Justice would stay the effectiveness
of the approval of the Comptroller of the Currency, unless a court specifically
orders otherwise.
Zions
and
NBA have filed an application with the Arizona Superintendent of Financial
Institutions requesting her approval of Zions' acquisition of control of
Stockmen's. 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 provides other financial and managerial information. In
evaluating the application, the Arizona Superintendent of Financial Institutions
will consider the financial and managerial resources of Zions and NBA, the
moral
character and integrity of their management, Zions' and NBA's plans for the
operation of the business of Stockmen's, and whether the proposed transaction
is
contrary to law.
The
approval or waiver 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 the consideration to be received by Stockmen's
shareholders is fair. Regulatory approval does not constitute an endorsement
or
recommendation of the merger or the bank merger.
Zions
has
received the written confirmation of the Department of Financial Institutions
of
the State of Utah that the approval of that department will not be required
to
consummate the merger.
Zions
and
Stockmen's are not aware of any governmental approvals or requirements under
banking laws and regulations whose receipt or satisfaction is necessary for
the
merger to become effective other than those described above. Zions and
Stockmen's intend to seek any other approval and to take any other action that
may be required to effect the merger and the bank merger.
The
merger and the bank 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 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.
A
holder of
shares of Stockmen's common stock is entitled to exercise the rights of a
dissenting shareholder under Chapter 13 of the Arizona Business Corporation
Act
(the "Act") to object to the merger agreement and demand that Zions, as the
surviving corporation, pay the fair value of the shares of Stockmen's common
stock held as determined in accordance with the Arizona statutory provisions.
The
Act
defines "fair value" as the value of the shares immediately before the
effectuation of the corporate action to which the dissenter objects, excluding
any appreciation or depreciation in anticipation of the corporate action unless
exclusion is inequitable. The
following summarizes the material provisions of Arizona law and is qualified
in
its entirety by reference to those statutory provisions, which we set forth
in
full in Appendix C to this document.
Arizona
law
requires that Stockmen's shareholders must follow certain prescribed procedures
in their exercise of the statutory right to dissent in connection with the
merger agreement and merger. The
failure to follow these procedures precisely on a timely basis, in the manner
required by Chapter 13 of the Act, may result in a loss of a shareholder's
dissenters' rights.
To
be
entitled to payment as a dissenting shareholder to the merger agreement and
merger, a shareholder must (i) deliver written notice of the shareholder's
intent to demand payment, (ii) not vote in favor of the proposed merger
agreement and merger, and (iii) make a payment demand, in each case as provided
below.
Any
shareholder
electing to exercise the right to dissent must deliver to Stockmen's, prior
to
the taking of the vote at our special meeting to be held on January 12, 2007,
written notice of the shareholder's intent to demand payment for such
shareholder's shares if the proposed merger agreement is effectuated.
Additionally, a shareholder who wishes to assert dissenters' rights cannot
vote
in favor of the proposed merger agreement. If the shareholder does not comply
with these two requirements, the shareholder will not be entitled to payment
for
the shareholder's shares of Stockmen's common stock. The
mere filing of a proxy directing a vote against the merger agreement, or a
purported objection to the merger submitted on a proxy, does not constitute
written notice of a shareholder’s intent to demand payment for such
shareholder’s shares.
If
the
proposed merger agreement is authorized at our special meeting, the Act requires
Zions, as the surviving corporation, to send a written dissenters' notice to
all
dissenting shareholders no later than ten (10) days after the merger agreement
is effectuated. The dissenters' notice must: (i) state where the dissenting
shareholder must send the shareholder's payment demand and where and when the
dissenting shareholder shall deposit the shareholder's certificates for
certificated shares; (ii) inform any dissenting shareholder who holds
uncertificated shares to what extent transfer of the shares will be restricted
after the dissenting shareholder's payment demand is received; (iii) supply
the
dissenting shareholder with a form for demanding payment that includes the
date
of the first announcement to news media or to shareholders of the terms of
the
merger agreement, which we refer to as the "announcement date," and that
requires the dissenting shareholder to certify whether or not the dissenting
shareholder acquired beneficial ownership of the shares before that date; (iv)
set a date by which Zions must receive the dissenting shareholder's payment
demand, which date shall be at least thirty (30) but not more than sixty (60)
days after the date the dissenters' notice is delivered; and (v) be accompanied
by a copy of Chapter 13, Article 2 of the Act.
Upon
receipt of a
dissenters' notice from Zions, the Act requires a dissenting shareholder to:
(i)
demand payment; (ii) certify whether the shareholder acquired beneficial
ownership of the shares before the announcement date, as set forth in the
dissenters' notice; and (iii) deposit the shareholder's share certificates
in
accordance with the terms of the dissenters' notice. A dissenting shareholder
who demands payment and deposits the shareholder's share certificates retains
all other rights of a shareholder until such rights are cancelled or modified
by
the effectuation of the merger agreement. A dissenting shareholder who does
not
demand payment or does not deposit the shareholder's certificates, if required,
each by the date set in the dissenters' notice, is not entitled to payment
for
the shareholder's shares under Chapter 13, Article 2 of the Act.
Except
in the case
of shares
acquired by a shareholder on or after the announcement date, which we refer
to
as
"after-acquired
shares," as soon as the merger agreement is effectuated, on receipt of a payment
demand, the Act provides that Zions, as the surviving corporation, must pay
the
dissenting shareholder who has demanded payment the amount that Zions estimates
to be the fair value of the dissenting shareholder's shares plus accrued
interest, as determined in accordance with the Act. Any appreciation or
depreciation in the value of dissenting shareholder's shares attributable to
the
merger agreement shall be excluded for determining the fair value of such
shares, unless such exclusion is inequitable. The payment must be accompanied
by: (i) Stockmen's balance sheet as of the end of a fiscal year ending not
more
than sixteen (16) months before the date of payment, an income statement for
that year, a statement of changes in shareholder's equity for that year and
the
latest available interim financial statements, if any; (ii) a statement of
Zions' estimate of the fair value of the shares; (iii) an explanation of how
the
interest was calculated; (iv) a statement of the dissenter's right to demand
payment if such dissenter is dissatisfied with Zions' payment; and (v) a copy
of
Chapter 13, Article 2 of the Act.
If
Zions does
not effectuate the merger agreement within sixty (60) days after the date set
for demanding payment and depositing share certificates, the Act requires Zions
to return the deposited certificates and release the transfer restrictions
imposed on uncertificated shares. If Zions effectuates the merger agreement
after returning the deposited certificates and releasing the transfer
restrictions imposed on uncertificated shares, Zions must send a new dissenters'
notice and repeat the payment demand procedure.
The
Act
permits Zions to elect to withhold payment from a dissenting shareholder with
respect to after-acquired shares. If Zions elects to withhold payment, the
Act
provides that Zions must estimate the fair value of the shares plus accrued
interest and pay this amount to each dissenting shareholder who agrees to accept
it in full satisfaction of the shareholder's demand for payment. The Act
requires Zions to send with its offer a statement of its estimate of the fair
value of the shares, an explanation of how the interest was calculated and
a
statement of the dissenting shareholder's right to demand payment under Chapter
13 of the Act.
The
Act
permits a dissenting shareholder to notify Zions in writing of the dissenting
shareholder's own estimate of the fair value of the dissenting shareholder's
shares and amount of interest due and either demand payment for the dissenting
shareholder's estimate, less any payment made by Zions, or reject Zions' offer
and demand payment of the fair value of the dissenting shareholder's shares
and
interest due, if: (i) the dissenting shareholder believes that the amount paid
by Zions or offered with respect to after-acquired shares is less than the
fair
value of the dissenting shareholder's shares or that the interest due is
incorrectly calculated; (ii) Zions fails to make payment within sixty (60)
days
after the date set for demanding payment; or (iii) Zions, having failed to
effectuate the merger agreement, does not return the deposited certificates
or
does not release the transfer restrictions imposed on uncertificated shares
within sixty (60) days after the date set for demanding payment.
A
dissenting
shareholder waives the right to demand payment as set forth in the proceeding
paragraph unless the dissenting shareholder notifies Zions of the shareholder's
demand in writing within thirty (30) days after Zions made or offered payment
for the dissenting shareholder's shares.
If
a dissenting
shareholder's demand for payment remains unsettled, the Act requires Zions
to
commence a proceeding within sixty (60) days after receiving the payment demand
and to petition the court to determine the fair value of the shares and accrued
interest. If Zions does not commence the proceeding within the sixty (60) day
period, it shall pay each dissenting shareholder whose demand remains unsettled
the amount demanded by each such dissenting shareholder. Zions must commence
the
action in the court in Mohave County, Arizona, make all dissenting shareholders,
whether or not residents of Arizona, whose demands remain unsettled, parties
to
the proceeding as in an action against their shares, and serve all such
dissenting shareholders with a copy of the petition. Nonresidents
may be served by certified mail or by publication as provided by law or by
the
Arizona rules of civil procedure. The
jurisdiction of the court in which the proceeding is commenced is plenary and
exclusive and there is no right to trial by jury.
The
court in
an appraisal proceeding will determine all costs of the proceeding and assess
those costs against Zions, except that the court shall assess costs against
all
or some of the dissenting shareholders to the extent the court finds that the
fair value does not materially exceed the amount offered by Zions or that the
dissenting shareholders acted arbitrarily, vexatiously or not in good faith
in
demanding payment. The court may also assess the fees and expenses of attorneys
and experts for the respective parties in amounts the court finds equitable
to
the extent set forth in Chapter 13, Article 3 of the Act. If the court
determines that the services of an attorney for any dissenting shareholder
were
of substantial benefit to other dissenting shareholders similarly situated,
that
court may award to these attorneys reasonable fees to be paid out of the amounts
awarded to the dissenting shareholders who were benefited.
Holders
of
Stockmen's common stock considering seeking appraisal by exercising their
dissenters' rights should be aware that the fair value of their Stockmen's
common stock determined under Arizona law could be more than, the same as,
or
less than their pro rata share of the merger consideration that they are
entitled to receive under the merger agreement if they do not seek appraisal
of
their Stockmen's common stock.
The
foregoing
discussion does not purport to be a complete statement of the procedures to
be
followed by holders of Stockmen's common stock desiring to exercise their
dissenters' rights. Because exercise of those rights requires strict adherence
to the relevant provisions of the Arizona Business Corporation Act, each
shareholder who may desire to exercise his or her dissenters' rights is advised
individually to consult the law (as set forth in Appendix C to this document)
and comply with the provisions of the statute.
Holders
of
Stockmen's common stock wishing to exercise their dissenters' rights are advised
to consult their own counsel to ensure that they fully and properly comply
with
the requirements of Arizona law.
Zions
common stock trades on the Nasdaq Global Select Market under the symbol "ZION."
Stockmen's common stock is held by approximately 215 shareholders of record.
No
established trading market exists for Stockmen's common stock, and consequently,
no information on trading prices for Stockmen's common stock is
provided.
The
following table reflects (1) the range of high and low sales prices of Zions
common stock, and (2) the amount of cash dividends declared per share by each
company:
| |
|
Zions
|
|
Stockmen's
|
|
| |
|
Sales
Prices
|
|
|
|
|
|
| |
|
High
|
|
Low
|
|
Dividends
|
|
Dividends
|
|
|
2004
|
|
|
|
|
|
|
|
|
|
|
First
Quarter
|
|
$
|
61.72
|
|
$
|
55.93
|
|
$
|
0.30
|
|
$
|
1.00
|
|
|
Second
Quarter
|
|
62.04
|
|
54.08
|
|
0.32
|
|
1.00
|
|
|
Third
Quarter
|
|
|
64.38
|
|
|
58.40
|
|
|
0.32
|
|
|
1.25
|
|
|
Fourth
Quarter
|
|
|
69.29
|
|
|
59.53
|
|
|
0.32
|
|
|
1.25
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First
Quarter
|
|
$
|
70.45
|
|
$
|
63.33
|
|
$
|
0.36
|
|
$
|
1.25
|
|
|
Second
Quarter
|
|
|
75.17
|
|
|
66.25
|
|
|
0.36
|
|
|
1.25
|
|
|
Third
Quarter
|
|
|
74.00
|
|
|
68.45
|
|
|
0.36
|
|
|
1.50
|
|
|
Fourth
Quarter
|
|
|
77.67
|
|
|
66.67
|
|
|
0.36
|
|
|
1.50
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First
Quarter
|
|
$
|
85.25
|
|
$
|
75.13
|
|
$
|
0.36
|
|
$
|
1.50
|
|
|
Second
Quarter
|
|
|
84.18
|
|
|
76.28
|
|
|
0.36
|
|
|
1.50
|
|
|
Third
Quarter
|
|
|
84.09
|
|
|
75.25
|
|
|
0.36
|
|
|
1.75
|
|
|
Fourth
Quarter (through
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
November
30,
2006)
|
|
|
81.79
|
|
|
77.57
|
|
|
0.39
|
|
|
1.75 |
|
The
timing
and amount of future dividends will depend upon earnings, cash requirements,
the
financial condition of Zions and its subsidiaries (and, prior to completion
of
the merger, of Zions and its subsidiaries insofar as Zions dividends are
concerned and Stockmen's and Stockmen's Bank insofar as Stockmen's dividends
are
concerned), applicable government regulations, and other factors deemed relevant
by the Zions board (and by the respective boards of Zions and Stockmen's prior
to completion of the merger). Because of the issuance by Zions of shares of
its
Preferred Stock on December 7, 2006, the ability of Zions to declare or pay
dividends on, or purchase, redeem or otherwise acquire, shares of its common
stock will be subject to certain restrictions if Zions fails to pay dividends
on
its Series A Preferred Stock. See " Comparision of Shareholders' Rights"
below. Various federal and state laws limit the ability of affiliated
banks to pay dividends to their parent corporations. The merger agreement
restricts the cash dividends payable on Stockmen's common stock, pending
completion of the merger. See "Approval of the Merger Agreement - Conduct of
Business Pending Completion of the Merger."
On
September
8, 2006, the last full trading day prior to the public announcement of the
proposed merger, the highest sales price of Zions common stock was $77.60 per
share, the lowest sales price of Zions common stock was $76.72 per share and
the
last reported sales price of Zions common stock was $77.45 per share. On
December 5, 2006, the most recent practicable date prior to the printing of
this
document, the last reported sales price of Zions common stock was $79.02 per
share. We urge shareholders to obtain current market quotations prior to making
any decisions with respect to the merger.
Upon
completion of the merger, our shareholders will become shareholders of Zions.
The rights of our shareholders are presently governed by Arizona law and our
articles of incorporation and bylaws. After the merger the rights of former
Stockmen's shareholders will be governed by Utah law and the Zions articles
of
incorporation and bylaws. The following chart summarizes the material
differences between the rights of holders of Stockmen's common stock prior
to
the merger and after completion of the merger when the former Stockmen's
shareholders will be Zions shareholders. This summary does not purport to be
complete and the summary is qualified in its entirety by reference to the
Stockmen's articles of incorporation and bylaws, the Zions articles of
incorporation and bylaws, and the relevant provisions of Arizona and Utah law.
You can obtain copies of the governing corporate instruments of Zions and
Stockmen's, without charge, by following the instructions listed under "Where
You Can Find More Information."
| |
|
Stockmen's
Shareholders'
Rights
|
|
Zions
Shareholders'
Rights
|
| |
|
|
|
|
|
Authorized
and outstanding stock
|
|
Authorized: 1,000,000
shares of common stock, no par value per share.
Outstanding:
348,713
shares of common stock as of the date of this document.
|
|
Authorized:
350,000,000 shares of common stock, no par value per share; 3,000,000
shares of preferred stock, no par value per share.
Outstanding:
106,953,956
shares of common stock as of November 27, 2006; no shares of preferred
stock. (1)
|
|
Preemptive
rights
|
|
No
shareholder of Stockmen's has been granted preemptive rights to acquire
any shares of Stockmen's.
|
|
No
shareholder of Zions has been granted preemptive rights to acquire
any
shares of Zions.
|
|
Special
meetings of shareholders
|
|
Special
meetings of the shareholders may be called at any time by the Chairman
of
the Board, the Vice Chairman, the President, the Board of Directors,
or by
the holders of at least 50% of the outstanding shares entitled to
vote at
that meeting.
|
|
Special
meetings may be called by the president or board of directors, or
by the
holders of at least 51% of all shares entitled to be cast on the
issue
proposed at the meeting.
|
|
Shareholder
action by written consent
|
|
Shareholder
action may be taken by written consent if signed by all of the
shareholders entitled to vote on the action.
|
|
Shareholder
action may be taken by written consent if signed by the holders of
outstanding shares having not less than the minimum number of votes
necessary to authorize the action at a shareholders'
meeting.
|
|
Inspection
of voting lists of shareholders
|
|
Shareholders
have a right to inspect the shareholder list beginning two business
days
after notice of the shareholder meeting and continuing through the
meeting.
|
|
Shareholders
may inspect a list of shareholders at the time and place of the meeting
and during the whole time of the meeting. Utah law requires the
shareholders list to be available for inspection beginning on the
earlier
of ten days before the meeting or two business days after notice
of the
meeting is given.
|
|
Vacancies
on the board of directors and additional directors
|
|
Shareholders
may fill vacancies at a shareholders' meeting called for that purpose.
A
vacancy can be filled by the remaining directors.
|
|
Shareholders
may fill vacancies at a shareholders' meeting. A vacancy can be filled
by
the remaining directors, and that director can serve for the remaining
term of the predecessor director. A director appointed by the board
to
fill a vacancy created by reason of an increase in the number of
directors
can serve only until the next election of directors by the
shareholders.
|
|
Cumulative
voting for directors
|
|
Shareholders
are permitted to cumulate their votes in the election of
directors.
|
|
No
such rights exist.
|
|
Classification
of the board of directors
|
|
The
Stockmen's board is comprised of one class, with all directors being
elected annually for a one year term.
|
|
The
Zions board is divided into three classes as nearly equal in size
as
possible, with directors in each class being elected for staggered
three-year terms.
|
|
Removal
of directors
|
|
Directors
may be removed with or without cause by a vote of the shareholders;
a
director will not be removed if the number of votes sufficient to
elect
the director under cumulative voting is voted against the director's
removal. A director may be removed by the shareholders only at a
meeting
called for the purpose of removing that director.
|
|
Shareholders,
by a vote of two-thirds of the outstanding shares, may remove a director.
Removal may be for or without cause.
|
|
Liability
of directors
|
|
Directors
are not personally liable to Stockmen's or its shareholders for monetary
damages, except for (1) the amount of a financial benefit received
by a
director to which the director is not entitled, (2) an intentional
infliction of harm on Stockmen's or its shareholder, (3) an intentional
violation of 10-833 of the Arizona Business Corporation Act, or (4)
an
intentional violation of criminal law.
|
|
Directors
are not personally liable to Zions or its shareholders for monetary
damages for 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 (3) for any transaction where the director received
an improper personal benefit.
|
|
Indemnification
of directors and officers
|
|
A
Stockmen's director or officer is entitled to indemnification to
the full
extent of Arizona law, except directors will not be indemnified for
(1)
the amount of a financial benefit received by a director to which
the
director is not entitled, (2) an intentional infliction of harm on
Stockmen's or its shareholders, (3) an intentional violation of 10-833
of
the Arizona Business Corporation Act, (4) an intentional violation
of
criminal law, or (5) as prohibited by 10-851(D) of the Arizona Business
Corporation Act, and officers will not be indemnified for (1) liability
in
connection with a proceeding by or in the right of Stockmen's, or
(2)
liability for conduct that constitutes receipt of a financial benefit
to
which the officer is not entitled, intentional infliction of harm
on
Stockmen's or its shareholders, or intentional violation of criminal
law.
|
|
A
Zions director, officer, employee or agent is entitled to indemnification
to the full extent of Utah law if he or she acted in good faith and
in a
manner he or she reasonably believed to be in, or not opposed to,
the best
interest of Zions and, with respect to any criminal action or proceeding,
had no reasonable cause to believe his or her conduct was
unlawful.
|
|
Shareholders'
dissenters' rights
|
|
Under
Arizona law, a shareholder is entitled to assert dissenters' rights
in
connection with a merger. The Arizona Business Corporation Act permits
a
shareholder to dissent to a merger and to receive cash equal to the
fair
value for that shareholder's shares in accordance with the procedures
established by Arizona law. Stockmen's shareholders are entitled
under
Arizona law to exercise their dissenters' rights.
|
|
Under
Utah law, a shareholder is not entitled to assert dissenters' rights
if
the corporation's common stock is listed on a national securities
exchange
or on the National Market System of Nasdaq or is held of record by
more
than 2,000 shareholders. Zions common stock is listed on the National
Market System of Nasdaq and is held of record by more than 2,000
shareholders. Therefore, Zions' shareholders are not entitled to
assert
their dissenters' rights under Utah law.
|
|
Restrictions
upon certain business combinations
|
|
Stockmen's
is not subject to the Arizona laws that limit control share acquisitions
and business combinations. The articles and bylaws of Stockmen's
are
silent regarding any special restrictions on business
combinations.
|
|
Certain
business transactions with a person who owns, directly or indirectly,
over
10% of outstanding stock must be approved by a majority vote of the
continuing directors or a shareholder vote of at least 80% of outstanding
voting shares. Such business transactions include mergers, consolidations,
sales of all or more than 20% of the corporation's assets, issuance
of
securities of the corporation, reclassifications that increase voting
power of the interested shareholder, or liquidations, spin-offs or
dissolution of the corporation. Zions is also subject to Utah's Control
Shares Acquisitions Act, which limits the ability of persons acquiring
more than 20% of Zions' voting stock to vote those shares absent
approval
of voting rights by the holders of a majority of all shares entitled
to be
cast, excluding all interested shares.
|
|
Shareholder
Rights Plan
|
|
None.
|
|
None.
|
|
Amendments
to articles of incorporation
|
|
The
Articles of Stockmen's may be amended as permitted by Arizona law,
which
permits an amendment to the articles of incorporation by recommendation
by
the board of directors and a majority of the shareholder votes entitled
to
be cast.
|
|
Zions'
Articles may be amended or repealed as permitted by Utah law, which
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.
|
|
Amendments
to bylaws
|
|
The
board of Stockmen's may amend, repeal, suspend or adopt bylaws at
any
time. The bylaws may also be amended or repealed by the shareholders
of
Stockmen's.
|
|
Zions'
board may amend, adopt or repeal bylaws at any time. Zions' shareholders
may adopt additional bylaws and may amend or repeal any bylaw, whether
or
not adopted by them, at any time.
|
(1)
On December 7, 2006, Zions issued $240 million of Series A Floating-Rate
Non-Cumulative Perpetual Preferred Stock. Because of this issuance, the
ability of Zions to declare or pay dividends on, or purchase, redeem or
otherwise acquire shares of its common stock will be subject to certain
restrictions if Zions fails to pay dividends on its Series A Preferred
Stock. Zions has incorporated by reference into this proxy
statement/prospectus its Form 8-K filed with the SEC on December 7, 2006 which
describes this transaction. See "Documents Incorporated by Reference" on
page 55 below.
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 authorize the issuance of 3,000,000 shares of
preferred stock with no par value per share. On December 7, 2006, Zions
issued $240 million of Series A Floating-Rate Non-Cumulative Perpetual
Preferred Stock. The Zions board is authorized by the articles of
incorporation 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. As of November 27, 2006, there are approximately 106,953,956 shares
of
common stock of Zions outstanding. 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. Because of the issuance by Zions
of shares of its Preferred Stock, as referenced in the preceding paragraph,
the
ability of Zions to declare or pay dividends on, or purchase, redeem or
otherwise acquire, shares of its common stock will be subject to certain
restrictions if Zions fails to pay dividends on its Series A Preferred
Stock. Holders of Zions common stock have no preemptive or conversion
rights.
Zions'
registrar and transfer agent is Zions First National Bank, Salt Lake City,
Utah.
The
following table sets forth at October 31, 2006 the beneficial ownership of
Stockmen's common stock of (i) each person known by Stockmen's to be the
beneficial owner of more than 5% of the common stock, (ii) each director of
Stockmen’s, (iii) the chief executive officer of Stockmen's and each of the four
next highest paid executive officers of Stockmen's or Stockmen's Bank in fiscal
year 2005 and (iv) all executive officers and directors as a group. The number
of shares beneficially owned by each person as indicated in the table is
determined under rules of the Securities and Exchange Commission, and the
information is not necessarily indicative of beneficial ownership for any other
purpose.
|
Name
of Beneficial Owner (1)
|
Number
of Shares Beneficially Owned (2)
|
|
Percentof
Class
|
|
John
G. Lingenfelter (3)
|
37,500
|
|
10.75%
|
|
Tod
W. Becker (4)
|
11,950
|
|
3.43%
|
|
Colleen
K. Kirby (5)
|
8,250
|
|
2.37%
|
|
William
W. Becker (6)
|
92,613
|
|
26.56%
|
|
Farrel
Holyoak (7)
|
12,606
|
|
3.62%
|
|
Grace
Helen Neal
|
22,981
|
|
6.59%
|
|
James
P. Walker
|
1,910
|
|
0.55%
|
|
Jeff
Duncan
|
350
|
|
0.10%
|
|
William
Kitchen
|
1450
|
|
0.42%
|
|
Vance
Miller
|
150
|
|
0.04%
|
|
All
Officers and Directors as a group (12 persons)
|
167,379
|
|
48.00%
|
| (1) |
Unless
otherwise indicated, the address of each of the above-named shareholders
is c/o The Stockmen's Bancorp, Inc., 3825 Stockton Hill Road, Kingman,
Arizona 86402-3879.
|
| (2) |
Unless
otherwise indicated, each person has sole voting and investment power
with
respect to the shares shown as individually owned and joint voting
and
investment power with respect to shares shown as jointly
owned.
|
| (3) |
Includes
25,151 shares held by the Lingenfelter Family Trust of which Mr.
Lingenfelter and his spouse are co-trustees; 7,598 shares held by
Mr.
Lingenfelter's IRA; 751 shares held by his spouse's IRA; and 4,000
shares
held by Lingenfelter Investments Ltd. Partnership of which Mr.
Lingenfelter is the general
partner.
|
| (4) |
Includes
500 shares held jointly by Tod and Lorilee
Becker.
|
| (5) |
Shares
are held jointly by Colleen and Willian
Kirby.
|
| (6) |
Shares
are held by The William W. Becker Living
Trust.
|
| (7) |
Includes
960 shares held by Mr. Holyoak's IRA; and 11,646 shares held jointly
by
Mr. Holyoak and his spouse.
|
Our
board is
also requesting our shareholders to consider and approve a proposal to approve
an adjournment of our special meeting to
permit
further solicitation of proxies if a quorum is not present at our special
meeting or if there are not sufficient votes at the time of our special meeting
to approve the merger agreement.
The
affirmative vote, either in person or by proxy, of the holders of a majority
of
the shares of our common stock entitled to vote at our special meeting and
represented at our special meeting, either in person or by proxy, is required
to
approve the adjournment proposal.
Our
board of
directors is unaware of other matters to be voted on at our special meeting.
If
other matters do properly come before our special meeting, we intend that the
persons appointed in our proxies will vote, or not vote for those matters in
their discretion the shares represented by proxies in the accompanying proxy
card.
The
validity
of the Zions common stock to be issued in connection with the merger and the
material federal income tax consequences of the merger will be passed upon
by
Duane Morris LLP,
Washington, D.C.
Ernst
&
Young LLP, independent registered public accounting firm, has audited Zions'
consolidated financial statements included in Zions' Annual Report on Form
10-K
for the year ended December 31, 2005, and management's assessment of the
effectiveness of Zions' internal control over financial reporting as of December
31, 2005, as set forth in Zions' reports, which are incorporated by reference
in
this proxy statement/prospectus and elsewhere in the registration statement.
Zions' financial statements and management's assessment are incorporated by
reference in reliance on Ernst & Young LLP's reports, given on their
authority as experts in accounting and auditing.
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 Stockmen's common stock in the
merger. This document is a part of that registration statement and constitutes
a
prospectus of Zions in addition to being a proxy statement of Stockmen's for
the
Stockmen's special meeting. As allowed by SEC rules, this document 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 document, which means that Zions can disclose
important information to you by referring you to another document filed by
Zions
separately with the SEC. The information incorporated by reference is deemed
to
be part of this document, except for any information superseded by information
in this document. This document incorporates by reference into this document
the
documents set forth below that Zions has previously filed with the SEC. These
documents contain important information about Zions, its finances and its common
stock.
Zions'
SEC Filings Incorporated by Reference into This Document
| · |
annual
report on Form 10-K for the year ended December 31,
2005;
|
| · |
quarterly
reports on Form 10-Q for the calendar quarters ended March 31, 2006,
June
30, 2006 and September 30, 2006;
|
| · |
current
reports on Form 8-K, filed with the SEC on January 24, 2006; February
2,
2006; February 14, 2006; February 15, 2006; March 31, 2006; April
20,
2006; April 27, 2006; May 5, 2006; June 2, 2006; July 3, 2006; July
17,
2006; July 20, 2006; September 12, 2006; September 28, 2006; October
6,
2006; October 19, 2006; November 15, 2006 and December 7,
2006 (except in each case, information that was "furnished" on Form
8-K and any related exhibits);
|
| · |
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.
|
Zions
hereby incorporates into this document by reference additional documents that
Zions files with the SEC pursuant to Sections 13(a), 13(c), 14 or 15(d) of
the
Exchange Act between the date of this document and the effective time of the
merger.
Zions
has
supplied all information contained or incorporated by reference in this document
relating to Zions, and Stockmen's has supplied all information relating to
Stockmen's.
Shareholders
may obtain documents incorporated by reference in this document without charge
by requesting them in writing or by telephone at the following
address:
Zions
Bancorporation
One
South
Main, Suite 1134
Salt
Lake
City, Utah 84111
Attention:
Mr. Clark B. Hinckley, Senior
Vice
President - Investor Relations and
Communications
Tel:
(801) 524-4787
e-mail
at: clark.hinckley@zionsbancorp.com
This
proxy
statement/prospectus incorporates important business and financial information
about Zions that is not included in or delivered with this document. In order
to
ensure timely delivery of documents, you should request information as soon
as
possible, but no later than January 5, 2007.
You
should
rely only on the information contained or incorporated by reference in this
document to vote on the Stockmen's proposal. We and Zions have not authorized
anyone to provide you with information that is different from what is contained
in this document. This document is dated December 11, 2006. You should not
assume that the information contained in this document is accurate as of any
date other than such date, and neither the mailing of this document to
shareholders nor the issuance of shares of Zions common stock in the merger
shall create any implication to the contrary.
This
document contains a description of the representations and warranties that
each
of Zions and Stockmen's made to the other in the merger agreement.
Representations and warranties made by Zions and Stockmen's are also set forth
in other documents (including the merger agreement) that are attached or filed
as exhibits to this document or are incorporated by reference into this
document. These representations and warranties were made as of specific dates,
may be subject to important qualifications and limitations agreed to between
the
parties in connection with negotiating the terms of the agreement, may be
subject to contractual standards of materiality different from what may be
viewed as material to shareholders, may be subject to exceptions set forth
in
disclosure schedules to the agreement, and may have been included in the
agreement for the purpose of allocating risk between the parties rather than
to
establish matters as facts. These materials are included or incorporated by
reference only to provide you with information regarding the terms and
conditions of the agreements, and not to provide any other factual information
regarding Stockmen's, Zions or their respective businesses. Accordingly, the
representations and warranties and other provisions of the merger agreement
should not be read alone, but instead should be read only in conjunction with
the other information provided elsewhere in this document or incorporated by
reference into this document.
AGREEMENT
AND PLAN OF REORGANIZATION
BY
AND
AMONG
ZIONS
BANCORPORATION,
NATIONAL
BANK OF ARIZONA,
THE
STOCKMEN'S BANCORP, INC.,
AND
THE
STOCKMEN'S BANK
dated
as
of September 8, 2006, as amended as of September 25, 2006
|
Agreement
and Plan of Reorganization
|
1 |
|
Definitions
and Rules of Interpretation
|
2 |
|
1.01
|
Certain
Definitions
|
2 |
|
1.02
|
Interpretation
|
11 |
|
Combinations
|
12 |
|
2.01
|
Merger
of TS Bancorp into Zions
|
12 |
|
2.02
|
Effect
of the Holding Company Merger
|
12 |
|
2.03
|
Merger
of TS Bank into NBA
|
12 |
|
2.04
|
Effect
of the Bank Merger
|
12 |
|
2.05
|
Notice
of Exchange
|
12 |
|
2.06
|
Voting
Agreements
|
12 |
|
2.07
|
Non-Competition
Agreements
|
12 |
|
2.08
|
Employee
Benefits
|
12 |
|
2.09
|
Environmental
Investigation
|
13 |
|
Effective
Time
|
13 |
|
3.01
|
Shareholder
Approval
|
13 |
|
3.02
|
Federal
Reserve Approval
|
13 |
|
3.03
|
OCC
Approval
|
13 |
|
3.04
|
Utah
Commissioner Approval
|
13 |
|
3.05
|
Superintendent
Approval
|
13 |
|
3.06
|
Other
Regulatory Approvals
|
13 |
|
3.07
|
Expiration
of Stays
|
13 |
|
3.08
|
Mutual
Agreement
|
13 |
|
Conditions
Precedent to Performance of Obligations of the
Parties
|
14 |
|
4.01
|
Regulatory
Approvals
|
14 |
|
4.02
|
Registration
Statement
|
14 |
|
4.03
|
Approval
by Shareholders of TS Bancorp
|
14 |
|
4.04
|
Federal
Income Taxation |
14 |
| 4.05 |
Adverse
Legislation |
14 |
|
4.06
|
Absence
of Litigation
|
14 |
|
Precedent
to Performance of the Obligations of Zions and
NBA
|
15 |
|
5.01
|
Representations
and Warranties; Performance of
Obligations
|
15 |
|
5.02
|
Opinion
of TS Bancorp and TS Bank Counsel
|
15 |
|
5.03
|
Opinion
of TS Bancorp and TS Bank Litigation Counsel
|
15 |
|
5.04
|
No
Adverse Developments
|
15 |
|
5.05
|
Consolidated
Net Worth
|
16 |
|
5.06
|
Loan
Loss Reserve
|
16 |
|
5.07
|
CRA
Rating
|
16 |
|
5.08
|
Affiliates
Agreements
|
16 |
|
5.09
|
Employment
Agreement
|
16 |
|
5.10
|
Excess
Parachute Payments
|
16 |
|
5.11
|
Dissenters'
Shares
|
16 |
|
5.12
|
Landlord
Consents
|
16 |
|
5.13
|
Adverse
Conditions
|
16 |
|
Conditions
Precedent to Performance of Obligations of TS
Bancorp and TS Bank
|
17 |
|
6.01
|
Representations
and Warranties; Performance of
Obligations
|
17 |
|
6.02
|
Opinion
of Zions Counsel
|
17 |
|
6.03
|
No
Adverse Developments
|
17 |
|
6.04
|
Nasdaq
Listing
|
17 |
| Representations
and Warranties of TS Bancorp and TS
Bank |
17 |
|
7.01
|
Organization,
Powers, and Qualification
|
17 |
|
7.02
|
Execution
and Performance of Agreement
|
18 |
|
7.03
|
Absence
of Violations
|
18 |
|
7.04
|
Compliance
with Agreements
|
18 |
|
7.05
|
Binding
Obligations
|
18 |
|
7.06
|
Absence
of Default; Due Authorization
|
18 |
|
7.07
|
Compliance
with BHC Act; Certain Bank Regulatory
Matters
|
18 |
|
7.08
|
Subsidiaries
|
18 |
|
7.09
|
Capital
Structure
|
18 |
|
7.10
|
Organizational
Documents and Minute Books
|
19 |
|
7.11
|
Books
and Records
|
19 |
|
7.12
|
Regulatory
Approvals and Filings, Contracts, Commitments,
etc
|
19 |
|
7.13
|
Financial
Statements
|
19 |
|
7.14
|
Call
Reports; Bank Holding Company Reports
|
19 |
|
7.15
|
Absence
of Undisclosed Liabilities
|
19 |
|
7.16
|
Absence
of Certain Developments
|
19 |
|
7.17
|
Reserve
for Possible Credit Losses
|
19 |
|
7.18
|
Tax
Matters
|
20 |
|
7.19
|
Consolidated
Net Worth
|
21 |
|
7.20
|
Examinations
|
22 |
|
7.21
|
Reports
|
22 |
|
7.22
|
Transactions
with Insiders and Section 23A Affiliates
|
22 |
|
7.23
|
SEC
Registered Securities
|
23 |
|
7.24
|
Legal
Proceedings
|
23 |
|
7.25
|
Absence
of Governmental Proceedings
|
23 |
|
7.26
|
Federal
Deposit Insurance
|
23 |
|
7.27
|
Other
Insurance
|
23 |
|
7.28
|
Labor
Matters
|
23 |
|
7.29
|
Employee
Benefits Plans
|
24 |
|
7.30
|
Compensation
|
24 |
|
7.31
|
Fiduciary
and Insurance Activities
|
25 |
|
7.32
|
Environmental
Liability
|
25 |
|
7.33
|
Intangible
Property
|
26 |
|
7.34
|
Real
and Personal Property
|
26 |
|
7.35
|
Loans,
Leases, and Discounts
|
27 |
|
7.36
|
Vender
Contracts
|
27 |
|
7.37
|
Employment
and Severance Arrangements
|
27 |
|
7.38
|
Material
Contract Defaults
|
27 |
|
7.39
|
Capital
Expenditures
|
27 |
|
7.40
|
Repurchase
Agreements
|
27 |
|
7.41
|
Internal
Controls
|
28 |
|
7.42
|
Dividends
|
28 |
|
7.43
|
Brokers
and Advisors
|
28 |
|
7.44
|
Interest
Rate Risk Management Instruments
|
28 |
|
7.45
|
COBRA
Matters
|
29 |
|
7.46
|
Opinion
|
29 |
|
7.47
|
Disclosure
|
29 |
|
7.48
|
Regulatory
and Other Approvals
|
29 |
|
7.49
|
Business
Continuity
|
29 |
|
Covenants
of TS Bancorp and TS Bank
|
30 |
|
8.01
|
Rights
of Access
|
30 |
|
8.02
|
Shareholder
Meeting
|
30 |
|
8.03
|
Monthly
and Quarterly Financial Statements; Minutes of Meetings
and Other Materials
|
30 |
|
8.04
|
Extraordinary
Transactions
|
30 |
|
8.05
|
Preservation
of Business
|
32 |
|
8.06
|
Comfort
Letter
|
33 |
|
8.07
|
TS
Bancorp Affiliates' Agreements
|
33 |
|
8.08
|
Dividend
Coordination
|
33 |
|
8.09
|
Accruals
and Reserves
|
33 |
|
8.10
|
1997
Plan
|
33 |
|
8.11
|
Landlord
Consents
|
34 |
|
8.12
|
Updates
to Schedules
|
34 |
|
8.13
|
Subsequent
Events
|
34 |
|
8.14
|
Inconsistent
Activities
|
34 |
|
8.15
|
Banker's
Bank of the West
|
35 |
|
8.16
|
COBRA
Obligations
|
35 |
|
8.17
|
Sale
of Investment Securities and Mutual Funds
|
35 |
|
Representations
and Warranties of Zions and
NBA
|
35 |
|
9.01
|
Organization,
Powers, and Qualification
|
35 |
|
9.02
|
Execution
and Performance of Agreement
|
35 |
|
9.03
|
Binding
Obligations; Due Authorization
|
36 |
|
9.04
|
Absence
of Default
|
36 |
|
9.05
|
Brokers
and Advisers
|
37 |
|
9.06
|
Books
and Records
|
37 |
|
9.07
|
Capitalization
|
37 |
|
9.08
|
Financial
Statements
|
37 |
|
9.09
|
SEC
Reports
|
37 |
|
9.10
|
Qualification
as a Reorganization
|
38 |
|
9.11
|
Absence
of Material Adverse Effect
|
38 |
|
9.12
|
Disclosure
|
38 |
|
9.13
|
Regulatory
and Other Approvals
|
38 |
|
9.14
|
Updates
to Representations and Warranties
|
38 |
|
Covenants
of Zions and NBA
|
38 |
|
10.01
|
Conduct
of Affairs
|
39 |
|
10.02
|
Nasdaq
Listing
|
39 |
|
10.03
|
Subsequent
Events
|
39 |
|
10.04
|
Trust
Preferred Securities
|
39 |
|
10.05
|
Indemnification
|
39 |
|
10.06
|
TS
Bank Funding Needs
|
39 |
|
Additional
Agreements
|
40 |
|
11.01
|
Proxy
Statement and Registration Statement
|
40 |
|
11.02
|
Information
|
40 |
|
11.03
|
Regulatory
Filings
|
40 |
|
Closing
|
41 |
|
12.01
|
Place
and Time of Closing
|
41 |
|
12.02
|
Events
to Take Place at Closing
|
41 |
|
Termination,
Damages for Breach, Waiver, and
Amendment
|
41 |
|
13.01
|
Termination
by Reason of Lapse of Time
|
41 |
|
13.02
|
Grounds
for Termination
|
42 |
|
13.03
|
Effect
of Termination
|
42 |
|
13.04
|
Waiver
of Terms or Conditions
|
43 |
|
13.05
|
Amendment
|
43 |
|
General
Provisions
|
44 |
|
14.01
|
Allocation
of Costs and Expenses
|
44 |
|
14.02
|
Mutual
Cooperation
|
44 |
|
14.03
|
Form
of Public Disclosures
|
44 |
|
14.04
|
Confidentiality
|
44 |
|
14.05
|
Information
for Applications and Registration
Statement
|
45 |
|
14.06
|
Changes
to Transaction Structure
|
45 |
|
14.07
|
Adjustments
for Certain Events
|
45 |
|
14.08
|
Stock
Repurchases
|
46 |
|
14.09
|
Counterparts
|
46 |
|
14.10
|
Entire
Agreement
|
46 |
|
14.11
|
Survival
of Representations, Warranties, and Covenants
|
46 |
|
14.12
|
Notices
|
46 |
|
14.13
|
Waiver
of Certain Notices
|
47 |
|
14.14
|
Choice
of Law and Venue
|
48 |
|
14.15
|
No
Third Party Beneficiaries
|
48 |
|
14.16
|
Severability
|
48 |
|
14.17
|
Binding
Agreement
|
48 |
AGREEMENT
AND PLAN OF REORGANIZATION
THIS
AGREEMENT AND PLAN OF REORGANIZATION made as of the eighth day of September,
2006, among ZIONS BANCORPORATION ("Zions"), a Utah corporation, THE STOCKMEN'S
BANCORP, INC. ("TS Bancorp"), an Arizona corporation, NATIONAL BANK OF ARIZONA
("NBA"), a national banking association, and THE STOCKMEN'S BANK ("TS Bank"),
an
Arizona banking corporation
WITNESSETH
THAT:
WHEREAS,
Zions is a bank holding company and the sole shareholder of NBA;
WHEREAS,
TS Bancorp is a bank holding company and the sole shareholder of TS
Bank;
WHEREAS,
Zions desires to affiliate with TS Bancorp through the merger of TS Bancorp
with
and into Zions, with Zions to be the surviving corporation (the "Holding
Company
Merger") and, in addition, to cause the merger of TS Bank with and into NBA,
with NBA to be the surviving national banking association (the "Bank
Merger");
WHEREAS,
the Board of Directors of TS Bancorp has determined that it would be in the
best
interests of TS Bancorp, its shareholders, its customers and those of TS
Bank
and the areas served by TS Bancorp and TS Bank to become affiliated with
Zions
through the Holding Company Merger and to cause the Bank Merger;
WHEREAS,
the respective boards of directors of NBA and TS Bank have determined that
it
would be in the best interests of NBA or TS Bank, as the case may be, its
shareholders and customers, for NBA and TS Bank to merge with each
other;
WHEREAS,
the respective Boards of Directors of Zions and TS Bancorp have agreed to
cause
the Holding Company Merger pursuant to the provisions of section 16-10a-1107
of
the UBCA and section 10-1107 of the ABCA; and to cause the Bank Merger pursuant
to the provisions of section 215a of title 12, United States Code, and section
6-212 of the Arizona Revised Statutes;
WHEREAS,
the respective Boards of Directors of NBA and TS Bank have agreed to cause
the
Bank Merger pursuant to the provisions of section 215a of title 12, United
States Code, and section 6-212 of the Arizona Revised Statutes;
WHEREAS,
the Parties intend that the Holding Company Merger and the Bank Merger qualify
as a tax-free reorganization under section 368(a) of the Code, and this
Agreement is intended to be and is adopted as a "plan of reorganization"
for
purposes of sections 354 and 361 of the Code;
WHEREAS,
the Parties desire to make certain representations, warranties, and agreements
in connection with the Holding Company Merger and the Bank Merger (together
the
"Mergers") and also to prescribe certain conditions to the Mergers;
NOW,
THEREFORE, in consideration of these premises and the mutual agreements
hereinafter set forth, intending to be legally bound, the Parties agree as
follows:
Article
1.
Definitions
and Rules of Interpretation
Section
1.01 Certain
Definitions.
The
terms set forth below, when capitalized in this Agreement, are used with
the
following meanings:
(a) "ABCA"
shall mean the Arizona Business Corporation Act.
(b) "ACC"
shall mean Arizona Credit Corporation.
(c) "Adverse
Environmental Condition" shall mean any contamination or other condition
caused
by or related to a Hazardous Substance which contamination or condition,
alone
or in combination with other such contaminations or conditions, would be
reasonably expected to result in liabilities and costs of testing, evaluating,
monitoring, and remediating such contamination or condition in excess of
$500,000.
(d) "Adverse
Structural Condition" shall mean a condition that Materially and adversely
affects the operating condition of any TS Bancorp Real Estate, except such
defects as do not Materially interfere with the continued use of such TS
Bancorp
Real Estate in the conduct of the normal operations of TS Bank.
(e) "Affiliates
Agreement" shall mean an agreement substantially in form and substance as
Exhibit V.
(f) "Alternative
Proposal" shall mean a bona fide tender or exchange offer to acquire more
than
50 percent of the voting power in TS Bancorp or TS Bank, a proposal for the
merger, consolidation or other business combination or similar transaction
involving TS Bancorp or TS Bank or any other proposal or offer to acquire
in any
manner more than 50 percent of the voting power in, or more than 50 percent
of
the business, assets or deposits of, TS Bancorp or TS Bank, other than the
transactions contemplated by this Agreement.
(g) "Average
Closing Price" shall mean the average of each Daily Sales Price of Zions
Stock
during the Pricing Period.
(h) "Bank
Merger" shall have the meaning set forth in the recitals.
(i) "Bank
Merger Agreement" shall mean a merger agreement substantially in the form
of
Exhibit II.
(j) "BBW"
shall mean Bankers' Bank of the West.
(k) "BBW
Obligations" shall mean any and all indebtedness and obligations owing by
TS
Bancorp to BBW.
(l) "BHC
Act"
shall mean the Bank Holding Company Act of 1956, as amended.
(m) "Board
of
Governors" shall mean the Board of Governors of the Federal Reserve System
or,
if applicable, the Federal Reserve Bank of San Francisco acting pursuant
to
authority delegated to it by the Board of Governors of the Federal Reserve
System.
(n) "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.
(o) "California
Department" shall mean the California Department of Financial
Institutions.
(p) "Call
Reports" shall mean FFIEC Consolidated Reports of Condition and Income.
(q) "CERCLA"
shall mean the Comprehensive Environmental Response, Compensation and Liability
Act of 1980.
(r) "Change
in Control Agreement" shall mean any agreement, plan, or arrangement entered
into, adopted or granted by TS Bancorp or TS Bank with respect to any of
the
officers, directors, shareholders, consultants, or other management officials
of
either of them and any officer, director, shareholder, consultant, or management
official of any affiliate of either of them providing for additional, increased
or accelerated compensation in the event of a change of control with respect
to
TS Bancorp or TS Bank or any other event affecting the ownership, control,
or
management of TS Bancorp or TS Bank.
(s) "Code"
shall mean the Internal Revenue Code of 1986, as amended.
(t) "Collateral
Real Estate" shall mean real property held as collateral for any outstanding
loan by TS Bank.
(u) "CRA"
shall mean the Community Reinvestment Act of 1977, as amended.
(v) "Daily
Sales Price" shall mean, for any trading day, the last sale price as reported
in
the Wall
Street Journal
or, if
no such sale price is so reported, the last sale price as reported by such
other
source upon which Zions and TS Bancorp shall mutually agree, or if no such
sale
takes place, the mean (unrounded) of the closing bid and asked prices of
Zions
Stock as reported on the Nasdaq Global Select Market, or in its absence by
such
other source upon which Zions and TS Bancorp shall mutually agree.
(w) "E & Y"
shall mean Ernst & Young LLP.
(x) "Effective
Time" shall mean the date and time to be specified in the Articles of Merger
to
be filed with the Secretary of State of the State of Utah pursuant to section
16-10a-1105 of the UBCA and with the Secretary of State of the State of Arizona
pursuant to section 10-1105 of the ABCA as the effective time of the Holding
Company Merger.
(y) "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.
(z) "ERISA"
shall mean the Employee Retirement Income Security Act of 1974, as
amended.
(aa) "Exchange
Act" shall mean the Securities Exchange Act of 1934, as amended.
(bb) "FDI
Act"
shall mean the Federal Deposit Insurance Act, as amended.
(cc) "FDIC"
shall mean the Federal Deposit Insurance Corporation.
(dd) "FFIEC"
shall mean the Federal Financial Institutions Examination Council.
(ee) "GAAP"
shall mean generally accepted accounting principles in the United
States.
(ff) "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.
(gg) "Hazardous
Substance" shall mean any hazardous waste, as defined by 42 U.S.C.
§ 6903(5), any hazardous substance, as defined by 42 U.S.C.
§ 9601(14), any "pollutant or contaminant," as defined by 42 U.S.C.
§ 9601(33), or any toxic substance, hazardous materials, oil, or other
chemicals or substances regulated by any Environmental Law.
(hh) "Holding
Company Merger" shall have the meaning set forth in the recitals.
(ii) "Holding
Company Merger Agreement" shall mean a merger agreement substantially in
the
form of Exhibit I.
(jj) "Holyoak"
shall mean Farrel Holyoak, an adult resident of the State of
Arizona.
(kk) "Insider"
shall mean any TS Bancorp Affiliate, any other officer or beneficial holder
of
5 percent or more of the common stock of TS Bancorp, and any Person
"con-trolled" (as that term is defined in the Financial Institutions Regulatory
and Interest Rate Control Act of 1978) by any of them.
(ll) "IRS"
shall mean the Internal Revenue Service within the United States Department
of
the Treasury.
(mm) "Knowledge,"
when used in reference to a Party that is not a natural person, shall mean
the
actual knowledge possessed by the present executive officers of such Party
after
appropriate inquiry.
(nn) "Landlord
Consents" shall mean such consents, in form and substance reasonably
satisfactory to Zions, of landlords under any TS Bancorp Real Estate leases
(except the lease with respect to the TS Real Estate at the TS Bank branch
in
Hanford, California) as shall be required pursuant to the terms of such leases,
and customary certificates of estoppel with respect thereto, in form and
substance reasonably satisfactory to Zions, to confirm the continuing validity
of such leases and the absence of default thereunder.
(oo) "Losses"
shall mean losses, claims, demands, damages, liabilities, judgments, fines,
penalties, costs, expenses (including reasonable attorneys fees) and amounts
paid in settlement.
(pp) "Material"
and its variants shall:
(i) when
used
as a capitalized term 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 $100,000;
(ii) when
used
as a capitalized term 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 $2 million; and
(iii) otherwise,
or when not capitalized, or, notwithstanding subsections (i) and (ii) of
this
section 1.01(pp), when used anywhere in this Agreement with explicit reference
to any of the federal securities laws or to the Proxy Statement or the
Registration Statement, be construed and understood in accordance with standards
of materiality as judicially determined under the federal securities
laws.
(qq) "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 which materially impairs
or
delays such Person's ability to consummate the transactions contemplated
by this
Agreement; provided that, in determining whether a Material Adverse Effect
has
occurred, there shall be excluded from consideration any effect on the
referenced Person the cause of which is (i) any change in applicable law,
including banking laws, rules or regulations of general applicability or
interpretations thereof by Governmental Authorities, except to the extent
that
any such change has a Materially disproportionate effect on such Person,
(ii) any change in GAAP that is generally applicable to the banking
industry, except to the extent that any such change has a Materially
disproportionate effect on such Person; (iii) any action or omission of TS
Bancorp or TS Bank taken with the prior written consent of Zions, or of Zions
or
any of its subsidiaries taken with the prior written consent of TS Bancorp,
(iv) any change affecting the banking industry generally, except to the
extent that any such change has a Materially disproportionate effect on such
Person, (v) any changes in general economic conditions affecting banks or
their
holding companies, except to the extent that any such changes have a Materially
disproportionate effect on such Person; (vi) expenses and costs reasonably
incurred in connection with the transactions contemplated by this Agreement;
(vii) the announcement of this Agreement or the transactions contemplated
by
this Agreement; or (viii) any action taken or not taken by such Person if
required to be taken or not taken, as applicable, by this Agreement. In
addition, solely for the purpose of determining whether a Material Adverse
Effect has occurred, all representations, warranties, and covenants that
are
qualified by the term "Material" (as a capitalized term) and its variants
shall
be read and interpreted as if no such qualification with respect to materiality
were included therein. Without limiting the foregoing, but subject to the
proviso, any such adverse changes or effects, individually or in the aggregate,
in the case of the Stockmen Entities having a dollar value in excess of $5
million shall be a Material Adverse Effect.
(rr) "Mergers"
shall have the meaning set forth in the recitals.
(ss) "NBA"
shall have the meaning set forth in the preamble.
(tt) "1997
Plan" shall mean the 1997 Stock Option Plan of TS Bancorp.
(uu) "OCC"
shall mean the Office of the Comptroller of the Currency within the United
States Department of the Treasury.
(vv) "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
(unless the requirement for board of directors' authorization is due solely
to
the applicability to the action of section 18(j)(2) of the FDI Act, section
22(h)(3) of the Federal Reserve Act, or section 215.4(b) of Regulation
O
of the
Board of Governors); 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.
(ww) "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.
(xx) "Parties"
shall mean Zions, TS Bancorp, NBA, and TS Bank.
(yy) "PBGC"
shall mean the Pension Benefit Guaranty Corporation.
(zz) "Person"
shall mean an individual, firm, corporation, partnership, joint venture,
trust,
Governmental Authority, limited liability company, association, unincorporated
organization, or any other entity.
(aaa) "Pricing
Period" shall mean the twenty consecutive trading days ending on and including
the trading day that is the eighth Business Day preceding the Effective Time,
if
that day is a trading day, or, if that day is not a trading day, the subsequent
calendar day that is a trading day; provided that if during the period that
comprises those twenty consecutive trading days Zions shall publicly release
its
quarterly earnings, "Pricing
Period" shall instead mean the twenty consecutive trading days most immediately
prior to that release.
(bbb) "Proxy
Statement" shall mean the proxy statement that shall be a part of the
Registration Statement.
(ccc) "Qualifying
Event" shall mean a qualifying event as defined in section 603 of
ERISA.
(ddd) "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 received by former holders of TS Bancorp Stock
in
the Holding Company Merger.
(eee) "Release"
shall mean releasing, spilling, leaking, pumping, pouring, emitting, emptying,
discharging, injecting, escaping, leaching, disposing, or dumping.
(fff) "Riegle
Act" shall mean the Riegle Community Development and Regulatory Improvement
Act
of 1994.
(ggg) "SEC"
shall mean the United States Securities and Exchange Commission.
(hhh) "Section
23A Affiliate" of a Person shall mean an entity that would be considered
to be
an "affiliate" of that Person under section 23A(b)(1) of the Federal Reserve
Act, 12 U.S.C. § 371c(b)(1), if the Person were a member bank.
(iii) "Securities
Act" shall mean the Securities Act of 1933, as amended.
(jjj) "Shareholder
Meeting" means the meeting at which the shareholders of TS Bancorp meet to
approve, ratify, and confirm the Holding Company Merger Agreement and the
transactions contemplated by this Agreement.
(kkk) "Statutory
Trusts" shall mean Stockmen's Capital Trust, a Delaware statutory trust;
Stockmen's Statutory Trust I, a Connecticut statutory trust; Stockmen's (AZ)
Statutory Trust II, a Connecticut statutory trust; and Stockmen's (AZ) Statutory
Trust III, a Connecticut statutory trust.
(lll) "Stockmen's
Entities" shall mean TS Bancorp, TS Bank, ACC, and the Statutory
Trusts.
(mmm) "Superintendent"
shall mean the Arizona Superintendent of Financial Institutions.
(nnn) "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.
(ooo) "TS
Bancorp" shall have the meaning set forth in the preamble.
(ppp) "TS
Bancorp Affiliate" shall mean:
(i) any
executive officer of TS Bancorp,
(ii) any
director of TS Bancorp,
(iii) any
person who owns 10 percent or more of the outstanding TS Bancorp Stock,
and
(iv) any
other
Person that possesses, directly or indirectly, the power to direct or cause
the
direction of management and policies of TS Bancorp, whether through the
ownership of voting securities, by contract, or otherwise.
(qqq) "TS
Bancorp Financial Statements" shall mean the audited consolidated statement
of
condition of TS Bancorp, as of each of December 31, 2003, December 31, 2004,
and
December 31, 2005, and the related audited consolidated statement of income,
consolidated statement of cash flows, and consolidated statement of changes
in
stockholders' equity of TS Bancorp for each of the periods then ended, and
the
notes thereto, and the unaudited consolidated statement of condition of TS
Bancorp as of June 30, 2006 and the related unaudited consolidated statement
of
income, consolidated statement of cash flows, and consolidated statement
of
changes in stockholders equity of TS Bancorp for the period then ended, and
the
notes thereto.
(rrr) "TS
Bancorp 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 TS Bancorp or TS Bank has any present right to future
benefits or payments or under which TS Bancorp or TS Bank has any present
or
future liability.
(sss) "TS
Bancorp Real Estate" shall mean any real property owned or leased by TS Bancorp
or TS Bank as of the date of this Agreement or acquired by TS Bancorp or
TS Bank
subsequent to the date of this Agreement.
(ttt) "TS
Bancorp Stock" shall mean the common stock, no par value, of TS
Bancorp.
(uuu) "TS
Bank"
shall have the meaning set forth in the preamble.
(vvv) "TS
Bank
Stock" shall mean the common stock, $5.00 par value, of TS Bank.
(www) "UBCA"
shall mean the Utah Revised Business Corporation Act.
(xxx) "Utah
Commissioner" shall mean the Commissioner of Financial Institutions of the
State
of Utah.
(yyy) "Zions"
shall have the meaning set forth in the preamble.
(zzz) "Zions
Bank" shall mean Zions First National Bank, a national banking association
with
its head office located in Salt Lake City, Utah.
(aaaa) "Zions
Divisor" shall have the meaning set forth in section 2(l)(v)
of
the Holding Company Merger Agreement attached as Exhibit I.
(bbbb) "Zions
Financial Statements" shall mean the audited consolidated statement of condition
of Zions as of each of December 31, 2003, December 31, 2004, and December
31,
2005, and the related audited consolidated statement of income, consolidated
statement of cash flows, 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 June 30,
2006,
and the related unaudited consolidated statement of income, consolidated
statement of cash flows, 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.
(cccc) "Zions
Stock" shall mean the common stock of Zions, without 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 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 his,
her, or 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.
Combinations
Section
2.01 Merger
of TS Bancorp into Zions.
Simultaneously with the execution of this Agreement, Zions and TS Bancorp
will
enter into the Holding Company Merger Agreement. Pursuant to the Holding
Company
Merger Agreement, TS Bancorp shall be merged with and into Zions at the
Effective Time.
Section
2.02 Effect
of the Holding Company Merger.
At the
Effective Time, the Holding Company Merger shall have the effect set forth
in
article 2 of the Holding Company Merger Agreement.
Section
2.03 Merger
of TS Bank into NBA.
Simultaneously with the execution of this Agreement, NBA and TS Bank will
enter
into the Bank Merger Agreement. Pursuant to the Bank Merger Agreement, TS
Bank
shall be merged with and into NBA at such time and date to be specified in
documentation to be filed by NBA with the OCC pursuant to the National Bank
Act
and in the Articles of Merger to be filed with the Secretary of State of
the
State of Arizona pursuant to section 10-1105 of the ABCA.
Section
2.04 Effect
of the Bank Merger.
The
Bank Merger shall have the effect set forth in article 2 of the Bank Merger
Agreement.
Section
2.05 Notice
of Exchange.
Promptly after the Effective Time, Zions Bank shall mail to each holder of
one
or more certificates formerly representing TS Bancorp 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 TS
Bancorp.
Section
2.06 Voting
Agreements.
Simultaneously herewith, each shareholder of TS Bancorp who is listed on
Schedule 2.06 shall each enter into an agreement with Zions, substantially
in
form and substance as that set forth as Exhibit III, in which he, she, or
it
agrees to vote all shares of TS Bancorp Stock that may be voted, or whose
vote
may be directed, by him, her, or it, in favor of the transactions contemplated
by this Agreement at the Shareholder Meeting.
Section
2.07 Non-Competition
Agreements.
On or
prior to the date of the Effective Time, each officer of TS Bank who is listed
on Schedule 2.07 shall each enter into an agreement with NBA, substantially
in
form and substance as that set forth as Exhibit VII.
Section
2.08 Employee
Benefits.
If any
employee of TS Bancorp or TS Bank becomes a participant in any employee 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
recognized or credited under a similar or comparable employee benefit plan
sponsored by TS Bancorp or TS Bank for purposes of eligibility and vesting,
but
not for benefit accrual purposes, provided that there be no duplication of
such
benefits as are provided under any employee benefit plans, practices, or
policies of TS Bancorp or TS Bank that continue in effect following the
Effective Time.
Section
2.09 Environmental
Investigation.
For a
period of ninety days following the date of this Agreement, Zions and NBA
shall
have the right, but not the obligation, at their sole cost and expense, to
cause
such investigations and tests to be made as they reasonably deem necessary
to
determine whether there has been any soil, surface water, groundwater, or
building space contamination on or under the TS Bancorp Real Estate. TS Bancorp
and TS Bank shall cooperate with Zions and NBA and their agents or contractors
in their evaluation and testing of the TS Bancorp Real Estate, including
by
providing Zions and NBA and their agents or contractors reasonable access
to
pertinent records and documents in TS Bancorp's or TS Bank's possession.
Any
investigations or tests performed by Zions or NBA shall be conducted in a
manner
so as not to damage in any material respect the TS Bancorp Real Estate and
so as
not to interfere in any material respect with the business or operations
conducted at the TS Bancorp Real Estate. After concluding any environmental
investigations or tests performed by or on behalf of Zions or NBA, Zions
or NBA,
as applicable, shall return the TS Bancorp Real Estate to substantially the
condition the TS Bancorp Real Estate was in prior to such investigations
and
tests. Zions and NBA shall give TS Bancorp reasonable prior notice of the
intention of either of them to conduct any investigation or test under this
section. Zions or NBA, as applicable, shall furnish TS Bancorp with a copy
of
each report or investigation setting forth the results of any test performed
by
Zions or NBA as soon as reasonably practicable after receipt. Nothing in
this
section 2.09 shall be deemed to limit the rights of access of Zions and NBA
to
TS Bancorp Real Estate pursuant to section 8.01 or any other section of this
Agreement.
Article
3.
Effective
Time
The
Effective Time shall be the first Friday following the latest of:
Section
3.01 Shareholder
Approval.
The day upon which the shareholders of TS Bancorp approve, ratify, and confirm
the Holding Company Merger Agreement and the transactions contemplated by
this
Agreement; or
Section
3.02 Federal
Reserve Approval.
As
applicable, the date thirty days following the date of the order of the Board
of
Governors approving the Holding Company Merger; or if, pursuant to section
321(a) of the Riegle Act, in connection with such an approval order the Board
of
Governors 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 the date five days following the expiration of the
period provided in section 225.12(d)(2)(v) of Regulation Y of the Board of
Governors, 12 C.F.R. § 225.12(d)(2)(v), during which the Board of Governors
may inform Zions that an application to the Board of Governors is required
in
connection with the Holding Company Merger, if the Board of Governors has
not so
informed Zions; or
Section
3.03 OCC
Approval.
The
first to occur of (a) the date thirty days following the date of the order
of the OCC approving the Bank 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
3.04 Utah
Commissioner Approval.
If the
approval of the Utah Commissioner is required by law, the date five Business
Days following the date of the order of the Utah Commissioner approving the
transactions contemplated by this Agreement; or
Section
3.05 Superintendent
Approval.
If the
approval of the Superintendent is required by law, the date five Business
Days
following the date of the order of the Superintendent approving the transactions
contemplated by this Agreement; or
Section
3.06 Other
Regulatory Approvals.
The
date upon which any other necessary 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
3.07 Expiration
of Stays.
Five Business Days after any stay of the approvals of any of the Board of
Governors, the OCC, the Utah Commissioner, or the Superintendent of the
transactions contemplated by this Agreement or any injunction against closing
of
said transactions is lifted, discharged, or dismissed; or
Section
3.08 Mutual
Agreement.
A
date mutually agreed by Zions Bank and TS Bancorp.
Article
4.
Conditions
Precedent to Performance of Obligations of the Parties
The
obligations of the Parties to consummate the Mergers and the issuance of
stock
incident to the Holding Company Merger 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 Mergers shall
have
been entered by the requisite Governmental Authorities, and all statutory
waiting periods in respect of those orders, consents, and approvals shall
have
expired.
Section
4.02 Registration
Statement.
(a) 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) Neither
the Registra-tion 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.
Section
4.03 Approval
by Shareholders of TS Bancorp.
The
shareholders of TS Bancorp shall have authorized, ratified, and confirmed
this
Agreement, the Holding Company Merger Agreement, and the Holding Company
Merger
by not less than the requisite percentage of the outstanding voting stock
of
each class of TS Bancorp, in accordance with the applicable laws of the State
of
Arizona.
Section
4.04 Federal
Income Taxation.
Zions
and
TS Bancorp shall have received a written opinion of Duane Morris LLP, or
of
another firm mutually agreeable to Zions and TS Bancorp, in form and substance
as attached as Exhibit IV, applying existing law, to the effect that
(a) each of the Mergers will qualify as a reorganization under section
368(a)(1) of the Code, (b) no gain or loss will be recognized by Zions as a
result of the Mergers, and (c) no gain or loss will be recognized by the
shareholders of TS Bancorp upon the exchange of TS Bancorp Stock for Zions
Stock
as a result of the Mergers, except as to those stockholders receiving cash
for
fractional shares or as a result of exercising dissenters' rights. In rendering
such opinion, counsel may require and rely upon representations contained
in
certificates of officers of Zions, NBA, TS Bancorp, TS Bank, 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 Mergers impossible
or
illegal.
Section
4.06 Absence
of Litigation.
No action, suit, or proceeding shall have been instituted or shall have been
threatened by any Governmental Authority, or shall have been instituted before
any Governmental Authority, to restrain, enjoin, or prohibit the Mergers,
or
that would reasonably be expected to Materially restrict the operation of
the
business of TS Bancorp or that of TS Bank or the exercise of any rights with
respect thereto or to subject any of the Parties or any of their subsidiaries,
directors, or officers to any Material liability, fine, forfeiture, divestiture,
or penalty on the ground that the transactions contemplated hereby, the Parties,
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
have been advised by counsel that, in the opinion of such counsel, such action,
suit, or proceeding raises substantial questions of law or fact that could
reasonably be decided adversely to any Party 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 Mergers and the issuance of
stock
incident to the Holding Company Merger 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.
Except
for such breaches of or variances from the facts stated in the representations
and warranties contained in Article 7 as have not had, and cannot reasonably
be
expected to have, in the aggregate, a Material Adverse Effect on TS Bancorp
or
TS Bank, all representations and warranties of TS Bancorp and TS Bank contained
in this Agreement shall be true and correct as of the Effective Time, 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 TS Bancorp
and TS Bank contained in this Agreement which specifically relate to an earlier
date shall be true and correct as of such earlier date. For purposes of the
previous sentence, the representations and warranties contained in sections
7.27(b) and 7.32 shall not be deemed to be subject to any exceptions set
forth
in Schedule 7 or any of its component schedules. All covenants and obligations
to be performed or met by TS Bancorp and TS Bank at or prior to the Effective
Time shall have been so performed or met in all material respects, except
that
the covenants and obligations set forth in sections 8.04(a), 8.04(b), 8.04(c),
8.04(d), 8.04(e), 8.04(k), 8.04(l),
8.04(p), 8.05(g), 8.05(h), 8.09(a)(ii), and 8:13 to be performed or met by
TS
Bancorp and TS Bank at or prior to the Effective Time shall have been so
performed or met without qualification as to materiality. On the date of
the
Effective Time, the president and chief executive officer and the chief
financial officer of TS Bancorp (each in his respective capacity as such),
and
the president and chief executive officer and the chief financial officer
of TS
Bank (each in his respective capacity as such) shall deliver to Zions one
or
more certificates to the effect that the conditions specified in this Section
5.01 are satisfied as of the Effective Time. The delivery of such officers'
certificates shall in no way diminish the warranties, representations,
covenants, and obligations of TS Bancorp and TS Bank made in this
Agreement.
Section
5.02 Opinion
of TS Bancorp and TS Bank Counsel.
Zions shall have received a favorable opinion from Stinson Morrison Hecker
LLP,
dated the date of the Effective Time, substantially in form and substance
as
Exhibit VIII.
Section
5.03 Opinion
of TS Bancorp and TS Bank Litigation Counsel.
Zions
shall have received a favorable opinion from legal counsel handling litigation
matters for TS Bancorp and TS Bank, dated the date of the Effective Time,
substantially in form and substance as Exhibit IX.
Section
5.04 No
Adverse Developments.
(a) During
the period from June 30, 2006 to the Effective Time, there shall not have
been
any Material Adverse Effect with respect to TS Bancorp or TS Bank.
(b) As
of the
Effective Time, except for the issuance of additional shares of capital stock
of
TS Bancorp pursuant to the exercise of stock options outstanding as of the
date
of this Agreement, the capital structure of TS Bancorp and the capital structure
of TS Bank 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 June 30, 2006 and liabilities incurred under Change
in
Control Agreements entered into subsequent to June 30, 2006 with the approval
of
Zions, there shall be no liabilities of TS Bancorp or TS Bank that were not
reflected on the unaudited consolidated statement of condition of TS Bancorp
as
of June 30, 2006 or in the related notes other than ones that, individually
or
in the aggregate, have not had and are not reasonably likely to have a Material
Adverse Effect on TS Bancorp or TS Bank.
(d) No
adverse action shall have been instituted or threatened against TS Bancorp
or TS
Bank 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, money laundering, 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 chief financial officer
of
TS Bancorp (each in his respective capacity as such), and the president and
chief executive officer and the chief financial officer of TS Bank (each
in his
respective capacity as such), certifying to the matters set forth in paragraphs
(a), (b), (c), and (d) of this section 5.04. The delivery of such officers'
certificates and other certificate or certificates shall in no way diminish
the
warranties and representations of TS Bancorp and TS Bank made in this
Agreement.
Section
5.05 Consolidated
Net Worth.
At and as of the Effective Time, excluding any adjustments made pursuant
to
section 8.09(b) of this Agreement, the consolidated net worth of TS Bancorp
as
determined in accordance with GAAP shall not be less than the sum of
(a) $62,925,000, (b) the capital paid in upon the exercise of TS
Bancorp stock options outstanding as of the date of this Agreement, and
(c) the proceeds to TS Bancorp of the sale of any treasury stock since June
30, 2006, minus (d) the lesser of $4.9 million or the net after-tax losses
(using an assumed effective tax rate of 33.23 percent) realized by TS Bancorp
and TS Bank on the sale of held-to-maturity securities between July 1, 2006
and
the Business Day before the Effective Time, and minus (e) the lesser of $1.5
million or the tax-effected excess of the value of liabilities and obligations
of TS Bancorp and TS Bank at the Effective Time to make future payments in
connection with TS Bank's Supplemental Executive Retirement Plan and related
agreements over the expense accrual on the books of TS Bancorp and TS Bank
as of
June 30, 2006 for such liabilities and obligations.
Section
5.06 Loan
Loss Reserve.
At and
as of the Effective Time, the aggregate reserve for loan losses of TS Bank
as
determined in accordance with GAAP, excluding any adjustments made pursuant
to
section 8.09(b) of this Agreement, shall not be less than
$6,236,000.
Section
5.07 CRA
Rating.
The CRA
rating of TS Bank shall be no lower than "satisfactory."
Section
5.08 Affiliates
Agreements.
Zions
shall have received an Affiliates Agreement:
(a) on
or
before the date of this Agreement, from each Person who, on the date of this
Agreement, is a TS Bancorp Affiliate, and
(b) not
later
than ten days after any other Person becomes a TS Bancorp Affiliate, from
such
Person.
Section
5.09 Employment
Agreement.
Holyoak
shall have entered into an employment agreement with NBA substantially in
form
and substance as Exhibit VI and a non-competition agreement with NBA
substantially in form and substance as that set forth as Exhibit
VII.
Section
5.10 Excess
Parachute Payments.
At or
before the Effective Time, Zions shall have received copies of duly executed
amendments, waivers, consents, and other documents, reasonably satisfactory
to
Zions, from all participants in and beneficiaries of Change in Control
Agreements, supplemental executive retirement plans to which TS Bancorp or
TS
Bank is a party, and other TS Bancorp Plans sufficient to provide Zions with
reasonable assurance that no payments will be required to be made by TS Bancorp
or TS Bank or the successor by merger of either of them to any such
beneficiaries to the extent such payments would be deemed to constitute excess
parachute payments under section 280G of the Code.
Section
5.11 Dissenters'
Shares.
Shares
as to which their holders have properly demanded appraisal in accordance
with
Arizona law shall constitute not more than 6 percent of the outstanding TS
Bancorp Stock.
Section
5.12 Landlord
Consents.
Zions
shall have received all of the Landlord Consents.
Section
5.13 Adverse
Conditions.
There
shall not have been any Adverse Environmental Condition or Adverse Structural
Condition at any TS Bancorp Real Estate that has not been cured to the
reasonable satisfaction of Zions.
Article
6.
Conditions
Precedent to Performance of Obligations of TS Bancorp and TS
Bank
The
obligations of TS Bancorp and TS Bank to consummate the Mergers 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 TS Bancorp in writing unless not so permitted by
law:
Section
6.01 Representations
and Warranties; Performance of Obligations.
Except
for such breaches of or variances from the facts stated in the representations
and warranties contained in Article 9 as have not had, and cannot reasonably
be
expected to have, in the aggregate, a Material Adverse Effect on Zions, all
representations and warranties of Zions and NBA contained in this Agreement
shall be true and correct as of the Effective Time, 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 that specifically relate to an earlier date shall be true
and
correct 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 in all material respects. On the date of the Effective Time,
either the president, the vice chairman, or an executive vice president of
Zions
(in his capacity as such) and either the chairman, the president, or an
executive vice president of NBA (in his capacity as such) shall deliver to
TS
Bancorp a certificate to the effect that the conditions specified in this
Section 6.01 are satisfied as of the Effective Time. 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.
TS Bancorp shall have received a favorable opinion from Duane Morris LLP,
dated
the date of the Effective Time, substantially in form and substance as Exhibit
X.
Section
6.03 No
Adverse Developments.
During the period from June 30, 2006 to the Effective Time, there shall not
have
been any Material Adverse Effect with respect to Zions, and TS Bancorp shall
have received a certificate dated the date of the Effective Time signed by
either the president, the vice chairman, or an executive vice president of
Zions
(in his capacity as such) 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 Nasdaq
Listing.
The
shares of Zions Stock to be issued in the Holding Company Merger shall be
listed
on the Nasdaq Global Select Market.
Article
7.
Representations
and Warranties of TS Bancorp and TS Bank
Except
as
set forth on Schedule 7, in each case with specific reference to the section
or
sections and subsection or subsections of this article 7 to which such exception
relates (provided that any exception disclosed in any section or subsection
of
Schedule 7 shall be deemed to be disclosed with regard to another section
or
subsection if the applicability to the other section or subsection is readily
apparent from the face of such disclosure), TS Bancorp (with respect to itself
and TS Bank) and TS Bank (solely with respect to itself) each represent and
warrant to Zions and NBA as follows:
Section
7.01 Organization,
Powers, and Qualification.
Each of
TS Bancorp and TS Bank 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. ACC 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. Each of the Statutory Trusts is a statutory trust
which is duly organized, validly existing, and in good standing under the
laws
of the state of its organization and has all requisite power and authority
to
own and operate its properties and assets and to carry on its business as
now
conducted. Each of the Stockmen's Entities owns or possesses in the operation
of
its business all Material 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.
Each of the Stockmen's Entities 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 would be Material.
Section
7.02 Execution
and Performance of Agreement.
Each of TS Bancorp and TS Bank has all requisite corporate power and authority
to execute and deliver this Agreement and to perform its terms, except that
consummation of the Holding Company Merger is subject to receipt of the
requisite approval of the shareholders of TS Bancorp.
Section
7.03 Absence
of Violations.
(a) None
of
the Stockmen's Entities is (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
that in the aggregate could not reasonably be expected to be Material; and
neither TS Bancorp nor TS Bank has received any claim or notice of violation
with respect thereto.
(b) Neither
TS Bancorp nor TS Bank nor any member of the management of either of them
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 Board of Governors, the FDIC, the
SEC,
the Superintendent, the California Department, any other banking or securities
authority of the United States or the State of Arizona or California, or
any
other Governmental Authority that relates to the conduct of the business
of TS
Bancorp or TS Bank or their assets; and no such agreement, memorandum, order,
condition, or decree is pending or threatened.
Section
7.04 Compliance
with Agreements.
None of the Stockmen's Entities is in violation of any term of any security
agreement, mortgage, indenture, or any other contract, agreement, instrument,
lease, or certificate, except for such violations that in the aggregate could
not reasonably be expected to be Material.
Section
7.05 Binding
Obligations.
Subject to the approval of the shareholders of TS Bancorp, this Agreement
constitutes the valid, legal, and binding obligations of each of TS Bancorp
and
TS Bank, enforceable against each of them 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 each of TS
Bancorp
and TS Bank.
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 of this Agreement 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 any Stockmen's Entity. Such execution, consummation,
and 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 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 any Stockmen's Entity pursuant
to
any agreement or instrument under which any Stockmen's Entity 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 any Stockmen's Entity in respect of which
it
is an obligor, except for such conflicts, breaches, violations, defaults,
rights
of termination, cancellation, or acceleration, or results that in the aggregate
could not reasonably be expected to be Material; (ii) if the Holding
Company Merger is approved by the Board of Governors under the BHC Act, or
if
the Board of Governors waives its jurisdiction over the Holding Company Merger,
and if the Bank Merger is approved by the OCC, the Utah Commissioner, and
the
Superintendent, as may be required, violate any law, statute, rule, or
regulation of any Governmental Authority to which any Stockmen's Entity is
subject and that is Material to its operations; or (iii) violate any
judgment, order, writ, injunction, decree, or ruling to which any Stockmen's
Entity 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 of
this
Agreement will require any authorization, consent, approval, or exemption
by any
Person which has not been obtained, or any notice or filing that 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
Board of Governors, the OCC, the Utah Commissioner, the Superintendent, the
SEC,
state securities commissions, the Secretary of State of the State of Utah,
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 TS
Bancorp
or TS Bank, in accordance with the applicable laws of the State of Arizona,
and
approvals that already have been obtained, no other corporate proceedings
on the
part of any Stockmen's Entity are necessary to approve or authorize this
Agreement, the Mergers, or the other transactions contemplated by this Agreement
or the carrying out of the transactions contemplated hereby.
(c) TS
Bancorp has made no election to be subject to any of the provisions of any
federal or state anti-takeover laws. The board of directors of TS Bancorp
has
taken all necessary action so that any applicable provisions of the takeover
laws of the United States or of any state, including any control share
acquisition, fair price, moratorium, business combination, interested
stockholders, or other anti-takeover laws, and any comparable provisions
of the
Organizational Documents of TS Bancorp do not and will not apply to this
Agreement, the Mergers, or the transactions contemplated hereby.
(d) TS
Bancorp has not adopted any shareholder rights plan, "poison pill" or similar
plan, or any other plan that could result in the grant of any equity, debt
or
hybrid security rights to any Person, or that could enable or require any
such
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 Mergers or any of the transactions contemplated by this
Agreement.
Section
7.07 Compliance
with BHC Act; Certain Bank Regulatory Matters.
(a) TS
Bancorp is registered as a bank holding company under the BHC Act. All of
the
activities and investments of TS Bancorp conform to the requirements applicable
generally to bank holding companies under the BHC Act and the regulations
of the
Board of Governors adopted thereunder.
(b) No
Person, other than TS Bancorp, is registered or is required to be registered
as
a bank holding company under the BHC Act by virtue of its control over TS
Bank
or over any company that directly or indirectly has control over TS
Bank.
(c) The
capital ratios of each of TS Bancorp and TS Bank comply fully with all terms
of
all currently outstanding supervisory and regulatory requirements and with
the
conditions of all regulatory orders and decrees. TS Bank is (i) "well
capitalized" as that term is defined in 12 C.F.R. § 325.103(b)(i),
(ii) "well managed" as that term is defined in 12 C.F.R.
§ 225.2(s)(1), and (iii) has at least a "satisfactory" rating under
the Community Reinvestment Act.
Section
7.08 Subsidiaries.
(a) Other
than TS Bank, which is a direct, wholly-owned subsidiary of TS Bancorp, ACC,
which is a direct, wholly-owned subsidiary of TS Bancorp, and the Statutory
Trusts, of each of which TS Bancorp owns all of the issued and outstanding
common securities, TS Bancorp 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 of any Federal
Home Loan Bank).
(b) Except
as
specified in the previous subsection, neither TS Bancorp nor TS Bank has
any
direct or indirect equity or ownership interest that represents 5 percent
or
more of the aggregate equity or ownership interest of any Person.
Section
7.09 Capital
Structure.
(a) The
authorized capital stock of TS Bancorp consists of 1,000,000 shares of TS
Bancorp Stock, of which, as of the date of this Agreement, 370,767 shares
have
been duly issued and of which 346,713 are validly outstanding, fully paid,
and
nonassessable, and held by approximately 215 shareholders of record. Such
shares
of TS Bancorp Stock are the only voting securities of TS Bancorp authorized,
issued, or outstanding as of such date; and, except in the case of stock
options
granted under the 1997 Stock Option Plan of TS Bancorp, 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 TS Bancorp, or calling
for or
requiring the issuance of any securities or rights convertible into or
exchangeable for shares of capital stock of TS Bancorp. TS Bancorp holds
24,054
shares of TS Bancorp Stock as treasury shares. None of the TS Bancorp Stock
is
subject to any restrictions upon transfer under the terms of the Organizational
Documents of TS Bancorp or under the terms of any agreement to which TS Bancorp
is a party or under which it is bound.
(b) The
authorized capital stock of TS Bank consists of 1,000,000 shares of TS Bank
Stock, of which, as of the date of this Agreement, 220,000 shares have been
duly
issued and are validly outstanding, fully paid, and nonassessable and all
of
which are held of record and beneficially by TS Bancorp directly, free and clear
of any adverse claims. Such shares of TS Bank Stock are the only voting
securities of TS Bank authorized, issued, or outstanding as of such date;
and
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 TS Bank, or calling for or requiring the issuance of any securities
or
rights convertible into or exchangeable for shares of capital stock of TS
Bank.
No shares of TS Bank Stock are held by TS Bank as treasury shares. None of
the
TS Bank Stock is subject to any restrictions upon transfer under the terms
of
the Organizational Documents of TS Bank or under the terms of any agreement
to
which TS Bank is a party or under which it is bound.
(c) None
of
the shares of TS Bancorp Stock has been issued in violation of the preemptive
rights, if any, of any shareholder.
(d) Except
for this Agreement, TS Bancorp and TS Bank are not aware of any 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 either TS Bancorp
or TS
Bank to vote or to dispose of his, her, or its shares of capital stock of
that
entity.
(e) TS
Bancorp 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 the Stockmen's Entities that have
been
provided to Zions are true, correct, and complete copies. To the Knowledge
of TS
Bancorp and TS Bank, the minute books of TS Bancorp and TS Bank which have
been
made available to Zions (a) contain accurate minutes of all meetings and
accurate consents in lieu of meetings of the board of directors (and any
committee of the board of directors) and of the shareholders of TS Bancorp
and
TS Bank since their respective inceptions; (b) accurately reflect all
transactions referred to in such minutes and consents in lieu of meetings;
and
(c) disclose all Material corporate actions of the shareholders and boards
of
directors of TS Bancorp and TS Bank and all committees thereof. Except as
reflected in such minute books, to the Knowledge of TS Bancorp and TS Bank
there
are no minutes of meetings or consents in lieu of meetings of the board of
directors (or any committee of the board of directors) or of shareholders
of TS
Bancorp or TS Bank.
Section
7.11 Books
and Records.
The books and records of each Stockmen's Entity 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.
Each Stockmen's Entity 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.
Schedule 7.12 lists the following, all of which TS Bancorp has made available
to
Zions:
(a) All
regulatory approvals received since January 1, 1996, of TS Bancorp and TS
Bank
relating to all bank and nonbank acquisitions or the establishment of
de
novo
operations;
(b) All
TS
Bancorp Plans, and any agreements, including trust agreements, embodying
such
contracts, plans, or arrangements, and all employee manuals and similar
documents, and any actuarial reports and audits relating to such TS Bancorp
Plans;
(c) All
Material contracts, agreements, leases, mortgages, and commitments to which
any
Stockmen's Entity is a party or may be bound (other than credit agreements
and
related credit and security-interest documentation entered into by TS Bank
as
lender, financing leases entered into by TS Bank as lessor, and agreements
and
arrangements with vendors and service providers cancellable within thirty
days
without penalty to any Stockmen's Entity); 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) Any
pending application, including any documents or materials related thereto,
which
has been filed by TS Bancorp or TS Bank 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; and
(e) All
federal, state, and local tax returns, including any amended returns, filed
by
any Stockmen's Entity for the years 2003 through 2005, the most recent audit
examination of each Stockmen's Entity by the IRS, and all correspondence
or
other documents with respect to any examination that has not yet been resolved,
the most recent examination from each state or local tax agency if any, for
each
Stockmen's Entity, and all 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 any
Stockmen's Entity received from or entered into with the IRS or any other
taxing
authority since January 1, 2000 or that would have continuing effect after
the
Effective Time.
Section
7.13 Financial
Statements.
TS Bancorp has furnished to Zions the TS Bancorp Financial Statements. All
of
the TS Bancorp Financial Statements, including the related notes,
(a) except as indicated in the notes thereto, were prepared in accordance
with GAAP consistently applied (subject, in the case of unaudited statements,
to
the absence of notes and recurring audit adjustments normal in nature and
amount), (b) are in accordance in all Material respects with the books and
records of TS Bancorp and TS Bank, (c) fairly present the consolidated
financial position of TS Bancorp and its consolidated subsidiaries as of
such
dates, and the consolidated results of operations of TS Bancorp and its
consolidated subsidiaries for the periods ended on such dates (subject, in
the
case of unaudited statements, to recurring audit adjustments normal in nature
and amount), and (d) reflect provision for, or reserves against, the possible
consolidated loan losses of TS Bancorp as of such dates determined in accordance
with GAAP consistently applied.
Section
7.14 Call
Reports; Bank Holding Company Reports.
(a) TS
Bank
has made available to Zions its Call Reports for the calendar quarter dated
March 31, 2004 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 or, to the extent different from
GAAP,
accounting principles mandated by the applicable instructions to such Call
Reports.
(b) No
Material adjustments are required to be made to the equity capital account
of TS
Bank as reported on any of the Call Reports referred to in subsection (a)
in
order to conform such equity capital account to equity capital as would be
determined in accordance with GAAP as of such date.
(c) TS
Bancorp has furnished to Zions (i) its annual report on Form FR Y-6 as
filed with the Board of Governors as of December 31, 2005, and (ii) its
semiannual report on Form FR Y-9LP as filed with the Board of Governors as
of
June 30, 2006.
Section
7.15 Absence
of Undisclosed Liabilities.
At June 30, 2006, no Stockmen's Entity had any obligation or liability of
any
nature (whether absolute, accrued, contingent, or otherwise, and whether
due or
to become due) required by GAAP to be set forth on the consolidated balance
sheet of TS Bancorp and its consolidated subsidiaries that was Material,
or that
when combined with all similar obligations or liabilities would have been
Material, to TS Bancorp, except (a) as disclosed in the TS Bancorp
Financial Statements, or (b) for unfunded loan commitments made by TS
Bancorp or TS Bank in the Ordinary Course of Business. The amounts set up
as
current liabilities for taxes in the TS Bancorp Financial Statements are
sufficient for the payment of all Taxes accrued in accordance with GAAP and
unpaid at June 30, 2006. Since June 30, 2006, neither TS Bancorp nor TS Bank
has
incurred or paid any Material obligation or liability except (y) for
obligations incurred or paid in connection with transactions by it in the
Ordinary Course of Business, or (z) as expressly contemplated
herein.
Section
7.16 Absence
of Certain Developments.
(a) Since
June 30, 2006, there has been (i) no Material Adverse Effect with respect
to TS Bancorp, (ii) no Material deterioration in the quality of the
consolidated loan portfolio of TS Bank, and no Material increase in the
consolidated level of nonperforming assets or nonaccrual loans at TS Bank
or in
the level of its consolidated provision for credit losses or its consolidated
reserve for possible credit losses; (iii) no declaration, setting aside, or
payment by TS Bancorp or TS Bank of any regular dividend, special dividend,
or
other distribution with respect to any class of capital stock of TS Bancorp
or
TS Bank, other than customary cash dividends paid by TS Bancorp or TS Bank
whose
amounts have not exceeded $606,748 per calendar quarter and the intervals
between which dividends have not been more frequent than past practice;
(iv) no repurchase by TS Bancorp of any of its capital stock; (v) no
Material loss, destruction, or damage to any property of TS Bancorp or TS
Bank,
which loss, destruction, or damage is not covered by insurance; (vi) except
in the Ordinary Course of Business or as consented to by Zions in each instance
or as otherwise explicitly permitted by this Agreement, and except for
extensions of credit to customers of TS Bank and sales of assets held in
the
securities portfolio of TS Bancorp or TS Bank, no Material acquisition or
disposition of any asset, nor any Material contract entered into by TS Bancorp
or TS Bank nor any Material amendment or termination of any contract to which
TS
Bancorp or TS Bank is a party, and (vii) no other transaction by TS Bancorp
or TS Bank outside the Ordinary Course of Business involving an amount in
excess
of $50,000 other than for fair value.
(b) Neither
TS Bancorp nor TS Bank has taken or agreed to take any action, or is aware
of
any fact or circumstance, that would prevent the Holding Company Merger from
qualifying as a reorganization within the meaning of section 368 of the
Code.
(c) Since
June 30, 2006, except for the transactions contemplated by this Agreement,
(i) each of TS Bancorp and TS Bank has conducted its business only in the
Ordinary Course of Business; (ii) TS Bank, on a consolidated basis, has
maintained the quality of its loan portfolio and that of each of its major
components at substantially the same level as existed at June 30, 2006; and
(iii) TS Bank, on a consolidated basis, has administered its investment
portfolio pursuant to essentially the same policies and procedures as existed
during 2005 and the first six months of 2006, and has taken no action to
lengthen the average maturity of the investment portfolio, or of any significant
category of that portfolio, to any Material extent.
Section
7.17 Reserve
for Possible Credit Losses.
The most recent of the TS Bancorp Financial Statements reflect a consolidated
reserve for possible credit losses that is adequate in accordance with GAAP
to
absorb reasonably anticipated losses in the consolidated loan and lease
portfolios of TS Bank, 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) All
Tax
returns and reports required to be filed by or on behalf of any Stockmen's
Entity 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, 2005, and all returns filed
are
complete and accurate for the periods covered thereby. All Taxes of any
Stockmen's Entity whether or not shown on any Tax return have been paid except
for any Taxes not yet due and payable. None of the Stockmen Entities has
engaged
in a "reportable transaction," as set forth in Treas. Reg.
§ 1.6011-4(b),
or
any transaction that is the same as or substantially similar to one of the
types
of transactions that the Internal Revenue Service has determined to be a
tax
avoidance transaction and identified by notice, regulation or other form
of
published guidance as a "listed transaction," as set forth in Treas. Reg.
§ 1.6011-4(b)(2).
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
Materially adverse to TS Bancorp or TS Bank, except as reserved against in
the
TS Bancorp Financial Statements. All Taxes due with respect to completed
and
settled examinations or concluded litigation have been properly accrued or
paid.
(b) No
Stockmen's Entity has 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, any Stockmen's
Entity for the period or periods beginning January 1, 2006 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
TS
Bancorp.
(d) Deferred
Taxes of TS Bancorp and TS Bank have been provided for on the TS Bancorp
Financial Statements in accordance with GAAP as in effect as of the date
of such
statements.
(e) The
deductions of TS Bank for bad debts taken and the reserve of TS Bank for
loan
losses for federal income tax purposes at December 31, 2005, 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, the laws of the
State
of California, or any other applicable federal, state, or local law with
respect
to Taxes assessed and not yet due and payable, there are no tax liens on
any of
the properties or assets of TS Bancorp or TS Bank.
(g) TS
Bancorp and TS Bank (i) have 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) have 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) have exercised due diligence in obtaining
certified taxpayer identification numbers as required under applicable
law.
(h) The
taxable year end of TS Bancorp for federal income tax purposes is December
31.
(i) TS
Bancorp and TS Bank have in all Material respects satisfied all federal,
state,
local, and foreign withholding tax requirements including income, social
security, and employment tax withholding.
(j) No
Stockmen's Entity (i) is, or has 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 TS Bancorp, and (ii) has any liability for the
Taxes of any Person (other than a Stockmen's Entity) under Treas. Reg.
§ 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 TS Bancorp 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 TS Bancorp as of the date of its most recent
regularly prepared balance sheet prior to the date of this Agreement, as
determined in accordance with GAAP consistently applied, excluding any
adjustments made pursuant to section 8.09(b) of this Agreement is not less
than
the sum of (a) $62,925,000, (b) the proceeds to TS Bancorp of the
exercise of stock options outstanding as of June 30, 2006, and (c) the
proceeds to TS Bancorp of the sale of treasury stock since June 30, 2006,
minus
(d) the lesser of $4.9 million or the net after-tax losses (using an
assumed effective tax rate of 33.23 percent) realized by TS Bancorp and TS
Bank
on the sale of held-to-maturity securities since July 1, 2006, and minus
(e) the
lesser of $1.5 million or the tax-effected excess of the value of liabilities
and obligations of TS Bancorp and TS Bank at the Effective Time to make future
payments in connection with TS Bank's Supplemental Executive Retirement Plan
and
related agreements over the expense accrual on the books of TS Bancorp and
TS
Bank as of June 30, 2006 for such liabilities and obligations.
Section
7.20 Examinations.
To the
extent consistent with law, TS Bancorp has heretofore disclosed to Zions
the
information described in the immediately following sentence contained in
the
most recent safety-and-soundness, compliance, CRA, and other Reports of
Examination with respect to TS Bancorp issued by the Board of Governors and
the
most recent safety-and-soundness, compliance, CRA, and other Reports of
Examination with respect to TS Bank issued by each of the Arizona Department
of
Financial Institutions, the California Department of Financial Institutions,
and
the FDIC. Such information so disclosed consists of all material information
with respect to the financial, operational, regulatory, compliance, and legal
condition of the entity under examination 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, 2003, each of TS Bancorp and TS Bank has effected all
registrations and filed all reports and statements, together with any amendments
required to be made with respect thereto, that it was required to effect
or file
with (a) the Board of Governors, (b) the FDIC, (c) the United
States Department of the Treasury, (d) the Arizona Department of Financial
Institutions, (e) the California Department of Financial Institutions,
(f) the SEC, and (g) 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 that, at the time and in the light of the
circumstances under which it was made and taking into account any amendment
filed prior to the date of this Agreement, is false or misleading with respect
to any material fact or that omits to state any material fact necessary in
order
to make the statements contained therein not false or misleading, except
that
information as of a later date will be deemed to modify information as of
an
earlier date.
Section
7.22 Transactions
with Insiders and Section 23A Affiliates.
Except
as set forth on Schedule 7.22,
(a) There
are
no outstanding loans or other extensions of credit made by TS Bancorp or
TS Bank
to any Insider;
(b) all
such
outstanding extensions of credit, if any, were at the time they were made
and
continue to be permitted by and in compliance with the provisions of Regulation
O
of the
Board of Governors;
(c) all
such
outstanding extensions of credit have been disclosed in writing by TS Bancorp
to
Zions in a schedule to this Agreement;
(d) no
Insider has any ongoing Material transaction with TS Bancorp or TS
Bank;
(e) 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 TS Bancorp or TS Bank not in the Ordinary Course of
Business;
(f) TS
Bank
is not a party to any agreement, arrangement, or understanding (whether oral
or
written) directly or indirectly, with any Section 23A Affiliate, including
any
purchase, sale, lease, investment, loan, service, or management agreement;
and
(g) all
of TS
Bank's agreements, arrangements, and understandings with Section 23A Affiliates
comply with sections 23A and 23B of the Federal Reserve Act and Regulation
W of
the Board of Governors.
Section
7.23 SEC
Registered Securities.
No
equity or debt securities of any Stockmen's Entity 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 TS Bancorp Financial Statements, there is no claim,
action, suit, arbitration, investigation, or other proceeding pending against
TS
Bancorp or TS Bank before any Governmental Authority, arbitrator, or "impartial
mediator" or, to the Knowledge of TS Bancorp and TS Bank, threatened against
or
affecting it or its property, assets, interests, or rights, or any basis
therefor of which notice has been given.
Section
7.25 Absence
of Governmental Proceedings.
Neither TS Bancorp nor TS Bank is a party defendant or respondent to any
pending
legal, equitable, or other proceeding commenced by any Governmental Authority
and, to the Knowledge of TS Bancorp and TS Bank, no such proceeding is
threatened.
Section
7.26 Federal
Deposit Insurance.
The
deposits held by TS Bank are insured within statutory limits by the Deposit
Insurance Fund of the FDIC pursuant to the provisions of the FDI Act, and
TS
Bank has paid all regular premiums and special assessments and filed all
related
reports and statements required of it under the FDI Act.
Section
7.27 Other
Insurance.
(a) Schedule
7.27 lists all Material insurance policies of the Stockmen's Entities in
force
as of the date of this Agreement. 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. Neither TS Bancorp nor TS Bank is in default
with respect to any such policy that is Material to it.
(b) All
of
the bank owned life insurance (BOLI) policies of TS Bancorp permit cash
surrender of such policies at each carrier for book value, and no surrender
charge, penalty or similar charge and no timing constraint ("crawl-out
provision") applies to any of them.
Section
7.28 Labor
Matters.
(a) Neither
TS Bancorp nor TS Bank is a party to or bound by any collective bargaining
contracts with respect to any employees of TS Bancorp or TS Bank. Since 2000
there has not been, nor to the Knowledge of TS Bancorp and TS Bank was there
or
is there threatened, any strike, slowdown, picketing, or work stoppage by
any
union or other group of employees against TS Bancorp or TS Bank or any of
its
premises, or any other labor trouble or other occurrence, event, or condition
of
a similar character. Neither TS Bancorp nor TS Bank is aware of any attempts
to
organize a collective bargaining unit to represent any of its employee
groups.
(b) To
the
Knowledge of TS Bancorp and TS Bank, each of TS Bancorp and TS Bank is in
substantial compliance 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.
To
the Knowledge of TS Bancorp and TS Bank, neither TS Bancorp nor TS Bank is
engaged in any unfair labor practice. No dispute exists between TS Bancorp
or TS
Bank and any of their respective employee groups regarding any employee
organization, wages, hours, or conditions of employment which would reasonably
be expected to interfere with the business or operations of TS Bancorp or
TS
Bank.
Section
7.29 Employee
Benefit Plans.
(a) Schedule
7.29 contains a complete list of all the TS Bancorp Plans.
(b) As
to
each of the TS Bancorp Plans, TS Bancorp has delivered or made available
to
Zions true, complete, current, and accurate copies of (i) the executed
document or documents governing the plan, including, where applicable, 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 determination 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, or any liabilities for benefits
owed
to plan participants in accordance with the terms of a TS Bancorp Plan, neither
TS Bancorp nor TS Bank has any tax, penalty, or liability with respect to
any TS
Bancorp Plan under ERISA, the Code, or any other applicable law, regulation,
or
ruling. As to each TS Bancorp Plan with respect to which a Form 5500 has
been
filed, no change has occurred with respect to the matters covered by the
most
recent Form 5500 since the date of that form, other than regular accruals
and
contributions, routine changes in the number of plan participants, and similar
insubstantial changes.
(d) Each
TS
Bancorp Plan substantially complies and in the past substantially complied
in
form and operation with all applicable requirements of law and regulation.
Neither TS Bancorp nor TS Bank has any liability under any TS Bancorp Plan
which
is not reflected on the TS Bancorp 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 Material in the aggregate).
There
have not been any non-exempt "prohibited transactions" with respect to any
TS
Bancorp 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 for which the thirty-day notice requirement of ERISA
has
not been waived by the PBGC, and the transactions contemplated by this Agreement
will not result in a "reportable event" within the meaning of section 4043
of
ERISA with respect to any TS Bancorp Plan. There has not been any accumulated
funding deficiency within section 302 of ERISA or section 402 of the Code.
Neither TS Bancorp nor TS Bank 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 TS Bancorp Plan that is subject to Title IV
of
ERISA, the value of assets of such TS Bancorp Plan is at least equal to the
present value of the vested and unvested accrued benefits in such TS Bancorp
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. Neither TS Bancorp nor TS Bank has any 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 TS Bancorp
or TS Bank 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 TS Bancorp and TS Bank, 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, 2005 of each director, officer, or other employee of each of
TS
Bancorp and TS Bank whose aggregate compensation for the fiscal year ended
December 31, 2005 exceeded $100,000 or whose aggregate compensation at present
exceeds the rate of $100,000 per annum. Except for Change in Control Agreements
entered into with the consent of Zions, and except for compensation and benefits
increases made in the Ordinary Course of Business or to comply with legal
requirements, since June 30, 2006 neither TS Bancorp nor TS Bank has changed
the
rate of compensation of any of its directors, officers, employees, agents,
dealers, or distributors, nor has any TS Bancorp Plan or program been instituted
or amended to increase benefits thereunder. There is no contract, agreement,
plan, arrangement, or understanding covering any individual that, considered
together with the amendments, waivers, and consents referred to in section
5.10,
could individually or collectively give rise to the payment of any amount
that
would not be deductible by TS Bancorp or TS Bank by reason of section 280G
of
the Code.
Section
7.31 Fiduciary
and Insurance Activities.
Other
than a custodian for individual retirement accounts the funds of which are
invested in deposits of TS Bank, TS Bank conducts no fiduciary or custodial
activities. Other than the sale of credit life insurance, credit accident
and
health insurance, credit disability insurance, and the forced placement of
property and casualty insurance incident to its lending activities, TS Bank
does
not engage in any insurance activity and holds no insurance
license.
Section
7.32 Environmental
Liability.
(a) TS
Bancorp and TS Bank have no Knowledge as of the date of this Agreement, nor
has
any of them been notified by any Governmental Authority, that TS Bancorp
or TS
Bank is in violation of any judgment, decree, order, law, license, rule or
regulation pertaining to environmental matters, including those arising under
the Environmental Laws.
(b) Neither
TS Bancorp nor TS Bank, nor, to the Knowledge of TS Bancorp and TS Bank,
any
borrower of TS Bank 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 TS Bancorp or TS Bank or, to the Knowledge
of TS Bancorp and TS Bank, any borrower of TS Bank 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 TS Bancorp Real Estate or property that formerly was TS Bancorp
Real Estate has been used by TS Bancorp or TS Bank for the generation, handling,
processing, storage, transportation, or disposal of Hazardous Substances
in a
manner that violates any Environmental Laws and, to the Knowledge of TS Bancorp
and TS Bank, no underground tank or other underground storage receptacle
for
Hazardous Substances is located on any of the TS Bancorp Real Estate or property
that formerly was TS Bancorp Real Estate. In the course of its activities,
neither TS Bancorp nor TS Bank has generated and neither of them is generating
any hazardous waste on any of the TS Bancorp Real Estate or property that
formerly was TS Bancorp Real Estate in a manner that violates any Environmental
Laws. There has been no past or present Release of Hazardous Substances by
TS
Bancorp or TS Bank in violation of an Environmental Law on, upon, or into
any of
the TS Bancorp Real Estate or property that formerly was TS Bancorp Real
Estate.
In addition, to the Knowledge of TS Bancorp and TS Bank, there have been
no such
Releases on, upon, or into any real property in the vicinity of any of the
TS
Bancorp Real Estate or property that formerly was TS Bancorp Real Estate
that
through soil or groundwater contamination, may be located on any of such
TS
Bancorp Real Estate or property that formerly was TS Bancorp Real
Estate.
(d) To
the
Knowledge of TS Bancorp and TS Bank, there are and have been no present or
past
actions or conditions that could reasonably form the basis of a claim against
TS
Bancorp or TS Bank, or against any other Person for whose actions TS Bancorp
or
TS Bank may be liable, under the Environmental Laws or in connection with
the
generation, transportation, treatment, storage, handling, transfer, disposal,
recycling, or receipt of Hazardous Substances.
(e) To
the
Knowledge of TS Bancorp and TS Bank, there are no Hazardous Substances present
on or in any of the properties owned or used by TS Bancorp or TS Bank in
the
conduct of their respective businesses or at any geologically or hydrologically
adjoining property, including any Hazardous Substances contained in barrels,
above-ground or underground storage tanks, landfills, land deposits, dumps,
movable or fixed equipment or other containers, either temporary or permanent,
and deposited or located in land, water, sumps, or any other part of such
properties or such adjoining properties, or incorporated into any structure
in
or on such properties or such adjoining properties.
(f) With
respect to any Collateral Real Estate, neither TS Bancorp nor TS Bank has
since
January 1, 1996 received notice from any TS Bank borrower or third party,
and
has no Knowledge that any TS Bank borrower has generated or is generating
any
Hazardous Substance on any of the Collateral Real Estate in a manner that
violates any Environmental Laws or that could reasonably form the basis of
a
claim against any TS Bank borrower 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 or that could reasonably
form the basis of a claim against any TS Bank borrower 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.
(g) TS
Bank
has no interest in any real estate partnership or real estate joint
venture.
Section
7.33 Intangible
Property.
(a) Each
of
TS Bancorp and TS Bank owns, or is licensed or otherwise possesses legally
enforceable rights to use all patents, trademarks, trade names, service marks,
copyrights, and any applications therefor, technology, know-how, computer
software programs or applications, and proprietary information or materials
that
are used in its business as currently conducted and, to its Knowledge, all
patents and registered trademarks and service marks, trade names, and copyrights
owned by it are valid and subsisting.
(b) Neither
TS Bancorp nor TS Bank is, nor will it be as a result of the execution and
delivery of this Agreement or the performance of its obligations hereunder,
in
substantial violation of any licenses, sublicenses, and other agreements
as to
which it is a party and pursuant to which it is authorized to use any
third-party patents, trademarks, service marks, and copyrights.
(c) No
claims
with respect to (i) the patents, registered and unregistered trademarks and
service marks, registered copyrights, trade names, and any applications therefor
owned by TS Bancorp or TS Bank, (ii) any Material trade secret owned by TS
Bancorp or TS Bank, or (iii) to the Knowledge of TS Bancorp and TS Bank,
any
licenses, sublicenses, and other agreements as to which it is a party and
pursuant to which it is authorized to use any third-party patents, trademarks,
service marks, and copyrights licensed to it are currently pending or are
threatened.
(d) To
the
Knowledge of TS Bancorp and TS Bank, there are no valid grounds for any bona
fide claims (i) to the effect that the sale or licensing of any product as
now
sold or licensed by TS Bancorp or TS Bank infringes on any copyright, patent,
trademark, service mark, or trade secret of any other Person, (ii) against
the
use by TS Bancorp or TS Bank of any trademarks, trade names, trade secrets,
copyrights, patents, technology, know-how, or computer software programs
and
applications used in the business of TS Bancorp or TS Bank as currently
conducted, (iii) challenging the ownership or validity of any of the
intellectual property rights owned by TS Bancorp or TS Bank, or (iv) challenging
the license or right to use any third-party patents, trademarks, service
marks,
and copyrights used by it.
(e) To
the
Knowledge of TS Bancorp and TS Bank, there is no unauthorized use, infringement,
or misappropriation of any of the patents, registered and unregistered
trademarks and service marks, registered copyrights, or trade names owned
by TS
Bancorp or TS Bank by any Person, including any employee or former employee
of
TS Bancorp or TS Bank.
Section
7.34 Real
and Personal Property.
Except for property and assets disposed of in the Ordinary Course of Business,
each of TS Bancorp and TS Bank possesses good and marketable title to and
owns
its real and personal property and other assets (other than leased real or
personal property), including those properties and assets reflected in the
TS
Bancorp Financial Statements as of June 30, 2006, or acquired by TS Bancorp
or
TS Bank subsequent to that date, free and clear of any mortgage, pledge,
lien,
charge, or other encumbrance or other third party interest of any nature
whatsoever which would interfere with the business or operations of either
TS
Bancorp or TS Bank. The leases pursuant to which TS Bancorp and TS Bank lease
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 substantial
existing default by TS Bancorp and TS Bank or any event that, with the giving
of
notice or lapse of time or otherwise, would constitute a substantial default
by
TS Bancorp or TS Bank. The real and personal property leased by either TS
Bancorp or TS Bank as lessee is free from any adverse claim that would interfere
with its business or operation. The properties and equipment owned or leased
as
lessee by TS Bancorp and TS Bank (a) are in normal operating condition, free
from any known defects, except such minor defects as do not interfere with
the
continued use of those properties and equipment in the conduct of the normal
operations of TS Bancorp and TS Bank; (b) to the Knowledge of TS Bancorp
and TS Bank, comply with all applicable zoning and building codes; (c) are
not the subject of any pending or, to the Knowledge of TS Bancorp and TS
Bank,
threatened condemnation proceedings, and (d) to the Knowledge of TS Bancorp
and
TS Bank, are in substantial compliance with all applicable health and safety
related requirements, including those under the Americans with Disabilities
Act
of 1990 and the Occupational Health and Safety Act of 1970.
Section
7.35 Loans,
Leases, and Discounts.
(a) In
the
course of its lending, loan administration, and loan collection activities,
TS
Bank maintains and follows procedures to provide reasonable assurance that
risks
inherent in the credit process are effectively managed and controlled through
prudent selection and assumption of risk, portfolio diversification, and
management of loan portfolio performance. These procedures address portfolio
composition and distribution, credit standards, limitations on lender authority
and on aggregate loans and commitments, including off-balance-sheet exposure,
financial information analysis requirements, collateral and structure
requirements, pricing guidelines, appraisal requirements, loan documentation,
loan grading and loan tracking standards, collections and charge-offs, and
internal controls including an independent loan review function and audit
function.
(b) To
the
Knowledge of TS Bancorp and TS Bank, each loan, lease, and discount reflected
as
an asset of TS Bank in the TS Bancorp Financial Statements as of June 30,
2006,
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 $100,000, and no outstanding letter of credit or commitment to
extend
credit having a notional amount in excess of $100,000, is subject to any
asserted defense, offset, or counterclaim known to TS Bancorp or TS
Bank.
(c) Neither
TS Bancorp nor TS Bank holds any loans or loan-participation interests purchased
from, or participates in any loans originated by, any Person other than TS
Bancorp or TS Bank.
Section
7.36 Vendor
Contracts.
Neither
TS Bancorp nor TS Bank nor any of the assets, businesses, or operations of
either of them is a party to, or is bound or affected by, or receives benefits
under any agreement, arrangement, or commitment to purchase or acquire tangible
or intangible goods or services not cancelable according to the terms of
such
agreement, arrangement, or commitment, by TS Bancorp or TS Bank without penalty
greater than $100,000, other than the agreements set forth on Schedule 7.36.
The
aggregate cost of such cancellation penalties will not exceed $1
million.
Section
7.37 Employment
and Severance Arrangements.
Schedule 7.37 sets forth
(a) all
Change in Control Agreements; and
(b) except
for at-will employment and service arrangements, all employment and severance
contracts, agreements, and arrangements between TS Bancorp or TS Bank and
any
officer, director, consultant, or other management official of either of
them.
Section
7.38 Material
Contract Defaults.
All
contracts, agreements, leases, mortgages, or commitments referred to in section
7.12 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, neither TS Bancorp
nor
TS Bank is or will be in Material default in any substantial respect under
any
of those contracts, agreements, leases, mortgages, or commitments; 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.
Neither TS Bancorp nor TS Bank has any outstanding commitments to make capital
expenditures which in the aggregate exceed $100,000.
Section
7.40 Repurchase
Agreements.
With
respect to all agreements pursuant to which TS Bancorp or TS Bank 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.
(a) Each
of
TS Bancorp and TS Bank 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.
(b) Since
December 31, 2005, (i) none of TS Bancorp, TS Bank, nor to the Knowledge
of TS
Bancorp and TS Bank any of the directors, officers, employees, auditors,
accountants, or representatives of either of them has received or otherwise
had
or obtained knowledge of any complaint, allegation, assertion, or claim,
whether
written or oral, regarding the accounting or auditing practices, procedures,
methodologies, or methods of TS Bancorp or TS Bank or their respective internal
accounting controls, including any complaint, allegation, assertion, or claim
that TS Bancorp or TS Bank has engaged in questionable accounting or auditing
practices, and (ii) no attorney representing TS Bancorp or TS Bank, whether
or not employed by either of them, has reported evidence of a violation of
securities laws, breach of fiduciary duty or similar violation by TS Bancorp,
TS
Bank, or any officer, director, employee, or agent of either of them to the
board of directors of TS Bancorp or any committee of its board of directors
or
to any of its directors or officers.
Section
7.42 Dividends.
Neither
TS Bancorp nor TS Bank has 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 for Hovde Financial, Inc., a copy of whose engagement agreement has
been
provided to Zions, (a) there are no asserted or potential claims for
brokerage commissions, finder's fees, or similar compensation arising out
of or
due to any act of TS Bancorp or TS Bank, in connection with the transactions
contemplated by this Agreement or based upon any agreement or arrangement
made
by or on behalf of TS Bancorp or TS Bank in connection with the transactions
contemplated by this Agreement, and (b) neither TS Bancorp nor TS Bank 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
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 TS Bancorp or TS Bank 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 TS Bancorp or TS Bank is a party or
by
which any of its properties or assets may be bound were duly authorized by
TS
Bancorp or TS Bank, as applicable, and 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 able
to
understand (either alone or in consultation with their advisors) and to bear
the
risks of such arrangements 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. TS Bancorp and TS Bank have substantially
performed all of their respective obligations thereunder to the extent that
such
obligations to perform have accrued; and to the Knowledge of TS Bancorp and
TS
Bank, there are no breaches, violations, or defaults or allegations or
assertions of such by any party thereunder. No such arrangement, were it
a loan
held by TS Bank, would be classified by TS Bank as "Other Loans Specially
Mentioned," "Special Mention," "Substandard," "Doubtful," "Loss," or words
of
similar import.
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 TS Bancorp
or TS Bank or any of their subsidiaries who have experienced a Qualifying
Event
since March 8, 2005, together with documentation of compliance by TS Bancorp
or
TS Bank, as the case may be, with applicable notice requirements.
Section
7.46 Opinion.
Prior
to the execution of this Agreement, TS Bancorp has received an opinion from
Hovde Financial, Inc. to the effect that as of the date of the opinion and
based
upon and subject to the matters set forth in the opinion, the merger
consideration to be received by shareholders of TS Bancorp is fair to them
from
a financial point of view. Such opinion has not been amended or rescinded
as of
the date of this Agreement. TS Bancorp has provided Zions with a true, correct,
and complete copy of such opinion.
Section
7.47 Disclosure.
No representation or warranty hereunder and no certificate, written statement,
or other document delivered by TS Bancorp or TS Bank hereunder or in connection
with this Agreement or any of the transactions contemplated under this Agreement
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 are no facts
known to TS Bancorp or TS Bank which, alone or in the aggregate, reasonably
should be expected to have a Material Adverse Effect on TS Bancorp. All copies
of documents delivered to Zions by TS Bancorp or TS Bank under this Agreement
are true, correct, and complete copies of those documents and include all
amendments, supplements, and modifications thereto and all waivers
thereunder.
Section
7.48 Regulatory
and Other Approvals.
(a) As
of the
date of this Agreement, neither TS Bancorp nor TS Bank is aware of any reason
why all 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 TS Bancorp and TS Bank as such business
is
carried on immediately prior to the Effective Time, free of any conditions
or
requirements that, in the aggregate, would be Material.
(b) As
of the
date of this Agreement, neither TS Bancorp nor TS Bank is aware of any reason
why all 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 TS Bancorp and TS
Bank
as such business is carried on immediately prior to the Effective Time.
Section
7.49 Business
Continuity.
Neither
TS Bancorp and TS Bank is aware of any reason why the historical businesses
of
TS Bank may not be conducted following the Bank Merger substantially as they
will have been conducted prior to the Bank Merger. Neither TS Bancorp and
TS
Bank is aware of any reasons why the historical business relationships of
TS
Bank, including its historical relationships with its customers, may not
be
maintained following the Bank Merger substantially as they existed prior
to the
Bank Merger.
Article
8.
Covenants
of TS Bancorp and TS Bank
TS
Bancorp (with respect to itself and TS Bank) and TS Bank (solely with respect
to
itself) each 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 TS Bancorp and TS Bank will give to Zions and NBA
and
to their representatives, including their certified public accountants,
E & Y, full access upon reasonable prior notice during normal
business hours to all of the property, documents, contracts, books, and records
of TS Bancorp and TS Bank, and such information with respect to their business
affairs and properties as Zions or NBA from time to time may reasonably request,
it being agreed that inspection of TS Bancorp Real Estate for Adverse
Environmental Conditions or Adverse Structural Conditions and inspection
for
purposes of ascertaining good title to owned TS Bancorp Real Estate are
reasonable in all instances, provided such investigation will not unreasonably
interfere with the business or operations of TS Bank.
Section
8.02 Shareholder
Meeting.
TS
Bancorp shall hold the Shareholder Meeting in accordance with section 10-1103
of
the ABCA and section 215a(a)(2) of title 12, United States Code, as promptly
as
reasonably possible after the effectiveness of the Registration Statement,
after
at least ten days' prior written notice thereof to the shareholders of TS
Bancorp, to consider nd vote upon the adoption of this Agreement, the Merger,
and the other transactions contem-plated hereby. Subject to its fiduciary
duty
to shareholders, TS Bancorp will use its reasonable best efforts to solicit
from
stockholders of TS Bancorp proxies in favor of the Holding Company Merger
and
will take all other action necessary or advisable to secure the vote or consent
of stockholders required by the ABCA to approve the Holding Company
Merger.
Section
8.03 Monthly
and Quarterly Financial Statements; Minutes of Meetings and Other
Materials.
(a) TS
Bancorp and TS Bank 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 June 30, 2006 and the date of
the
Effective Time which they customarily prepared during the period between
January
1, 2005 and June 30, 2006 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 (except that Call
Reports may be prepared in accordance with the official instructions applicable
thereto at the time of filing).
(b) TS
Bancorp and TS Bank shall promptly provide Zions with (i) copies of all of
their 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 their respective boards 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 TS Bancorp or TS Bank, as the case may
be.
Section
8.04 Extraordinary
Transactions.
Without
the prior written consent of Zions, which in the case of the matters addressed
in paragraph (k) of this section 8.04 will not unreasonably be withheld,
neither
TS Bancorp nor TS Bank will, on or after the date of this
Agreement:
(a) subject
to section 8.08, declare or pay any cash dividends or property dividends
with
respect to any class of its capital stock, with the exception of customary
periodic cash dividends paid by TS Bancorp or TS Bank to holders of its common
stock in amounts not exceeding the rate paid during the fiscal quarter
immediately preceding the date of this Agreement and at intervals that are
not
more frequent than past practice of that payer;
(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, or
grant
any options to acquire such additional securities;
(c) either
(i) merge into, consolidate with, or sell or otherwise dispose of all or
substantially all of its assets to any other Person, or enter into any other
similar transaction or agree to effect any other similar 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 TS Bank 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, as otherwise explicitly permitted by this
Agreement, or to accomplish the transactions contemplated by this Agreement,
voluntarily incur or agree to incur any Material liability or obligation,
make
any Material commitment or disbursement, acquire or dispose of any Material
property or asset, make any Material contract or agreement, pay or voluntarily
become obligated to pay any Material legal, accounting, or miscellaneous
other
expense, or engage in any Material transaction, provided that TS Bank may
sell
assets held in its securities portfolio;
(g) other
than in the Ordinary Course of Business, and excluding statutory liens,
voluntarily subject or agree to 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 $100,000 or that in the aggregate exceed
$250,000;
(i) price
any
of its deposit account categories other than consistently with its historical
deposit pricing methods and practices;
(j) solicit
or accept any deposit that, under 12 C.F.R. § 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 June 30, 2006, increase the rate of compensation of any employee
or enter into any agreement to increase the rate of compensation of any
employee;
(l) pay
or
obligate itself to pay any bonus to any officer, director, consultant, other
management official, or employee which, when combined with other bonuses
paid or
obligated to be paid by TS Bancorp and TS Bank on or after January 1, 2006,
would exceed 220 percent of the amount accrued on the books of TS Bancorp
and TS
Bank as of June 30, 2006 for the payment of 2006 bonuses;
(m) 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;
(n) other
than to employ non-officer employees in the Ordinary Course of Business for
the
purpose of filling vacancies or of staffing de novo branches, or directly
to
facilitate the transactions contemplated by this Agreement, enter into any
employment or personal services contract with any Person;
(o) purchase
any loans or loan-participation interests from, or participate in any loans
originated by, any Person other than TS Bancorp or TS Bank; nor
(p) acquire
or establish any subsidiary.
Section
8.05 Preservation
of Business.
Each of TS Bancorp and TS Bank will:
(a) carry
on
its business and manage its assets and properties diligently and substantially
in the same manner as heretofore;
(b) use
commercially reasonable efforts to continue in effect its present insurance
coverage on all properties, assets, business, and personnel;
(c) 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;
(d) comply
with each contract, agreement, commitment, or obligation to which it is a
party
or by which it may be bound;
(e) conduct
its affairs so that at the Effective Time (i) none of its representations
and
warranties will be inaccurate (A) due to its deliberate act or (B) if such
inaccuracy has, or can reasonably be expected to have, together with all
other
such inaccuracies, a Material Adverse Effect on TS Bancorp or TS Bank, (ii)
none
of its covenants and agreements will be breached, and (iii) no condition
in this
Agreement will remain unfulfilled by reason of its actions or
omissions;
(f) not
take
any action reasonably likely to cause the Holding Company Merger to fail
to
qualify as a reorganization within the meaning of section 368 of the
Code;
(g) not
amend
its Organizational Documents; and
(h) 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, TS
Bancorp shall furnish Zions with a letter from McGladrey & Pullen, LLP, its
independent auditors, in form and substance acceptable to Zions, stating
that
(a) they are independent accountants with respect to TS Bancorp within the
meaning of the Securities Act and the published rules and regulations thereunder
and (b) a reading of the latest available unaudited financial statements of
TS Bancorp and TS Bank and inquiries of certain officials of TS Bancorp and
TS
Bank responsible for financial and accounting matters as to transactions
and
events since the date of the most recent statement of condition included
in
their most recent report with respect to TS Bancorp and TS Bank did not cause
them to believe that (i) such latest available unaudited financial
statements are not stated on a basis consistent with that followed in TS
Bancorp's and TS Bank's 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 TS Bancorp's capital stock or
any
change in consolidated long-term debt or any decrease in the consolidated
net
assets of TS Bancorp or the consolidated allowance for loan and lease losses
of
TS Bancorp as compared with the respective amounts shown in the most recent
TS
Bancorp and TS Bank financial statements. The letter shall also cover such
other
matters pertaining to TS Bancorp's and TS Bank's financial data and statistical
information as may reasonably be requested by Zions.
Section
8.07 TS
Bancorp Affiliates' Agreements.
Schedule 8.07 lists each individual known to TS Bancorp who as of the date
of
execution of this Agreement is reasonably likely to be deemed to be a TS
Bancorp
Affiliate. TS Bancorp will furnish to Zions a list of each individual known
to
TS Bancorp who is not listed on Schedule 8.07 and who at the date of the
special
meeting of the TS Bancorp share-holders to vote upon the transactions
contemplated by this Agreement is reasonably likely to be deemed to be a
TS
Bancorp Affiliate.
Section
8.08 Dividend
Coordination.
(a) The
board
of directors of TS Bancorp shall cause its regular quarterly dividend record
dates and payment dates for TS Bancorp Stock to be the same as the regular
quarterly dividend record dates and payment dates for Zions Stock (in
particular, by deferring the record date for TS Bancorp Stock by up to thirty
days beginning in the second quarter following the quarter in which this
Agreement is executed), and TS Bancorp shall not thereafter change its regular
dividend payment dates and record dates, provided that TS Bancorp may pay
its
scheduled November 1, 2006 regular dividend.
(b) If
the
Effective Time is after March 1, 2007, then any covenant or agreement of
TS
Bancorp or TS Bank contained in this Agreement to the contrary notwithstanding,
TS Bancorp may declare for payment to its stockholders on the day of the
Effective Time a special cash dividend in the aggregate amount of (i) the
actual
consolidated undistributed after-tax earnings of TS Bancorp, determined in
accordance with GAAP, for each whole calendar month between March 1, 2007
and
the Business Day before the Effective Time, using an assumed effective tax
rate
of 33.23 percent, and (ii) for the period between the last whole calendar
month
before the Effective Time and the Business Day before the Effective Time,
the
product of the number of days in such period and 1/365th of the consolidated
after-tax earnings of TS Bancorp in 2006, determined in accordance with GAAP;
provided that if the failure of the Merger to occur on or before March 1,
2007
is due to delay on the part of TS Bancorp or any subsidiary of TS Bancorp,
then
no dividend may be paid under this section 8.08(b).
Section
8.09 Accruals
and Reserves.
(a) From
the
date of this Agreement until the Effective Time, TS Bank shall:
(i) make
periodic provisions to its allowance for possible loan and lease losses at
intervals and in amounts substantially the same as it made during the first
six
months of 2006, and
(ii) maintain
its allowance for possible loan and lease losses at a dollar level no lower
than
that which existed at June 30, 2006.
(b) To
the
extent permitted by law, TS Bank shall establish such additional accruals
and
reserves as NBA shall determine are reasonably necessary to conform the
accounting and credit loss reserve practices and methods of TS Bank to those
of
NBA, provided that no such action need be effected until all approvals and
consents of Governmental Authorities necessary to consum-mate the Mergers
have
been received. Except to the extent required by GAAP, in making the calculations
in sections 5.05, 5.06, and 7.19 of this Agreement and in determining the
existence of a Material Adverse Effect the accruals and reserves made in
compliance with this section shall be disregarded.
Section
8.10 1997
Plan.
Within
sixty days of the date of this Agreement, the Compensation Committee of the
board of directors of TS Bancorp shall (a) cancel, as of the day before the
Effective Time, all of the stock options that are then outstanding pursuant
to
the 1997 Plan, (b) give reasonable advance notice of the cancellation to
each
holder of stock options granted under the 1997 Plan, and (c) permit each
holder
of stock options granted under the 1997 Plan to exercise the stock options
he or
she holds for a reasonable period prior to the effective date of the
cancellation.
Section
8.11 Landlord
Consents.
TS
Bancorp and TS Bank shall use commercially reasonable efforts to obtain all
Landlord Consents as soon as reasonably practicable after the execution of
this
Agreement.
Section
8.12 Updates
to Schedules.
Upon
the later of (a) two Business Days after the Effective Time is determined
or (b)
fifteen Business Days prior to the Effective Time and as of the Effective
Time,
TS Bancorp and TS Bank will deliver to Zions any updates to the schedules
to
their representations which may be required to disclose events or circumstances
arising after the date of this Agreement, provided that any failure to comply
with this requirement will not constitute the failure of any condition set
forth
in section 5.01 unless the underlying event not disclosed would independently
result in a failure of a condition set forth in section 5.01. 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
8.13 Subsequent
Events.
Until
the Effective Time, TS Bancorp and TS Bank 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 that (if existing and known
at the
date of the execution of this Agreement) would have been required to be set
forth or disclosed by TS Bancorp or TS Bank 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 TS Bancorp or TS Bank of a covenant contained
in
this Agreement impossible or make such performance substantially more difficult
than in the absence of such fact or occurrence, or that (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
8.14 Inconsistent
Activities.
TS
Bancorp will immediately cease and cause to be terminated any activities,
discussions, or negotiations conducted before the date of this Agreement
with
any persons other than Zions with respect to any proposal for the merger,
consolidation or other business combination or similar transaction involving
TS
Bancorp or TS Bank or any other proposal or offer to acquire in any manner
more
than 1 percent of the voting power in, or more than 1 percent of the business,
assets, or deposits of, TS Bancorp or TS Bank, other than the transactions
contemplated by this Agreement. TS Bancorp will use its reasonable best efforts
to enforce any confidentiality or similar agreement relating to any such
proposal. Unless and until the Holding Company Merger has been consummated
or
this Agreement has been terminated in accordance with its terms, neither
TS
Bancorp or TS Bank will (a) solicit or encourage, directly or indirectly,
any inquiries or proposals to acquire more than 1 percent of the TS Bancorp
Stock or more than 1 percent of the TS Bank stock or any significant portion
of
the assets of either of them (whether by tender offer, merger, purchase of
assets, or other transactions of any type); (b) afford any third party that
may be considering any such transaction access to its properties, books,
or
records; (c) enter into any discussions or negotiations for, or enter into
any agreement or understanding that 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; provided that in the event TS
Bancorp receives an unsolicited bona fide Alternative Proposal after the
execution of this Agreement and prior to (but not after) the approval of
this
Agreement by the shareholders of TS Bancorp at the Shareholder Meeting, and
the
TS Bancorp board of directors concludes in good faith that such Alternative
Proposal constitutes a superior proposal, TS Bancorp may, and may permit
its
subsidiaries and its and its subsidiaries' representatives to, furnish or
cause
to be furnished nonpublic information and participate in such negotiations
or
discussions to the extent that the board of directors of TS Bancorp concludes
reasonably and in good faith (and after receiving the written advice of Stinson
Morrison Hecker LLP and taking into account the written advice of its financial
advisors (which shall be a nationally recognized investment banking firm)
that
failure to take such actions would result in a violation of its fiduciary
duties
under applicable law; provided that prior to providing any nonpublic information
permitted to be provided pursuant to the foregoing proviso, it shall have
entered into a confidentiality agreement with such third party on terms no
less
favorable to it than the Confidentiality Agreement entered into with Zions;
provided further that TS Bancorp and the board of directors of TS Bancorp
shall
keep Zions informed of the status and terms of any such proposals, offers,
discussions, or negotiations on a prompt basis, including by providing a
copy of
all material documentation or correspondence relating thereto. If TS Bancorp
or
TS Bank becomes aware of any offer or proposed offer to acquire any shares
of
capital stock of TS Bancorp or TS Bank or any significant portion of the
assets
of TS Bancorp or TS Bank (regardless of the form of the proposed transaction)
or
of any other matter that could adversely affect this Agreement, the Holding
Company Merger, or the Bank Merger, TS Bancorp or TS Bank, as applicable,
shall
immediately give notice thereof to Zions. Nothing contained in this Agreement
shall prevent TS Bancorp or the Board of Directors of TS Bancorp from complying
with mandatory provisions of Rule 14e-2 under the Exchange Act with respect
to
an Alternative Proposal to the extent such rule applies to TS
Bancorp.
Section
8.15 Banker's
Bank of the West.
At
least thirty days prior to the Effective Time, TS Bancorp shall (a) take
all
necessary actions to pay, satisfy, and terminate, without default, the BBW
Obligations; (b) cause BBW to terminate, cancel, and return to TS Bancorp
marked
"satisfied" all documents related to the BBW Obligations including (1) the
Loan
Agreement dated November 7, 1998 by and between TS Bancorp and BBW, as amended
or modified, (2) the Promissory Note dated March 25, 1999, by TS Bancorp
in
favor of BBW in the original principal amount of $5,000,000, as amended or
modified, and (3) the Stock Pledge Agreement dated March 25, 1999, between
TS
Bancorp and BBW; (4) any and all Uniform Commercial Code filings by BBW against
TS Bancorp; (c) cause BBW to transfer and deliver to TS Bancorp all capital
stock of TS Bank including all stock certificates and stock powers, free
and
clear of any and all liens, claims and encumbrances thereon; and (d) take
any
and all other actions as may be necessary to cause such TS Bank stock to
be
owned by TS Bancorp free and clear of any and all liens, claims and encumbrances
thereon.
Section
8.16 COBRA
Obligations.
For all
individuals covered under a group health plan that is subject to section
601 of
ERISA and sponsored by TS Bancorp or TS Bank, and who experience a "qualifying
event" (as defined in section 603 of ERISA) within thirty days of the date
of
this Agreement, TS Bancorp or TS Bank, as the case may be, 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
8.17 Sale
of Investment Securities and Mutual Funds.
On or
before October 3, 2006 TS Bancorp and TS Bank shall sell securities held
in the
consolidated investment securities and mutual funds portfolios of TS Bancorp
having an aggregate book value as of June 30, 2006 of not less than $250
million
and reinvest the cash proceeds of such sales in short-term liquid investments
whose interest-rate sensitivity characteristics shall be reasonably acceptable
to Zions and NBA.
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 TS Bancorp and TS Bank 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 be Material.
Each of
Zions and NBA 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 be Material.
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 of this Agreement 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 such conflicts, breaches,
violations, defaults, rights of termination, cancellation, or acceleration,
or
results that in the aggregate could not reasonably be expected to be Material,
or (b) if the Holding Company Merger is approved by the Board of Governors
under the BHC Act, or if the Board of Governors waives its jurisdiction over
the
Holding Company Merger, and if the Bank Merger is approved by the OCC, the
Utah
Commissioner, and the Superintendent, violate any law, statute, rule, or
regulation of any Governmental Authority to which Zions or NBA is subject
and
that 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 of this Agreement will require any authorization,
consent, approval, or exemption by any Person which has not been obtained,
or
any notice or filing that 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 Board of Governors, the OCC, the Utah
Commissioner, the Superintendent, the SEC, state securities commissions,
the
Secretary of State of the State of Utah, and the Secretary of State of the
State
of Arizona.
Section
9.05 Brokers
and Advisers.
(a) There
are
no asserted or potential 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 substantial
compliance 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.
Section
9.07 Capitalization.
(a) The
authorized capital stock of Zions consists of 3,000,000 shares of preferred
stock, no par value, and 350,000,000 shares of Zions Stock. As of June 30,
2006,
(i) 106,611,731 shares of Zions Stock were issued and outstanding, all of
which were duly authorized, validly issued, fully paid and non-assessable,
and
not issued in violation of any preemptive right of any Zions stockholder,
(ii)
no shares of Zions common stock were held in the treasury of Zions, and (iii)
7,235,439 shares of Zions Stock were subject to outstanding stock options
issued
pursuant to Zions' stock option plans. Except as set forth in
clause (a)(iii) of this section 9.07, and except in connection with the
Zions Shareholder Rights Protection Plan, there are no outstanding options,
warrants or other rights, agreements, arrangements or commitments of any
character, including, without limitation, voting agreements or arrangements,
relating to the issued or unissued capital stock or other equity interests
of
Zions or obligating Zions to issue or sell any shares of capital stock or
other
equity interests of, or other equity interests in, Zions.
(b) The
Zions
Stock to be issued pursuant to the Holding Company Merger will, upon issuance
in
accordance with the provisions of this Agreement, be duly authorized, validly
issued, fully paid and non-assessable.
Section
9.08 Financial
Statements.
Zions has furnished to TS Bancorp 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 (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 extraordinary or out-of-period items, and (d) reflect, in
accordance with GAAP, consistently applied, adequate provision for, or reserves
against, the possible consolidated loan losses of Zions as of such dates.
Zions
has not had any dispute with any of its auditors regarding accounting matters
or
policies during any of its past three full fiscal years or during the current
fiscal year-to-date requiring disclosure pursuant to Item 304 of Regulation
S-K promulgated by the SEC.
Section
9.09 SEC
Reports.
Zions
has filed all forms, reports, and documents required to be filed with the
SEC
since December 31, 2003, and as of the date of this Agreement has delivered
or made available to TS Bancorp (a) its Annual Reports on Form 10-K for the
fiscal years ended December 31, 2003, December 31, 2004, and
December 31, 2005, (b) all proxy statements relating to Zions' meetings of
shareholders (whether annual or special) held since December 31, 2003, (c)
all Reports on Form 8-K filed by Zions with the SEC since December 31,
2003, (d) all other reports or registration statements filed by Zions with
the
SEC since December 31, 2003, and (e) all amendments and supplements to all
such reports and registration statements filed by Zions with the SEC since
December 31, 2003. Such forms, reports, and documents were prepared
Materially in accordance with the requirements of applicable law and did
not at
the time they were filed, after giving effect to any amendment thereto filed
prior to the date hereof, contain any untrue statement of a Material fact
or
omit to state a Material fact required to be stated therein or necessary
in
order to make the statements therein, in light of the circumstances under
which
they were made, not misleading, except that information as of a later date
(but
before the date of this Agreement) will be deemed to modify information as
of an
earlier date.
Section
9.10 Qualification
as a Reorganization.
Neither
Zions nor NBA has taken or agreed to take any action, or is aware of any
fact or
circumstance, that would or would be reasonably likely to adversely affect
the
Holding Company Merger from qualifying as a reorganization within the meaning
of
section 368(a) of the Code.
Section
9.11 Absence
of Material Adverse Effect.
Since June 30, 2006, there has been no Material Adverse Effect with respect
to
Zions.
Section
9.12 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 under this Agreement 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 that might have a Material Adverse Effect on Zions that has
not
been disclosed in the Zions Financial Statements or a certificate or other
document delivered by Zions to TS Bancorp. All copies of all documents delivered
to TS Bancorp or TS Bank by Zions under this Agreement are true, correct,
and
complete copies of those documents and include all amendments, supplements,
and
modifications thereto and all waivers thereunder.
Section
9.13 Regulatory
and Other Approvals.
(a) As
of the
date of this Agreement, Zions and NBA are not aware of any reason why all
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 Zions as such business is carried on immediately prior to the
Effective Time, free of any conditions or requirements that, in the aggregate,
would be Material.
(b) As
of the
date of this Agreement, Zions and NBA are not aware of any reason why all
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 Zions as such business is carried on
immediately prior to the Effective Time.
Section
9.14 Updates
to Representations and Warranties.
Upon
the later of (a) two Business Days after the Effective Time is determined
or (b)
fifteen Business Days prior to the Effective Time and as of the Effective
Time,
Zions will deliver to TS Bancorp any updates to its representations which
may be
required to disclose events or circumstances arising after the date of this
Agreement, provided that any failure to comply with this requirement will
not
constitute the failure of any condition set forth in section 6.01 unless
the
underlying event not disclosed would independently result in a failure of
a
condition set forth in section 6.01. Such representations shall be updated
only
for the purpose of making the representations and warranties contained in
this
Agreement true and correct in all material respects as of the date such
representation is updated, and the update to a representation 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. For purposes of determining whether the condition set forth in section
6.01 to obligations of Zions have been met, any such updates to representations
delivered to TS Bancorp shall be disregarded unless TS Bancorp shall have
agreed
to accept any changes reflected in such updates.
Article
10.
Covenants
of Zions and NBA
Zions
(with respect to itself and NBA) and NBA (solely with respect to itself)
each
hereby covenant and agree as follows:
Section
10.01 Conduct
of Affairs.
Each of
Zions and NBA will:
(a) 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; and
(b) use
commercially reasonable efforts to cause the Holding Company Merger to qualify
as a reorganization within the meaning of section 368 of the Code and not
take
any action reasonably likely to cause the Holding Company Merger not to so
qualify.
Section
10.02 Nasdaq
Listing.
Zions
will use commercially reasonable efforts to cause the shares of Zions Stock
to
be issued in the Holding Company Merger to be listed or authorized for listing
on the Nasdaq Global Select Market as of the time of the effectiveness of
the
Registration Statement, subject to official notice of issuance.
Section
10.03 Subsequent
Events.
Until
the Effective Time, Zions and NBA will immediately advise TS Bancorp in a
detailed written notice of any fact or occurrence or any pending or threatened
occurrence of which it obtains Knowledge and that (if existing and known
at the
date of the execution of this Agreement) would have been required to be set
forth or disclosed by Zions or NBA 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 Zions or NBA 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 that (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
10.04 Trust
Preferred Securities.
At the
Effective Time, Zions shall expressly assume all of TS Bancorp's obligations
under the indentures related to the subordinated debentures issued by TS
Bancorp
in connection with the issuances by the Statutory Trusts of preferred securities
intended to be "qualified trust preferred securities" as defined in regulatory
capital guidelines of the Board of Governors or to qualify as grandfathered
trust preferred securities and shall execute any documents, instruments,
and
agreements, including any supplemental indentures, guarantees, or declarations
of trust required by such indentures, the subordinated debentures, or the
trust
preferred securities issued by the Statutory Trusts, or as may reasonably
be
requested by the applicable trustees, and thereafter shall perform all of
TS
Bancorp's obligations with respect to the subordinated debentures and the
trust
preferred securities issued by the Statutory Trusts.
Section
10.05 Indemnification.
Following the Effective Time, Zions will indemnify, defend and hold harmless
the
present and former directors and officers of TS Bancorp and TS Bank against
all
costs or expenses (including reasonable attorneys' fees), judgments, fines,
losses, claims, damages or liabilities as incurred, in connection with any
claim, action, suit, proceeding, or investigation, whether civil, criminal,
administrative, or investigative, arising out of actions or omissions occurring
at or before the Effective Time (including the transactions contemplated
by this
Agreement), to the same extent as such persons are indemnified or have the
right
to advancement of expenses pursuant to the Organizational Documents and
indemnification agreements, if any, in effect on the date of this Agreement
with
TS Bancorp and TS Bank.
Section
10.06 TS
Bank Funding Needs.
At any
time from September 25, 2006 until October 10, 2006, Zions shall cause one
or
more of its bank subsidiaries (whose identity or identities are mutually
and
reasonably acceptable to Zions and TS Bank) to issue to TS Bank (against
proper
payment therefor by TS Bank in immediately available funds) one or more
certificates of deposit in an aggregate amount not to exceed the aggregate
proceeds of the sale of the investment securities and mutual fund shares
sold by
TS Bancorp and TS Bank pursuant to section 8.17. The terms of such certificate
or certificates of deposit will include a maturity date of May 1, 2007, an
annual percentage yield of 5.37 percent payable at maturity, and such other
terms as are customary for large-denomination certificates of deposit of
the
issuing bank.
Article
11.
Additional
Agreements
Section
11.01 Proxy
Statement and Registration Statement.
As
promptly as practicable after the execution of this Agreement, TS Bancorp
and
Zions will prepare and file with the SEC the Proxy Statement and Registration
Statement relating to the approval of this Agreement and the transactions
contemplated hereby, including the Holding Company Merger, by the stockholders
of TS Bancorp and will use all reasonable efforts to cause the Registration
Statement to become effective as soon thereafter as practicable. Each of
TS
Bancorp and Zions will furnish all information concerning itself and its
affiliates that is required to be included in the Proxy Statement or, to
the
extent applicable, the other filings, or that is customarily included in
Proxy
Statement or other filings prepared in connection with transactions of the
type
contemplated by this Agreement. Each of TS Bancorp and Zions will use its
reasonable best efforts to respond as promptly as practicable to any comments
of
the SEC with respect to the Proxy Statement or the other filings and to cause
the definitive Proxy Statement to be mailed to TS Bancorp's stockholders
as
promptly as reasonably practicable after the date of this Agreement. Each
party
will promptly notify the other party upon the receipt of any comments from
the
SEC or its staff or any request from the SEC or its staff for amendments
or
supplements to the Proxy Statement or the other filings and will provide
the
other party with copies of all correspondence between it and its
representatives, on the one hand, and the SEC and its staff, on the other
hand
relating to the Proxy Statement or the other filings, provided that Zions
need
not provide to TS Bancorp and TS Bank copies of those portions of
correspondence, if any, between it and its representatives, on the one hand,
and
the SEC and its staff, on the other hand that do not relate to TS Bancorp
or TS
Bank or to the transactions contemplated by this Agreement. If at any time
prior
to the Shareholder Meeting, any information relating to TS Bancorp, Zions
or any
of their respective affiliates, officers or directors should be discovered
by TS
Bancorp or Zions which should be set forth in an amendment or supplement
to the
Proxy Statement or the other filings, so that the Proxy Statement or the
other
filings do not contain any untrue statement of a material fact or omit to
state
any material fact required to be stated therein or necessary in order to
make
the statements therein, in light of the circumstances under which they are
made,
not misleading, the party which discovers such information will promptly
notify
the other party, and an appropriate amendment or supplement describing such
information will be filed with the SEC and, to the extent required by applicable
law, disseminated to the stockholders of TS Bancorp. Except with respect
to
correspondence, if any, between Zions and its representatives, on the one
hand,
and the SEC and its staff, on the other hand that do not relate to TS Bancorp
or
TS Bank or to the transactions contemplated by this Agreement, prior to filing
or mailing the Proxy Statement or filing the other filings (or, in each case,
any amendment or supplement thereto) or responding to any comments of the
SEC
with respect thereto, the party responsible for filing or mailing such document
will provide the other party an opportunity to review and comment on that
document or response.
Section
11.02 Information.
Each of
Zions and TS Bancorp agrees, as to itself and its subsidiaries, that none
of the
information supplied or to be supplied by it for inclusion or incorporation
by
reference in (a) the Registration Statement will, at the time the Registration
Statement and each amendment or supplement thereto, if any, becomes effective
under the Securities Act, contain any untrue statement of a material fact
or
omit to state any material fact required to be stated therein or necessary
to
make the statements therein not misleading and (b) the Proxy Statement and
any amendment or supplement thereto will, at the date of mailing to shareholders
and at the time of the Shareholder Meeting, contain any untrue statement
of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which such statement was made, not misleading. Each of Zions and TS
Bancorp further agrees that if it becomes aware that any information furnished
by it would cause any of the statements in the Proxy Statement or the
Registration Statement to be false or misleading with respect to any material
fact, or to omit to state any material fact necessary to make the statements
therein not false or misleading, to promptly inform the other party thereof
and
to take appropriate steps to correct the Proxy Statement or the Registration
Statement.
Section
11.03 Regulatory
Filings.
(a) Subject
to the other provisions of this Agreement, the parties hereto shall cooperate
and use their respective reasonable best efforts to prepare all documentation,
to effect all filings and to obtain all permits, consents, approvals, and
authorizations of all third parties and Governmental Authorities necessary
to
consummate the transactions contemplated by this Agreement; and any initial
filings with Governmental Authorities shall be made by Zions (and TS Bancorp,
if
applicable) as soon as reasonably practicable after the execution of this
Agreement. Each of Zions and TS Bancorp shall have the right to review in
advance, subject to applicable laws relating to the exchange of information,
all
of the information relating to such party and any of its subsidiaries that
appears in any filing made by the other party with, or written information
submitted to, any third party or any Governmental Authority in connection
with
the transactions contemplated by this Agreement.
(b) Each
party agrees, upon request, to furnish the other parties with all information
concerning itself, its subsidiaries (if applicable), directors, officers,
and
stockholders and such other matters as may be reasonably necessary or advisable
in connection with any filing, notice, or application made by or on behalf
of
such other parties or any of their respective subsidiaries to any third party
or
Governmental Authority.
Article
12.
Closing
Section
12.01 Place
and Time of Closing.
Closing shall take place at a mutually agreeable location within the State
of
Arizona, or such other place as the Parties choose, or (if the Parties shall
be
unable to agree on such a location or place) at the office of NBA located
at
6001 North Twenty-Fourth Street, Phoenix, Arizona, 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 to close have then been met or
waived.
Section
12.02 Events
To Take Place at Closing.
At the Closing, the following actions will be taken:
(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
Holding Company Merger and the issuance of shares incident thereto and the
Bank
Merger shall be effected; provided, however, that the administrative and
ministerial aspects of the issuance of shares incident to the Holding Company
Merger will be settled as soon thereafter as shall be reasonable under the
circumstances.
Article
13.
Termination,
Damages for Breach, Waiver, and Amendment
Section
13.01 Termination
by Reason of Lapse of Time.
Notwithstanding the provisions of section 13.02, this Agreement may be
terminated by any Party on or after May 31, 2007, 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, or to the failure
of
its affiliated Party, to perform or observe its covenants and agreements
as set
forth herein.
Section
13.02 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 TS
Bancorp):
(a) by
mutual
written consent of the Parties;
(b) by
Zions,
upon written notice to TS Bancorp given at any time (i) if any of the
representations and warranties of TS Bancorp or TS Bank contained in article
7
was incorrect when made, or (ii) in the event of a breach or failure by TS
Bancorp or TS Bank of any covenant or agreement of TS Bancorp or TS Bank
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 TS
Bancorp or TS Bank and which 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
TS
Bancorp, 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
incorrect when made, or (ii) in the event of a breach or 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 TS Bancorp upon written notice given to the other if the board of
directors of either Zions or TS Bancorp shall have determined in its sole
judgment made in good faith, after due consideration and consultation with
counsel, that the Holding Company 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 TS Bancorp upon written notice given to the other if any of the
approvals referred to in section 3.02, 3.03, 3.04, 3.05, or 3.06 are denied
and
such denial has become final and nonappealable;
(f) by
either
Zions or TS Bancorp upon written notice given to the other if the shareholders
of TS Bancorp shall have voted on and failed to adopt this Agreement at the
Shareholder Meeting;
(g) By
Zions,
at any time during the three-Business-Day period beginning on the seventh
Business Day preceding the Effective Time, if the Average Closing Price is
more
than $93.24; provided that Zions will have no right to terminate this Agreement
under this section 13.02(g) if Zions is acquired by any other Person not
affiliated with it or has announced an acquisition by any other Person not
affiliated with it after the date of this Agreement and prior to the Effective
Date, whether that acquisition is through merger, stock purchase, consolidation
or other business combination; and provided further that if Zions chooses
to
exercise its -right pursuant to this section 13.02(g), it shall give immediate
written notice thereof to TS Bancorp. During the three-Business-Day period
commencing with receipt of such notice, TS Bancorp shall have the option
to
agree that the "Zions Divisor" for purposes of the Holding Company Merger
Agreement shall be the Average Closing Price divided by 1.15. If TS Bancorp
so
elects within such three-Business-Day period, it shall give immediate written
notice thereof to Zions, whereupon no termination shall have occurred pursuant
to this section 13.02(g) and this Agreement shall remain in effect in accordance
with its terms (except that the Parties will promptly amend the Holding Company
Merger Agreement to provide that the "Zions Divisor" shall be the Average
Closing Price divided by 1.15);
(h) by
TS
Bancorp, at any time during the three-Business-Day period beginning on the
seventh Business Day preceding the Effective Time, if the Average Closing
Price
is less than $68.92; provided that if TS Bancorp chooses to exercise its
-right
pursuant to this section 13.02(h), it shall give immediate written notice
thereof to Zions. During the three-Business-Day period commencing with receipt
of such notice, Zions shall have the option to agree that the "Zions Divisor"
for purposes of the Holding Company Merger Agreement shall be the Average
Closing Price divided by 0.85. If Zions so elects within such three-Business-Day
period, it shall give immediate written notice thereof to TS Bancorp, whereupon
no termination shall have occurred pursuant to this section 13.02(h) and
this
Agreement shall remain in effect in accordance with its terms (except that
the
Parties will promptly amend the Holding Company Merger Agreement to provide
that
the "Zions Divisor" shall be the Average Closing Price divided by 0.85);
or
(i) by
TS
Bancorp, upon written notice to Zions given at any time, if the board of
directors of TS Bancorp, based upon the written advice of Stinson Morrison
Hecker LLP and taking into account the written advice of its financial advisors
(which shall be a nationally recognized investment banking firm), determines
in
good faith that such termination is required for the board of directors to
comply with its fiduciary duties to stockholders imposed by law by reason
of an
Alternative Proposal being made; provided that TS Bancorp shall have paid
the
amount of liquidated damages set forth in section 13.03(c).
Section
13.03 Effect
of Termination.
In the event of the termination and abandonment of this Agreement pursuant
to
the provisions of section 13.01 or section 13.02, this Agreement shall become
void and have no force or effect, without any liability on the part of Zions,
NBA, TS Bancorp, TS Bank, or their respective directors or officers or
shareholders, in respect of this Agreement. Notwithstanding the
foregoing:
(a) the
provisions of sections 13.03, 14.01, 14.04, and 14.05 shall survive such
termination;
(b) if
such
termination is a result of any of the representations and warranties of a
Party
being incorrect when made or a result of the breach or failure by a Party
of a
covenant or agreement hereunder, such Party whose representations and warranties
were incorrect or who breached or failed to perform its covenant or agreement
shall be liable in the amount of $2,250,000 to the other Party or Parties
that
are not affiliated with it (it being understood and agreed for the purposes
of
the preceding clause that Zions and NBA are Parties that are affiliated with
each other and that TS Bancorp and TS Bank are Parties that are affiliated
with
each other. Only one payment in the amount set forth in the previous sentence
must be made, but the Parties entitled to that payment may decide how the
payment is to be allocated among them and if they cannot decide, the payment
may
be made to either Party entitled to payment;
(c) if
such
termination is pursuant to section 13.02(i)
of this
Agreement, or if this Agreement is terminated for any reason specified in
section 13.02(b) of this Agreement and a definitive agreement with respect
to an
Alternative Proposal is executed by TS Bancorp or TS Bank within one year
after
such termination, then in either case, and in addition to any amount payable
or
paid under subsection (b) of this section 13.03, TS Bancorp shall be liable
to
Zions for liquidated damages in the further amount of $7,500,000. TS Bancorp
acknowledges that the agreements contained in subsection (c) of this section
13.03 are an integral part of the transactions contemplated in this Agreement
and that, without these agreements, Zions would not enter into this Agreement;
and
(d) unless
such termination is pursuant to section 13.02(i),
and in
the event that the Three-Year Swap Rate (as defined in the next sentence)
shall
be less than 5.37 percent, then Zions shall be liable to TS Bancorp in the
amount of the present value for the period beginning on May 1, 2007 and ending
on April 30, 2010 (discounted at the Three-Year Swap Rate) of the product
of the
aggregate face amount of the certificate or certificates of deposit issued
to TS
Bank pursuant to section 10.06 and the difference between 5.37 percent per
annum
and the Three-Year Swap Rate. The "Three-Year Swap Rate" shall be the annual
percentage rate imputed from the average of the bid and asked prices as of
the
close of business (London time) on May 1, 2007 as displayed on page 32 of
the
Forward Curve Analysis (FWCV) section of the screen service of Bloomberg
L.P.
(or such other page as may replace page 32 on that service for the purpose
of
displaying actual or implied London interbank offered rates) with respect
to
deposits in U.S. dollars with a maturity of three years.
Section
13.04 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
that is, or whose shareholders are, entitled to the benefit thereof, and
the
other Parties may rely on the delivery of such a waiver as conclusive evidence
of such judgment and the validity of the waiver.
Section
13.05 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; 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 TS Bancorp in any respect that would prejudice the economic
interests of such TS Bancorp shareholders, or any of them.
Article
14.
General
Provisions
Section
14.01 Allocation
of Costs and Expenses.
Except as provided in this section, each Party 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 shall be deemed to be incurred
on
behalf of TS Bancorp and the cost of registering under federal and state
securities laws the stock of Zions to be received by the shareholders of
TS
Bancorp shall be deemed to be incurred on behalf of Zions.
Section
14.02 Mutual
Cooperation.
(a) Subject
to the terms and conditions herein provided, each Party shall use commercially
reasonable efforts, and shall cooperate fully with the other Parties, 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 TS Bancorp 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 TS
Bancorp
and TS Bank to Zions' own system of electronic data processing by the next
Business Day following the Effective Time. Each Party shall bear its own
costs
associated with the transfer of tapes and information and the conversion
of
data. TS Bancorp 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 TS Bancorp and TS
Bank
systems) and set of deconversion reports on or before October 1, 2006, 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. TS Bancorp shall also
arrange the delivery to Zions at the main office of Zions (or at such other
location as has been designated in writing by Zions no later than five business
days before the Effective Time) no later than 6:00 a.m. Mountain time on
the day
immediately following the Effective Time, two duplicate final data processing
conversion file packages and deconversion reports in an industry standard
format.
Section
14.03 Form
of Public Disclosures.
Zions and TS Bancorp shall mutually agree in advance upon the form and substance
of all public disclosures concerning this Agreement and the transactions
contemplated hereby.
Section
14.04 Confidentiality.
Zions, NBA, TS Bancorp, TS Bank, 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,
TS Bancorp, TS Bank, 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 TS Bancorp and TS Bank,
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 its terms, 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 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 14.04. The confidentiality agreement contained
in this
section 14.04 shall remain operative and in full force and effect, and shall
survive the termination of this Agreement.
Section
14.05 Information
for Applications and Registration Statement.
(a) Each
Party represents and warrants that all information concerning it that 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, information
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 14.05 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.
(b) In
order
to provide for just and equitable contribution in circumstances in which
the
indemnity agreement contained in section 14.05(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.
Section
14.06 Changes
to Transaction Structure.
Zions
may at any time change the method of effecting the Holding Company Merger
(including by providing for the merger of TS Bancorp and a wholly owned
subsidiary of Zions) or the method of effecting the Bank Merger (including
by
providing for the conversion of TS Bank into a national banking association
and
the merger of such converted association and NBA) if requested by Zions and
consented to by TS Bancorp (which consent shall not unreasonably be withheld);
provided, however, that no such change shall (a) change the amount or kind
of
merger consideration provided in this Agreement, (b) adversely affect the
tax
treatment of the Merger with respect to the stockholders of TS Bancorp, or
(c)
substantially impede or delay consummation of the transactions contemplated
by
this Agreement.
Section
14.07 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 or for the dividend
addressed in section 8.08(b).
Section
14.08 Stock
Repurchases.
TS
Bancorp and TS Bank acknowledge 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
14.09 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. 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
14.10 Entire
Agreement.
This Agreement sets forth the entire understanding of the Parties with respect
to their commitments to one another and their undertakings vis-à-vis one another
on the subject matter of this Agreement. Any previous agreements or
understandings among the Parties regarding the subject matter of this Agreement
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, TS Bancorp, TS Bank, and their respective
shareholders any rights or remedies under or by reason of this
Agreement.
Section
14.11 Survival
of Representations, Warranties, and Covenants.
The
respective representations, warranties, covenants, and agreements contained
in
this Agreement will not survive the Effective Time other than sections 2.05,
10.05, and this article 14 which shall survive the Effective Time. Each Party
shall be deemed to have relied upon each and every representation and warranty
of the other Parties regardless of any investigation heretofore or hereafter
made by or on behalf of such Party.
Section
14.12 Notices.
All notices, consents, waivers, or other communications that 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 1134
Salt
Lake
City, Utah 84111
Attention:
Mr.
Doyle
L. Arnold
Vice
Chairman and Chief Financial Officer
With
a
required copy to:
Brian
D.
Alprin, Esq.
Duane
Morris LLP
1667
K
Street, N.W., Suite 700
Washington,
D.C. 20006-1608
If
to TS
Bancorp or TS Bank:
The
Stockmen's Bancorp, Inc.
3825
Stockton Hill Road
Kingman,
Arizona 86402-3879
Attention:
Mr.
Farrel Holyoak
President
and Chief Executive Officer
With
a
required copy to:
C.
Robert
Monroe, Esq.
Stinson
Morrison Hecker LLP
1201
Walnut Street, Suite 2900
Kansas
City, Missouri 64106
All
such
notices shall be deemed to have been given on the date delivered, transmitted,
or mailed in the manner provided above.
Section
14.13 Waiver
of Certain Notices.
TS
Bancorp in its capacity as shareholder of TS Bank hereby expressly and
irrevocably waives:
(a) the
requirement of a meeting of the shareholders of TS Bank to consider and vote
upon the Bank Merger, and
(b) notice
of
any such meeting, including the publication of notice of the time, place,
and
object of the meeting in any newspaper, the dispatch of notice by certified
or
registered mail, and any other form of notice as may be afforded to it by
the
Arizona Revised Statutes, the National Bank Act, the articles of incorporation
and bylaws of TS Bank, or otherwise.
Section
14.14 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.
Section
14.15 No
Third Party Beneficiaries.
No
representation, warranty, inducement, promise, understanding, or condition
not
set forth in this Agreement has been made or relied on by any party in entering
into this Agreement. Except for Section 10.05, which is intended to benefit
the
Indemnified Parties to the extent stated, nothing expressed or implied in
this
Agreement is intended to confer any rights, remedies, obligations, or
liabilities upon any person other than the parties hereto.
Section
14.16 Severability.
If any
provision of this Agreement or the application thereof to any person or
circumstance is determined by a court of competent jurisdiction to be invalid,
void or unenforceable, the remaining provisions, or the application of such
provision to persons or circumstances other than those as to which it has
been
held invalid or unenforceable, will remain in full force and effect and will
in
no way be affected, impaired, or invalidated thereby, so long as the economic
or
legal substance of the transactions contemplated hereby is not affected in
any
manner materially adverse to any party. Upon such determination, the parties
will negotiate in good faith in an effort to agree upon a suitable and equitable
substitute provision to effect the original intent of the parties.
Section
14.17 Binding
Agreement.
This
Agreement shall be binding upon the Parties and their respective successors
and
assigns.
[the
remainder of this page is left blank intentionally]
IN
WITNESS WHEREOF, the Parties have executed this Agreement as of the date
first
above written.
| |
|
|
| |
ZIONS
BANCORPORATION |
|
|
|
| |
By: |
Doyle
L.
Arnold |
| |
Doyle
L. Arnold |
| |
Title:
Vice Chairman and Chief Financial
Officer |
| |
|
|
| |
THE
STOCKMEN'S BANCORP, INC. |
|
|
|
| |
By: |
Farrel
Holyoak |
| |
Farrel
Holyoak |
| |
Title:
President and Chief Executive
Officer |
| |
|
|
| |
NATIONAL
BANK OF ARIZONA |
|
|
|
| |
By: |
Keith
D.
Maio |
| |
Keith
D. Maio |
| |
Title:
President and Chief Executive
Officer |
| |
|
|
| |
THE
STOCKMEN'S BANK |
|
|
|
| |
By: |
Farrel
Holyoak |
| |
Farrel
Holyoak |
| |
Title:
President |
SCHEDULE
2.06
Tod
W.
Becker
Tod
W.
Becker and Lorilee M. Becker
William
W. Becker
The
William W. Becker Living Trust
Farrel
Holyoak
Charles
Schwab & Co., Inc. Custodian Farrel Holyoak IRA
Colleen
K. Kirby
Lingenfelter
Family Trust
Edward
D.
Jones & Co. Custodian FBO John G. Lingenfelter
Edward
D.
Jones & Co. Custodian FBO Diana Lingenfelter
Lingenfelter
Investments Ltd Partnership
EXHIBIT
I
HOLDING
COMPANY MERGER
AGREEMENT
PLAN
OF MERGER
This
Plan
of Merger is made and entered into as of September 8, 2006, between THE
STOCKMEN'S BANCORP, INC. ("TS Bancorp"), a corporation organized under the
laws
of the State of Arizona, and ZIONS BANCORPORATION ("Zions"), a corporation
organized under the laws of the State of Utah. TS Bancorp and Zions are
hereinafter sometimes individually called a "Constituent Corporation" and
collectively called the "Constituent Corporations."
RECITALS
TS
Bancorp is a corporation duly organized, validly existing, and in good standing
under the laws of the State of Arizona. As of June 30, 2006 the authorized
capital stock of TS Bancorp consisted of 1,000,000 shares of Common Stock,
no
par value, of which 336,835 shares were issued and outstanding.
Zions
is
a corporation duly organized, validly existing, and in good standing under
the
laws of the State of Utah. As of June 30, 2006, the authorized capital stock
of
Zions consisted of 3,000,000 shares of Preferred Stock, without par value,
of
which no shares were issued and outstanding, and 350,000,000 shares of Common
Stock, without par value, of which 106,611,731 shares were issued and
outstanding.
Zions,
TS
Bancorp, National Bank of Arizona, and The Stockmen's Bank have entered into
an
Agreement and Plan of Reorganization, dated September 8, 2006 (the "Plan
of
Reorganization"), setting forth certain representations, warranties, and
agreements in connection with the transactions therein and herein contemplated,
which contemplates the merger of TS Bancorp with and into Zions (the "Merger")
in accordance with this Plan of Merger (the "Plan").
The
Boards of Directors of each of TS Bancorp and Zions deem the Merger advisable
and in the best interests of each corporation and its shareholders. The Boards
of Directors of each of TS Bancorp and Zions, by resolutions duly adopted,
have
approved the Plan of Reorganization and this Plan. The Board of Directors
of TS
Bancorp, by resolutions duly adopted, has directed that this Plan, and
authorization for the transactions contemplated hereby, be submitted to
shareholders of TS Bancorp for approval. Pursuant to the Utah Revised Business
Corporation Act, action by the shareholders of Zions is not
required.
At
the
Effective Time (as defined in article 1) shares of TS Bancorp common stock
shall
be converted into the right to receive shares of the common stock of Zions,
without par value (the "Zions Stock"), as provided herein.
In
consideration of the premises and the mutual covenants and agreements herein
contained and subject to the terms and conditions of this Plan, the parties
hereto hereby covenant and agree as follows:
Article
1.
Merger.
TS
Bancorp shall be merged with and into Zions on the date and at the time to
be
specified in the Articles of Merger to be filed with the Secretary of State
of
the State of Utah pursuant to section 16-10a-1105 of the Utah Revised Business
Corporation Act and with the Secretary of State of the State of Arizona pursuant
to section 10-1105 of the Arizona Business Corporation Act (the "Effective
Time").
Article
2.
Effect
of the Merger.
(a) TS
Bancorp and Zions shall be a single corporation, which shall be Zions. Zions
is
hereby designated as the surviving corporation in the Merger and is hereinafter
sometimes called the "Surviving Corporation."
(b) The
separate existence of TS Bancorp shall cease.
(c) Zions
shall have all the rights, privileges, immunities, and powers and shall assume
and be subject to all the duties and liabilities of a corporation organized
under the Utah Revised Business Corporation Act.
(d) The
Surviving Corporation shall thereupon and thereafter possess all of the rights,
privileges, immunities, and franchises, of a public as well as of a private
nature, of each of the Constituent Corporations; and all property, real,
personal and mixed, and all debts due on whatever account, including
subscriptions to shares and all other choses in action, and all and every
other
interest of and belonging to or due to each of the Constituent Corporations
shall be taken and deemed to be transferred to and vested in the Surviving
Corporation without further act or deed; and the title to any real estate,
or
any interest therein, vested in either of the Constituent Corporations shall
not
revert or be in any way impaired by reason of the Merger.
(e) The
Surviving Corporation shall thenceforth be responsible and liable for all
the
liabilities and obligations of each of the Constituent Corporations; and
any
claim existing or action or proceeding pending by or against either of the
Constituent Corporations may be prosecuted as if the Merger had not taken
place,
or the Surviving Corporation may be substituted in its place. The Surviving
Corporation expressly assumes and agrees to perform all of TS Bancorp's
liabilities and obligations. Neither the rights of creditors nor any liens
upon
the property of either Constituent Corporation shall be impaired by the
Merger.
(f) Any
taxes, penalties, and public accounts of the State of Utah and the State
of
Arizona, claimed against either of the Constituent Corporations but not settled,
assessed, or determined prior to the Merger shall be settled, assessed, or
determined against the Surviving Corporation and, together with interest
thereon, shall be a lien against the franchises and property, both real and
personal, of the Surviving Corporation.
(g) The
articles of incorporation of Zions as they exist immediately prior to the
Effective Time shall be the articles of incorporation of the Surviving
Corporation until later amended pursuant to Utah law.
(h) The
bylaws of Zions as they exist immediately prior to the Effective Time shall
be
the bylaws of the Surviving Corporation until later amended pursuant to Utah
law.
(i) The
authorized shares of capital stock of Zions as of the Effective Time shall
be
3,000,000 shares of Preferred Stock, without par value, and 350,000,000 shares
of Common Stock, without par value.
(j) 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 that, prior to the Effective Time, represented shares of TS Bancorp
Stock, other than any shares of TS Bancorp Stock held by Zions (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, 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 equal to the product of the number of TS
Bancorp
Shares formerly represented by that certificate and the Exchange
Ratio.
(k) With
respect to any matters relating to stock certificates representing Zions
Shares,
Zions may rely conclusively upon the record of shareholders maintained by
TS
Bancorp containing the names and addresses of the holders of record of TS
Bancorp Shares at the Effective Time.
(l) The
terms
set forth below are used in this Plan with the following meanings:
(i) "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.
(ii) "Exchange
Ratio" shall mean the fraction, rounded to the nearest ten-thousandths of
an
integer, obtained by dividing the Issuable Zions Shares by the number of
shares
of the Common Stock of TS Bancorp that shall be issued and outstanding at
the
Effective Time.
(iii) "Issuable
Zions Shares" shall mean the Purchase Price divided by the Zions
Divisor.
(iv) "Purchase
Price" shall mean $210 million as increased or reduced in accordance with
the
subsections (A) and (B) of this section 2(l)(iv).
(A) The
Purchase Price shall be increased by $2,325,198.
(B) The
tax-effected excess of the value of liabilities and obligations of TS Bancorp
and TS Bank at the Effective Time to make future payments in connection with
TS
Bank's Supplemental Executive Retirement Plan and related agreements over
the
expense accrual on the books of TS Bancorp and TS Bank as of June 30, 2006
for
such liabilities and obligations shall be a reduction of the $210 million
purchase price. The Constituent Corporations stipulate and agree that the
tax-effected amount of such excess for purposes of this section 2(l)(iv)(B)
is $1,498,000.
(v) "Zions
Divisor" shall mean $81.08.
(vi) "Zions
Stock" shall mean the common stock of Zions, without par value.
(m) Notwithstanding
anything to the contrary herein, no shares of Zions Stock shall be issued
in
respect of any shares of TS Bancorp Stock the holders of which shall object
to
the Merger in writing and demand payment of the value of their shares pursuant
to article 13 of title 10 of the Arizona Business Corporation Act, and as a
result payment therefor is made, such holders to have only the rights provided
by article 13 of title 10 of the Arizona Business Corporation Act.
(n) Zions
will, promptly after the Effective Time, issue and deliver to Zions Bank,
in its
capacity as the Exchange Agent designated as such pursuant to section 6(a),
the
share certificates representing shares of Zions Stock (each a "New Certificate")
to be remitted to holders of TS Bancorp Shares in accordance with this
Plan.
(o) At
the
Effective Time, each stock option to purchase TS Bancorp Stock not exercised
prior to the Effective Time, 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 any TS Bancorp stock options, to substitute
options to purchase Zions Stock in place of any TS Bancorp stock options,
or to
assume any obligations under any stock plans under which TS Bancorp stock
options have been or may be issued.
Article
3.
Acts
to Carry Out Plan.
(a) TS
Bancorp and its officers and directors shall do all such acts and things
as may
be necessary or proper to vest, perfect, or confirm title to such property
or
rights in Zions and otherwise to carry out the purposes of this
Plan.
(b) If,
at
any time after the Effective Time, Zions 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
Zions its right, title, or interest in or under any of the rights, properties,
or assets of TS Bancorp acquired or to be acquired by Zions as a result of,
or
in connection with, the Merger, or (ii) otherwise carry out the purposes of
this Plan, TS Bancorp and its officers and directors shall be deemed to have
granted to Zions 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 Zions and otherwise to carry out the purposes
of this Plan; and the officers and directors of Zions are fully authorized
in
the name of TS Bancorp or otherwise to take any and all such
action.
Article
4.
Fractional
Shares.
Zions
will not issue fractional shares of its stock. In lieu of fractional shares
of
Zions Stock, if any, each shareholder of TS Bancorp who is entitled to a
fractional share of Zions Stock shall receive an amount of cash equal to
the
product of such fraction times the average of the last sale price of Zions
Stock
as reported in the Wall
Street Journal
or, if
no such sale price is so reported, the last sale price as reported by such
other
source upon which Zions and TS Bancorp shall mutually agree, or if no such
sale
takes place, the mean (unrounded) of the closing bid and asked prices of
Zions
Stock as reported on the Nasdaq Global Select Market, or in its absence by
such
other source upon which Zions and TS Bancorp shall mutually agree, during
the
twenty consecutive trading days ending on and including the trading day that
is
the eighth Business Day preceding the Effective Time, if that day is a trading
day, or, if that day is not a trading day, the subsequent calendar day that
is a
trading day; provided that if during the period that comprises those twenty
consecutive trading days Zions shall publicly release its quarterly earnings,
the
twenty consecutive trading days most immediately prior to that release shall
instead be used. Such fractional share interest shall not include the right
to
vote or to receive dividends or any interest thereon.
Article
5.
Dividends;
Interest.
No
shareholder of TS Bancorp entitled to receive Zions Stock in the Merger will
be
entitled to receive dividends on his or her Zions Stock until he or she
exchanges his or her certificates representing TS Bancorp Shares for Zions
Stock. Any dividends declared on Zions Stock to holders of record on or after
the Effective Time shall, with respect to stock to be delivered pursuant
to this
Plan to such shareholders of TS Bancorp who are entitled to exchange and
have
not exchanged their certificates representing TS Bancorp Shares for Zions
Stock,
be paid to the Exchange Agent as designated in article 6 of this Plan and,
upon
receipt from such a former TS Bancorp shareholder of certificates representing
TS Bancorp Shares, the Exchange Agent shall forward to such former TS Bancorp
shareholder (a) certificates representing his or her shares of Zions Stock,
(b) dividends declared thereon subsequent to the Effective Time (without
interest), (c) the cash value of any fractional shares determined in
accordance with article 4 of this Plan, and (d) the cash portion of the
consideration to which such shareholder is entitled.
Article
6.
Designation
of Exchange Agent.
(a) The
parties hereto hereby designate Zions First National Bank, a national banking
association with its head office in Salt Lake City, Utah ("Zions Bank"),
as
Exchange Agent to effect the exchanges contemplated by this Plan.
(b) If
any
share certificate representing shares of Zions Stock is to be issued in a
name
other than that in which the corresponding certificate which, immediately
prior
to the effectiveness of the Merger, had represented Zions Shares (an "Old
Certificate") 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 share certificate
representing shares of Zions Stock 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.
(c) If
Old
Certificates are not surrendered and exchanged for New Certificates prior
to two
years after the Effective Time (or, in any particular case, prior to the
date
before the second anniversary of the Effective Time on which the whole shares
of
TS Bancorp 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 TS Bancorp 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 TS Bancorp payable
to
holders of record of shares of TS Bancorp 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 TS Bancorp 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. Notwithstanding the foregoing,
neither Zions nor its agents or any other Person shall be liable to any former
holder of TS Bancorp Stock for any property delivered to a public official
pursuant to applicable abandoned property, escheat, or similar
laws.
Article
7.
Counterparts.
This
Plan
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 Plan or any counterpart of this Plan to produce or account
for the other counterpart or counterparts.
Article
8.
Interpretation.
Article
titles, headings to articles, 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 Plan. Exhibits referred to in this
Plan
shall be construed with and as an integral part of this Plan to the same
extent
as if they were set forth verbatim in this Plan. As used in this Plan,
"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 his, her, or its successors and assigns;
except as the context may otherwise require, "hereof," "herein," "hereunder,"
and comparable terms refer to the entirety of this Plan and not to any
particular article, section, or other subdivision of this Plan or attachment
to
this Plan; 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 Plan or an "Exhibit" or "Schedule" to this Plan. The
parties hereto acknowledge that each party and its counsel have reviewed
and
revised this Plan 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 Plan
or
any amendment, schedule, or exhibit to this Plan.
Article
9.
Choice
of Law and Venue.
This
Plan
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 Plan. 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 Plan or the transactions contemplated by this Plan 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
Plan
or the transactions contemplated thereby brought in the courts
aforesaid.
Article
10.
Adjustments
for Certain Events.
Anything
in this Plan to the contrary notwithstanding, all prices per share and exchange
ratios referred to in this Plan 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 or for the dividend
addressed in section 8.08(b) of the Plan of Reorganization.
Article
11.
Binding
Agreement.
This
Plan
shall be binding upon the parties and their respective successors and
assigns.
Article
12.
Amendment.
To
the
extent permitted by law, this Plan 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, provided that this Plan may not be amended
after the action by shareholders of TS Bancorp in any respect that would
prejudice the economic interests of such TS Bancorp shareholders, or any
of
them, except as specifically provided herein or by like action of such
shareholders.
Article
13.
Termination.
This
Plan
shall terminate and be abandoned upon (i) termination of the Plan of
Reorganization or (ii) the mutual consent of TS Bancorp and Zions at any
time prior to the Effective Time, and there shall be no liability on the
part of
either of the parties hereto (or any of their respective officers or directors)
except to the extent provided in the Plan of Reorganization.
IN
WITNESS WHEREOF, the parties have executed this Plan as of the date first
above
written.
| |
|
|
| |
ZIONS
BANCORPORATION |
|
|
|
| |
By: |
Doyle
L.
Arnold |
| |
Doyle
L. Arnold |
| |
Title:
Vice Chairman and Chief Financial Officer |
| |
|
|
| |
THE
STOCKMEN'S BANCORP, INC. |
|
|
|
| |
By: |
Farrel
Holyoak |
| |
Farrel
Holyoak |
| |
Title:
President and Chief Executive Officer |
EXHIBIT
II
BANK
MERGER
AGREEMENT
PLAN
OF MERGER
This
Plan
of Merger is made and entered into as of September 8, 2006, among THE STOCKMEN'S
BANK ("TS Bank"), a banking corporation organized under the laws of the State
of
Arizona, and NATIONAL BANK OF ARIZONA ("NBA"), a national banking association
organized under the laws of the United States. TS Bank and NBA are hereinafter
sometimes individually called a "Constituent Bank" and collectively called
the
"Constituent Banks."
RECITALS
TS
Bank
is a banking corporation duly organized, validly existing, and in good standing
under the laws of the State of Arizona. As of June 30, 2006, the authorized
capital stock of TS Bank consisted of 1,000,000 shares of Common Stock, par
value $5.00, of which 220,000 shares were issued and outstanding.
NBA
is a
national banking association duly organized, validly existing, and in good
standing under the laws of the United States. As of June 30, 2006, the
authorized capital stock of NBA consisted of 200,000 shares of Common Stock,
$30.00 par value, of which 150,000 shares were issued and
outstanding.
NBA,
TS
Bank, Zions Bancorporation, and The Stockmen's Bancorp, Inc. have entered
into
an Agreement and Plan of Reorganization, dated September 8, 2006 (the "Plan
of
Reorganization"), setting forth certain representations, warranties, and
agreements in connection with the transactions therein and herein contemplated,
which contemplates the merger of TS Bank with and into NBA (the "Merger")
in
accordance with this Plan of Merger (the "Plan").
The
Boards of Directors of each of TS Bank and NBA deem the Merger advisable
and in
the best interests of each bank and its shareholders. The Boards of Directors
of
each of TS Bank and NBA, by resolutions duly adopted, have approved the Plan
of
Reorganization and this Plan. The Boards of Directors of each of TS Bank
and
NBA, by resolutions duly adopted, have directed that this Plan, and
authorization for the transactions contemplated hereby, be submitted to
shareholders of TS Bank and NBA, respectively, for approval.
In
consideration of the premises and the mutual covenants and agreements herein
contained and subject to the terms and conditions of this Plan, the parties
hereto hereby covenant and agree as follows:
Article
1.
Merger.
TS
Bank
shall be merged with and into NBA on the date and at the time to be specified
in
documentation to be filed by NBA with the Office of the Comptroller of the
Currency pursuant to the National Bank Act and in the Articles of Merger
to be
filed with the Secretary of State of the State of Arizona pursuant to section
10-1105 of the Arizona Business Corporation Act (the "Effective
Time").
Article
2.
Effect
of the Merger.
(a) TS
Bank
and NBA shall be a single association, which shall be NBA. NBA is hereby
designated as the surviving association in the Merger and is hereinafter
sometimes called the "Surviving Bank."
(b) The
separate existence of TS Bank shall cease.
(c) NBA
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,
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 debts due on whatever account, including subscriptions to
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 act
or
deed; 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.
(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 as if the Merger had not taken place, or the Surviving
Bank may be substituted in its place. The Surviving Bank expressly assumes
and
agrees to perform all of TS Bank's liabilities and obligations. Neither the
rights of creditors nor any liens upon the property of either Constituent
Bank
shall be impaired by the Merger.
(f) Any
taxes, penalties, and public accounts of the State of Arizona or the State
of
California, claimed against either of the Constituent Banks but not settled,
assessed, or determined prior to the Merger shall be settled, assessed, or
determined against the Surviving Bank and, together with interest thereon,
shall
be a lien against the franchises and property, both real and personal, of
the
Surviving Bank.
(g) 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.
(h) The
bylaws of NBA as they exist immediately prior to the Effective Time shall
be the
bylaws of the Surviving Bank until amended pursuant to federal law.
(i) The
authorized shares of capital stock of NBA as of the Effective Time shall
be
200,000 shares of common stock, par value $30.00 per share.
(j) The
currently outstanding 150,000 shares of common stock of NBA, each of $30.00
par
value, will remain outstanding as shares of the $30.00 par value common stock
of
NBA, and the holders of such stock shall retain their present
rights.
(k) The
shares of TS Bank Stock shall be cancelled.
Article
3.
Acts
to Carry Out Plan.
(a) TS
Bank
and its officers and directors shall do all such acts and things as may be
necessary or proper to vest, perfect, or confirm title to such property or
rights in NBA and otherwise to carry out the purposes of this Plan.
(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 TS Bank 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 Plan, TS Bank and its 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
Plan; and the officers and directors of NBA are fully authorized in the name
of
TS Bank or otherwise to take any and all such action.
Article
4.
Counterparts.
This
Plan
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 Plan or any counterpart of this Plan to produce or account
for the other counterpart or counterparts.
Article
5.
Interpretation.
Article
titles, headings to articles, 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 Plan. Exhibits referred to in this
Plan
shall be construed with and as an integral part of this Plan to the same
extent
as if they were set forth verbatim in this Plan. As used in this Plan,
"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 his, her, or its successors and assigns;
except as the context may otherwise require, "hereof," "herein," "hereunder,"
and comparable terms refer to the entirety of this Plan and not to any
particular article, section, or other subdivision of this Plan or attachment
to
this Plan; 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 Plan or an "Exhibit" or "Schedule" to this Plan. The
parties hereto acknowledge that each party and its counsel have reviewed
and
revised this Plan 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 Plan
or
any amendment, schedule, or exhibit to this Plan.
Article
6.
Choice
of Law and Venue.
This
Plan
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 Plan. 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 Plan or the transactions contemplated by this Plan 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
Plan
or the transactions contemplated thereby brought in the courts
aforesaid.
Article
7.
Binding
Agreement.
This
Plan
shall be binding upon the parties and their respective successors and
assigns.
Article
8.
Amendment.
To
the
extent permitted by law, this Plan 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.
Article
9.
Termination.
This
Plan
shall terminate and be abandoned upon (i) termination of the Plan of
Reorganization or (ii) the mutual consent of TS Bank and NBA at any time
prior to the Effective Time, and there shall be no liability on the part
of
either of the parties hereto (or any of their respective officers or directors)
except to the extent provided in the Plan of Reorganization.
IN
WITNESS WHEREOF, the parties have executed this Plan as of the date first
above
written.
| |
|
|
| |
NATIONAL
BANK OF ARIZONA |
|
|
|
| |
By: |
Keith
D.
Maio |
| |
Keith
D. Maio |
| |
Title: President
and Chief Executive Officer |
| |
|
|
| |
THE
STOCKMEN'S BANK |
|
|
|
| |
By: |
Farrel
Holyoak |
| |
Farrel
Holyoak |
| |
Title:
President |
H
Hovde
FINANCIAL
September
7, 2006
Board
of
Directors
The
Stockmen's Bancorp, Inc.
3825
Stockton Hill Road
Kingman,
Arizona 86402-3879
Dear
Members of the Board:
We
understand that The Stockmen's Bancorp, Inc., an Arizona corporation
("Stockmen's Bancorp"), and its wholly owned subsidiary, The Stockmen's Bank,
an
Arizona banking corporation ("Stockmen's Bank"), on the one hand, and Zions
Bancorporation, a Utah corporation ("Zions"), and its wholly owned subsidiary,
National Bank of Arizona, a national banking association ("National Bank"),
on
the other hand, are about to enter into an Agreement and Plan of Reorganization
(the "Plan"), to be dated on or about September 6, 2006, and certain other
agreements as provided for in the Plan, including the Holding Company Merger
Agreement (such other agreements are collectively, the "Transaction Agreements";
together with the Plan, the "Agreement"), pursuant to which Stockmen's Bancorp
will merge with and into Zions Bancorporation (the "Merger"). In connection
with
the Merger, subject to certain adjustments and except as provided for in the
Agreement, the shares of the authorized capital stock of Stockmen's Bancorp
("Capital Stock"), shall, in the aggregate, be converted into the right to
receive a number of shares of common stock, without par value, of Zions ("Zions
Common Stock") with a value (established in accordance with the Agreement)
of
Two Hundred Ten Million Dollars ($210,000,000) (collectively, the "Merger
Consideration"). In connection with the Merger and the Agreement, you have
requested our opinion as to the fairness, from a financial point of view, of
the
Merger Consideration to be paid to the holders of Capital Stock of Stockmen's
Bancorp.
Hovde
Financial, Inc. ("Hovde"), as part of its investment banking business, is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
bidding, secondary distributions of listed and unlisted securities, private
placements and valuations for estate, corporate and other purposes.
We
were
retained by Stockmen's Bancorp to act as its financial advisor in connection
with the Agreement and the Merger. We will receive compensation from Stockmen's
Bancorp in connection with our services, a significant portion of which is
contingent upon the consummation of the Merger. Additionally, Stockmen's Bancorp
has agreed to indemnify us for certain liabilities arising out of our
engagement.
During
the course of our engagement and for the purposes of the opinion set forth
herein, we have:
(i)
reviewed the Agreement and all attachments thereto;
(ii)
reviewed certain historical publicly available business and financial
information concerning Stockmen's Bancorp and Zions;
(iii)
reviewed certain internal financial statements and other financial and operating
data concerning Stockmen's Bancorp;
(iv)
held
discussions with representatives of Stockmen's Bancorp and Zions for the purpose
of reviewing the future prospects of Stockmen's Bancorp and Zions;
(v)
reviewed historical market prices and trading volumes of Zions Common
Stock;
(vi)
reviewed the terms of recent merger and acquisition transactions, to the extent
publicly available, involving banks and bank holding companies that we
considered relevant;
(vii)
evaluated the pro forma ownership of Zions Common Stock by the holders of
Capital Stock of Stockmen's Bancorp relative to the pro forma contribution
of
Stockmen’s Bancorp's assets, liabilities, equity and earnings to the combined
company;
(viii)
analyzed the pro forma impact of the Merger on the combined company’s earnings
per share, consolidated capitalization and financial ratios; and
(ix)
performed such other analyses and considered such other factors as we have
deemed appropriate.
We
also
took into account our assessment of general economic, market and financial
conditions and our experience in other transactions as well as our knowledge
of
the banking industry and our general experience in securities
valuations.
In
rendering this opinion, we have assumed, without independent verification,
the
accuracy and completeness of the financial and other information and
representations contained in the materials provided to us by Stockmen's Bancorp
and Zions and in the discussions with the managements of Stockmen's Bancorp
and
Zions. In that regard, we have assumed that the financial forecasts, including,
without limitation, the Synergies and projections regarding under-performing
and
nonperforming assets and net charge-offs have been reasonably prepared on a
basis reflecting the best currently available information and judgments and
estimates of Stockmen's Bancorp and Zions and that such forecasts will be
realized in the amounts and at the times contemplated thereby. We are not
experts in the evaluation of loan and lease portfolios for purposes of assessing
the adequacy of the allowances for losses with respect thereto and have assumed
that such allowances made by the subsidiaries Stockmen's Bancorp and Zions
are
in the aggregate adequate to cover such losses. We were not retained to and
did
not conduct a physical inspection of any of the properties or facilities of
Stockmen's Bancorp or Zions or their respective subsidiaries. In addition,
we
have not reviewed individual credit files nor have we made an independent
evaluation or appraisal of the assets and liabilities of Stockmen's Bancorp,
Zions or any of their respective subsidiaries and we were not furnished with
any
such evaluations or appraisals.
We
have
assumed that the Merger will be consummated substantially in accordance with
the
terms set forth in the Agreement. We have further assumed that the Merger will
be accounted for as tax free reorganization under generally accepted accounting
principles. We have assumed that the Merger is, and will be, in compliance
with
all laws and regulations that are applicable to Stockmen's Bancorp, Zions and
their subsidiaries. In rendering this opinion, we have assumed that there are
no
factors that would impede any necessary regulatory or governmental approval
of
the Merger and we have further assumed that, in the course of obtaining the
necessary regulatory and governmental approvals, no restriction will be imposed
on Zions or the surviving corporations that would have a material adverse effect
on the surviving corporations or the contemplated benefits of the Merger. We
have also assumed that no change in applicable law or regulation would occur
that would cause a material adverse change in the prospects or operations of
Zions or any of the surviving corporations after the Merger.
Our
opinion is based solely upon the information available to us and the economic,
market and other circumstances, as they exist as of the date hereof. Events
occurring and information that becomes available after the date hereof could
materially affect the assumptions and analyses used in preparing this opinion.
We have not undertaken to reaffirm or revise this opinion or otherwise comment
upon any events occurring or information that becomes available after the date
hereof, except as otherwise agreed in our engagement letter.
We
are
not expressing any opinion herein as to the prices at which Zions Common Stock
issued in the Merger may trade if and when they are issued or at any future
time, nor does our opinion constitute a recommendation to any holder of Capital
Stock of Stockmen's Bancorp as to how such holder should vote with respect
to
the Agreement at any meeting of holders of the Capital Stock of Stockmen's
Bancorp.
This
letter is solely for the information of the Board of Directors of Stockmen's
Bancorp and is not to be used, circulated, quoted or otherwise referred to
for
any other purpose, nor is it to be filed with, included in or referred to in
whole or in part in any registration statement, proxy statement or any other
document, except in each case in accordance with our prior written consent
which
shall not be unreasonably withheld; provided, however, that we hereby consent
to
the inclusion and reference to this letter in any registration statement, proxy
statement, information statement or tender offer document to be delivered to
the
holders of Capital Stock of Stockmen's Bancorp in connection with the Merger
if
and only if this letter is quoted in full or attached as an exhibit to such
document and this letter has not been withdrawn prior to the date of such
document.
Subject
to the foregoing and based on our experience as investment bankers, our
activities and assumptions as described above, and other factors we have deemed
relevant, we are of the opinion as of the date hereof that the Merger
Consideration to be paid to the holders of Capital Stock of Stockmen's Bancorp
pursuant to the Agreement is fair, from a financial point of view.
Sincerely,
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/s/ Hovde
Financial, Inc. |
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Title: HOVDE
FINANCIAL, INC. |
ARIZONA
BUSINESS CORPORATION ACT
CHAPTER
13: DISSENTERS’ RIGHTS
ARTICLE
1: DISSENT
AND PAYMENT FOR SHARES
10-1301.
Definitions
In
this
article, unless the context otherwise requires:
1.
"Beneficial shareholder" means the person who is a beneficial owner of shares
held in a voting trust or by a nominee as the record shareholder.
2.
"Corporation" means the issuer of the shares held by a dissenter before the
corporate action or the surviving or acquiring corporation by merger or share
exchange of that issuer.
3.
"Dissenter" means a shareholder who is entitled to dissent from corporate action
under section 10-1302 and who exercises that right when and in the manner
required by article 2 of this chapter.
4.
"Fair
value" with respect to a dissenter's shares means the value of the shares
immediately before the effectuation of the corporate action to which the
dissenter objects, excluding any appreciation or depreciation in anticipation
of
the corporate action unless exclusion is inequitable.
5.
"Interest" means interest from the effective date of the corporate action until
the date of payment at the average rate currently paid by the corporation on
its
principal bank loans or, if none, at a rate that is fair and equitable under
the
circumstances.
6.
"Record shareholder" means the person in whose name shares are registered in
the
records of a corporation or the beneficial owner of shares to the extent of
the
rights granted by a nominee certificate on file with a corporation.
7.
"Shareholder" means the record shareholder or the beneficial shareholder.
10-1302.
Right
to dissent
A.
A
shareholder is entitled to dissent from and obtain payment of the fair value
of
the shareholder's shares in the event of any of the following corporate
actions:
1.
Consummation of a plan of merger to which the corporation is a party if
either:
(a)
Shareholder approval is required for the merger by section 10-1103 or the
articles of incorporation and if the shareholder is entitled to vote on the
merger.
(b)
The
corporation is a subsidiary that is merged with its parent under section
10-1104.
2.
Consummation of a plan of share exchange to which the corporation is a party
as
the corporation whose shares will be acquired, if the shareholder is entitled
to
vote on the plan.
3.
Consummation of a sale or exchange of all or substantially all of the property
of the corporation other than in the usual and regular course of business,
if
the shareholder is entitled to vote on the sale or exchange, including a sale
in
dissolution, but not including a sale pursuant to a court order or a sale for
cash pursuant to a plan by which all or substantially all of the net proceeds
of
the sale will be distributed to the shareholders within one year after the
date
of sale.
4.
An
amendment of the articles of incorporation that materially and adversely affects
rights in respect of a dissenter's shares because it either:
(a)
Alters or abolishes a preferential right of the shares.
(b)
Creates, alters or abolishes a right in respect of redemption, including a
provision respecting a sinking fund for the redemption or repurchase, of the
shares.
(c)
Alters or abolishes a preemptive right of the holder of the shares to acquire
shares or other securities.
(d)
Excludes or limits the right of the shares to vote on any matter or to cumulate
votes other than a limitation by dilution through issuance of shares or other
securities with similar voting rights.
(e)
Reduces the number of shares owned by the shareholder to a fraction of a share
if the fractional share so created is to be acquired for cash under section
10-604.
5.
Any
corporate action taken pursuant to a shareholder vote to the extent the articles
of incorporation, the bylaws or a resolution of the board of directors provides
that voting or nonvoting shareholders are entitled to dissent and obtain payment
for their shares.
B.
A
shareholder entitled to dissent and obtain payment for his shares under this
chapter may not challenge the corporate action creating the shareholder's
entitlement unless the action is unlawful or fraudulent with respect to the
shareholder or the corporation.
C.
This
section does not apply to the holders of shares of any class or series if the
shares of the class or series are redeemable securities issued by a registered
investment company as defined pursuant to the investment company act of 1940
(15
United States Code section 80a-1 through 80a-64).
D.
Unless
the articles of incorporation of the corporation provide otherwise, this section
does not apply to the holders of shares of a class or series if the shares
of
the class or series were registered on a national securities exchange, were
listed on the national market systems of the national association of securities
dealers automated quotation system or were held of record by at least two
thousand shareholders on the date fixed to determine the shareholders entitled
to vote on the proposed corporate action.
10-1303.
Dissent
by nominees and beneficial owners
A.
A
record shareholder may assert dissenters' rights as to fewer than all of the
shares registered in the record shareholder's name only if the record
shareholder dissents with respect to all shares beneficially owned by any one
person and notifies the corporation in writing of the name and address of each
person on whose behalf the record shareholder asserts dissenters' rights. The
rights of a partial dissenter under this subsection are determined as if the
shares as to which the record shareholder dissents and the record shareholder's
other shares were registered in the names of different
shareholders.
B.
A
beneficial shareholder may assert dissenters' rights as to shares held on the
beneficial shareholder's behalf only if both:
1.
The
beneficial shareholder submits to the corporation the record shareholder's
written consent to the dissent not later than the time the beneficial
shareholder asserts dissenters' rights.
2.
The
beneficial shareholder does so with respect to all shares of which the
beneficial shareholder is the beneficial shareholder or over which the
beneficial shareholder has power to direct the vote.
ARTICLE
2: PROCEDURE
FOR EXERCISE OF DISSENTERS’ RIGHTS
10-1320.
Notice
of dissenters' rights
A.
If
proposed corporate action creating dissenters' rights under section 10-1302
is
submitted to a vote at a shareholders' meeting, the meeting notice shall state
that shareholders are or may be entitled to assert dissenters' rights under
this
article and shall be accompanied by a copy of this article.
B.
If
corporate action creating dissenters' rights under section 10-1302 is taken
without a vote of shareholders, the corporation shall notify in writing all
shareholders entitled to assert dissenters' rights that the action was taken
and
shall send them the dissenters' notice described in section 10-1322.
10-1321.
Notice
of intent to demand payment
A.
If
proposed corporate action creating dissenters' rights under section 10-1302
is
submitted to a vote at a shareholders' meeting, a shareholder who wishes to
assert dissenters' rights shall both:
1.
Deliver to the corporation before the vote is taken written notice of the
shareholder's intent to demand payment for the shareholder's shares if the
proposed action is effectuated.
2.
Not
vote the shares in favor of the proposed action.
B.
A
shareholder who does not satisfy the requirements of subsection A of this
section is not entitled to payment for the shares under this article.
10-1322.
Dissenters'
notice
A.
If
proposed corporate action creating dissenters' rights under section 10-1302
is
authorized at a shareholders' meeting, the corporation shall deliver a written
dissenters' notice to all shareholders who satisfied the requirements of section
10-1321.
B.
The
dissenters' notice shall be sent no later than ten days after the corporate
action is taken and shall:
1.
State
where the payment demand must be sent and where and when certificates for
certificated shares shall be deposited.
2.
Inform
holders of uncertificated shares to what extent transfer of the shares will
be
restricted after the payment demand is received.
3.
Supply
a form for demanding payment that includes the date of the first announcement
to
news media or to shareholders of the terms of the proposed corporate action
and
that requires that the person asserting dissenters' rights certify whether
or
not the person acquired beneficial ownership of the shares before that
date.
4.
Set a
date by which the corporation must receive the payment demand, which date shall
be at least thirty but not more than sixty days after the date the notice
provided by subsection A of this section is delivered.
5.
Be
accompanied by a copy of this article.
10-1323.
Duty
to demand payment
A.
A
shareholder sent a dissenters' notice described in section 10-1322 shall demand
payment, certify whether the shareholder acquired beneficial ownership of the
shares before the date required to be set forth in the dissenters' notice
pursuant to section 10-1322, subsection B, paragraph 3 and deposit the
shareholder's certificates in accordance with the terms of the
notice.
B.
A
shareholder who demands payment and deposits the shareholder's certificates
under subsection A of this section retains all other rights of a shareholder
until these rights are canceled or modified by the taking of the proposed
corporate action.
C.
A
shareholder who does not demand payment or does not deposit the shareholder's
certificates if required, each by the date set in the dissenters' notice, is
not
entitled to payment for the shareholder's shares under this article.
10-1324.
Share
restrictions
A.
The
corporation may restrict the transfer of uncertificated shares from the date
the
demand for their payment is received until the proposed corporate action is
taken or the restrictions are released under section 10-1326.
B.
The
person for whom dissenters' rights are asserted as to uncertificated shares
retains all other rights of a shareholder until these rights are canceled or
modified by the taking of the proposed corporate action.
10-1325.
Payment
A.
Except
as provided in section 10-1327, as soon as the proposed corporate action is
taken, or if such action is taken without a shareholder vote, on receipt of
a
payment demand, the corporation shall pay each dissenter who complied with
section 10-1323 the amount the corporation estimates to be the fair value of
the
dissenter's shares plus accrued interest.
B.
The
payment shall be accompanied by all of the following:
1.
The
corporation's balance sheet as of the end of a fiscal year ending not more
than
sixteen months before the date of payment, an income statement for that year,
a
statement of changes in shareholders' equity for that year and the latest
available interim financial statements, if any.
2.
A
statement of the corporation's estimate of the fair value of the
shares.
3.
An
explanation of how the interest was calculated.
4.
A
statement of the dissenter's right to demand payment under section
10-1328.
5.
A copy
of this article.
10-1326.
Failure
to take action
A.
If the
corporation does not take the proposed action within sixty days after the date
set for demanding payment and depositing share certificates, the corporation
shall return the deposited certificates and release the transfer restrictions
imposed on uncertificated shares.
B.
If
after returning deposited certificates and releasing transfer restrictions,
the
corporation takes the proposed action, it shall send a new dissenters' notice
under section 10-1322 and shall repeat the payment demand
procedure.
10-1327.
After-acquired
shares
A.
A
corporation may elect to withhold payment required by section 10-1325 from
a
dissenter unless the dissenter was the beneficial owner of the shares before
the
date set forth in the dissenters' notice as the date of the first announcement
to news media or to shareholders of the terms of the proposed corporate
action.
B.
To the
extent the corporation elects to withhold payment under subsection A of this
section, after taking the proposed corporate action, it shall estimate the
fair
value of the shares plus accrued interest and shall pay this amount to each
dissenter who agrees to accept it in full satisfaction of his demand. The
corporation shall send with its offer a statement of its estimate of the fair
value of the shares, an explanation of how the interest was calculated and
a
statement of the dissenters' right to demand payment under section
10-1328.
10-1328.
Procedure
if shareholder dissatisfied with payment or offer
A.
A
dissenter may notify the corporation in writing of the dissenter's own estimate
of the fair value of the dissenter's shares and amount of interest due and
either demand payment of the dissenter's estimate, less any payment under
section 10-1325, or reject the corporation's offer under section 10-1327 and
demand payment of the fair value of the dissenter's shares and interest due,
if
either:
1.
The
dissenter believes that the amount paid under section 10-1325 or offered under
section 10-1327 is less than the fair value of the dissenter's shares or that
the interest due is incorrectly calculated.
2.
The
corporation fails to make payment under section 10-1325 within sixty days after
the date set for demanding payment.
3.
The
corporation, having failed to take the proposed action, does not return the
deposited certificates or does not release the transfer restrictions imposed
on
uncertificated shares within sixty days after the date set for demanding
payment.
B.
A
dissenter waives the right to demand payment under this section unless the
dissenter notifies the corporation of the dissenter's demand in writing under
subsection A of this section within thirty days after the corporation made
or
offered payment for the dissenter's shares.
ARTICLE
3: JUDICIAL
APPRAISAL OF SHARES
10-1330.
Court
action
A.
If a
demand for payment under section 10-1328 remains unsettled, the corporation
shall commence a proceeding within sixty days after receiving the payment demand
and shall petition the court to determine the fair value of the shares and
accrued interest. If the corporation does not commence the proceeding within
the
sixty day period, it shall pay each dissenter whose demand remains unsettled
the
amount demanded.
B.
The
corporation shall commence the proceeding in the court in the county where
a
corporation's principal office or, if none in this state, its known place of
business is located. If the corporation is a foreign corporation without a
known
place of business in this state, it shall commence the proceeding in the county
in this state where the known place of business of the domestic corporation
was
located.
C.
The
corporation shall make all dissenters, whether or not residents of this state,
whose demands remain unsettled parties to the proceeding as in an action against
their shares, and all parties shall be served with a copy of the petition.
Nonresidents may be served by certified mail or by publication as provided
by
law or by the Arizona rules of civil procedure.
D.
The
jurisdiction of the court in which the proceeding is commenced under subsection
B of this section is plenary and exclusive. There is no right to trial by jury
in any proceeding brought under this section. The court may appoint a master
to
have the powers and authorities as are conferred on masters by law, by the
Arizona rules of civil procedure or by the order of appointment. The master's
report is subject to exceptions to be heard before the court, both on the law
and the facts. The dissenters are entitled to the same discovery rights as
parties in other civil proceedings.
E.
Each
dissenter made a party to the proceeding is entitled to judgment
either:
1.
For
the amount, if any, by which the court finds the fair value of his shares plus
interest exceeds the amount paid by the corporation.
2.
For
the fair value plus accrued interest of the dissenter's after-acquired shares
for which the corporation elected to withhold payment under section
10-1327.
10-1331.
Court
costs and attorney fees
A.
The
court in an appraisal proceeding commenced under section 10-1330 shall determine
all costs of the proceeding, including the reasonable compensation and expenses
of any master appointed by the court. The court shall assess the costs against
the corporation, except that the court shall assess costs against all or some
of
the dissenters to the extent the court finds that the fair value does not
materially exceed the amount offered by the corporation pursuant to sections
10-1325 and 10-1327 or that the dissenters acted arbitrarily, vexatiously or
not
in good faith in demanding payment under section 10-1328.
B.
The
court may also assess the fees and expenses of attorneys and experts for the
respective parties in amounts the court finds equitable either:
1.
Against the corporation and in favor of any or all dissenters if the court
finds
that the corporation did not substantially comply with the requirements of
article 2 of this chapter.
2.
Against the dissenter and in favor of the corporation if the court finds that
the fair value does not materially exceed the amount offered by the corporation
pursuant to sections 10-1325 and 10-1327.
3.
Against either the corporation or a dissenter in favor of any other party if
the
court finds that the party against whom the fees and expenses are assessed
acted
arbitrarily, vexatiously or not in good faith with respect to the rights
provided by this chapter.
C.
If the
court finds that the services of an attorney for any dissenter were of
substantial benefit to other dissenters similarly situated and that the fees
for
those services should not be assessed against the corporation, the court may
award to these attorneys reasonable fees to be paid out of the amounts awarded
the dissenters who were benefited.
THE
STOCKMEN'S BANCORP, INC.
Proxy
Solicited on Behalf of the Board of Directors
The
undersigned hereby appoints Jeff Duncan and Farrel Holyoak, and either of them,
with full power of substitution, proxies to vote all of the stock of The
Stockmen's Bancorp, Inc. ("Stockmen's") which the undersigned is entitled to
vote at the special meeting of shareholders of Stockmen's to be held at the
Main
Office of The Stockmen's Bank, 3825 Stockton Hill Road, Kingman, Arizona on
January 12, 2007 at 10:00 a.m. local time, or at any adjournment or postponement
thereof, with all power which the undersigned would possess if personally
present, upon the following proposal described in the accompanying document,
in
accordance with the following instructions. THIS
PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED BY THE UNDERSIGNED.
IF
NO DIRECTION IS INDICATED ON AN OTHERWISE PROPERLY EXECUTED PROXY, THIS PROXY
WILL BE VOTED "FOR"
THE FOLLOWING PROPOSALS.
1. To
approve the Agreement and Plan of Reorganization, dated as of September 8,
2006,
as amended as of September 25, 2006, by and among Zions Bancorporation
("Zions"), National Bank of Arizona ("NBA"), Stockmen's, and The Stockmen's
Bank
(the "merger agreement"), whereby Stockmen's will merge with and into Zions,
with Zions being the surviving corporation, and whereby The Stockmen's Bank
will
merge with and into NBA, with NBA being the surviving bank.
[__]
FOR [__]
AGAINST [__]
ABSTAIN
2. To
approve adjournments of the special meeting, if necessary, to permit further
solicitation of proxies if there are not sufficient votes at the time of the
special meeting to approve the merger agreement.
[__]
FOR [__]
AGAINST [__]
ABSTAIN
In
their
discretion to vote upon such other matters that may properly come before the
meeting.
[X] Please
mark your proxy as in this example.
Date:
_______________ Signature(s):
___________________________________
___________________________________
Please
sign here exactly as name(s) appear(s) on this proxy card. When signing as
attorney, executor, administrator, trustee, guardian, or in any other fiduciary
capacity, give full title. If more than one person acts as trustee, all should
sign. All joint owners must sign.
I
plan to
attend the Special Meeting: ___________
Please
mark, sign and date, and mail in the enclosed postage paid
envelope.